A Few More Unrelated Health Care Reform Items

There’s always something happening related to health care reform in general and the Patient Protection and Affordable Care Act in particular. As I continue my year end “clean-up” here’s some short takes on some of the more noteworthy events and ideas I’ve come across lately.

The AMA and the Individual Mandate:
The American Medical Association is of two minds when it comes to requiring everyone to obtain health care coverage  This individual mandate is at the heart of many of the law suits seeking to overturn the PPACA in court. During the health reform debate they supported this requirement. As reported over at the HealthAffairs blog, during their recent interim House of Delegates meeting the AMA voted to reverse this position. Only after “desperate scrambling by AMA leaders” the House voted to refer the issue to the AMA Board of Trustees and to hold a vote concerning their their position on the individual mandate when the House reconvenes again in June.

Both votes were close and reveal a deep schism within the AMA. Like the Wright on Health blog where I came across this item, I don’t believe the result will actually split the AMA, but if the organization abandons its support for the individual mandate it would be a serious political blow to the Obama Administration.

The PPACA and Medicare:
President Barack Obama and his allies argue that the Patient Protection and Affordable Care Act will strengthen Medicare even though the health care reform package cuts about $500 billion from the federal health program over the next 10 years. The Associated Press did an interesting fact check that sheds some light on the PPACA’s impact on Medicare. The bottom line: unless there are offsetting cost reductions in Medicare, the cuts to the program required by the PPACA will simply need to be replenished by other sources. While the Associated Press’ Q&A points out another example of the financial gimmickry so common in Washington, it also highlights the need to reform Medicare, especially in terms of reining in medical spending. The PPACA creates some pilot projects and the like to do just that. Whether they will generate the savings necessary in time is the $500 billion question.

And for a lighter look at Medicare, feel free to check out “The New Medicare Drug Card” brought to you by the Onion.

Speaking of Controlling Medical Costs:
Health insurance premiums reflect the cost of health care. This is a fact that many lawmakers seems unable to grasp. Perhaps its a gap in their education or, at the risk of being appropriately cynical, perhaps it’s because it is easier – and better politics – to beat up on insurance companies than it is to take on hospitals and doctors.

One way to reduce costs is to reduce needless care. As David Leonhardt wrote in the New York Times earlier this year, the potential savings from eliminating unnecessary medical treatment is huge, both in terms of dollars and in lives. Mr. Leonhardt, who writes the Economic Scene column for the paper, identifies three steps necessary to earn these savings: 1) “learning more about when treatments work and when the don’t;” 2) “give patients the available facts about treatments;” and 3) “changing the economics of medicine to reward better care rather than simply more care.”

What’s especially interesting, and especially for those who believe the PPACA does nothing to restrain health care costs, is Mr. Leonhardt’s point that the new health care reform law makes a good start down this path. As he makes clear, the PPACA doesn’t go as far as is needed, but it lays the groundwork for much of the hard work yet to come.

Physician Owned Surgery Centers:
Here’s a not surprising headline: “Doctors with ownership in surgery center operate more often: U-M study.” Shocking, no? The University of Michigan study shows the financial incentives gained by doctors when they have a financial stake in a a surgery center. One possible explanation the researchers mention for this is “that these physicians may be lowering their thresholds for treating patients with … common outpatient procedures.” Those financial incentives can be hefty, amounting to what the authors call a “triple dip.” Doctors with a stake in a surgery center “collect a professional fee for the services provided … share in their facility’s profits and [in] the increased value of their investment.”

Writing in Health Affairs, the data showed that “owners operated on an average of twice as many patients as non-owners” and their caseloads increased more rapidly and dramatically. Significantly, the study reports that doctors have a stake in 83 percent of surgery centers in the United States. To be fair, these out-patient centers often charge less for comparable treatments than hospitals do. But if they double the number of surgeries, how much do they really contribute to constraining health care costs?

The “Best of” CBO’s Health Care Reform Reports:
The Congressional Budget Office occupies a unique position in the legislative process. In a hyper-partisan Congress, they are an island of non-partisanship. (Of course, partisans in both parties only admit this when what the CBO reports supports their position, but that’s politics). This is not to say that the CBO is always right or that they’re not constrained by the questions asked or the data they are provided. But at the end of the day, when it comes to reliable information and analysis, there are few places better to turn to than the Congressional Budget Office.

When it comes to health care reform the CBO was instrumental in providing meaningful input to the debate. And now those reports – and other health care related studies – are compiled in a greatest hits collection entitled “Selected CBO Publications Related to Health Care Legislation, 2009-2010.” The information contained in this 364-page compendium is invaluable. But what will be even more fun five or 10 years from now will to look back on the CBO’s projections and see how rarely the world world abides by the predictions of even well-informed and well-intentioned economists.

Two More Unrelated Health Care Reform Items

In something as complex and pervasive as, say, changing the entire health insurance industry, the “big” things tend to divert attention from noteworthy items that deserve some attention, too. In my previous post I wrote about the inability of Congress to repeal the 1099 requirement contained in the Patient Protection and Affordable Care Act.  As I continue to clean out my (digital) files, there’s a few other items I’ve come across that deserve mentioning.

Anti-Trust Suit:

Back in October, the Justice Department filed suit against Blue Cross Blue Shield of Michigan claiming the health plan had used its dominant position in the market to force hospitals to charge higher prices to its competitors, a violation of anti-trust laws. According to New York Times, the complaint alleges the “most favored nation” clauses insisted upon by BCBSMi, which “require hospitals to charge other insurers a specified percentage more than they charge Blue Cross — in some cases, 30 to 40 percent more” result in “higher health insurance premiums for consumers and employers.” The clauses also prevent the medical providers from offering any other carrier a better price than they offer to BCBSMi. In exchange for the favorable treatment the suit asserts BCBSMi agreed to pay higher prices themselves.

A spokesman for the health plan was quoted by the New York Times as responding that it was against the insurer’s interests to pay more than they could otherwise negotiate and the “These kinds of low-cost guarantees are widely used in a variety of contracts in a number of industries.”

However the suit turns out, merely bringing the legal action will draw attention to what the Washington Post describes as the “concentration of power that dominant health insurers wield in many parts of the country.”  A study sponsored by the General Accounting Office last year found that the median small group market share of the largest carrier in a state was 47 percent. The dominance of a single insurer varied considerably from state-to-state: in Arizona the largest carrier had a 21 percent market share among small businesses; in Alabama the dominant carrier had a 96 percent share.

A government-run health plan, what was called the “public option” during the health care reform debate,  was President Barack Obama’s attempt to, among other things, provide competition to these dominant carriers. Of course, in bringing competition to Alabama (where arguably it is needed) he was also imposing a government-run plan on Arizona (where it apparently is not needed). Having failed to secure a public health plan in the PPACA, the Obama Administration is now using the courts to bring about greater competition among health insurers.

The courts will determine if what Blue Cross Blue Shield of Michigan does in its contracts are unfairly (and illegally) anti-competitive.  There’s nothing wrong with the Administration bringing suit to find out. That’s how America’s legal system works. But given a recent insurance industry study disclosing that hospital costs in California rose 159 percent over the past 10 years, in part because of the dominant position some medical providers enjoy in parts of the state, it will be interesting to see if the Administration gets around to exploring the anti-competitive activity that may be involved in their business practices.

Doctor Owned Hospitals

The Patient Protection and Affordable Care Act makes it extremely difficult, if not impossible, to create new physician-owned hospitals that bill Medicare for reimbursement. A group of Texas doctors sued to have this provision (Section 6001 of the new health care reform law for those keeping track at home) declared unconstitutional. U.S. District Court Judge Michael Schneider dismissed the suit, but the plaintiffs have pledged to appeal his decision according the Becker’s Hospital Review. The plaintiffs claim the provision, which also limits expansion of existing doctor-owned facilities and freezes the percentage physicians can own of a hospital, is “retroactive in effect.”

It was only last summer when Dr. Atul Gawande, writing in The New Yorker described the impact doctor-owned facilities had on making McAllen, Texas the most expensive town in the country in terms of Medicare spending. His article gained widespread attention and was cited by President Obama during a major speech on to the nation on health care reform. The PPACA attempted to address this cost driver. Doctors are suing to excise that provision. Whether they succeed or not, the law suit will (hopefully) bring additional attention to the advisability of having the those who help determine the amount of demand for care own the source of supplying that care.

And what both these items underscore is the important role courts will play in determining the nature — and affordability — of America’s health care system in the coming years.