Thursday, May 31, 2007

Latest "Health Wonk Review" is Up

The newest version of Health Wonk Review is now up over at Richard Eskow's "The Sentinel Effect." It a sample of some of the best posts from the world of health care blogs and worth a read.

Drug Reimportation from Canada––The Drug Industry Loves It

Well, the illegal kind of reimportation anyway.

For many years we have been debating the issue of drug reimportation--the importation of American drugs from other nation's, such as Canada, at much lower prices which their government-run systems enable their pharmacies to charge.

Drug reimportation was never going to be much of a solution to America's high drug price problems--just how many excess American drugs were going to be available from these countries anyway?

In the past, I have called drug reimportation one of the goofiest health policy ideas ideas that has ever come along. Think about it. Believing that our drug affordability problems could be solved by manufacturing a drug in Kansas, shipping it to Canada, and bringing it back at a price much lower than we pay here because of the way Canada regulates its drug markets.

Now, that hits the issue head-on.

But the notion of drug reimportation seems to be dieing a natural death.

In the Senate this month, sponsors failed to get even close in a vote to add it to a major FDA bill--largely because the Bush administration said it would veto the important FDA bill that reauthorized key drug and medical device programs for the FDA if a reimportation amendment were added to it.

A recent Toronto Globe and Mail article reported that drug reimportation sales from Canada to the U.S. are half what they were in 2004--now about $500 million (Canadian) per year. The article also pointed out that the number of online Canadian pharmacies has fallen from 55 in 2004 to 30 today. According to the Globe and Mail, many of the U.S. city and state reimportation programs that garnered so much publicity a few years ago, as politicians were quick to call press conferences announcing they had the courage to defy federal reimportation laws, have just faded away victims of administrative costs that were higher than actual savings.

While I always thought these reimportation schemes made little policy sense, I have believed the Congress would pass a reimportation bill anyway. The polls told us it was a popular idea in great part because so many of us know friends and family that have used Canadian drugs as a lifeline when U.S. prices were too high.

More than anything, the new Part D Medicare senior drug plan has hurt the reimportation business and its political fate. That family member who needed the Canadian drug lifeline in 2004 is now probably getting their drugs for a $20 co-pay through Part D. The increased use of generic drugs in the U.S. has also taken a lot of pressure off--generics are a lot cheaper here than in Canada.

But, on the surface, it still sounds like a good idea--an easy way to get cheaper drugs. In fact, Hillary Clinton included it in her recent speech on how to contain health care costs.

While the Congress is no longer likely to pass a reimportation bill--in part because most of the pressure to do so is off and in part because President Bush would veto it anyway--don't look for the feds to aggressively enforce existing laws to kill what's left of the Canadian drug reimportation business.

Here's the incredible irony when it comes to reimportation--allowing the illegal trade is in the best interest of the pharmaceutical industry!

While Part D has solved the senior's portion of drug price angst, there are still 45 million uninsured in the U.S. They can still benefit from the Canadian pharmacies. Being uninsured, they aren't much of a market for the drug companies anyway. With Canadian shipments now down to only $500 million a year, reimportation isn't hurting the huge drug industry and it keeps the uninsured lobby quiet.

With employers paying most of the pharma cost for the insured, seniors taken care of by Part D (both benefiting from managed care discounts), and many uninsured getting their drugs from Canada, when was the last time you heard anyone complain about higher U.S. drug prices?

So who is benefiting most from this modest amount of illegal drug reimportation? The drug industry.

Don't look for any big enforcement actions against the Canadian online pharmacies any time soon--at least the ones that are left.

Wednesday, May 30, 2007

Giuliani, McCain, and Romney--Where Are Their Health Care Plans?

Looking at the leading Republican candidates for president you wouldn't think health care is much of an issue.

In fact, finding anything the top three Republican candidates have said regarding health care is sort of like playing, "Where's Waldo."

A recent tour of their official campaign Websites:

Rudy Giuliani - Click on "On the Issues" on Giuliani's Website and health care isn't listed as one of the eleven issues shown from "Fiscal discipline" to "Marriage." Apparently, he hasn't made the connection between Medicare going broke and "Fiscal Discipline."

The only reference I found to Giuliani's health care platform on Google was a story in the Des Moines Register where he mentioned health care vouchers, high risk pools for the uninsurable, and support for President Bush's State of the Union proposal to end the tax exemption on employer provided health insurance in favor of a standard tax exemption. He was also quoted as saying he supports, "fee market, profit-driven" health care as one that serves people best.

John McCain - Click on the "On the Issues" icon on McCain's Website and you get his position on nine issues from "Government Spending, Lower Taxes and Economic Prosperity" to "Protecting Second Amendment Rights"--but none of them deal with health care. Like Giuliani, apparently McCain hasn't made a connection between "Government Spending" and our ballooning entitlement costs--particularly Medicare. He also doesn't mention health care under the "Human Dignity" portion of his platform.

McCain is not a newcomer to health care--he was a primary sponsor, with Senator Kennedy in 1999, of the failed "Patients' Bill of Rights" that would have regulated health insurers.

Mitt Romney - Romney's Website actually mentions health care! Under the "Issue Watch" icon, health care is the tenth of eleven issues he lists. The third issue he lists is, "Competing With Asia." He makes no connection between this and American health care costs (he might ask Detroit about that). Under the "Health Care" issue icon he shows three short statements including, "The health of our nation can be improved by extending health insurance to all Americans, not through a government program or new taxes, but through market reforms."

Romney does not mention the Massachusetts health reform bill he signed that does create a new and very large government program and started out mandating that consumers buy health insurance that costs about $7,000 for a family of three ($2,000 deductible plan, average age of 37).

Apparently, the leading Republican candidates, unlike their Democratic opposites, don't think they need to address health care to win the Republican nomination.

Maybe, and only maybe, that makes sense in the short term, but they would be wrong to underestimate just how important an issue this is to American voters.

You wouldn't think the Democrats won the last election.

Recent post: Clinton, Edwards, Obama--Offering Health Care Reform Proposals More Similar Than Different

Tuesday, May 29, 2007

Clinton, Edwards, Obama--Offering Health Care Reform Proposals More Similar Than Different

In sailboat racing there is a strategy called "covering." It means that when your competitor makes a move you make exactly the same move. That way, you have covered their every move and they can't get away from you because of any new tactic they aim to employ.

When you "cover" you intentionally stay even during that phase of the race--you have no intention of getting ahead at that point.

On health care so far in the Democratic race, Clinton, Edwards, and Obama are "covering." They are proposing pretty much the same things and as a result protecting themselves from criticism--when compared to their Democratic rivals--on the issue of health care reform.

Hillary Clinton, John Edwards, and Barack Obama obviously don't intend to win the nomination on health care--but more importantly they don't intend to lose the nomination on this highly volatile issue.

Each of the Democratic front-runners have so far proposed essentially the same health care reform steps.

Months ago, John Edwards proposed a comprehensive plan building on existing public and private programs and largely paid for by ending the Bush tax cuts for the "rich" and mandatory employer contributions. His plan contained an individual mandate and a series of mostly non-controversial cost containment provisions I would label "cost containment lite." His plan looks very similar to the recently enacted Massachusetts health reform plan.

Last week, Hillary Clinton unveiled the first elements of her plan focusing on a series of cost containment proposals using many of the same "cost containment lite" elements. She will discuss her plans to improve access and quality later. Earlier post: Hillary Clinton Outlines the First Elements of Her Health Care Reform Plan

Hillary Clinton may be using the smartest tactics. Politically vulnerable from the failure of her 1993 failed Clinton Health Plan, she has waited for her two main rivals to put their plans on the table and will now offer something very similar. That makes it difficult for her Democratic rivals to use health care as a weakness against her.

Today, Barack Obama released his health care reform outline. It looks a lot like the John Edwards plan (and Massachusetts) and also includes many of the cost containment provisions Mrs Clinton proposed. Obama would also end the Bush tax cuts on the "rich" to pay for his plan. Like Edwards, Obama would create a "more efficient health insurance market" similar to the Massachusetts "Connector" and the Federal Employee Health Benefit plan.

There are some differences. Edwards would mandate that individuals buy health insurance (with substantial support for the low income). Obama would not require that individuals buy insurance but both would require employers to pay for it (Obama would exempt the smallest employers)--and both would also offer substantial payment support for the poor. Obama has also proposed a large claim reinsurance scheme similar to the Kerry proposal.

So, when the day is done the Edwards and Obama plans look a lot alike--incremental expansion of existing public and private plans with plenty of money being spent to subsidize low-income folks. From what we have seen from Mrs. Clinton, all three candidates would employ generally non-controversial cost containment proposals such as the expansion of health information technology, broader use of evidence-based medicine, more preventive care, and chronic disease management.

I fully expect that when Hillary Clinton adds her access and quality components they will look very much like those proposed by Edwards and Obama.

So, when it is all over, each candidate can criticize some nuances in their opponents plans but can't lose a lot of ground to the others over health care.

The are "covering."

A recent post on why these incremental health reform proposals may be the only practical way to achieve health care reform: The “Realistic” Way to Do Health Care Reform

A recent review of the leading Republican health care positions: Giuliani, McCain, and Romney--Where Are Their Health Care Plans?

Friday, May 25, 2007

Hillary Clinton Outlines the First Elements of Her Health Care Reform Plan

Hillary Clinton took the first steps in outlining her health care reform platform this week. This time focusing on the underlying problem in the health care system--costs.

They were just first steps, fairly vague and hardly controversial.

We hear that she will deliver two more speeches in the future outlining her thinking on quality and insurance coverage.

This is how Mrs. Clinton says she would tackle health care costs:
  • A prevention initiative focusing on preventable diseases such as diabetes.
  • Modernizing health care records through computerization.
  • Overhauling health care for the chronically ill who account for two-thirds of costs.
  • "Ending insurance discrimination" by covering people with preexisting conditions.
  • Creating a "best practices institute" to establish standards of care.
  • Legalizing prescription drug reimportation and requiring Medicare to negotiate lower drug prices.
  • Implementing "common sense" changes to the medical malpractice system.
On their face, most, if not all, are all fairly non-controversial in great part because Mrs. Clinton has left out the details.

For example, under her Medicare drug negotiation provision, will Senator Clinton allow Medicare to remove a drug from coverage if the drug company does not give her a low price?

She calls for the ending of "insurance discrimination" by covering people with preexisting conditions. I don't know any way to do that without also creating a universal coverage system so consumers can't wait until they are sick before purchasing coverage. Just how will she accomplish this?

She would implement "common sense" changes to the medical malpractice system. This is usually code for supporting a medmal system friendly to the trial lawyers.

The point is that her fairly vague outline leaves us with more questions than answers.

While her cost platform also contains a number of items most people in the health care policy business would consider constructive--such as computerizing medical records--it is not at all clear that her plans to reduce costs have much in real teeth. This list could probably be characterized as cost containment "lite."

I hope a comprehensive health reform plan document will eventually be forthcoming from Mrs. Clinton detailing just what she would do--just as we should expect that from all of the candidates.

I will also be looking for some teeth in her cost containment strategy.

Thursday, May 24, 2007

$6 Billion for Something Called aQuantive and $1.3 Billion for Chrysler--What's Wrong With This Picture?

A lead story in Saturday's Wall Street Journal caught my eye: "Microsoft agreed to buy online-ad specialist aQuantive for $6 billion."

Then there was the big story on Friday: Private equity firm buys 80% of Chrysler for $1.3 billion. The private equity firm will also contribute $6 billion to Chrysler and the separated Chrysler will assume all of the estimated $19 billion in health and pension liabilities for employees and retirees represented by the United Auto Workers.

So, Daimler gets a net of only $1.3 billion for 80% of the American icon--mostly because of its unfunded liabilities.

I know the American auto industry also has trouble building vehicles people want to buy but you can't escape the impact the cost of health care in America has had on this legacy business.

What's wrong when a brand new company hardly anyone has every heard of and sells ads on the Ethernet (founded in 1997 with 2600 employees and $615 million in revenue) is worth four times more than Chrysler Corporation?

We need to get these health care costs under control.

How many good jobs can there be in the Ethernet?

Wednesday, May 23, 2007

Bush Administration Threatens to Veto Democratic Budget if it Doesn't "Address the Unsustainable Growth in Entitlement Spending"--What Chutzpah!!

President Bush spent considerable political capital passing the Part D Medicare drug benefit. That benefit alone increased the long-term Medicare unfunded liability by $8 trillion over the next 75 years. All of Medicare now has a $32 trillion unfunded liability.

The President used substantial political capital just after his reelection trying to change the Social Security system because he made the point it is unsustainable in its present structure. Social Security has a $4 trillion long-term unfunded liability--half what President Bush just added with the Part D program.

Now he is telling the Democratic Congress he is going to veto their budget if they don't show some restraint and get the entitlement programs--like Medicare--under control!

His Budget Director in a May 11 letter to Congressional leaders: "I will recommend the president veto any appropriations bill that that exceeds his request until Congress demonstrates a sustainable path that keeps discretionary spending within the president's top line of $933 billion."

First, I can't agree more that we need to get entitlement programs under control--and we need to do it with real reform of the entire health care system.

But for this President to now act like he's a symbol of budget discipline when he and his Republican Congress spent the last six years spending like "drunken sailors" (the federal debt increased by $3 trillion during this period) is the ultimate in chutzpah.

Earlier post: Part D Was “Financially Irresponsible”—The Medicare Part D Drug Plan Liability is Twice That of the Social Security System!

Tuesday, May 22, 2007

The “Realistic” Way to Do Health Care Reform

There is a debate about whether we ought to do incremental health care reform as the political process allows us to do so, or whether that is a major waste of time unless we deal with all of the big problems--particularly soaring costs--in a comprehensive way.

This Massachusetts health care reform experience and all the problems it is having comes to mind as a case in point.

In March, the Senate Finance Committee held hearings on this topic of which--incremental or comprehensive--is the best way to proceed with national health care reform.

Witnesses generally agreed that it would cost $70 billion to $100 billion a year to enact universal coverage for the entire country.

The Massachusetts health reform challenge reminds us once again that you can’t fix the U.S. health care system if you can’t control its costs.

Longtime health policy expert, Stuart Altman of Brandeis University, someone I have come to respect over the years, made the point that trying to deal with both the uninsured and the cost of care at the same time would be politically impractical—dealing with the cost issues risks alienating a lot of key stakeholders. He suggested it would be best to cover the uninsured first and leave the cost to a second round of reform.

I guess what Stuart was really saying is that it’s best to get everyone into this leaky boat, and once that is done, and we have everyone really driving the costs even more out-of-control, we’ll have finally created the political imperative to finally fix the thing.

Looking at the pending experience in Massachusetts, one can see his logic.

Now, there’s a positive thought.

Saturday, May 19, 2007

"Florida Health News" Debuts

Always glad to plug folks doing a good job in the states.

If you are interested in health care policy and market activities in Florida, check out the Florida Health News, sponsored by the Florida Health Policy Center.

It's a non-profit run by folks now doing it as a labor of love.

So--to all of you making tons of money in health care down in Florida--give them a hand!

Friday, May 18, 2007

The California HealthCare Foundation Launches a New Site Following California Health Reform

An excellent non-partisan website covering health reform efforts in California has recently launched--CalHealthReform.org.

They explain themselves:

"Health care reform has become a major topic of discussion and a key priority for California policymakers in 2007. The California HealthCare Foundation (CHCF) is working to inform statewide efforts to expand access to affordable care and coverage. CHCF is providing analytic support to assist in developing feasible, sustainable coverage expansion policies.

"As part of these efforts, CHCF and the Center for Governmental Studies have created CalHealthReform.org as a one-stop site to learn about the reform proposals on the table, compare and analyze features of the proposals, and weigh in on the policy debate. The site offers comprehensive analysis, discussion, and news about health care reform in California."

For all of your following state events, I highly recommend it.

The Kerry Reinsurance Plan--Important Improvements and the Need for Fundamental Cost Containment

My good friend, Richard Eskow, on his blog "The Sentinel Effect," has published another one of his thoughtful posts this time commenting on John Kerry's proposal to have the federal government absorb large health claim costs from employers: "John Kerry's Reinsurance Bill: Will it Work?"

Richard is responding to an earlier post I did (John Kerry's Health Reinsurance Idea is Counter Productive--Kerry Would Transfer All Health Care Costs Above $50,000 to the Feds) on Senator Kerry's reinsurance plan and is suggesting a number of improvements that could have some very positive benefits.

Richard very correctly points out that the shortcoming in the Kerry plan is that it isn't a very good reinsurance model--it doesn't leave the "reinsured" employer (or their insurer) with enough incentives to better manage the costs as would a well designed reinsurance program. A well designed reinsurance scheme transfers risk but does so without leaving behind a "moral hazard"--that is it still keeps the "reinsured" anxious to keep claim costs down through various incentives.

Richard goes on to suggest ways the Kerry plan could be upgraded to become a better reinsurance model and he makes some good suggestions.

Still, I have concerns that the Kerry reinsurance plan seems to avoid the "big elephant" in America's health care living room. That is, costs continue to rise at unsustainable levels. We can't just transfer these costs--we need to hit them head-on.

I don't believe any reinsurance scheme can fundamentally help unless it operates in connection with a real cost containment plan. I just get the sense that, as it is, the Kerry reinsurance plan would just sort of hide these ever rising costs inside the federal budget.

The more costs the federal government absorbs and covers with general revenues, the more necessary it is for the feds to have a cost containment program in place. Just as it is important for the private sector today.

How can cost containment be accomplished? That's the "$64,000 question."

My best answer is to look to the National Coalition on Health proposal supported by more than 100 stakeholders from all sides of the debate.

Thanks to Richard Eskow for adding some good ideas to Senator Kerry's proposal.

Thursday, May 17, 2007

The Debate Over Medicare Advantage Funding--The NAACP Goes "Whoops!" and Stark Tries to Start a "Food Fight" Over Who Has to Come Up With the Money

The History--Skip it if you do this everyday.
The Democratic Congress needs billions to offset the 10% Medicare physician fee cuts that will happen on January 1st if action isn't taken and to reauthorize the bipartisan State Children's Health Insurance Program (S-CHIP).

S-CHIP will take at least $15 billion over five years--many Democrats (but not enough) want to expand it for a total cost of $50 billion over five years.

Offsetting the 10% Medicare physician fee cut in full will cost almost $8 billion just in 2008 and as much as $65 billion over five years to fix the problem.

The Congressional Medicare adviser--MedPAC--and the Congressional Budget Office (CBO) are saying private Medicare Advantage plans are significantly overpaid compared to the traditional Medicare program. The CBO says by $54 over five years and MedPAC says by 12%--19% for the private fee-for-service plans.

In recent weeks the health insurance industry has countered these arguments pointing out that private Medicare Advantage plan payments are being gradually reduced anyway because of changes in the payment formula and ongoing payment increases that are less than the cost of medical inflation. They also enlisted the NAACP and a Latino organization to argue that the private plans are great for low income people because of all the extra benefits these additional payments make possible.

As I have said before, many of the longstanding Democratic chairmen, particularly in the House, hate Medicare Advantage because they see it as a conservative attempt to destabilize the original Medicare program through privatization and because they see the extra private payments as just a special interest payoff.

Most people on Capitol Hill look at the Medicare Advantage plans and either see a laudable private market experiment in an attempt to use the market to improve both the cost and quality of Medicare or they see it as a right wing attempt to end the longstanding success they see Medicare has had in creating an efficient universal health insurance pool for all seniors.

The Democratic Congress now controls the budget process and many--but not all--of its leaders see their chance to turn back the conservative onslaught on a centerpiece of Democratic social legislation.

While many Democrats want to cut Medicare Advantage plans and take the money to reauthorize S-CHIP and fix the Medicare doctor payment problems, Medicare (CMS) is well into setting the 2008 Medicare Advantage payments. Most likely, the first time the Democrats are going to be able to get hold of any of the Medicare Advantage money will be for calendar year 2009.

That Takes Us to Where We Are Now.
Ethanol, Medicare Advantage, and Corporate Welfare
The health insurance industry's attempt to invoke the likes of the NAACP, in a bid to argue that we need to pay Medicare Advantage plans more than the traditional Medicare plan because it is good for poor people, has resonated inside the Beltway about as outrageously as it always appeared on the surface.

Ethanol comes to mind. Ethanol, just like private Medicare plans, began as a noble experiment by government to solve a national problem--this time energy independence. But where has the federal ethanol program evolved to? Corporate welfare. There is all kinds of evidence to indicate we aren't going to work our way out of our energy problems by growing more corn. But which presidential candidate warming up for the Iowa caucuses is going to say so?

Fast forward to Medicare Advantage--a noble experiment to determine just how effective the private market can be in bettering the government program by giving seniors better cost and quality. Four years after the Medicare Modernization Act, that rejuvenated the private Medicare Advantage program, where are we? Are the health plans putting lots of data on the table showing us just how much smarter and more effective the market is?

No. The health insurance industry trade association has the NAACP telling us insurance companies are the minority communities' best friend--we need to keep overpaying the private plans because that's the best way to give poor people more comprehensive benefits.

The health insurance industry trade association--instead of defending this experiment by showing us how much better the private market can deliver health care--is falling back on one of the more convoluted defenses of corporate welfare (a rationalization to continue the high profit private plans) we have seen in some time.

As I said in an earlier post, I hope the NAACP has asked the insurance industry what it will do if there are some cuts and the for-profit health plans have to make a choice between continuing to provide these extra benefits or keeping Wall Street happy by protecting profits (and cutting benefits).

Whatever the NAACP has or hasn't asked, they are back-peddling on their alliance with their new corporate health care allies. In a May 14 "clarification" letter, the NAACP told Congress the organization understood "hard choices" will have to be made under the Democratic "pay-as-you-go" rules. In a related interview, an NAACP spokesman said that Medicare Advantage has been a "good program" but that the "vast majority of African-Americans benefit from the traditional Medicare program."

Sounds like a big "Whoops!" coming out of the NAACP as they repair some fences with the likes of the letter's recipients--the key Democratic chairmen.

The Food Fight
The fight over where the money is going to come from to fix the Medicare physician fee cut and reauthorize S-CHIP got even more interesting this week.

House Ways and Means Health Subcommittee Chair, Pete Stark, effectively told the hospital industry he was going to cut their Medicare payments to come up with some money if the hospitals didn't join in on the effort to get the money out of the private Medicare Advantage plans.

The president of the American Hospital Association, in a written statement, told Stark, that private fee-for-service plans that do not provide care management services should receive payment "adjustments." However, in "those instances where plans are providing actual management services...payments above fee-for-service may be appropriate."

Stark responded by telling the hospitals that they have to be clear on their priorities--I translate that as do you (hospitals) want to be cut or do you want to help me cut the insurance plans?

That's not an entirely clear choice for the hospital industry since they often get more from a private Medicare plan than they do from the government-run Medicare plan.

Add to this all of the bad publicity over Medicare Advantage marketing abuses and the attendant Congressional hearings and the Democratic counteroffensive is in high gear.

The Democrats are now clearly playing hardball:
  • Someone on the Democratic side has obviously explained some things to the NAACP.
  • There is no doubt the hospital industry is being told they have a choice--you or them.
  • The marketers of Medicare Advantage are now under a national press and Congressional oversight "microscope."
An industry friend heavy into this business warned me the other day I had better be careful with all my criticism of the way the industry is playing this because I was in the middle of a "very political minefield."

Damn right this is a big political minefield and my friend may now be undergoing a practical demonstration in how this all works. This was never going to be as easy as arguing that the big payments were always intended for the poor people.

It always helps to defend your policies on merit. Merit may not always carry the clout it should in Washington, but it never goes out of style--no matter who's in power.

Separately, there are unconfirmed reports that
Stark is going to seek to cut $23 billion in Medicare Advantage payments over five years. That would be about half the "excess" payments the plans are supposedly getting.

Enough for the plans to have to choose between cutting benefits or cutting profits.

NAACP take note. This may be a good time to ask that question.

May also be a good time for a merit offensive on the part of the health insurance industry.

But then, I don't understand this big league political stuff too good.


Health Wonk Review--Recent Posts Worthy of Your Time

Health Wonk Review is a biweekly compendium of the best of the health policy blogs. More than two dozen health policy, infrastructure, insurance, technology, and managed care bloggers participate by contributing their best recent blog postings to a roving digest, with each issue hosted at a different participant's blog. For participants, it's a way to network and share ideas, and for those readers who don't live in this space every day, it's a way to sample some of the latest thinking and the "best of the best."

This time, it's my turn to host and, as usual, our network of health policy bloggers have given us a wide range of their cutting edge thinking.

David Harlow, over at HealthBlawg, starts things off with a post that reminds us that one organization's "good idea" in health care is another's "bad idea" in "Minute Clinics Opening Soon To a CVS Near You."

Not only is there lots of debate about what's a good idea and what isn't, in health care we can also look at the same facts and come away with a very different spin. Hank Stern at INSUREBLOG calls USAToday on their story that the uninsured too often pay retail in his post, "The Amazing, Self-Fisking Gap Report."

The original report on what the uninsured are billed, cited in USAToday, appeared in Health Affairs and Jane Hiebert-White puts a different spin on the same facts in her post on the Health Affairs blog, "Hospitals: "Soak the Poor:" Uninsured Hit With Higher Hospital Bills."

And sometimes, what someone originally thought was a good idea turns out for them to be a bad idea. David Harlow comes back with his post, "IRS gives friendly PCs the cold shoulder" a story about the IRS' change of heart on what constitutes a "friendly" physician practice in the making of an integrated health care system.

Lot's of people think that reforming the existing medical malpractice system is a good idea. Pioneering Ideas, the blog from the Robert Wood Johnson Foundation, gives us a series of intriguing posts that challenge us with what could be a better idea--fundamentally changing the medical justice system by creating health courts. Their series of short posts is well worth the read.

Worker's having access to benefits--like workers' compensation--is always a good idea. At least I thought so until Jon Coppelman writing at Workers' Comp Insider updated us on the ongoing debate about just who's an independent contractor and who's an employee in his post, "Fleece on Earth, Ill Will to Independent Contractors."

If there are lots of people who would like to either nationalize or heavily regulate your business, it's always a good idea not to give them any more ammunition. Joe Paduda, at Managed Care Matters, points out that recent developments in the insurance industry make you wonder if some insurance executives aren't aware we are about to have another major debate about who should control America's health care dollars in his post, "Private Insurers Aren't Helping Themselves."

The Service Employees International Union (SEIU) is clearly a stakeholder in the nation's health care debate--both as a union with so many health care workers and a union that wants to preserve its member's benefits. SEIU exec Mary Kay Henry tells us why reaching out to the other stakeholders--even one's that aren't a natural ally--is a good idea so obvious we wonder why others don't do it: "The Service Employees International Union Leads by Example--The Importance of Reaching Out in the Health Care Debate."

Trying to improve on some ideas, Michael Cannon, on Cato@Liberty, takes the recent discussion between John Goodman and Uwe Reinhardt over HSAs on the Health Affairs blog another step forward in, "HSAs: Goodman vs. Reinhardt."

Michael Tanner, also on Cato@Liberty, questions why a self-described conservative like Mitt Romney thinks the Massachusetts health plan is a good idea in, "Romney 'Loves' Government-Run Health Care."

Richard Eskow at The Sentinel Effect takes the time to give us a thoughtful analysis of the controversy over just how good the Veteran's Administration is in providing health care in his post, "VA Played Fast and Loose With the Facts - So, How Good Are They Really?"

And finally, David Williams at the Health Business Blog wonders why we can't see the cost of medical technology drop as it scales up just as it does in the information technology business in his post on, "Amputee Rights."

Tuesday, May 15, 2007

As Part D Drug Prices are Rising are Profits Falling?

The House Oversight and Government Reform Committee says the prices paid by consumers for the ten most prescribed drugs in the Part D program rose an average of 6.8% since December. At the same time, the committee says wholesale prices have risen just 3%.

The committee also says that rebates from the drug companies to the Part D players total 4.6% of total drug costs--down from 5.2% last year. Medicare had expected the drug plans to reach 6% in rebates during 2006.

The prescription drug and insurance industry counter that Part D premiums are lower than anyone expected them to be at this point and the higher use of generic drugs is saving everyone money.

Most seniors won't see the impact of these higher prescription drug prices until they hit the coverage gap (or "doughnut hole") and have to pay the full cost of the drugs. That gap begins when a senior's covered drug costs hit $2,250 during the calendar year.

Seeing brand-name drugs prices up 6.8% in just a few months is worrisome--that is what we would have expected to happen over a full year.

News of these price increases is particularly notable for me because I have been hearing that insurer's Part D profit results in the early months have sometimes not met expectations. There are some anecdotal reports of early claims being higher than expected.

All of this is either very early data or too anecdotal to know what's really going on.

But it is consistent enough to make us wonder if something is happening in the new Part D program in its second year.

Monday, May 14, 2007

The Massachusetts Health Plan--Even the Uninsured Deserve Choices

The publisher of Health Market Survey returns with comments on what he believes is the fatal flaw in the new Massachusetts health plan:

The Danger In The Massachusetts Health Plan

by Bill Boyles

Reputable and well-meaning people continue to applaud the Massachusetts health plan as a flawed but solid first start on covering the uninsured. A guest New York Times columnist last week fell into the trap (May 10). But this is a dangerous attitude which actually postpones the day we will have a scalable, national solutions that will actually work.

Almost everybody who knows health financing (versus academic theory) now knows that the Massachusetts health plan will fail. The name of the game is timing: how long can we stretch out the myth that this might work to get beyond the next election or until the public forgets.

The big goof is the one that is the most fixable. The idea of a single benefit design applied to a large uninsured population has never worked, and never will work. You can’t force Americans to buy health insurance they can’t afford. Instead a real plan will give the uninsured lots of benefit options – preferably dozens of options. Sure some people will pick the lowest premium with the least benefits – that’s their choice. I have no problem with creating a standard benefits package for prevention benefits only that is mandated because the impact on premiums is so small it is worth it to almost everybody.

The fatal flaw here is the perpetual variation in purchasing power across the uninsured population, something never mentioned by true believers. Purchasing power for medical care involves personal tradeoffs that are life-changing in the case of people with very low disposable income. No single benefits option can possibly address this because it will always be too rich for a majority of the uninsured. No tradeoffs are possible so nobody goes into the program. If you think they will force people in, just wait until they try it.

The only way to get at this is to offer variation in benefits options that give poor people tradeoffs they can make given their own values. A single package is something that works for government actuaries and state legislators. It will never work for low-income uninsured.

Thursday, May 10, 2007

The Service Employees International Union (SEIU) Leads by Example--The Importance of Reaching Out in the Health Care Debate

Fundamental health care reform will not occur until the traditional opponents in the debate are willing to work together to build the foundation for a national consensus on how our health care system will work. No one side is ever going to win this debate and until the big players come to understand that the health care debate will give us more frustration than results.

The Service Employees International Union (SEIU) stands out as a health care stakeholder willing to reach out to others who haven't been natural allies before in order to make real progress.

Mary Kay Henry serves as an Executive Vice President of the Service Employees International Union, the nation’s largest health care union. In her capacity as the head of the union’s Health Systems Division, Mary Kay works with the union’s nearly 1 million health care providers to advocate for better patient care and working conditions, and a more rational and humane health care system.

Today, Mary Kay is a guest contributor. Here are her comments on the importance of partnerships in health care reform, the principals for change, and the importance of breaking the logjam:

At SEIU, we look at health care from a number of different vantage points. Our membership includes nearly 1 million nurses, physicians, hospital staff, nursing home, and home care workers. We also represent 1 million service workers in public and property service industries. So we see health care from the bedside, but we also see it at the bargaining table and the dining room table.

And so, over the past year, we’ve gotten deeper and deeper into the national health care policy debate. We’ve reached out to some new and unlikely allies – starting the kind of partnerships that are necessary if we are going to get health care reform right. In January we announced the creation of the Divided We Fail partnership with AARP and the Business Roundtable. In February we stood with top Fortune 500 CEOs, civic leaders, and policy advocates to launch the historic Better Health Care Together coalition. Just last week the Partnership for Quality Care brought health care providers of all levels – from hospital CEOs to CCU nurses – together to combine their energies, insight, and experience on the health care crisis.

Although each of these partnerships is different, they come together on what must get done:
  • coverage must be universal – extending to every man, woman and child in America;
  • quality and efficiency of care must improve dramatically – we currently spend far more than other advanced nations with far less to show for it in terms of health outcomes;
  • costs must be brought under control by establishing a stable, broad-based, and predictable health care financing system;
  • consumers must retain the right to choose among providers and care plans; and
  • preventive care must be available to promote health, control costs, and eliminate economic and racial disparities.
But agreeing to principles is only one part of the task before us. Before we will see any significant change in our health care system, we must dispel the following stubborn myths:

Myth #1: Reform must move at a glacial pace, and be done piecemeal. This is the conclusion many people draw from the failed reform efforts of 1994. But thirteen years later, things are profoundly different. 46 million people go without coverage every day, and less than a quarter of middle class families can cope with a typical medical emergency. According to a recent New York Times poll, a majority of Americans now say they are even willing to pay higher taxes and forgo future tax cuts to guarantee health insurance for all.

Myth #2: America’s health care crisis is a moral problem only. Ask any CEO or CFO and they’ll tell you why it’s an urgent economic crisis as well. We are the only industrialized nation in the world that puts the price of healthcare on the cost of our products. By 2008, American business will pay more for health care than they will make in profits. That is a major drag on American business competitiveness. And it is simply not sustainable.

I’m learning that health care reform is more art than science. It’s time – past time, in fact – to summon the collective creativity and wisdom of American business, labor unions, the nonprofit sector, government and health care providers to make it happen. After all, the health of our nation depends on it.

Wednesday, May 9, 2007

The Senate’s Mixed Message on Drug Reimportation—They Voted For it Before They Voted Against It!

To be completely fair, they actually voted against it before they voted for it but the outcome is the same.

A whole lot of Senators now go down as voting for the ability of drug wholesalers, retailers, and consumers to bring drugs in from industrialized nations where prescription drugs are a lot cheaper. This provision was one that could have really had an impact on drug prices.

While drug reimportation from places like Canada is illegal, it goes on virtually unimpeded everyday as individuals buy small amounts for personal use from online pharmacies.

What made this provision different is that it would have allowed the big prescription drug purchasers—drug wholesalers and retailers like big chain drug stores—to import large quantities of prescription drugs from cheaper markets. That would have likely busted the market open with cheaper drugs and a new level of competition.

The pharmaceutical drug industry argues that would also have opened up a “Pandora’s box” of problems—particularly safety issues—as tons of new and cheaper drugs flooded the market from Europe and Canada.

In response to these concerns, the Senate added a provision that requires the Secretary of HHS to assure the safety of foreign drug supplies. The result is that the final bill is loaded with a "poison pill" that all but guts it.

The Senate has done this before—in fact at least once during the Clinton administration. Back then Donna Shalala wouldn’t certify the safety of drug imports (because she didn’t have the resources to do so) and Mike Leavitt isn’t going to in this administration. So, the bill is meaningless in its current form.

The vote to add the "poison pill" Cochran amendment was 49-40 with the likes of liberal Senator Ted Kennedy somewhat surprisingly voting with the majority to add the "poison pill."

Why did so many Democrats who might have been expected to vote for drug reimportation effectively vote against it?

The answer lies in the primary bill that supporters were using to attach their reimportation amendment to—a bill that would give the Food and Drug Administration (FDA) significant new regulatory powers over how drugs are used and promoted after they go to market.

This FDA bill has been a longtime in coming and is considered vital legislation and groundbreaking—particularly by its Senate cosponsors Ted Kennedy (D-MA) and Mike Enzi (R-WY).

With President Bush already saying he would veto the whole FDA bill if a strong drug reimportation provision were added, the “poison pilled” version was the only way that both the important FDA bill would become law and Senators could appear to be supporting cheaper drugs from Canada and Europe.

Of course by voting for the Cochran amendment they really weren’t supporting drug reimportation—just looking like they did.

Hence, they voted for it but not really.

Will prescription drug remimportation be back on the Senate agenda in 2007?

It likely will.

But even if we see a real up or down vote on drug reimportation there is no doubt that President Bush will veto it.

But for now the President is happy with the “poison pilled” version.

He’s for it before he has to be against it.

In Washington, DC, this all really does make a lot of sense!

Monday, May 7, 2007

Medicare Advantage Private Fee-For-Service Programs Take a Big Hit in New York Times Article

The health insurance industry's attempts to justify the Medicare Advantage private fee-for-service (PFFS) product took a big hit in a story in the New York Times today.

The Medicare Advantage experiment was supposed to be about proving that the market could provide better cost and quality care then the traditional government-run Medicare program.

Instead, Medicare Advantage, and in particular its private-fee-for-service version, seems to have become nothing more to some in the industry than a "gold rush" opportunity to boost profits. These people are about to ruin it all for the rest of the industry.

Now, that the Democrats are looking to cut the program and put its insurance company payments on a par with the government run version of Medicare, we get this kind of expose.

Last week I pointed out that the health insurance industry has to get serious about defending Medicare Advantage with hard data that shows they are actually outperforming the traditional Medicare program. Instead, they enlisted the likes of the NAACP in an ethically challenged effort to try and prove that extra payments to private Medicare are the best way to help poor people.

After today's New York Times story, the health insurance industry trade association had better get serious about justifying its place in Medicare.

See the New York Times Story

My post last week: The Health Insurance Industry Employs Minority Groups to Protect Medicare Advantage Payments--Could They Have Sunk Any Lower?

Thursday, May 3, 2007

John Kerry's Health Reinsurance Idea is Counter Productive--Kerry Would Transfer All Health Care Costs Above $50,000 to the Feds

Senator John Kerry (D-MA) has rewarmed a health care proposal from his failed presidential campaign in 2004.

Kerry is proposing that the federal government reimburse (or reinsure) an employer's health care costs for any worker incurring more than $50,000 in annual costs. The employer would have to offer a comprehensive health plan to its workers below this point and also offer wellness benefits.

Senator Kerry's proposal is well meaning but wouldn't do anything to reduce our nation's overall health care cost burden.

Senator Kerry's proposal is also popular among some big companies with tons of legacy health care costs looking for someone dumb enough to take them of their hands.

I see two problems:
  1. This isn't cost containment. It is cost shifting. Kerry is simply shifting the cost of a person's care above $50,000 per year to the federal government.
  2. We lose the incentive to manage the cost and quality of care. The employer health plan (and their insurer) would still have responsibility for managing the care but would have no incentive to do it efficiently since the government would reimburse them for their costs. After shifting these costs to the government, who would have the incentive to manage care and reduce the costs of these very expensive episodes of care?
Seventy-five percent of all health care costs are incurred by only about 15% of us.

Most of America's health care costs are incurred by the very sick--including those who are chronically ill.

Senator Kerry is right to worry about the high cost of health care that is disproportionately borne by the employer in the under-age-65 market.

However, sending a huge chunk of our health care costs into the black hole of government is not the answer.

When someone--doctors, hospitals, health plans, patients, or even government--is at risk for the cost of care they have a reason to manage it. For all the shortcomings in the private American health care system we have made great progress learning to manage episodes of expensive care.

Senator Kerry, you can't just send the costs for the sickest Americans into the black hole of the federal government and kid yourself that you've reduced our health care costs.

The question is not where we park these people's costs.

The question is how we get control of their costs.

Show us a cost containment plan not a cost shift plan.

Tuesday, May 1, 2007

The Health Insurance Industry Employs Minority Groups to Protect Medicare Advantage Payments--Could They Have Sunk Any Lower?

The Democratic led Congress is looking hard at cutting payments to insurers participating in the Medicare Advantage business.

With both the Medicare Payment Advisory Commission (MedPAC) and the Congressional Budget Office (CBO) saying the private plans are overpaid by billions of dollars (the CBO says by $54 billion over five years) these HMO payments are a tempting target for Democrats looking to reverse the scheduled 2008 10% Medicare physician fee cut and find money to reauthorize the State Children's Health Insurance Program (S-CHIP).

With literally billions of dollars of health insurer profits at stake over these cuts, the health insurance industry trade association has pulled out all the stops to undermine Democratic attempts to go after these payments. The latest is the enlisting of the NAACP and the League of Latin American Citizens (LULAC) to support the higher Medicare HMO payments because they afford poor people who sign up for the private plans more comprehensive coverage.

Sarah Lueck had a terrific story on this topic on the front page of Monday's Wall Street Journal that is worth a read.

Let's first get a couple of things out of the way.

Everyone in the health insurance industry knows two things:
  1. There are extra Medicare Advantage payments. The extra money isn't necessarily a bad policy. After the big Medicare HMO cuts in 1997, the industry had all but given up on the private Medicare market and money was needed to "prime the pump" and get HMOs back in the business to prove the private market had a place in Medicare. After the industry withdrew its plans in so many markets, seniors also had to be enticed back to the alternative programs. These extra payments might not be defensible for the long term, but there is a logic to the "prime the pump" strategy.
  2. If there are cuts, the for-profit HMOs, who dominate this business, are going to cut the extra benefits to seniors before they forgo profits and disappoint Wall Street.
I don't have a moral issue with the number 1. We can argue about whether the market can do a better job than the private sector all day long. A reasonable, if debatable, point can be made to support the "priming the pump" strategy to entice the market to enter the business and prove whether or not the private sector can better manage health care then the traditional Medicare program.

My problem is that it is clear the health insurance industry trade association hasn't made the second point clear to the minority community it is so aggressively recruiting to defend it.

Will Medicare Advantage payments be cut? Highly likely. The only real question is when and by how much? Pete Stark would like a 10% to 12% cut now--the amount generally regarded as the "extra" payment.

But with Republicans, and moderate Democrats like Senate Finance Chair Max Baucus wanting to proceed more carefully, Stark won't get all he wants. He will have to compromise.

In the end, House and Senate budget negotiators will cut some amount from the Medicare HMOs. The Congress just needs a lot of money for the Medicare physician fee fix and S-CHIP and they can find it in the Medicare Advantage payments. It is unlikely the cuts will be the full 12% and it is just as unlikely there will be no cuts. In Washington, the safest bet is that the cuts will come somewhere in the middle.

That's the third thing everyone is expecting--there will be a compromise on the size of the cuts Medicare HMOs get.

Even a 5% or 6% "splitting the difference" cut will cause the industry to have to make a choice:
  1. The Medicare HMOs could cut senior benefits in order to maintain profits--and please Wall Street.
  2. The Medicare HMOs could cut profits and maintain the extra benefits for seniors--and please the NAACP and the LULAC.
Guess which one the for-profit HMOs are going to choose?

You see, everyone in the health insurance industry already knows these things.

That is why the health insurance industry trade association's "minority strategy" is so disgusting--and disingenuous.

It's one thing to play hardball politics in defending your constituency. It's one thing to make "strange bedfellows" in advancing your political agenda.

But, this is just about as low as it gets.

Maybe the NAACP and the LULAC ought to ask their new friends in the health insurance industry trade association what they are going to do if it comes down to a choice between the minority community and Wall Street.
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