This post includes links to featured posts worth a close look.
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The Health Care Blog (THCB) has acquired a
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industry. The Wall Street Journal calls us "among the most widely read insider
publications in the field.
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Started in August 2003, for most of the first five years of its existence THCB was the mostly exclusive domain of Matthew Holt, who still owns and runs THCB. But a mix of increased consulting work and the growth of the Health 2.0 Conference that
Matthew co-founded with Indu Subaiya in 2007 limited Matthew's time to write every day. And the growth of readership (from a few each day to over 80,000 visits in October 2008) and the interest of other people in writing on THCB has all meant that there's been less of Matthew and much more of
many great authors on the site. And so in March 2008 THCB officially became a group blog, in which all authors (including Matthew) started to use their own byline. (For posts prior to March 2008, no byline means Matthew was the author)
THCB prints original material from many contributors (some regular, some not so regular) and reprints (by permission) great posts from other bloggers. If you are interest in writing something for us, take a look at our writer's guidelines.
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And Matthew is not sure whether he should be happy or chagrined but since the change to the group blog status, readership has more than doubled!
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Matthew Holt
Musings about the goings-on in American health care from a general health care consultant. Topics can include policy, health insurers, technology and eHealth, physicians, pharma and anything else that grips my fancy. Although my opinions shine through, this blog tries to concentrate on what I think is happening and will happen, rather than what I’d like to happen. Feel free to email me, and to send tips, opinions and requests for work my way.
The Blogs Insiders Read to Stay Current
November 16, 2005; Page D1
The music industry has one, Wall Street bankers have several and even CPAs have come around.
No self-respecting industry these days is without a
must-read blog. Although they vary wildly on fine points like accuracy,
they are now so widely read that it’s assumed anybody in the business
is up to speed on the latest postings. For outsiders, they are also a
window into the inner workings, preoccupations and gossip of fields
ranging from real estate to mergers and acquisitions.
People who follow electronics got an early peek at a key new product when Engadget posted photos of Microsoft Corp.’s
XBox 360 videogame console a week ahead of its debut. TV executives
keep tabs on which networks are ordering and canceling shows. Doctors
and others in health care can link to the latest news and commentary on
drug marketing. Reporters and media watchers turn to Jim Romenesko, who
runs a blog on the Poynter Institute’s Web site.
Here are some of the most influential blogs across
industries ranging from publishing and finance tonhealth care and
Hollywood, put together by The Wall Street Journal’s beat reporters in
these areas.
Healthcare:
This blog, billed as "Everything You Always Wanted to
Know About the Health Care System, But Were Afraid to Ask," is
published by Matthew Holt, a consultant and publisher of an email
digest of health-care news for executives and hospital administrators.
Mr. Holt uses his blog to draw attention to health-policy articles in
other publications and on other blogs, and share his thoughts about
Medicare policy, health insurers, electronic medical records and
doctors. There have been frequent posts dissecting the new Medicare law
and highlighting waste and fraud in the system. The site is currently
running a contest for readers to come up with solutions for fixing the
health-care system — in 250 words or less.
Real Estate
This blog attempts to deflate real-estate hype.
Updated roughly a half dozen times a day, the site, run by former
magazine editor Lockhart Steele, takes on overpriced condo listings,
pokes fun at the language brokers use to pump up properties, and links
to the relevant news from mainstream press and other blogs. A running
feature called PriceChopper highlights grossly overpriced apartments
and takes credit when the asking price drops. Another fixture called
BubbleWatch links to optimistic market forecasts. Curbed’s major
drawback is its New York-centric coverage and its obsession with
celebrity and luxury properties. Recent posts on projects in Los
Angeles and Boston, however, indicate the site’s willingness to
acknowledge there is a real estate world outside the Big Apple.
A sober alternative to Curbed, the Slatin Report
delivers all-original commentary and analysis on the world of
commercial real estate. The brainchild of veteran real-estate
journalist Peter Slatin, the site weighs in on real-estate investment
trusts, industry dealmakers, and design and architecture. A recent
article pointed out how Donald Trump could get locked out of profits
for decades in a complicated transfer of a property he’s involved in.
Mr. Trump disputed the characterization as "totally false." One issue
with the site is that the posts are sporadic and irregular. But users
can sign up for an email alert when new items appear.
Advertising
This blog is one of the best ways to keep up on
Madison Avenue’s ups and downs. Published by Steve Hall, a former
ad-agency employee, adrants covers topics ranging from urinal
advertising to the news of the day, all with a bemused tone. The site
also provides links to breaking-news stories featured by other Web
publications. John Osborn, president and chief executive of the New
York office of Omnicom Group‘s BBDO Worldwide, is a fan.
Wall Street
This site systematically takes apart proxy statements,
quarterlies and news releases, offering opinions and asking questions
about management compensation and other items tucked away in the small
print. Free-lance journalist Michelle Leder, who runs the site, hands
out gold stars on Fridays to companies with clear disclosures and
points out oddities buried in the footnotes, like sudden changes to
stock-option plans, or when loan issuer Dollar Financial Corp. recently
forgave the interest on a loan to its own chief executive. (Dollar
Financial didn’t return calls seeking comment.) Newer entries have
included one about Lisa Marie Presley’s evolving stake in a company
called CKX Inc.
jeffmatthewsisnotmakingthisup.blogspot.com
A popular opinion and news-analysis blog among traders
and institutional investors written by Jeff Matthews, head of the hedge
fund Ram Partners in Greenwich, Conn. Mr. Matthews, a mostly
value-oriented investor, isn’t afraid to rile up the vocal trading
community by commenting on closely watched stocks such as Overstock.com
Inc., dissecting the chief executives latest public comments on his
blog. While he occasionally makes grand market pronouncements — he
recently declared that the real-estate market had peaked — he is
admired for also supporting any such prophetic dictums. The blog
skewers boilerplate financial filings, and features analysis on
everything from Google Inc. (he’s a fan) to the Hawaiian Public Utilities Commission.
This blog from deallawyers.com, an educational group
that offers research on legal issues surrounding deal activity,
dissects M&A flow based on both obscure and widely known legal
issues. It evaluates private-equity involvement, recent arbitrations,
cross-border transactions and other issues for companies like Toys ‘R’
Us Inc. and Six Flags Inc. It also examines deal technicalities
like lock-ups, stapled financings and M&A accounting. Downsides to
the blog, though, are that it’s written with a lot of jargon and
postings can be a little sparse.
Health Care
The site focuses on how drug companies can get
accurate and trustworthy information to doctors and consumers. John
Mack, publisher of the monthly online newsletter Pharma Marketing News,
started his blog in January 2005. He offers commentary on news events
and is often critical of the industry’s focus on blockbuster drugs and
what Mr. Mack views as unethical or misguided marketing. Among his pet
peeves is erectile-dysfunction advertising, which he believes focuses
too heavily on younger men and libido-enhancing promises while failing
to educate consumers about the disease. The site lambastes pharma
companies for ads that foster a "magic pill solution preference among
Americans," while rarely mentioning changes in lifestyle or diet that
will help reduce risks such as cardiovascular disease. But he’s quick
to praise efforts that address the industry’s credibility problem with
consumers, such as Johnson & Johnson‘s new TV and print campaigns that he says put drug risks on more-equal footing with drug benefits.
Music
The Lefsetz Letter started in 1986 as a photocopied
tip sheet for music-industry executives. Today Bob Lefsetz, a former
artist-management executive, posts his opinions on everything to do
with the music business. Mr. Lefsetz offers wide-ranging,
stream-of-consciousness rants — often blasted out multiple times
daily. They include ruminations on everything from the industry’s
strategy of suing peer-to-peer network users (futile), to U2’s recent
guest appearance on HBO’s "Entourage" (like a married man flaunting a
girlfriend on the side, "just to be able to impress his buddies") to
Rod Stewart fans ("so old and so out of it that they’ll buy ANYTHING
with his name on it. As long as it doesn’t disrupt their cocktail
parties.") Sign up for email list at http://lefsetz.com12, or on the Web at: rhino.com/rzine/columnists/lefsetz/index.lasso13
Hollywood
This blog compiles entertainment news and adds a heavy
dose of snarky opinion. Agents, producers, studio executives and other
power players in Hollywood read it religiously — largely because it
lavishes attention on them. (The site’s motto is: "LA is the world’s
cultural capital. Defamer is the gossip rag it deserves.") A recent
entry on CBS Chairman Leslie Moonves describes him as "a future
galactic despot who will one day use his humble position as head of a
successful network to hold the entire universe in his incredibly
charismatic sway." (CBS declined to respond to the quote.) The site,
launched last year by Gawker Media, keeps tabs on which networks have
ordered or canceled which shows and closely monitors movie box-office
tallies, along with the latest peccadilloes of major stars.
Television
Focused on TV news, the blog presents snippets from
top stories of the day and is constantly updated with items ranging
from major network decisions — NBC’s recent move to make its entire
flagship "Nightly News" broadcast free on the Internet, for example —
to gossip about behind-the-scenes fighting at the morning news shows.
TV Newser, which is hosted by the journalism-related Web site Media
Bistro, also includes job listings and detailed parsing of ratings with
a heavy focus on cable news channels. Towson University student Brian
Stelter says he founded the site last year after being inspired by the
blanket coverage the cable networks gave the start of the 2003 Iraq war.
Publishing
Run by Michael Cader, a former book packager, this
paid site (cost: $20 a month) contains a selection of print and
Web-based book-publishing stories, as well as first-person
editorializing. Mr. Calder gets information from sources including
agents, editors, publicists, authors, and licensees. The site lists the
latest book proposals to be sold, including in some cases a sense of
what price they fetched. It’s also widely used to get in touch with
people in the industry — the agent who represents a particular author,
for example. Mr. Cader has an arch tone, and is quick to jump on news
involving Internet companies such as Google Inc. or Amazon.com Inc. But
he sometimes is too reliant on industry handouts, such as this recent
posting: "Hyperion Plans ‘Lost’ Book."
This daily blog provides links to reviews and news,
along with sharp commentary. A recent posting noted that the New
Orleans Public Library had reopened — but only after firing 90% of its
staff. Elsewhere, after romance publisher Harlequin Enterprises Ltd.
said it plans to add novels with Nascar storylines, the site posted
this prediction: "Look for ‘Naked Came the Pit Crew’ early next
spring." The site is published by Jessa Crispin, a former nonprofit
fund-raiser.
Theater
A lot of fan sites and trade publications operate Web
sites dedicated to theater news, but the big gun is BroadwayStars.
Filled with an exhaustive list of daily theater news — some stories
are culled from obscure regional alternative publications — the site
also contains links to various discussion boards. (Things can get catty
in a hurry.) A popular feature here is a list of Broadway shows that
have been discussed by producers in news articles but haven’t been
formally announced, such as a stage production of Walt Disney
Co.’s "The Little Mermaid." On the downside, the site, operated by a
company called 2die4 Productions of Irvington, N.Y., is cluttered —
there’s even a five-day weather forecast for top theater cities.
Taxes
This site, run by Tax Analysts, a nonprofit publisher
based in Arlington, Va., offers a handy way to catch up on breaking
news. The site also has interesting historical material, such as copies
of actual federal income-tax returns filed by presidents from Franklin
D. Roosevelt to George W. Bush. (Look under "Tax History.") There also
are transcripts of conferences organized by Tax Analysts, such as one
last month on the subject: "Can or should you have tax reform without
increasing taxes?" Tax Analysts also offers several subscription-only
publications, such as Tax Notes, an influential weekly.
Economics
This blog from Barry Ritholtz, chief market strategist
at money-management firm Maxim Group LLC, mixes straight market
commentary with Mr. Ritholtz’s musings on the inner workings of
glamorous industries such as music, film and technology. Mr. Ritholtz
mulls over interest rates, gross domestic product and bond markets,
complete with charts and links to news sites. Then, on separate pages,
he ruminates on movie box-office slumps, TiVo and music file-sharing.
Contemplation takes many forms, including quotes and essays. He
evaluates news like the latest on the avian flu and inserts
eye-catching charts and graphics to make his point.
Accounting
www.accountingobserver.com/blog/22
This opinion and news analysis blog is run by Jack
Ciesielski, a certified public accountant who owns the
investment-research firm R.G. Associates in Baltimore. Mr. Ciesielski
has served on several accounting rule-making and policy advisory
boards. He uses his blog, which he updates roughly once a week, to rant
about the latest corporate troubles, such as Delphi Corp.’s recent
accounting mess. Other frequent topics include stock-option expensing,
Sarbanes-Oxley compliance and lease restatements. Recently, Mr.
Ciesielski has taken up troubled auto companies as discussion fodder,
with a posting last month called "Dana in the Dumps," referring to
auto-parts maker Dana Corp.’s latest restatements.
Insurance
This blog spells out legal issues affecting
property-casualty insurers, and keeps editorializing to a minimum. The
person behind the site is Marc Mayerson, a Harvard Law School-trained
lawyer with Spriggs & Hollingsworth in Washington, D.C. Unlike
other more light-hearted blogs, these postings are written with some
wonky weight — recent entries dissected court decisions against State
Farm Insurance Cos. and the nuances of liability issues in certain
insurance policies. Mr. Mayerson keeps up with hurricane-related
insurance issues, sometimes even discussing his own insurance policy as
a reference point.
Digital Content
This blog tracks the latest developments from a range
of businesses interested in delivering entertainment, news and other
services to consumers in new ways (through mobile phones, for example).
It reports its own news, offers commentary and draws attention to
articles in other publications. The site is run by Rafat Ali and Staci
Kramer. This month, Mr. Ali wrote that pricing the new Sanyo Mobile
ESPN phone at $500 was "suicide, pure and simple." (ESPN said the price
listed for the phone was incorrect on the blog site, omitting a $100
rebate, and that the blog entry didn’t describe the phone’s range of
features.) The blog regularly breaks news, in September scooping
mainstream media outlets including The Wall Street Journal on Viacom
Inc.’s deal to acquire IFilm. Fans include Jim Bankoff, executive vice
president for programming at AOL, and Liz Schimel, senior vice
president for content development at Comcast Corp.
Currencies
www.rgemonitor.com/blog/roubini25
This blog tracks monetary issues, among others,
through a macroeconomic lens. It offers the views of Nouriel Roubini
and is affiliated with the subscription-based site, Roubini Global
Economics Service, a New York-based economics research group. Entries
take a global view on currency swings and appear every few days. Recent
meditations have included postings on Brazil issuing long-term
local-currency-denominated bonds in the international market. Mr.
Roubini also recently examined asset bubbles.
BLOGGING: Christmas & Holiday blogging
I’m still in the UK and I may get to another post before Christmas, but then again I may not, and next week will be beyond spotty…there are a couple of articles in the queue but they may not make it out of the computer in time for 2005.
I will be writing my by now traditional end of year letter usually going out sometime next week, but that’s about personal charity and politics rather than health care, but I’ll put it up elsewhere on the web and link over to it from here.
In any event thanks for reading in 2004, and definitely check back in for 2005 on January 3rd (or the 4th if I haven’t recovered for the 3rd) and have a fun, and safe end of 2004. Happy christmas, holidays, channukah, kwanza, turkey day…..and here’s to Chelsea being top of the league on January 1! (That’s a clue as to where I’m spending December 26!)
PHARMA: Industry Veteran on Don Johnson’s ideas on saving Merck
Don Johnson at the BusinessWord blog had a long piece on how Merck might be turned around. I personally think that the cause is pretty hopeless, and that like many other once great companies, Merck will just have to accept its future shotgun marriage–although I think that the price needs to get a little cheaper before that happens. However, the Industry Veteran has a few ideas of his own about Don’s view of Merck, and as a Christmas treat to THCB readers, I serve them up for you, written in an open posting to Don:
Don–Your suggestions to Merck are provocative, wholly unrealistic, but at least amusing.
I don’t know if your suggestions to Merck reflect the frustrations of a market ideologue when confronted with actual corporate behavior, or just indicate someone who wants to see good corporate citizenship from Big Pharma but doesn’t know beans about the industry. In either case your list contains some laudable goals but their prospects for adoption are remote. Below are my comments on a few items in your list.
* Appointing a glamorous, articulate physician as CEO may make casual observers feel better, temporarily, but unless the person also knows the pharmaceutical business very well, he won’t be able to address the structural problems and strategic deficiencies that have put Merck in its current predicament. The Merck Board appointed a person from outside the industry in 1994 when they picked Gilmartin and he took the company to its present condition. More precisely, he failed to initiate changes to an organization that his predecessor left in precarious circumstances. Merck’s arrogantly chauvinistic approach to R&D was the lengthened shadow of the previous CEO, Dr. Roy Vagelos. When Gilmartin arrived at Merck, its haughtiness and financial statements during the boom 90’s concealed some major problems. As an outsider to the industry Gilmartin felt obliged to leave the cultural legacy and strategic approaches in place. Instead he merely added his own affectations such as a crippling political correctness and the ascendancy of the legal department. Gilmartin also outsourced virtually all organizational planning to cronies at the Monitor Group. The result brings to mind a line from an Ernest Hemingway story. Someone asks how a particular character went broke. "Two ways," he was told. "First gradually, then all of a sudden."
* Single pricing for the entire world won’t work. Too many countries will execute compulsory licensing (i.e., break patents). I’m not talking about just poorer countries in Latin America, Africa or Asia, but western Europe as well. Here’s where your naivete sets in. Don’t you think Big Pharma and its lackeys among American trade emissaries have tried getting tough with other countries? The Bush administration recently tried it with what they thought would be a compliant government in Australia. After all, they’re conservatives, they supported his decision to invade Iraq and they were looking for us to lower quotas and tariffs on their agricultural products. All political segments in Australia held firm and the PM issued a stern rebuke to the Bushies. If we couldn’t squeeze the Aussies for a fairtrade agreement, you better believe it won’t work in other places.
* The idea of trading away some premium pricing in return for volume guarantees sounds appealing, but Big Pharma is against it because they fear it will open to door to a single buyer (or Single Payer, as it’s commonly called) relationship. Most of the world lives with that sort of a system and, in many cases, their health care outcomes are better than ours (the WHO rated the US as 37th in the world), but the bloody shirt of "Canadian-style health care" will be thrown in the face of anyone who pushes your suggestion.
* Raising the regulatory standards to both protect the public and impose competitive entry barriers sounds interesting (although the libertarian in me feels a minor twinge), but here you’re really outside the loop of plausibility. Try suggesting tougher approval standards to any of the R&D fiduciary officers in Big Pharma companies and tell me if your wrist chronometer records tenths of a second before you’re shown the door.
* Now here’s where you really start operating in fantasyland. "Produce and sell drugs that will win in their classes and get rid of product lines that aren’t number one in their classes in cost effectiveness, safety and efficacy. Price accordingly. Call off the detail dogs, who aren’t trusted by physicians and, according to recent research, may be less profitable than conventional wisdom suggests." The Jack Welch stuff won’t work in pharmaceuticals because, unlike most of GE’s operating divisions, product development is extremely long and precarious. That’s why Pharma has developed an economic model where a competitor can hold fifth-place in ACE-inhibitor market share or fourth place in the statin class and still make a ton of money. If wishes were fishes…
* Now this idea of getting tough with the product liability trial lawyers seems clever: NOT. I wonder why someone else didn’t think of that. Actually someone did — it was the tobacco companies and you may remember how well it worked out for them. Given the number of Pharma researchers and investigator-physicians who feed information to Public Citizen, to plaintiffs’ attorneys and media reporters, how long do you think it will be before someone comes up with incriminating documents and makes the fen-phen damages look like chump change?
* You make some suggestions that do appeal to my libertarian side because their objective consists of evening up the asymmetry of information that exists between the Pharma manufacturers on one side and practicing physicians and patients on the other. It’s actually amusing when you advise Merck to sponsor a "prime-time consumer-oriented health and medicine talk show on MSNBC or CNBC. Allow physicians and consumers to ask questions and comment on blogs and message boards. No holds barred. Docs will watch and learn". That will be must-see TV when pigs fly. Some of your other suggestions actually seem biblical: Merck should cut its marketing budget and drug prices in half, help institutional buyers reduce inappropriate uses of expensive drugs and put easy-to-comprehend product comparisons on the Internet. And the last shall be as first and the meek shall inherit the earth.
My own suggestions to the Merck board are substantially more modest, less apocalytptic, but more likely to deal with the world as it is.
* Hire one of the usual suspects from outside the company as the next CEO. The Dutchman who ran Warner-Lambert and Don Hayden at BMS are two likely candidates. Have the new guy bring in his own R&D man and together they should go up and down the halls of MRI, West Point and Upper Gwynedd the way the Russians went through Berlin: house to house carnage, taking no prisoners, looting, pillaging, raping and humiliating along the way. Ooo, Ooo, "the delicate flowers" in R&D, as Richard Sykes once called them, may be offended and leave. Tell them not to let the door hit them in the ass. Confiscate their notes, hold on to the intellectual property rights, and after the security marshalls lead them out the door, hire other scientists to replace them. In case you hadn’t noticed, it’s buyer’s market out there.
* Eject from business departments the ignoramus, Ivy League MBAs who know nothing about the industry but feel they can comprehend the universe with spreadsheets. These people are holdovers from Vagelos’s era, abetted in politically correct fashion by Gilmartin and David Anstice. And while we’re at it, stop the kickback arrangements with outside suppliers that has made Merck’s self-righteous hypocrisy well known inside the industry years before Vioxx.
Hey, that’s just for starters. For anything more specific, Merck will have to pay. Of course the idea of Merck paying me to tell them that they’re such dumbf—s is also in the realm of biblical prophecy.
BlOGS: New health care blogs
Joe Padua has a new-ish blog called Managed Care Matters and there’s a new team blog on the ills of the health care system by a group of academics called HCRenewal. Both worth a look!
PHARMA: Don Johnson on how to save Merck
I’m not sure Merck is salvageable. My assumption is that its sales force is worth something, as is Fossamax, and that a shotgun marriage with another pharma with a better pipeline is in the offing. But Don Johnson from The Business Word gives Merck a gazillion dollars worth of consulting on how to make the turnaround, and seems to be doing it for free! An excellent analysis from a savvy business observer. Someone in New Jersey should be reading and getting Don on a plane at a high fee. I’m not sure anything can work to save Merck as it faces post-Vioxx and Zocor going off patent, but many of his ideas are well worth thinking about.
POLICY: Medicare dis-Advantaged?
A couple of weeks back I suggested that the Medicare CCIP (disease management) demonstration projects were designed at least in part to get private health plans (and the DSM companies that contract with them) involved in the wider management of Medicare FFS patients. The Oliver Stones amongst us think that this is part of a logical attempt by the Administration and its Congressional allies (perhaps I should just start calling them "the Government") to fast-forward the privatization of Medicare. Now a somewhat renegade ex-CMS employee, Robert Berenson of the Urban Institute, has a paper in Health Affairs that accurately recounts the history and likely future of the other larger part of the privatizing Medicare equation.
Berenson shows that, essentially, private plans are being bribed back into Medicare Advantage (the new name for Medicare plus Choice, nee Medicare Risk) with payments that equate to roughly 108% of the equivalent per capita cost of a senior in traditional Medicare. In addition Medicare is introducing regional private PPOs even though:
The traditional Medicare program has enough market power to impose administrative prices on providers at rates that are generally lower than those of commercial PPOs. Medicare beneficiaries already enjoy broader freedom of choice, with limits on balance-billing, than in most PPOs. In other words, the main virtues of the PPO model in commercial markets are not applicable to Medicare, which itself functions in many ways like a PPO.
In addition to the private PPOs, and the improved terms for the private Medicare Advantage plans, the new Part D which will be run by a different set of private actors, the PBMs. And of course many of the most expensive and sickest Medicare patients will be in the CCIP programs which will be expanded if they prove successful, and have been set up to give at the least a very good chance of success. So when private sector Medicare has shown little skill at implementing cost control in the past, why is it being encouraged so much now? Part of this is the ideological preference of the Republicans to see the market work and the government fail. But there’s more than that going on.
Former CMS administrator Tom Scully argued that one main purpose for creating an extensive network of PPOs in Medicare would be to decrease the market power of the traditional program yet to replace it with nongovernmental insurers, which themselves might have sizable market power. In his view, private monopsony payers would be unencumbered by the political interests and regulatory requirements that arguably restrict the flexibility of the traditional Medicare program to act decisively to reduce spending and to respond to market-specific factors related to quality and access.
In other words, if Medicare is going to be reformed–and yes I agree it needs to be–the Administration believes that the government itself can’t do it. It’s just too political, and the interested parties will resist any significant reform or price cuts. Those interested parties are of course largely America’s providers who have indeed grown fat at the Medicare trough over the last 40 years. Instead the Administration’s hope is to hand it off to a gang of private enforcers who they hope will be as successful with reducing cost in Medicare as they were for their private employer clients in the mid-1990s.
There are of course several potential pitfalls with this approach. First, in order to increase the numbers in Medicare Advantage from the current 12% to a percentage where their weight of numbers might have some impact, the bribes paid to the private plans are (and need to be) rather substantial. In order for the program as a whole to be reformed by the private plans rather than directly by CMS, many, many more seniors have to be tempted into Medicare Advantage. However, although some good policies like real risk adjustment and competitive bidding have been included in the legislation and are due to be implemented in the next couple of years, the current way that they’ve been set up doesn’t really encourage plans to cut costs–rather it will likely result in them pricing to a benchmark that CMS sets. Of course that benchmark and indeed all payments from CMS are vulnerable themselves to yet more political interference. And if the amount of the bribes start going in a direction that the private plans don’t like, well we’ve seen this movie before in 1999-2002 when lots of plans took their ball back and went home.
Secondly, the biggest likely interference will arrive should the so-called conservatives in the Congress remember that being a conservative is supposed to be about reducing government spending. The argument which goes that "we have to increase Medicare spending now in order to put a structure of enough private plans in place so that they can cut spending at some unspecified future date", may not hold much water if Congress ever decides to look at the deficit seriously. Of course if you really want to cut Medicare spending and you can muster the political will to do it, doing it by reducing the amount you pay providers in the traditional program is the most effective way. After all it worked pretty well in 1998-2001. And if you grow the private plan side, instead of having a group of voracious cost cutters, you may just end up with a group of Mr Ten-Percents in the middle who also need to be taken care of politically and will have more power to ensure that they are. It can’t have escaped everyone’s notice that health insurers actually have done better financially in times of big cost increases rather than when they were slashing and burning provider rates.
Finally there are two other sleeper issues with Medicare that shouldn’t be forgotten. One is Teddy Kennedy’s overriding concern that increasing Medicare privatization combined with the (admittedly limited) means-testing for Part D introduced in the MMA will lead to a de-facto defined contribution mindset. He foresees Medicare eventually paying a flat rate voucher for seniors’ membership of plans, and as that amount is cut over time, you’ll see a distinction between the class of private plan for different Medicare recipients, based on whether they can afford bigger premiums out of pocket. Kennedy’s eventual fear is that the "contribution" eventually becomes regarded as a kind of welfare payment. And we all know how the public feels about cutting back on welfare. There are certainly influential Republicans (Grover Norquist is one who wants to "drown government in a bath tub") who regard that as a legitimate end-game.
The other issue is one that Ross at the sadly quiet again Public Health Press has raised many times. Hidden in the MMA legislation is a provision that if Medicare premiums for Part B no longer cover 50% of Part B costs (and that money has to come from the general taxation) benefits/payments will be cut until the premiums do cover 50%. In other words there’s a self-limiting mechanism built in which will likely mean that seniors will end up paying more to get less.
If I had to make a tenuous forecast, my suspicion is that the payments to Medicare private plans end up getting reduced sometime in the near enough future that they never obtain the critical mass that Scully and others want them to get to enable them to reform the system. I believe that the future of Medicare is a fairly straight fight between providers and taxpayers, with an increasingly aggressive CMS pushing P4P and attempting to reduce regional spending variation using the fee-schedule as its main weapon. But trying to privatize this process to stop it being political, well that just sounds un-American to me! Anytime the tax payer is forking over several hundred billion dollars, the process will indeed remain political.
