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Defined Contribution Health Care—The Conservatives’ Silver Bullet

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By ROBERT LASZEWSKI

Conservatives are in a full court press these days telling us the answer to America’s out-of-control health care costs—and our fiscal crisis—is to move Medicare, Medicaid, and the tax code subsidy for private insurance to a defined contribution system.

Instead of the federal government defining a benefit and then shouldering the cost of whatever that promise leads to (today’s defined benefit plan), many conservatives are suggesting that we gradually move to a system where the government only promises an annual payment (or tax credit) for health care in the form of a voucher and then the consumer uses it (arguably more efficiently) to buy one of many health plans competing for their business.

First, let me tell you that I think defined contribution health care is generally a good idea. For too long the federal tax system and Medicare policy has subsidized careless health care spending.

Many worry that defined contribution health care would lead to poor people getting second-class health care because they would not be able to afford more than the voucher allows them. That is a legitimate concern and while that outcome can be tempered it cannot likely be eliminated. But that also occurs today, as many seniors have nothing more than a combination of Medicare and Medicaid while the wealthier can afford much better supplemental insurance. And, it will occur in the future under the Affordability Act because the new federal health care subsidies are based on the more limited plans available.

But I will also tell you that it is naïve to think the way to control health care costs is to simply move to a more market-oriented defined health care system.Continue reading…

Glen Tullman @ HIMSS11

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Glen Tullman, CEO of Allscripts, talked with Matthew about mergers, consolidation and payment changes taking place in the healthcare system.

The HMO in Your Future

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By JOHN GOODMAN

I have not been able to determine how you pronounce the acronym for Accountable Care Organization (ACO). Is it ā´ ko? Or ā´ so? Or ăh so´, as in Charlie Chan movies? What about ĕ´ ko, as in a canyon? Or simply ick, with a silent o?

Anyway, this is not a trivial matter because you are likely to be in an ACO at some point in the future and it’s probably going to happen sooner than you think.

In Massachusetts, stakeholders are already meeting to develop a plan to push everyone with commercial insurance into an ACO. [Can you guess who doesn’t count as a “stakeholder?” If you live in Massachusetts and you weren’t invited to the meeting, that’s a clue.] Nationwide, Medicare will start paying fees to ACOs, beginning next year. Eventually, the Obama administration would like to see everyone in an ACO.

But if no one had any previous interest in forming ACOs, let alone joining them, what is going to cause us all to change our minds? Money. Insurers won’t be able to get premium increases unless they adopt ACO plans. Doctors and hospitals will be paid less if they don’t join. Eventually doctors will find they are ineligible to treat Medicare patients or patients insured in the newly-created health insurance exchanges if they are not practicing in ACOs. As for the patients, there won’t be any plans to join other than ACO plans.Continue reading…

Free Drug Samples and Hospital Hotels: Which is the Greater Evil?

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By MICHAEL KIRSCH, MD

Many folks criticize pharmaceutical companies for providing physicians’ offices with free drug samples. They claim that this giveaway harms consumers because drug companies must raise their prices to cover the costs of these freebies. Of course, this is undeniable. Any business expense, such as payroll or advertising, has to be covered and is expectedly borne by the consumer. If a company chooses not to advertise, outsources manufacturing to a country with cheaper labor, offers limited benefits to its employees, then they can sell their product at a low price. In this hypothetical example, anemic sales may doom the company quickly.

Naturally, free samples are not really free. The rest of us pay for them. While this is true, I don’t think it is evil. Unlike the U.S. government, at least drug companies are covering their costs and not simply borrowing money every year to meet budget. Interesting concept.

Two of the community hospitals I work at have undergone transformations. One is owned by the dominant health care behemoth in Cleveland and has just completed a near $200 million renovation and expansion. The other smaller hospital is one of the few remaining Cleveland area hospitals that are still independent. I’d like to sneak there at night and hoist up a ‘Live Free or Die’ flag up the flagpole, to celebrate its independent streak, but I’m sure that there are video cameras everywhere and that I would be in violation of several bylaws. The apt punishment might be that I would have to spend a cold Cleveland night chained to the flagpole reading electronic medical record manuals out loud.Continue reading…

Are Academic Medical Centers Toast in a Post-Healthcare Reform World?

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By BOB WACHTER, MD

My hospital, UCSF Medical Center, is thriving. Our profits this year will be nearly $200 million. We’re building a sparkling clinical complex – a combined women’s, children’s, and cancer hospital – adjacent to our new downtown biomedical research campus. We are installing a state-of-the-art computer system. US News & World Report calls us the 7th best hospital in the country. Our students, residents, and fellows have never been better.

Yet angst is in the air, borne of a sense that the future is coming at us fast, and we are not prepared.

We’re not alone, mind you. Every hospital enjoying a positive bottom line today is contemplating a bleaker future. Traditionally, hospitals planned to lose about 30% on every Medicaid patient and 5-10% on every Medicare patient, while banking enough profits from commercially insured patients to make the math work out. All of these payers – both governmental and private – are getting stingier, and this latticework of cross-subsidies will soon be a fading memory.

This threat to profitability is roiling hospital board rooms everywhere, but the threats to academic medical centers seem particularly daunting. After all, the community hospital simply (I guess that should be “simply”) needs to make enough of a profit to refurbish the physical plant, pay everybody’s salaries, keep the docs and nurses happy, and save for a rainy day. Academic medical centers, on the other hand, suffer from a different problem: Mission-O-Megaly.Continue reading…

Heart Failure or System Failure?

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By MERRILL GOOZNER

Today’s New England Journal of Medicine reports the results of a government-funded study of two potential approaches to giving emergency diuretics to congestive heart failure patients who show up on emergency room doorsteps gasping for breath. Should it be through a continuous drip or periodic injections? Should physicians prescribe high doses or low doses of these fluid dispersal drugs? Cost isn’t an issue since diuretics are generics. The pressing question was whether high doses caused a greater incidence of renal failure, which had been suggested by a number of smaller trials.

This comparative effectiveness study is the kind of research that never receives attention in the press. No new drugs are involved, nor does it involve a high-profile disease. But it merits closer scrutiny because of the patient population. There are more than a million patients who enter hospitals every year with acute episodes of congestive heart failure. The average age in this study was 66, i.e., Medicare was paying the tab. Three quarters had been admitted to the hospital within the past year. More than half had diabetes, and around 40 percent had implanted defibrillators. Most were on two or more drugs for high blood pressure. I searched for data on the average weight of this population, but, alas, that wasn’t included. I think you can guess.

The results were mildly interesting. It didn’t matter what approach physicians took, the outcomes were about the same. Fears of exacerbating renal failure in this vulnerable patient population from high dose diuretics appear to be overblown.

I’m afraid this is going to be the conclusion of much comparative effectiveness research, which received a major shot in the arm through the 2009 stimulus bill and will receive a continuous injection of funds from the Affordable Care Act, presuming the Republicans in Congress aren’t successful in de-funding the bill. Physician and hospital practice will have better evidence about what to do in certain situations, but radical changes in procedures that have a dramatic impact on cost will be elusive.Continue reading…

Guess Who Has Been Over-Treated For More Than Twenty Five Years?

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By MAGGIE MAHAR

When I was in my twenties, I was diagnosed with glaucoma. At the time, I didn’t worry about it. I was twenty-something, busy teaching, having babies, writing a book—and, with glasses, my eyesight was 20/20.

It was only when I moved to Manhattan twenty-five years ago that I began to take the disease seriously. A friend recommended an ophthalmologist who, I was told, was one of the best in the city. He regularly turned up on lists of New York’s star specialists, had an office on Park Avenue, and didn’t take insurance of any kind. Twenty-five years ago, this was unusual. But, my employer’s insurance was generous and paid most of his very high fee.

At my first appointment, I mentioned the early diagnosis of glaucoma. After examining my eyes, Dr. X told me that that I must begin using eye drops immediately. I also should begin making appointments to see him every four months so that he could check the “pressure” on my optic nerve. Glaucoma is the second leading cause of blindness in the U.S. There is no cure, but usually it can be controlled with eye drops. “It must be watched carefully,” said Dr. X.

Over a period of years, I saw Dr. X regularly, and continued to use the eye drops, morning and night. At least once a year he prescribed a “field vision test” to check whether my peripheral vision was degenerating. Meanwhile, an appointment with Dr. X killed an afternoon. He kept his waiting room full. And while he had many minions (young assistants who seemed afraid of him), he was a solo practitioner, so the line moved slowly. He once explained to me that he preferred solo practice because, “I don’t want anyone looking over my shoulder.”Continue reading…

The Other Scarlet Letter

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By J.D. KLEINKE

Do you hate abortion? Me too. Every form of the procedure sickens me, and has since the first one I ever heard about, when I was 10 years old.

My mother had come home early, distraught and bathed in tears, from her job as a teacher in a special high school for pregnant teenagers. Her school had let out early, following the news that a 15-year-old student had just died in the hospital from sepsis, a few hours after delivering a second-trimester, stillborn fetus she had impaled the night before with a knitting needle. It was 1972, a year before Roe vs. Wade.

No, it was not appropriate to explain abortion to a 10-year-old. And perhaps it was my overexposure as a child to the nasty realities of the world that continues to inspire my utter impatience with the nonsense running out of some peoples’ mouths, in particular moralizing politicians who are probably cheating on their wives, but that’s another story. The starkness and radicalization of my upbringing gave me a hair-trigger for spotting and calling out hypocrisy and collective self-delusion – especially when both are so obvious, no one else in the room seems to see them.

To wit: those who claim to be “pro-life,” whatever the hell that means, should get real about how the real world works. The “pro-lifers” in Congress leading the charge to dismantle Planned Parenthood should try listening to their own rhetoric about the inexorable power of market forces. Demand will always seek and find supply; and as demand for abortions will never go away on its own, neither will those who “supply” them, be they overseas physicians for the wealthy, discreet, chart-buffing physicians for the middle class, back-alley butchers for the poor, or desperate, do-it-yourself teenagers. Anyone who thinks I am kidding – and who has not had the benefit of an OB/GYN rotation in a public hospital and/or a politically furious mother with poor boundaries – should read or watch the blistering Revolutionary Road through to its bloody end.Continue reading…

The Triumph of Fear, Uncertainty, and Doubt

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By JOE FLOWER

According to a new poll, half of all Americans say they are “confused” about healthcare reform. And boy howdy, are they right!

Take a look at this new Kaiser Family Fund poll: http://www.kff.org/kaiserpolls/upload/8156-C.pdf

Scan down to Slide 9: Almost a quarter of all Americans think that ObamaCare has been already been repealed. More than a quarter aren’t sure. Barely half are paying attention enough to realize that it’s still law.

What about the idea that the reform law is wildly unpopular, and most people want it repealed? Slide 4 shows that 39% want it repealed, and 50% want it kept or expanded. But take a look at slides 7 and 8. The only major provision of the law that a majority of Americans want repealed is the individual mandate—the part that says you have to buy healthcare insurance or be fined. Even those who want the law repealed agree, except that a majority also think it’s unfair to make the wealthy pay a heftier Medicare tax.

Think about that: Even those who will tell pollsters that they want the law repealed say that, well, yes, they think it’s a good idea to give tax credits to small business to help them give health insurance to their employees. And to close the Medicare “doughnut hole.” And to subsidize low and moderate income Americans to buy health insurance. Or to provide voluntary long-term care insurance (the CLASS Act). And to tell insurance companies that they have to take all comers (“guaranteed issue”).

So 39% want health care reform repealed, but 30% want it expanded. And a majority across the spectrum want insurance companies to be forced to sign up all comers, but they don’t want to be forced to sign up if they don’t feel like it.

What are we to make of this?

1. What most Americans think about healthcare reform is somehow not exactly what you would hear on Fox News or on the red side of the House of Representatives.
2. Most Americans aren’t exactly paying attention anyway.
3. If Americans have a strong suit, it’s not arithmetic.

The Obamacare Shift

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By PAUL LEVY

A colleague pointed this out to me recently, and I think he has it right: While more people will have health insurance as a result of the federal health care reform act, a side effect will be to reduce the number of people insured through the employer-based insurance plans that have characterized the US health care system. These people will either be insured as individuals through the state exchanges that are to be established or, if eligible, through Medicaid. There are three aspects of economic hydraulics that are likely to lead to this result.

First, the penalty to be assessed against employers for not offering coverage — $2000 per year — is dramatically below the cost of providing insurance. If you are an employers and can save, say, $5,000 by paying $2,000, why wouldn’t you do that? And the $2000 is not even indexed to inflation, while the annual charge for an employer-sponsored plan is likely to go up over time. Hence the differential will grow every year.

In the past, the provision of a health care benefit was viewed as competitive factor in hiring and retaining a firm’s work force. But for the vast majority of businesses, that may be a less important factor than saving a few thousand dollars per employee and being able to offer a portion of those savings in higher wages and/or improving the profitability of the firm. Sure, some businesses might still want to attract workers by having their own semi-customized insurance benefit, but the power of that is likely to diminish over time.

A second factor is that the so-called “Cadillac” tax will make employer-sponsored health care even more expensive if you have a plan with generous benefits. Health coverage in excess of $10,200 for individual plans and $27,500 for family plans will be hit with a 40 percent excise tax on the amount in excess of the floor. The tax is indexed for inflation plus 1 percent.

Finally, to help avoid the excise tax, employers are going to “dumb down” plan designs by raising deductibles and co-pays. As they do so, the substantive difference between their own plans and the ones that will be offered through state exchanges or Medicaid will diminish. Even if you have a residual concern that your workers may want an employer-based plan, their desire might be diminished as you make your plan less attractive, so you lose little in competitiveness by referring them to the non-employer based plans.

There are those who believe that there was an ideological basis for this construct, that the Administration and a majority of Congress wanted people to move away from employer-based health insurance as part of an eventual movement to a federally chartered single-payer regime. Others say that it is just an natural extension of a bill that created important protections — benefit mandates, a floor for medical loss ratios, guaranteed issue, restrictions on medical underwriting — all of which act to increase the cost of insurance products.Continue reading…

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