Medical Cost Containment Drum Beat Continues

File this under “Better Late Than Never” but the drum beat aimed at focusing attention on the need to constrain medical costs in America continues.

Earlier this week I wrote about Sacramento Bee columnist Daniel Weintraub’s posting a reality check for California lawmakers that all the insurance carrier bashing they’re enjoying will do little to address the rising cost of health care. That post also reported on Warren Buffet’s advice to the president to do much more to rein in costs.

Then, yesterday, President Obama indicated he’ll be incorporating into the legislation he’ll be proposing later today some of the medical cost cutting ideas put forward by Republicans during last week’s bipartisan health care reform summit.

And the beat goes on. CNN has been reporting this week on extraordinary and wasteful costs in America’s health care system. $140 for a single Tylenol pill? $1,000 for a toothbrush anyone?

Some of the unnecessary expenses are mistakes made by the hospital that slip past health insurers’ claim examiners (a Georgia patient billed for 41 bags of IV solutions for an emergency room visit that lasted two hours in which just one bag was used). But some of the outrageous expenses are intentionally designed “to make up for lower payments the government pays through Medicare and Medicaid.”

The CNN report goes on to cite, however, a Pricewaterhouse Cooper’s Health Research Institute finding that $1.2 trillion of health care spending in the United States – roughly half – represents waste. This analysis includes in the definition of waste defensive medicine, preventable hospital readmissions, medical errors, and unnecessary emergency room visits. (The Congressional Budget Office has estimated that 30 percent of America’s health care spending is wasted or spent on low-value services using a less broad definition of waste.

There hasn’t been this much talk focused on the need to reduce medical costs since Dr. Atul Gawande wrote about the difference in Medicare spending experienced in two Texas cities, McAllen and El Paso. That was right before attention shifted to the misbehavior of demonstrators during Congressional Town Hall meetings and the debate in Washington pivoted to health insurance reform rather than health care reform. And I am not suggesting that the need to focus on medical cost containment undermine efforts to reform health insurance company behavior where that’s necessary.

Nor am I saying that the health care reform bill the President will put forward today does enough to attack skyrocketing medical care costs. But it will be a start. And it will do more than the proposal he unveiled last week or those previously passed by the Senate and House of Representatives. And that’s a good thing. Let’s just hope it’s the beginning of the effort to reduce health care costs and not the end of it.

Bashing Insurance Companies May Be Fun, But Avoids the Real Issue

That health insurance carriers were ascending to the throne of political piñata in the health care reform debate has been apparent for some time now. Last July President Barack Obama began referring to health care reform as health insurance reform. A couple of weeks later Speaker Nancy Pelosi described insurance companies as “almost immoral” for opposing the creation of a government-run health plan. That insurance companies were to be cast as the villains was pretty much inevitable. People like and trust hospitals and doctors much more than health insurance carriers. And pharmaceutical companies, while profiting far more from health care than medical carriers are a bit removed from people’s daily experience. The reality is the only group Americans trust less when it comes to health care reform than insurance companies are Republicans in Congress.

Compounding the situation the health insurance industry has had atrocious timing. America’s Health Insurance Plans (AHIP), the industry’s trade organization, released a report warning that health care reform plans being considered by Congress would dramatically increase medical insurance premiums for many Americans. The message was hardly welcomed by Congressional Democrats, but what infuriated them was the timing. The Senate Finance Committee was about to vote upon the closest lawmakers had come to a bipartisan agreement (meaning at least one Republican voted for it. The vitriol the report inspired went far beyond its substance.

Then there’s the timing of recent rate increases in the individual health insurance market. While Anthem Blue Cross’ individual market increase first captured the public – and lawmakers’ attention – it’s now clear several carriers have levied double-digit premium increases in multiple states in both the individual and small business market segments. Many political observers believe that these rating actions breathed new life into flagging reform efforts.

But the 24-hour news channels and other media along with their innumerable pundits need fresh meat. Their job is to keep people watching (or reading) so the commercials don’t run together. There’s only so many ways you can use “insurance company” and “venal” in the same story before it gets old. Insurance company bashing will continue, but there are signs that serious attention may be given to aspects of America’s health care system reform beyond insurance markets.

Consider: Daniel Weintraub is one of California’s most respected journalists. In addition to reporting for and providing opinion pieces to the Sacramento Bee he maintains an excellent blog on health care issues, HealthyCal.org. In the past, Mr. Weintraub has been hard on insurance carriers. Nor is he a fan of the health care status quo in this country. So it must have been a surprise to even him when he wrote a post that makes clear that bashing health insurance companies is not the same as enacting meaningful health care reform.

Mr. Weintraub begins his post citing the political travails California insurance companies face in the state today, ranging from separate investigations by Attorney General Jerry Brown and Insurance Commissioner Steve Poizner to a host of legislative hearings led by lawmakers who, like the Attorney General and Insurance Commissioner, are seeking higher office in this election year.

While noting the entertainment value of this spectacle and recognizing that “it might actually produce information relevant to the health care debate,” Mr. Weintraub makes clear that “health insurance company profits and administrative costs remain a relatively small factor in driving the cost of coverage skyward. The biggest reason that health insurance is getting more expensive,” he continues, ”is that health care is getting more expensive.”

The post includes a useful pie chart describing national health expenditures as broken down by the US Centers for Medicare and Medicaid Services. Of the $2.3 trillion on health care Americans spent in 2008, $159 billion (approximately seven percent) “went to private insurers after deducting all the costs they pass through to the doctors, hospitals and other health care providers.” Put another way: “health care costs nearly doubled between 1998 and 2008, increasing by 96 percent. If we had eliminated private insurance companies in 1998, and assuming they provide no benefit in managing costs, health spending still would have increased by 83 percent during that decade.”

None of this means that health insurance companies and their behavior should be ignored nor their misdeeds forgiven. But as Mr. Weintraub notes, “when this election year is over and the current political bash-fest comes to an end, the core costs of health care will still be there, and chances are they will still be rising.”

That a respected journalist is noting that attacks on health insurance companies are diverting attention from other serious issues with America’s health care system is significant. But he’s not alone. According to Politico.com, Warren Buffett is advising President Obama “to scrap the health care bill and start over” because the legislation “does not focus on controlling costs.” (He went on to say that he’d vote for the Senate bill as opposed to maintaining the status quo).

President Obama and his allies will argue that their legislation does attack rising costs – and they have some evidence to back their claim. But few could honestly say it goes far enough. And while good starts are important, the question is whether the Administration and Congress have the political will to follow-up with meaningful cost containment measures.

Attacks on the health insurance industry will continue. Every drama needs a villain and in this particular theater, carriers are the bad guys. But that folks like Mr. Weintraub and Mr. Buffet are calling out politicians for failing to more fully address the most critical issue undermining America’s health care system – runaway medical costs – is an encouraging sign.

Big Impact from Small Health Care Reform Initiatives?

Whether Congress will pass comprehensive health care reform is, shall we say, an “iffy” proposition at this stage. Members of Congress continue to meet, seeking to find a way to pass meaningful reforms through a House increasingly reluctant to support anything expensive and a Senate incapable of shutting off a filibuster. Not surprisingly, observers are looking for clues as to what Plan B … or C, D, E and F … might look like.

According to the Associated Press “President Barack Obama’s modest health care budget may be harbinger of what’s ahead if his overhaul plan dies in Congress.” “Modest” is the correct word. Among the items:

  1. Emergency funds for state Medicaid programs ($25.5 billion) to help handle the influx of program participants as a result of the recession.
  2. $290 million to community health centers, providers to much of the uninsured.
  3. Funds for Medicare to experiment with ways of treating chronic health problems.
  4. Increased funding for comparative effectiveness research to help identify the treatments most effective at addressing costly conditions
  5. A boost to existing efforts to speed adoption of computerized medical records.
  6. increasing anti-fraud personnel and programs within Medicare and Medicaid.

Any and all of these may be useful and necessary. None individually or all of them collectively can be called “comprehensive.” As Secretary of Health and Human Services, Kathleen Sebelius describes them, the budget is “a platform.” And that is how it should be looked at. If comprehensive health care reform legislation dies in Congress, the game will shift to “small ball” in Washington, D.C. The goal will be to accumulate minor gains through the budget, to advance health care reform through executive orders, and to use existing programs to experiment with ways of improving medical care and reducing health care costs.

Comprehensive health care reform coming out of Washington is still possible, albeit far more unlikely now than just two weeks ago. As a result states are far more likely to move forward with more robust reform legislation than were considered in the past year or so. And Washington will continue to try to improve on the status quo through small efforts aimed at having a substantial cumulative effect. Significantly, because these more restrained proposals are less controversial, there’s a high likelihood at least some of these ideas will become law.

Medical Cost Savings Experiment Launches

In Washington, Democrats are contemplating ways to move health care reform forward in a filibuster-sensitive Congress and the White House is pivoting towards emphasizing job creation. Meanwhile, in the real world, Indiana and North Carolina are the site of two pilot projects that could have a significant impact on the quality and cost of medical care.

The Centers for Medicare and Medicaid Services (“CMS”) announced earlier this week the launch of what Health Data Management describes as “the first large-scale Medicare study of a multi-payer, quality reporting and improvement, and pay-for performance program. Data from Medicare, Medicaid, private insurers and employer-sponsored health plans will be combined with clinical data to test if quality improvement and pay-for-performance programs are more effective in a multi-payer environment.”

In other words, the folks who operate Medicare are testing a method of moving from paying medical providers for what they do to a means of compensating providers for what they accomplish. At the same time the program will “provide participating physicians with better information on the patients they are treating,” according to a press release issued by the CMS. This demonstration project will take place in Indiana.

In North Carolina, meanwhile, CMS is working with a group to test ways of better coordinating care, implementing performance incentives and measuring the quality of care received by low-income Medicare beneficiaries. The test is for model termed “medical home,” which Health Management Data describes as “redesigned practices that are more functional and workflow-friendly” and that “focus on quality, safety and alternative reimbursement methods.” The model also requires extensive use of health information technologies (think e-prescribing, clinical decision support, and electronic health records.)

My background is in selling health insurance and the politics and substance of health care reform. So I may be misinterpreting the import of these pilot projects, but my take is that they are baby steps down a very significant path: constraining the cost of health care. Most significantly, they are being done by the Obama Administration without the need for further Congressional authorization, without the need for bridging partisan chasms, and without a lot of fuss or bother. The CMS is just doing what the CMS is supposed to do. Their authority? According to the CMS press release,  the demonstrations are authorized by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. No new or additional authority required. 

Given the lack of fanfare and attention given to these efforts, this may or may not be a signal that President Barack Obama and his administration are launching a coordinated effort to implement meaningful health care reform on their own as I wrote about earlier this week. I’m not sure it matters, however. The key fact is that these experiments could identify methods of wringing savings from the current health care system without the political sausage making inherent in legislative undertakings. So even while health care reform is at a political standstill, the real work of reform seems to be moving forward.

That’s encouraging.

Massachusetts Offers Both Parties a Window of Opportunity for Health Care Reform

Not that anyone asked, but here’s some free advice to both Democrats and Republicans in Washington: don’t over think what’s happened in Massachusetts. There are as many interpretations of the “meaning,” “message” and “impact” of state Senator Scott Brown’s victory Tuesday night as there are television pundits. And just like paranoids noodling with a conspiracy theory, the facts can be manipulated to prove anything (I’ve heard all of these in the past 24 hours or so): President Barack Obama was too liberal; he tried too hard to be bi-partisan; he didn’t move fast enough on health care reform; he moved too fast on health care reform.

Or that the special election results prove that the Republican strategy of non-cooperation with Democrats is working; that the Republican establishment is out of step with Republican grass roots; that the country is irretrievably locked into blue/red gridlock; that the Republicans are branding themselves up as barriers to progress.

Or that Attorney General Martha Coakley defeat reflects voters feelings about the two candidates; what they think about President Obama, Speaker Nancy Pelosi and/or Senate Majority Leader Harry Reid; that Republicans are assured of victory in November; that Democrats have had a wakeup call and will rebound; or that the results reflect the skill (or lack thereof) of the candidates and their campaigns.

Yeah, yeah, yeah. One could argue that it means all those things and more. Usually, however, the simplest interpretation is usually closest to the truth: voters rejected Republicans last year because they were fed up with political games, hypocrisy and ineptitude. They are rejecting Democrats this year because they are fed up with political games, hypocrisy and ineptitude. The reality is that both parties have shown a remarkable inability to govern this complicated country let alone unify its diverse political viewpoints.

So instead of wasting time trying to squeeze every nuance out of the Boston-brewed tea leaves, my advice to both parties is to take advantage of the window of opportunity that election created between now and President Obama’s State of the Union Address to reinvent yourselves. Because let’s face it, voters don’t like either Democrats or Republicans. And why should they? Democrats lost sight of the reality that this is a centrist country. And Republicans have lost sight of the need to stand for something besides “we’re not those guys.”

Not surprisingly, given the topic of this blog, I think health care reform provides both parties with the chance to prove they deserve votes for something other than being the best of two evils.

Democrats have to stop acting like every member of their party thinks alike. Liberals seemed to think that with 60 votes in the Senate they’d quickly adopt the Progressive Caucus’ wish list. If they’d looked past their own hubris they’d have noticed that some of the folks in their caucus room were pretty darn moderate – heck, some are downright conservative. And they were elected as Democrats, too. Which means their views and votes are just as “Democratic” as those of liberals.

Given that the liberal agenda was never within reach and now is even more remote, think carefully about what you do next. Pass health care reform through some political legerdemain and you’ll only confirm to independent voters that you’re more interested in political games than acceptable public policy. (And remember, it’s independents that will determine the make-up of Congress. Consider: there are perhaps only 50-75 House seats winnable by either party – most Congressional seats are so solidly in one camp the seats are safe for the party who holds them now, assuming the incumbent avoids scandal or indictment).

Instead of passing health care reform in the next 24 hours, promise to take a step back and reconsider some of its elements. Then streamline the bill down to the essentials. What really matters when it comes to health care reform?

  • Restraining costs. There’s some interesting cost containment ideas buried in the current health care reform proposals. Paring the legislation down to its essentials will allow Democrats to make these ideas more prominent. Add some stronger malpractice reform language for good measure. Sure defensive medicine’s impact on costs is perceived as being far greater than it is, but let’s face it, Democrats have a perception problem. Pushing malpractice reform takes a talking point away from Republicans, shows independents that Democrats can stand up to trial lawyers, and can become a symbol for how serious Dems are to tackle runaway medical costs.
  • Unshackle Consumers with Pre-Existing Conditions. In America today, if you don’t get coverage through your employer and you have an existing medical condition, you’re out of luck. You may want to buy health insurance. You might be able to afford health insurance. But if you don’t already have coverage, you’re not going to get it. And if you do have coverage you’re stuck with it. Carriers can raise the rates, lower the benefits or both and you’ve got nowhere else to go. Most voters know someone in this predicament. Many voters are in it themselves. Require carriers to accept all applicants (what’s called “guarantee issue.”) But do so responsibly. Either require everyone to buy health insurance (called an “individual mandate”) or impose a meaningful penalty for failing to do so. Otherwise, costs will skyrocket as everyone waits until they need coverage before they purchase it – the equivalent of buying auto coverage from the tow truck driver hoisting your car after an accident (what’s called “adverse selection”). The problem is that Republicans have painted individual mandates as the devil’s work, forcing consumers to buy policies they may not want. So let the carriers provide the discipline: if a consumer fails to purchase coverage within a specified period of time after becoming eligible for it (for example by becoming too old to be covered as a dependent on their parent’s policy or losing employer-sponsored coverage) allow carriers to exclude pre-existing conditions for 12 months and to charge a 10 percent higher premium for two years. This makes those who choose to self-insure accountable for their decision while still allowing themselves a path back to responsibility.
  • Reduce the Number of Uninsured and Underinsured. Most Americans acknowledge there’s something wrong with America’s high number of uninsured. Whether the actual number is 47 million uninsured (greater than the population of California) or some lower number, the fact is it’s too many. Those with coverage pay a tax to support the uninsured, estimated at roughly $1,000 per year in higher insurance premiums. So expand Medicaid. Close the doughnut hole in Medicare prescription benefits. Offer subsidies to Americans who cannot afford premiums, but fail to qualify for government programs. Just don’t create new bureaucracies to do it. Voters know new agencies generally do more harm than good. Why feed the suspicion?
  • Reduce the Cost of Health Care Reform. If a reform package sets in motion medical cost containment, makes coverage portable, and reduces the number of uninsured – and that’s about it, the cost will be far less than what’s currently contemplated. Put on the table a tax on the wealthiest Americans (removing the tax cut President George Bush gave those earning more than $1 million per year. Then offer to replace the tax with revenue provisions Republicans offer. If they object to any revenue increases of any kind, then they will have fully embraced their branding as the do nothing party.  That’s a recipe for turning their current momentum into failure.

Which brings me to advice for Republicans. Waving a sheaf of paper at a presidential address on the floor of Congress is not proof of a Republican plan. Introduce a plan that the Republican caucus in both the Senate and the House can support. Submit it to the CBO for scoring. Treat it like a real bill. Demand hearings. Declare it a starting point for negotiations and then set up a time and place for a meeting to negotiate. If Democrats don’t show up Republicans will have enough political fodder to last two, maybe three, election cycles.

Sure, Rush Limbaugh won’t like it. He wants President Obama to fail and wants Republicans to fight every step he tries to take. But independent voters want America to succeed. They don’t care about who gets the credit, but they do care about appropriate progress. And they know achieving this means legislation that both President Obama and Republicans consider acceptable. So put together something that can gain votes beyond a Chamber of Commerce luncheon (see the above for some ideas). Remember, obstinacy is not a rallying cry. And if the GOP is not not careful, someone will remind voters that Republicans controlled Congress and the White House for six years, but never even considered meaningful health care reform. Voters don’t want the wrong health care reform, but that does not mean they don’t want any health care reform. The status quo is imposing hardship on more and more Americans. They need and deserve help. If Republicans want voters to return them to power in 10 months, they need to demonstrate leadership today.

As far as changes go, please get real. Allowing plans to sell across state lines undermines state’s rights. Republicans are for state’s rights, remember? Telling voters in California that policy makers in South Dakota will determine what’s adequate consumers protections when it comes to health insurance is lousy public policy. Republicans should go through their various proposals and cobble together a coherent package. And they should make it clear they want to pass some kind of health care reform. Proclaiming the status quo as adequate is unlikely to fly as a platform for very long.

The Massachusetts Senate race is the story of the week – and then some. Yes, it will have long term political ramifications, but eventually it will be yesterday’s news. Some other issue, scandal, disaster or discovery will take its place. For now, however, Senator-elect Brown’s upset gives both Democrats and Republicans a chance to prove they’re the party of the future, not the party of the left or of no or of, worst of all, the recent past. Whether either will choose to seize the opportunity is anyone’s guess. What’s yours?

Of course, what’s significant about the Massachusetts special election is not what I think it should mean, but what the actual impact it has on health care reform. Which I’ll be writing about as soon as the crystal ball clears a bit.

Health Care Reform 2009 Style

When it comes to health care reform 2009 has been an interesting year. And while comprehensive health care reform legislation will not be arriving on President Barack Obama’s desk this year, it is all but certain that will happen early in 2010. Getting to this penultimate moment has, to put it mildly, taken some doing. And the process says a lot about America and its leaders.

Health Care Reform Activity

President Obama had made clear throughout his campaign for the presidency that health care reform would be a top priority of his new administration. He lost no time making his promise real after his inauguration. Expansion of the State Children’s Health Insurance Plan, a proposal twice vetoed by then President George Bush, along with significant funding for medical technology, were a part of Administration’s economic stimulus package.

President Obama’s health care reform efforts took a serious blow in February when former Senate Majority Leader Tom Daschle was forced to withdraw his nomination as Secretary of Health and Human Services and as Director of the White House Office on Health Reform due to problems with his past tax returns. Senator Daschle is a political pragmatist who is highly regarded by lawmakers from both parties. Would the health care reform debate have been more civil had Senator Daschle led the White House reform effort? We’ll never know. What we do know is that civility quickly left the room as the House and Senate Committees with jurisdiction on the matter began their deliberations. The health care reform debate was passionate, raucous and partisan to the extreme. Neither party and no ideology is blameless for this descent into the dark side of politics. Both have benefited from it (although none as much as the 24 hour cable news channels) and both have sullied their standing with the public as a result.

Given what’s at stake when 1/6th of the nation’s economy is subjected to the legislative process, there may have been no avoiding an ugly health care reform debate. President Obama made clear in a speech in February that he wanted health care reform passed quickly. Many Republicans (and their talk show host allies) made it clear they’d rather see no health care reform rather than anything along the lines being proposed by – or that would politically benefit – President Obama. Meanwhile, the House Ways and Means, House Education and Labor and the Senate Health, Education, Labor and Pensions Committees pushed through liberal bills; anchors on the left in anticipation of the negotiations to follow. The resulting climate promoted intense partisanship.

Eventually more conservative Democrats forced the House Energy and Commerce Committee to slow done and moderate the legislation, although what they passed would still be considered “liberal” by most definitions.  All the House bills passed out of the committees without a single Republican vote. Meanwhile Senator Max Baucus was trying to fashion legislation that might gain the support of at least three GOP members of the Senate Finance Committee. (He would eventually manage to get the support of only one GOP Senator).

The difficulty of finding common ground between liberals and conservatives on health care reform was made abundantly clear during the summer of 2009. The disruption of lawmaker’s town hall meetings were reminiscent of the anti-Viet Nam War protests of the 1960’s. (I suppose it’s ironic that many of those shutting down the town hall meetings had participated in the anti-war protests more than 40 years earlier). The passion and concern of the health care reform protests were as sincere as some of the rhetoric and actions were unfortunate and despicable (death threats and swastikas are inherently contemptible and disgraceful). The protests did assure, however, that Republicans would remain united against the kind of reforms being pushed by the Administration.

Reform was being pushed by the White House even if the Administration was declining to define reform. Instead the White House broadly described the key elements they’d like to see in a reform bill. President Obama’s three core principles for health care reform called for reducing costs, guaranteeing choice and ensuring quality care for all. He would later add other conditions (e.g., reform could not add to the deficit), but the details of the bill were being hashed out in Congress by Democratic lawmakers. The result, much to the chagrin of liberals, was that over time the legislation became increasingly moderate culminating in the legislation passed out of the Senate Finance Committee with the support of only one Republican, Senator Olympia Snowe.

With all the committees of jurisdiction having staked out their positions it was time for Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to pull together the pieces into bills that could pass their respective chambers. Speaker Pelosi succeeded first with the House passing a health care reform in November. The price of passage was high: liberals had to accept language dealing with abortions that sparked outrage in the pro-choice community.  It took the Senate more than a month to follow suit, but eventually they did. Now it’s up to a conference committee to pull the pieces together into one bill that can pass both the House and the Senate. Not an easy task, but with the finish line in sight it’s very doubtful lawmakers will falter now.

The Public Policy Dimension

While the activity swirling around health care reform has been … interesting, the evolution of the substance of the legislation has been even more fascinating. Not all that long ago liberal lawmakers were claiming a health care reform bill lacking a government-run health plan was no health care reform at all. They seemed to believe that a public health plan was the magic wand that would remake America’s health care system into something fair, competitive and wonderful. Or maybe they just thought the public option was a way station on the path to their promised land: a single payer system. While the House bill would create a new government health plan, the Senate legislation rejected the public option. While liberals outside of Congress continue to attack reform without a public option, liberals lawmakers seem to accept the inevitable. What emerges from the conference committee will no doubt lack a public option and liberal lawmakers will still support the reform package.

While liberals were losing a public option an unlikely coalition of conservatives and liberals were also watering down a requirement that all Americans purchase coverage. Conservatives dislike the idea as a restriction on the freedom of people to have their health care reform subsidized by higher health insurance premiums for everyone else. Liberals don’t like it because, apparently, the result is a windfall for evil health insurance companies. (OK, they offer more substantive public policy arguments against the individual mandate, but the rhetoric focuses on freedom and windfalls). Never mind that requiring health plans to sell coverage without requiring individuals to buy coverage before they incur claims is a recipe for higher insurance costs or that many states require drivers to buy auto insurance. As the legislation has moved through Congress the penalty for failing to purchase coverage has drifted toward a slap on the wrist end of the spectrum.

Other issues have taken interesting turns as well. Reimbursing doctors for counseling to seniors concerning living wills and the like was removed from the bill once the discussions were labeled “death panels.” What taxes will be imposed to pay for health care reform is still uncertain. Anti-abortion advocates have done a masterful job of inserting abortion into the debate. Both the House and Senate bills contained provisions that could “bend the cost curve” (which is apparently the new articulation of what was once called cost containment). If all the cost cutting provisions in the current bills were moved into separate legislation it would actually look like a serious effort. Mixed in with the health insurance reform dominating the current versions, however, the provisions appear weak and almost an afterthought.

Health Care Reform 2009: The Human Factor

So what to make of health care reform 2009 style?

First, that the legislative process is messy and can be downright uninspiring. Second, that tackling an issue as important and complicated as health care reform cannot overcome the need for partisans of both parties to put aside the public good for their political stratagems. Third, that the health care reform package that finally passes will be far more moderate than might have been apparent earlier this year. Fourth, criticism that Congress is moving too fast on reform are really complaints that Congress is not doing what critics leveling this charge want them to do. The health care reform bill that will find its way to President Obama’s desk in 2010 will be over a year in the making. Longer if you count the debate on health care held during the 2008 presidential election. Longer still if you include the previous health care reform efforts undertaken over the past several decades.

We elect politicians to hold office because they promise to address problems. No one has ever won a campaign on the promise to do nothing if elected. In 2008 Democrats won, and won handily, in part on a promise to solve the problems posed by America’s current health care system. They are fulfilling that promise. In the process they will create new problems.

Because the fact is we humans rarely solve problems. Instead we tend to replace existing problems with new ones. And if the 2009 health care reform process has taught us anything, it’s that the people who make up the Administration and Congress (and the general public) are only human. Anyone looking at the health care reform package emerging from Congress would find evidence of that reality.

Health Care Reform’s Likely Outcome: Worse Than Promised; Not as Bad as Feared

As the Senate begins their effort to pass health care reform anxiety levels are, quite naturally and rightly rising. Health care is highly personal. For those of us working within the current framework, having politicians mess with our livelihood is a stressful to say the least. That these politicians (both Democrats and Republicans) seem to care less about the substance of the reform and more about how they appeal to their electoral base does nothing to reduce that stress.

Of course, what we’re reacting to at this stage is not the final reform legislation. The House and Senate proposals foreshadow what Congress will eventually pass (if it passes anything). The actual legislation is still to come. Put another way, we know the basic outline, but the devil resides in a suburb of the details. As I pointed out in my previous post, however, the real drafting of health care reform legislation hasn’t started yet. With the Senate taking up the issue we’re seeing the end of the legislative phase in which the parameters are defined. It’s in the upcoming conference committee that will define health care reform 2009-style (or, more likely, early 2010).

Concerning that prior post, Ron Masters, a friend and frequent reader/commenter of this blog, took me to task for writing too kindly about the current House and Senate versions of health care reform. “I’m surprised that you seem to feel that either of these bills are any good,” he write. This after a litany of shortcomings concerning the current administration, the ability of government to deliver much of anything, and the foolishness of imposing taxes and creating new entitlements in the midst of the current economic mess. And he makes some fair points.

He’s not alone. I’ve heard from a lot of brokers, readers and others who are convinced the coming health care reform will be a disaster leading to ruin and damnation for the country. I disagree. Here’s why.

As any reader of this blog knows, I don’t buy into the premises of those at the extreme. Not all government programs are good, but some are. Not all taxes are bad, but some are. Change is important, but getting change right is more important. Defending the status quo just because it is the status quo is indefensible. In other words, I’m comfortable with the gray shades of reality and uncomfortable with the black-and-whites of true believers.

I’m also comfortable with the government doing stupid things now and then. No party and no administration has a monopoly on such foolishness. (Nor has any party or administration failed to achieve some truly noble accomplishments). What’s more, no administration lasts forever. Whatever health care reform passes in the next few months will be administered by a parade of future administrations and modified by Congresses yet to-be-elected. Many people have a tendency to believe whatever Congress passes and how the current administration implements it will remain unchanged forever. It won’t. Medicare was vilified as socialistic and a fast slide toward America’s ruin when it was being created. Things didn’t work out that way. The program has survived for nearly 45 years under the administrations of Presidents Johnson, Nixon, Ford, Carter, Reagan, Bush-the-first, Clinton and Bush-the-second. Yes, it is a far from perfect program and faces significant challenges. Still, it works, it’s evolved and it will continue to do so. And the country has survived.

Another reason I’m not outright opposed to health care reform is because I believe expanding access to health insurance is critically important. It is well understood that everyone in America has access to health care. But it is also well documented that people with health insurance live healthier, longer lives. A recent study by researchers at Harvard Medical School confirmed an earlier study from the 1980’s that “uninsurance is associated with mortality.” That’s an awkward way of stating a well-accepted truism: being uninsured can be hazardous to your health.

Expanding coverage, however, is expensive. The more people who have coverage the more people who will incur medical expenses. That is after all, the whole idea and a desirable outcome. It’s also an expensive outcome. In my mind, it’s a price worth paying. Especially considering the potential return on this investment.

Those with insurance are already making heavy payments to pay for care received by the uninsured according to a study by Families USA. In 2008, the study reports, nearly $43 billion of health care the uninsured received from hospitals, doctors and other providers went unpaid. This uncompensated care results in higher premiums for those with coverage. In 2008 this hidden tax increased premiums $368 for single coverage and $1,017 for family coverage. Given the recession, this amount has no doubt gone up. Increasing the number of Americans with insurance should reduce this burden.

Early identification of potential health conditions before they blossom into serious diseases can generate tremendous economic benefits, although these savings are rarely considered in a cost-benefit analysis. Every dollar invested in preventing and treating heart attacks generates $7 in increased productivity, according to a study by United BioSource Corporation.

In other words, it’s not just the reform bills being considered in Washington that are expensive. So is the status quo. Health care costs are crippling businesses, bankrupting families and state governments, enabling fraud and abuse, increasing taxes, and failing to deliver on many of its promises. Change is inevitable – and it’s coming.

Too many in Washington believe (or at least claim to believe) that reforming the health insurance industry will reduce the cost of coverage. Far from it. The bills being considered in Congress will cause premiums to increase. Until Congress tackles the underlying causes of skyrocketing medical costs, health insurance coverage will become increasingly unaffordable. The House and Senate health care reform bills do have more cost containment provisions than is generally acknowledged. Could they be stronger and more ambitious? Yes. Are obvious cost containment opportunities missing (e.g., malpractice reform?) Yes. But they’re there. And future efforts to restrain medical costs will benefit from the seeds planted in the current reform debate.

Which brings us, I suppose, to the key question: are the House and Senate health care reform bills good? No, not really. They’re too heavy handed, using an axe when a scalpel is required. As noted, their cost containment provisions are weaker than the American people deserve. The bills reflect a misunderstanding of how health insurance works and about what drives premiums. The costs for the program are no doubt understated (few initiatives of this magnitude, whether attempted by government or business, come in under budget).

If either the House or Senate bills were the final legislation I’d be more concerned than I am now (and, for the record, I am concerned). But neither HR 3962 nor Senate Majority Leader Harry Reid’s proposal are going to be enacted, not as currently written. I believe the conference committee will need to make significant changes in order to get the votes needed for passage – if that’s even possible.

There are plenty of substantive problems with these health care reform proposals. To make matters worse, their backers and opponents are knowingly overpromising or attempting to frighten the public. Democrats claim their reforms will reduce overall health care costs, lower premiums and reduce the deficit. Wrong on all counts. Republicans claim it will destroy American businesses, annihilate Medicare, create death panels and bankrupt the country. Just as wrong.

We’ve seen this script before concerning Medicare, Iraq, and a host of other issues. Partisans on one side over promise, their opponents dredge up scenarios of doom. That both sides are equally guilty makes it no more acceptable or welcome. But it is what it is.

The main point of my previous post, and of this one, is that if reform passes, it will not be as bad as feared nor as good as promised. It will be refined sooner (by regulation) and later (by future legislation). The fight for a better health care system will continue. Only the status quo will have changed. The need to improve on it will remain.

Comprehensive Health Care Reform Not Very Comprehensive

Once upon a time it looked like Congress and the White House would deliver meaningful, comprehensive health care reform to the American people. They certainly started down that path. The talk was of “bending the cost curve.” And of tackling issues like medical malpractice. There was even promises being made of moving toward comparative effectiveness programs and away from the costly fee-for-service provider reimbursement model of today.

Those were the days, but they’re over now. Whether as a result of the August Town Hall ruckuses, lawmaker’s ignorance, or general cynicism, those ideas are pretty much a thing of the past. Yes, there are modest efforts in the current Congressional bills to control costs. But to call them modest is kind. Politicians and pundits. will claim that what’s moving through Congress will make health care coverage more affordable and relieve the burden of medical costs on American families, but few actually believe it.

Over the past few months, the focus of health care reform has shifted to health insurance reform. And while some changes in the way health care coverage is marketed and administered are necessary, those changes will do little if anything to bring down the cost of care. On the contrary, some of the proposals being considered will, it is generally accepted, increase insurance premiums.

This shift by lawmakers from comprehensive health care reform to simply addressing marketing and distribution reform is, to say the least, disappointing. It also shows the challenge in accomplishing major change in Washington. The partisan divide is deep and cynical. The extremes within each party are in ascendancy, making compromise – the life-blood of the legislative process – all but impossible.

So instead of passing real reform, changes to the system that would restrain medical cost increases, the goal seems to have shifted to passing something – passing anything – on which the “health care reform” label can be hung. The result will do little to increase the affordability of insurance coverage or to restrain medical cost inflation. Lawmakers choose to ignore this reality – and to distract attention from it by keeping the focus on whether Congress will create a publicly run plan to compete with private carriers.

Yes, health care reform is hard while taking on the insurance companies is easy. And, as I’ve mentioned, there are some industry practices that need reforming. Given the political realities in Washington it may be that health insurance reform is all that lawmakers are capable of delivering any time soon. 

The shame of it all is that the current health care system is unable to meet America’s needs. The status quo, most objective observers from across the political spectrum agree, is unacceptable. America is the only developed nation in which medical costs bankrupts families. The cost of medical care is overwhelming state governments, threatening their ability to deliver other necessary services. Medical cost inflation is outpacing growth in wages and general inflation, resulting in increasing numbers of families and businesses being priced out of health care coverage.

Meaningful, comprehensive health care reform is critically needed. It’s what the American people desire. But Congress and the White House seem unable to deliver. The fault is not solely with the Democrats nor solely with the Republicans. This is a bi-partisan failure. And hiding behind health insurance reform won’t change that reality.

Affordability and America’s Healthy Future Act

In yesterday’s post answering questions about Senator Max Baucus’ health care reform proposal, I inadvertently overlooked a question posed by JimK. He points out the proposed health care reform legislation provides a tax credit to those earning up to 300% of the Federal Poverty Level (FPL), but questions whether the Chairman’s Mark mandates people pay 13 percent of their income in premium as alleged on Countdown with Keith Olbermann.  Here’s how (I think) Mr. Olbermann’s math works.

Under the America’s Healthy Future Act every citizen would be required to purchase health insurance coverage. As JimK notes, subsidies would be available to help those earning less than 300 percent of the Federal Poverty Level  purchased coverage through the exchange. (Subsidies are apparently not available to those purchasing coverage in the traditional market). These premium subsidies are available on a sliding scale. Those households at the poverty level would be required to contribute three percent of the income toward their health insurance premiums; households at 300 percent of the poverty level would contribute 13 percent. (Chairman’s Mark page 21, page 24 of the PDF)

The FPL is adjusted annually. In 2009 the federal poverty level is $10,830 for an individual and $22,050 for a family of four. If the Baucus health care reform plan was in-force today, individuals earning 100 percent of the FPL would pay $325 toward their medical premium; a family of four with household income of 100 percent of the FPL would pay $662. Individuals at 300% of the Federal Poverty Level ($32,490) could pay $4,224 for medical coverage while our hypothetical family of four (earning $66,150 annually),could pay as much as $8,600.

There are two things to keep in mind concerning this aspect of the Senate Finance reform plan. First, these are preimum subsidies. Consumers could pay thousands of additional dollars — and a greater percentage of their income —  for out-of-pocket expenses.

Second, once household income exceeds 300 percent of the FPL no premium subsidy is provided. In 2009, according to a Kaiser Family Foundation study, “average annual (health insurance) premiums for employer-sponsored health insurance are $4,824 for single coverage and $13,375 for family coverage.” Granted, coverage obtained through the work place is usually much more expensive than insurance purchased on one’s own. Finding an average price for policies purchased on one’s own is a bit harder. eHealthinsurance, based on the carriers they represent and consumers purchasing through their site, found the median premium for individual health insurance was $1,584; for families it was $3,948 (the numerical averages were higher: $1,932 and $4,596 respectively). eHealthinsurance reports the average deductible for the individual plans it sold was $2,326 while it was $3,129 for family coverage)

For an individual earning $35,000 (323 percent of the Federal Poverty Level) and ineligible for a subsidy, the median premium ($1,584) represent 4.5 percent of household income; the average premium ($1,932) comes to 5.5 percent. For a family of four earning $70,000 (317 percent of FPL) their $3,948 median premium amounts to slightly more than 5.5 percent of household income; the average premium ($4,596) represents 6.6 percent of their income.  Again, this is before any out-of-pocket medical expenses are paid.

Which raises the question: assuming the eHealthinsurance rates are roughly equivalent to the cost of coverage available after health care reform, will coverage be affordable? If Americans must purchase health insurance it’s only fair that the cost for this coverage is within their means.

It’s likely Senator Baucus set the subsidy levels based on what the cost of this premium support would be on the federal budget. He determined this is the level of support the country can afford to provide consumers. But can consumers afford these costs? For a family of four with income of $70,000, paying nearly $4,000 in premium plus potentially several thousand more in out-of-pocket medical expenses is a significant burden. The problem is, going without coverage could be much more damaging to their finances — and to their health.

Balancing personal responsibility with the cost of coverage to families and impact of premium support on the federal budget is both a financial and a moral challenge. It requires lawmakers — and voters — to make tough choices. It also shows that the effort to restrain medical costs must be pursued just as rigorously, if not more so, than increasing access. Otherwise health care reform could result in insurance coverage and financial hardship for all.

Health Care Reform Odds & Ends

When it comes to health care reform, to maul Dickens: It is the busiest of times. It is the calmest of times. Or as general agent Michael Traynor put it, “These are interesting times when talk of exchanges and pre-existing exclusions have bumped Paris Hilton and Lindsay Lohan from the news.”

This coming week it will be even harder on E! News and the like. Sure, Hollywood has the Emmys, but Washington has the debate in the Senate Finance Committee over America’s Healthy Future Act of 2009. Not a contest. Add to the mix President Barack Obama’s five appearances on Sunday morning television shows (plus his stint Monday night as David Letterman’s guest) and these are strange days, indeed. 

There’s several items in the mix I wanted to comment upon, but none of them really warranted their own post. So here they are, mashed together into a single article. Think of it as clearing the deck in anticipation of all the fun news coming out of Washington in the next few days. 

1. Excluding Pre-Existing Conditions

Yes, it’s true, health insurance companies exclude individuals with pre-existing conditions. When they can carriers refuse to offer coverage to those likely to use that coverage. According to some politicians and pundits of all political stripes, instead of being a legitimate business practice, this process (called “underwriting”) is evidence of the evil nature of health insurance carriers and their executives. 

Under today’s rules, however, underwriting is necessary to keep the cost of coverage from going even higher than it is today. Imagine permitting people to buy auto insurance from the tow truck driver at the scene of an accident. Or picture homeowners buying fire insurance after the flood waters recede. The cost of these policies would be astronomical. Why would anyone buy auto or homeowners coverage before they need it if they can buy the same policy after an accident or disaster? The cost of insurance in this environment would be the cost of the claim (plus administrative expenses). Have $1,000 in damage after that wreck? The cost of the policy sold by the tow truck driver would need to be more than $1,000 because no one else’s premium would be available to cover any of the cost.

The same applies to health insurance.  Allow individuals to purchase coverage on their way to the hospital and costs will skyrocket. (Don’t laugh, one of the GOP proposals would allow consumers to buy coverage in the emergency room). In New York and New Jersey, where there’s a mandate to sell individual health insurance but no mandate to buy it, premiums are three-times higher than in California.

Which illustrates the only way to resolve this situation: require everyone to obtain medical coverage. Without this balance (both a mandate for carriers to sell and for consumers to buy coverage) premiums quickly become unaffordable. Lawmakers who propose guarantee issue without a mandate to buy – and they exist on both sides of the aisle – are either grandstanding, mathematically challenged or ill-informed.

2. Losing Coverage When You Need It

The other popular market reform concerns carriers cancelling coverage after claims are incurred by policy holders, a practice called “rescission.” Much of the furor over rescissions in Washington and elsewhere are legitimate, the result of carrier’s tone deaf, heavy-handed, and inept approach to a reasonable concern: preventing fraud. So long as health insurance is voluntary, carriers need to protect their members from being gamed by those who would intentionally abuse the system. To hear some talk about the problem, however, you’d think every claim submission is answered by a termination notice. Estimating the total number of rescissions is difficult due to disparate reporting requirements around the country. Yet in testimony before Congress three of the largest carriers claimed to have canceled about 20,000 health insurance policies over five years. Four thousand annual rescissions sounds like a lot, but it’s a small fraction of the millions of policies sold and maintained by those carriers each year.

Because the number of terminations is small does not excuse the health plans from abusing their rescission power. Change in this area is needed to restrict rescissions to only intentional misrepresentation of medical conditions. In the meantime, overstating the severity of the problem may be good politics, but it is misleading. (Of course, if underwriting is eliminated, this problem goes away: if carriers cannot charge premiums based on pre-existing conditions there’s no reason to even ask about prior medical conditions.)

3. Non-Profit Doesn’t Mean Cheaper

Liberals demanding that reform legislation include a government-run health plan usually claim it will reduce the cost of coverage by introducing a non-profit health plan into the market. Here’s how Senator Jay Rockefeller put it on MSNBC, “There’s got to be some discipline to other insurance companies, that make them take seriously, not just competing with each other, but competing with somebody who because they are non-profit … and don’t have to please their shareholders because they don’t have any, that they can offer premiums at lower prices” (this sound bite begins at about the 2:35 mark). Yet there are already non-profits operating in most states. In California, for example, Kaiser Permanente and Blue Shield of California are two. In some parts of the state, these plans do offer the most affordable plans; in other regions the lowest cost plans are available from their for-profit competitors. Experience indicates little correlation between a carrier having shareholders and their premiums. Claiming it does may sound good, but anyone taking the time to see what’s happening in the real world will realize this is a false argument.

4. Ugly Language is Dangerous.

House Speaker Nancy Pelosi raised the possibility that the angry rhetoric prominent in the health care reform debate could turn violent, comparing it to the situation in San Francisco over gay rights in the 1970s. The link between the anti-gay rhetoric and the murder of Mayor George Moscone and Supervisor Harvey Milk is legitimate. So is the Speaker’s concern. Words can motivate. Passions can lead to horrendous acts – from terrorist bombings to the murder of doctors who perform abortions.

What’s hypocritical about Speaker Pelosi’s comment, however, is that she has contributed to tenor of the debate. When Speaker Pelosi, the individual third-in-line to the presidency calls opponents “immoral” and describes them as”the villains” in America’s health care reform system she loses the ability to complain when others claim her policies are socialist. The fact that Speaker Pelosi is guilty of what she rails against should not mean her warning is ignored. America’s health care system will be reformed by thoughtful deliberation. Depicting President Obama as Hitler, painting swastikas on the offices of lawmakers, pastors praying for the death of President Obama, or calling opponents “traitors” inspires ugly emotions and provides cover for crazies who take the law (both governmental and ecclesiastic) into their own hands.

Speaker Pelosi hopes for a more responsible tone in the health care reform debate. Her greatest contribution to achieving this goal would be to moderate her own rhetoric.