Friday, May 29, 2009

Money-Driven Medicine—N.Y. Premiere of Film, June 11

Many of you know Maggie Mahar who comments regularly on this blog and has one of her own.

She is also the author of "Money Driven Medicine: The Real Reason Health Care Costs So Much."

Now here is something to be impressed by, Maggie's book has been made into a movie!

Here is a recent post from her blog, Health Beat, with an open invitation from Maggie to all you health care wonks out there to attend the premiere:

Money-Driven Medicine—N.Y. Premiere of Film, June 11

At last, Money-Driven Medicine is finished. This 90-minute documentary was produced by Alex Gibney, best known for his 2005 film, Enron: The Smartest Guys in the Room and his 2007 Academy Award Winning documentary, Taxi to the Dark Side.

The film was directed by Andy Fredericks, and is based on my book, Money-Driven Medicine: The Real Reason Health Care Costs So Much (Harper Collins).

The Century Foundation and the New York Society for Ethical Culture are co-hosting the New York premiere on June 11, 7p.m. at the New York Society for Ethical Culture, 2 West 64th Street at Central Park West. Doors open at 6:30. Admission is free. If you’re planning to attend, please RSVP Loretta Ahlrich, ahlrich@tcf.org or (212) 452-7722 so that we can have a rough idea of how many people will be coming.

Alex Gibney will be there to talk about the film, and following the screening, I’ll take questions from the audience about healthcare and healthcare reform.

About the Film

Money-Driven Medicine explores how a profit-driven health care system squanders billions of health care dollars, while exposing millions of patients to unnecessary or redundant tests, unproven, sometimes unwanted procedures, and over-priced drugs and devices that, too often, are no better than the less expensive products they have replaced. As I have said on this blog, this isn’t just a waste of money. It’s ‘hazardous waste’—waste that is hazardous to our health.

In remarkably candid interviews both doctors and patients tell the riveting, sometimes funny, and often wrenching stories of a system where medicine has become a business. “We are paid to do things to patients,” says one doctor. “We are not paid to talk to them.”

Patients,and physicians star in the film. They include Dr. Don Berwick, author of Escape Fire and founder of the Institute for Health Care Improvement , and Dr. Jim Weinstein, Director of Dartmouth’s Institute for Health Policy and Clinical Practice. ( Dr. Jack Wennberg, the founder of what I often refer to as “the Dartmouth Research” passed the torch to Weinstein in 2007.)

Lisa Lindell, a HealthBeat reader, patient advocate and author of 108 Days, also appears in the documentary, talking about her husband’s experience in a Texas hospital after he was seriously burned in a freak industrial accident. .

How Physicians Inspired Money-Driven Medicine

I narrate the film, and in the course of the narration, recall how the story began:

“When I started writing the book, I began phoning doctors, explaining the project, and asking for interviews. To my great surprise the majority of them returned my calls. In most cases, I didn’t know them. I expected responses from perhaps 20 percent. Instead, four out of five called back.

“‘We want someone to know what is going on,’ explained one prominent physician in Manhattan. ‘But please don’t use my name. You have to promise me that. In this business, the politics are so rough—it would be the end of my career.’”

They were right. Everyone needs to know.

Thursday, May 28, 2009

When We Really Do Health Care Reform They'll Know It In McAllen Texas

In recent posts I have expressed my concern that the Congress has all but given up on real health care reform and seems more interested in entitlement expansion.

I worry that the Democrats have found the path to paying for a health care bill (note that I did not say health care reform).

I will suggest that path includes a little cost containment window dressing so they can spin that they have a way to bring costs under control, shaving some provider payments but not too much that it actually hurts, and lots of new taxes.

Real health care reform, on the other hand, would be about crafting unambiguous changes in incentives that drove providers—doctors, hospitals, drug and device makers, and insurers—toward sweating that 30% of the waste out of the system thereby paying for universal care and making the system sustainable.

Just what do all of these words—waste, cost containment, unambiguous changed incentives—mean in real world?

Atul Gawande has an article in The New Yorker that is worth your time: The Cost Conundrum—What a Texas Town Can Teach Us About Health Care.”

Here is a piece:
One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.

“Medicine has become a pig trough here,” he muttered.

Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.

We began talking about the various proposals being touted in Washington to fix the cost problem. I asked him whether expanding public-insurance programs like Medicare and shrinking the role of insurance companies would do the trick in McAllen.

“I don’t have a problem with it,” he said. “But it won’t make a difference.” In McAllen, government payers already predominate—not many people have jobs with private insurance.

How about doing the opposite and increasing the role of big insurance companies?

“What good would that do?” Dyke asked.

The third class of health-cost proposals, I explained, would push people to use medical savings accounts and hold high-deductible insurance policies: “They’d have more of their own money on the line, and that’d drive them to bargain with you and other surgeons, right?”

He gave me a quizzical look. We tried to imagine the scenario. A cardiologist tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her. They discuss the blockages in her heart, the operation, the risks. And now they’re supposed to haggle over the price as if he were selling a rug in a souk? “I’ll do three vessels for thirty thousand, but if you take four I’ll throw in an extra night in the I.C.U.”—that sort of thing? Dyke shook his head. “Who comes up with this stuff?” he asked. “Any plan that relies on the sheep to negotiate with the wolves is doomed to failure.”
When we have a health care bill that starts to change things in McAllen Texas then it will be worthy of the label, health care reform.

I highly recommend you read the entire article here.

Wednesday, May 27, 2009

UnitedHealth Knows How to Save $500 billion In the Medicare Program--So Why Do They Need the Extra Private Medicare Payments?

This from Erica Werner's AP story today:
A major health insurer [United Health Group] says the government can save more than $500 billion in Medicare spending by sending patients to less expensive, more efficient doctors, reducing hospital visits by the elderly and cutting down on unnecessary care.
So UnitedHealth knows how to save $500 billion in Medicare spending.

Aside from the fact that all of this is voluntary and has no consequences in it for failing to deliver it---and therefore not "scoreable" under Congressional budget rules--I have a question.

If United Health knows how to save $500 billion in Medicare costs why has it been lobbying for years to maintain the hundreds of billions of dollars in extra payments private Medicare plans--of which United is the biggest player--get from the government?

It would seem to me that if they know how to save all of this money in Medicare they wouldn't need the extra 14% the government pays United and all the other private Medicare plans above what it pays itself under the traditional Medicare plan.

The Obama administration says these extra payments to private Medicare HMOs are worth $175 billion over ten years and the private plans have about 40% of the Medicare market. Forty percent of the $500 billion these savings United says are there would therefore be in the private market--or $200 billion. So all of these great ideas United put on the table today should more than make-up for the industry giving up the extra $175 billion payments.

Am I missing something here?

Gee, next thing you know AHP will be going to the White House volunteering the $175 billion for President Obama's health care plan.

They're just coming up with extra cash all over the place!

Sunday, May 24, 2009

An Open Letter to the New National Coordinator for Health IT: Part 4 -- Bringing Patients into the Conversation About "Meaningful Use" of Health IT

by DAVID C. KIBBE and BRIAN KLEPPER

The Obama health team at HHS and ONC are gradually establishing the rules that will determine how approximately $34 billion in ARRA/HITECH funds are spent on health IT over the next several years. But there is a "missing link" in these deliberations that, so far, has not been addressed by Congress or the Administration: how the patient's voice can be "meaningfully used" in health IT.

After all, we, the taxpayers, will pay for all this hardware, software, and associated training. There are many more consumers of health care than doctors or health care professionals. Shouldn't we have a say in what matters - in what is meaningful - to us?

It may have been an oversight, but patients and consumers have been left very much on HITECH's sidelines. The attention and the money is squarely aimed at the health care providers - doctors, clinics, and hospitals. The Act's intention is to create "interoperable" electronic health records that, in the future, will be more accessible to them: doctors, clinics, and hospitals.

This is a policy that is tied unnecessarily to an outdated vision. It is provider-centered, paternalistic and top-down. But it could be re-imagined to take advantage of the new ways millions of consumers, patients, and care giving families are using information and communications technologies to solve problems, form online communities, and share information and knowledge.

We're moving more fully as a society into the Age of the Internet and, as the economist Jane Sarasohn-Kahn's landmark study The Wisdom of Patients compellingly showed, patients are far ahead of the health care industry in using it to advantage. Consider:
  • According to the latest Pew poll results "about half the public (49%) turned to the internet for information about the [swine flu] virus. Moreover, asked which news source had been most useful in this regard, 25% of respondents named the internet, putting it at the top of the list of information sources in terms of utility."
  • An earlier Pew poll showed that between 75% and 80% of American Internet users have looked online for health information, an estimate consistent with similar polling from Harris Interactive's 2009 data. 78% of home broadband users look online for health information.
  • Going online makes a difference in terms of decision-making, especially for e-patients with a chronic illness or a new diagnosis, according to Pew:
"For example, 75% of e-patients with a chronic condition say their last health search affected a decision about how to treat an illness or condition, compared with 55% of other e-patients. Newly diagnosed e-patients and those who have experienced a health crisis in the past year are also particularly tuned in: 59% say the information they found online led them to ask a doctor new questions or get a second opinion, compared with 48% of those who had not had a recent diagnosis or health crisis. Some 57% of recently challenged or diagnosed e-patients say they felt eager to share their new health or medical knowledge with others, compared with 45% of other e-patients."
  • The public appears ready to embrace shared online electronic medical record-keeping. A just-released joint NPR/Kaiser Family Foundation/Harvard School of Public report indicated not simply privacy concerns, but the strong conviction that this risk would be accompanied by the benefits of improved personal care and overall quality improvement.
  • The public also seems ready, as are some physicians, to use online methods to establish patient-physician relationships and provide care services. As David Kibbe recently reported on THCB, online care and consumers' familiarity with and use of tele-health is steadily expanding. American Well and TelaDoc, Google Health, Microsoft HealthVault and a rapidly growing number of companies are part of an evolving ecosystem that speaks directly to the interest of patients and health consumers to engage in many kinds of online health experiences.
  • The e-patient public is showing signs of engaging and even confronting established Medicine on the issue of access to their health data. A Google search on "e-patient Dave" yields almost 9,000 hits, the majority of these related to Dave deBronkart's revelation, covered extensively by the Boston Globe, the New York Times, and hundreds of blogs, that his hospital medical records were incomprehensible and often inaccurate. Dave, a kidney cancer survivor, had taken up the offer by Beth Israel Deaconess Medical Center's CIO, John Halamka, MD, of automated data transfer between the hospital's IT system and Dave's Google Health account. The good idea was to help Dave create a personal health summary at Google Health that could be refreshed by information from his doctors at BIDMC, and always be available to him as needed. Dave found, thought, that the hospital's IT system merely passed on billing diagnoses and codes, many of which were neither accurate nor up-to-date. The upshot: an apology from Halamka and BIDMC, a meeting with Google Health's team, and a change in policy at BIDMC. From now on, only physician-generated and reviewed diagnoses and problems will transfer to Google Health from BIDMC. This story of a modern day David representing e-patients versus a Goliath from the health care industry continues to reverberate in the industry and to have consequences for the future of personal health records.
So why not include health consumers and patients in the meaningful uses of health IT? Here's a short list of ideas about how to do this, provided in part by Don Kemper, the founder and CEO of HealthWise. We agree with his suggestions that "meaningful use" ought to include the routine practice of electronic communications with patients and care givers, starting with these five areas.
  1. Prevention and screening reminders. As appropriate, these should be shared along with a personal health plan and full access to one's records.
  2. Patient decision aids for major surgery and procedures. This might include messaging pre-and post-surgery to help avoid waits and delays.
  3. Patient instructions for acute and chronic conditions. What to do at home; what signs of problems or improvements to look for; when to call if symptoms develop or improvements don’t occur as expected.
  4. Guided self-management messaging for chronic conditions. Instructions in self monitoring, lifestyle, medications management, action plans, etc.
  5. Visit preparation for scheduled visits. This could include questions to ask the doctor or provider and biometric instructions, e.g. the need to fast before a test.
Let's ask the question another way: If the HITECH monies are spent on CCHIT certified EHRs that can't do any of these patient-centered tasks, or EHRs that don't come equipped with the features and functions to extend health IT capability to the patients and consumers, do we really think that the money will have been spent wisely?

But that's the pathway we seem headed down, led by the vendors. As Dire Straits once said, "money for nothing....those guys ain't dumb."

David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on health care professional and consumer technologies. Brian Klepper PhD is a health care market analyst and a Founding Principal of Health 2.0 Advisors, Inc. Their collected collaborative columns, including the first 3 columns in this series, may be found here.

Wednesday, May 20, 2009

The First "Harry and Louise" Ads!

To me a "Harry and Louise" ad is negative health care reform advertising meant to defend a special interest's self-interest in what we all pay for health care. Whether it actually has "Harry" or "Louise" in it is for me beside the point. To qualify it just has to be trying to scare people to protect a special interest.

Yesterday, CQ's Drew Armstrong had a story with the headline, "Labor Unions' Campaign Targets Wyden's Proposed Cap on Benefits Reduction."

From his article:
The ads, called “Stop Wyden’s Health Tax,” are sponsored by Oregon chapters of national labor unions in an effort to defend their members from having any portion of their health benefits taxed. Wyden, D-Ore., has proposed a cap on the tax deduction for employer health care benefits.

The $60,000 advertising buy will run in the Portland and Eugene markets. It is being paid for by local chapters of AFSCME, the National Education Association, and the United Food and Commercial Workers International Union.

Labor groups on the conference call declined to comment on whether the ads were meant as a shot across the bow of Baucus and others. Instead, they said they were waiting to see the legislation.
Ya think? Sort of like, "Was that dead horse head in the guy's bed in Godfather 1 meant to send a message?"

America's labor unions have been at the front of the parade calling for everyone to come together and accomplish health care reform. They have been quick to point out the problems with insurers, drug companies, and all of the other special interests and haven't been shy about taking the moral high ground.

I doubt there is literally anyone in this debate (including these guys) that, at least privately, wouldn't agree that rich benefit programs are contributors toward our high health care inflation.

So what happens when a Senator makes a constructive proposal, thinks outside the box, reaches out to fellow Democrats and Republicans, and crafts a health care proposal an impressive number of both Democratic and Republican Senators have signed onto?

He gets a dead horse head in his bed with the clear message he won't be the last if he and his colleagues don't tow the line.

How much of a threat is Wyden’s plan to these unions' members anyway? The Healthy Americans Act would limit the amount workers could exclude from taxes to $6,025 annually for an individual. Married couples with children could deduct $15,210, plus an additional $2,000 per dependent child.

That compared to the average cost for family health insurance at just under $13,000 a year. So, families that have health plans costing more than $2,000 over the average have nothing to worry about.

Talk about taking the moral high ground.

Like the Healthy Americans Act or not you can't fault the creative bipartisan effort being made here.

This is how they reward a legislator back in Oregon who thinks outside the box and has accomplished more to date than any other member of Congress in crafting a bipartisan solution to a big problem?

We Are On Our Way To Confusing Entitlement Expansion With Health Care Reform

I generally find Washington Post business columnist Steven Pearlstein levelheaded. But his column today has me shaking my head.

Effectively, he is saying forget what it costs--health care reform needs to be done.

His biggest problem is that he doesn't know the difference between entitlement expansion and health care reform.

But the way things are looking neither does the U.S. Congress.

From Pearlstein's column:

There is, for example, general agreement that it will cost $100 billion to $150 billion a year to provide the subsidies necessary to allow all Americans to afford a basic health plan. But the Congressional Budget Office, the official scorekeeper on these matters, has been reluctant to certify the major cost savings that might come from various proposals to restructure the health delivery system, or reform the health insurance market to make it more competitive, or change the way doctors and hospitals are compensated so they have the incentive to use only the most cost-effective treatments.

It is, of course, the CBO's job to be skeptical, particularly after a number of past experiments in this area have yielded disappointing results. But it is also true that because nothing of this scale and complexity has been tried before, projecting the fiscal impact is next to impossible. This budgetary standoff will leave Congress with no choice but to try to finance its health-reform efforts by raising taxes or limiting payments to doctors and hospitals, possibly jeopardizing the entire project.

We can certainly applaud policymakers for their reluctance to enact another expensive and popular entitlement program without finding the money to pay for it. But it is folly for them to put themselves in a political and procedural straitjacket. In all of history, no revolution was ever made by budget analysts. Health reform requires leaders with the foresight and confidence to take a leap into the unknown.

Indeed, health care reform will require a bit of a revolution. Entitlement expansion only requires we pour more money on this mess we call a health care system.

He isn't the only one I've heard recently say that finally getting health care reform is more important than how we will pay for it.

I think it's time to remind ourselves that there is a difference between health care reform and entitlement expansion.

Health care is the problem it is for America's fiscal solvency because its costs are out of control.

As the President has very correctly pointed out we need to accomplish health care reform to get our costs under control, and in turn fix our economy and long-term fiscal health, and to convert the waste everyone agrees is there into the cash we need to cover everybody.

The big mistake here is that Pearlstein is calling for the expansion of the health care entitlement and confusing that with health care reform. He's saying we'll just hope for the best that costs can somehow be controlled even, as he says here, "particularly after a number of past experiments in this area have yielded disappointing results."

There is entitlement expansion--you just raise taxes, lop a little off the top of provider reimbursement, or pare back benefits--to come up with what you need to pay for it. That looks to me like what the Congress is getting ready to do.

Health care reform--the thing we really need to do--creates new, powerful, and measurable incentives that actually begin to convert the waste to the money we need to cover everyone and control our costs.

Entitlement expansion is just loading more people onto the Titanic.

Health care reform is the refashioning of the system into something that is sustainable.

Monday, May 18, 2009

Progress on Finding the $2 Trillion--Insurer Association Says Physician and Hospital Payment Changes "Won't All Be Voluntary"

Just how will the health care stakeholders who promised President Obama $2 trillion in savings last week achieve the reduction?

This from a May 18th Bloomberg story:

Standardized billing and forms would cut administrative expenses, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a Washington-based trade group, in an interview today. Some likely measures, such as changing how government programs pay hospitals and doctors, will need legislation, said Jay M. Gellert, chief executive officer at Health Net Inc., an insurer in Woodland Hills, California...

The health-insurance industry will probably recommend paying physicians on the basis of how well their patients fare rather than the number of doctor’s visits, Gellert said.

It won’t all be voluntary,” Gellert said in an interview last week. “A lot of it will be law.”

Oh, so the insurance industry plans to have the docs and hospitals incur changes to their compensation aimed at developing some of the $2 trillion in payment reductions that "won't all be voluntary?" I presume the reference to "mandatory" changes is there so that they'll be "scoreable" under the Congressional budget rules.

I wonder, did the insurance trade association make that clear to the AHA and the AMA before they took them into the West Wing?

This is just getting to be more and more fun to watch!

Related posts:

"Health Care Leaders Say Obama Overstated Their Promise to Control Costs"

The $2 Trillion Offer to Reduce Health Care Costs—Now They've Done It!

Friday, May 15, 2009

"Health Care Leaders Say Obama Overstated Their Promise to Control Costs"

That was the headline in yesterday's New York Times regarding Monday's promise by health care stakeholders to reduce spending by $2 trillion.

A couple of snipets from the Times article:
Hospitals and insurance companies said Thursday that President Obama had substantially overstated their promise earlier this week to reduce the growth of health spending.

“There’s been a lot of misunderstanding that has caused a lot of consternation among our members,” said Richard J. Umbdenstock, the president of the American Hospital Association. “I’ve spent the better part of the last three days trying to deal with it.”

One of the lobbyists, Karen M. Ignagni, president of America’s Health Insurance Plans, said the savings would “ramp up” gradually as the growth of health spending slowed.
Right after the $2 trillion announcement I posted:
Don’t also assume that the American Medical Association (AMA) really represents doctors—I don’t think anyone or anything really represents doctors. If the AMA makes a commitment that actually means sacrifice among the docs you will see just what I mean—especially if the national association folks do a deal with the insurers "on behalf" of all the docs back home requiring real sacrifice. To some degree, you can say the same for the thousands of hospitals out there.

If these stakeholders don't deliver $2 trillion in something Orszag can take to the bank will the Democratic response be a "public health plan?" Watch the fireworks.

Someone dug themselves one heck of a hole yesterday.

Is it the stakeholders that now have to do in a few weeks what no one has done in decades of pondering this dilemma—make a tangible, measurable, and enforceable offer that cuts real money? If you think coming up with $2 trillion was a big deal actually figuring out the mechanism to carry it off will be a dramatically bigger challenge.

Was it the Obama administration that just raised expectations exponentially trusting these guys can actually deliver something measurable? Or, is the Obama administration just setting them up?
Or was the Obama administration just setting them up?

When those stakeholders walked into the White House on Monday they never intended to make more than a vague promise. When they walked out it was to headlines that they would make "scoreable" proposals by June 1st.

They also had some very angry constituents across the country wondering just what kind of deal they were doing.

They never had $2 trillion and now they have one big problem!

As one insider told me this week, "They got smoked!"

Update: Stakeholders released a statement in response to the NY Times article:
Washington, DC — “We are committed to working together to bend the health care cost curve. Health care reform will not be sustainable unless the nation brings down the rate of growth of health care spending. We are committed to doing our part to make reform sustainable and to make the system more affordable and effective for patients and purchasers.

"Our organizations are currently engaged in an intensive process to develop proposals to reduce the rate of increase in future health care costs. And to be successful, we must take action in public-private partnership. We look forward to offering cost-savings
recommendations in the weeks ahead.

"The participating organizations reaffirm their commitment as outlined in the May 11 letter pledging to do our part to bring down health care costs."

Thursday, May 14, 2009

Paying For a Big Part of Health Care Reform With New Taxes Would Be a Terrible Mistake!

How would you like a chunk of your income taxes tied to the top line in this graph?

The top line represents the health insurance cost trend rate over the past 20-years.

The two bottom lines represent the increase in worker earnings and overall inflation during the same period.


This chart comes from the Kaiser Family Foundation.

I have repeatedly reported here that the Congress is having trouble finding the savings necessary to pay for health care reform. The bill will likely cost at least $1.2 trillion over ten years and so far no one has put more than about $300 billion in offsetting savings from the health care system on the table.

Tax increases will undoubtedly be part of any successful health care reform effort.

But paying for most of health care reform by raising taxes would be nothing less than cowardly and fiscally irresponsible.

It would be cowardly because it would mean that the Congress was not able to stand-up to the special interests that have been a part of this bloated and inefficient health care system and force the long-term savings that are so critical to getting America's fiscal house in order.

It would be irresponsible because we did not use reform to bring our system under control--we just raised taxes to keep paying this already unaffordable and unsustainable bill.

The President has said we can't continue to "kick this can down the road" any longer. He has said that we must do health are reform this year because we will never get our entire fiscal system under control if we do not deal with health care costs.

The President is right on both counts.

But I smell a trend here--the Congress may be about to use tax increases more than health care system reform to pay for it all.

At the top of the list is phasing out the tax deduction for employer-provided health insurance for families making over $160,000 a year. The CBO says that could save as much as $552 billion over five years.

But if we also don't get health care costs under control how long would it be until that $160,000 cutoff started to fall into the middle class?

Let me be clear. I support means testing for both Medicare and Social Security. It makes sense to me that we should use the income tax system to encourage more efficient health plan design--limiting tax deductibility to the level of a standard plan, for example.

And undoubtedly, some tax increases are unavoidable for something as big has health care reform.

But relying on tax increases so we can take a pass on facing up to the cost of health care and its impact on our long-term fiscal solvency? That would be cowardly and it would be irresponsible.

But the Congress is so desperate to find money and so unwilling to anger any powerful health care special interests we better get ready for some interesting rationalizations to promote tax increases in the place of fundamental reforms.

The latest tax idea to surface in the Congress is the soda pop tax. The CBO says a three cent tax on drinks that include sugar would raise $24 billion over four years. On the surface that might not be such a bad wellness idea--as if three pennies will change any behavior.

Whatever the proposals, any tax increases need to be a small part of health care reform and not an example of Congress finding it easier to hit consumers with something like a new soda pop tax rather than facing up to health care special interests and their powerful lobbyists.

Recent post: Halfway to Paying for Health Care Reform? A Growing Consensus for Taxing Health Insurance Benefits Produces Lots of Money

Wednesday, May 13, 2009

Halfway to Paying for Health Care Reform? A Growing Consensus for Taxing Health Insurance Benefits Produces Lots of Money

But do we want to pay for most of it with tax increases?

This is a reprint of an April 22nd post.


Yesterday in Senate Finance it was clear that changes to the tax treatment of employer-provided health insurance are on the table.

I thought it important to revisit my earlier summary of just what such a tax change does toward raising the needed money for reform. Since I posted this, the most commonly used estimate for the cost of a health care reform plan is at least $1.2 trillion with the range continuing to be as high as $1.7 trillion.

We have not seen a health care reform bill much less seen it “scored”—or its costs estimated. Until we do, the working assumption is that a major health bill of the type the President talked about during the campaign would cost about $1.5 trillion over ten years.

As I have said many times, show me where we get that money and I can be optimistic about health care reform happening this year.

It is clear to me that there is real movement in the Senate on the issue of taxation of health benefits. I can see key Senators on both sides of the aisle agreeing to it as a means to help pay for reform. Likely, it would take the form of taxing everyone’s benefits above a certain threshold or taxing all health benefits for higher income people.

The CBO recently priced a couple of potential tax changes similar to these ideas:
  • Replace the Income Tax Exclusion for Employment-Based Health Insurance With a Deduction– And begin to phase it out for unmarried tax filers making more than $80,000 a year and $160,000 for married couples. The CBO estimated that this structure would raise $552 billion over ten years. This option has the advantage of applying only to “wealthy” taxpayers. It is likely a compromise would not end the employer exemption but would only use the deduction phase-out part of this idea—but would have about the same fiscal impact.
  • Reduce the tax exclusion for Employment-Based Health Insurance and the Health Insurance Deduction for Self-Employed Individuals – Limiting how much health insurance that would continue to be exempt from personal income taxes to the 75th percentile of what employers pay ($565 for individuals and $1,440 for families in 2010) would save an estimated $452 billion over ten years. This option has the politically negative impact of taxing lower-income families who are fortunate to have very rich benefit plans—union members for example.
A Senate consensus is by no means assured here. Republicans could end up insisting on a structure that discouraged "excessive" benefit packages while Democrats focused on cutting the tax benefit for just the "wealthy."

While the options the CBO scored may be somewhat different than any final deal, the CBO's work does give us a sense for what these kinds of tax changes could produce—about $500 billion over ten years.

My sense is that there could be a consensus around finding the needed $1.5 trillion for health care reform from the following places:
  • A change to the tax treatment of health benefits—likely phasing-out the exemption for high-income earners—worth about $500 billion over ten years.
  • “Equalizing” payments to Medicare HMOs—worth $175 billion over ten years.
  • The relatively minor provider cuts outlined in the Obama budget that focus on reductions to hospitals, home health care, and post-acute care—worth $141 billion over ten years.
This totals $815 billion over ten years or about half the amount that will be needed to fund an Obama campaign-like health plan.

Where will the rest come from?

First, about everyone in this debate has said that we have to begin to control our health care costs.

Of the $815 billion I have identified, more than 60% comes from a tax increase.

If we are going to raise taxes to pay for health care reform it is important to understand that we would be tying taxes to something—medical trend cost—that has been increasing at a rate two to three times the growth in the rest of the economy for decades now.

And tax increases do not qualify as “bringing our costs under control.”

Some tax increases to pay for health care reform are inevitable but most of the money will have to come from reductions in what we would have paid for health care if we have any chance at crafting a sustainable system—and that means either provider or beneficiary cuts.

That’s the really hard part.

Half found and half to go. But that last half will be a lot tougher!

Recent post: Progress on Key Health Care Reform Issues?

Tuesday, May 12, 2009

The $2 Trillion Offer to Reduce Health Care Costs—Now They've Done It!

First it was great to see the press coverage of the $2 trillion offer come back down to reality as the day wore on yesterday. From gushing over the “unprecedented” commitment to reform by these key stakeholder groups the news reports and editorials finally, by days end, reflected the fact that nothing is really promised or enforceable yet.

Now we hear that these groups have to deliver specifics on just how they will deliver the trillions in the next few weeks.

For this to be a big deal it has to be “scorable.” By the Congressional budget rules that means there has to be the reasonable expectation the savings will be there. The referee, the Congressional Budget Office (CBO), has proven to be skeptical of anything that isn’t backed up with hard data. (Good for them!).

Don’t also assume that the American Medical Association (AMA) really represents doctors—I don’t think anyone or anything really represents doctors. If the AMA makes a commitment that actually means sacrifice among the docs you will see just what I mean—especially if the national association folks do a deal with the insurers "on behalf" of all the docs back home requiring real sacrifice. To some degree, you can say the same for the thousands of hospitals out there.

So if we get more vague promises and nothing scorable then how will the Obama administration respond? If we do get something cutting edge how will the constituents respond? Will the constituents even let the stakeholders get that far?

I continue to get reporters asking me if—or arguing—it is really different this time compared to 1993 and 1994.

Sure, there are lots of things that are different compared to 15 or 16 years ago—the critical nature of the problem at the top of the list.

But I was there in the Indian Treaty Room with the Clinton task force. I was in Ira Magaziner’s office. Let me tell you, in May of 1993 every one of these stakeholders couldn’t wait to be part of the process and on the right side of Mrs. Clinton. The term, “being at the table” was as commonly used then as it was yesterday in all of the glowing reports.

Then the details came out and it got ugly. "Harry and Louise" was never intentional—it was a reaction that came months later when it became clear the insurers were on the outs and had a “bulls eye” on their backs.

But back to this year.

If these stakeholders don't deliver $2 trillion in something Orszag can take to the bank will the Democratic response be a "public health plan?" Watch the fireworks.

Someone dug themselves one heck of a hole yesterday.

Is it the stakeholders that now have to do in a few weeks what no one has done in decades of pondering this dilemma—make a tangible, measurable, and enforceable offer that cuts real money? If you think coming up with $2 trillion was a big deal actually figuring out the mechanism to carry it off will be a dramatically bigger challenge.

Was it the Obama administration that just raised expectations exponentially trusting these guys can actually deliver something measurable? Or, is the Obama administration just setting them up?

Or, is the expectation it will be the CBO that will break under all the added pressure and suddenly get easy in evaluating these vague promises?

To have health care reform we will need to find more than a trillion dollars to pay for it. So far, the Obama administration has identified about $300 billion in scorable savings.

And don’t forget the need to find over a trillion dollars and the $2 trillion offer is apples and oranges. The $1 trillion+ is what we need to offset a new program in the federal budget. The $2 trillion relates to the entire health care economy that will total something approaching $40 trillion in the next ten years.

Really, nothing has changed during the last couple of days. This morning, Chuck Grassley referred to the $2 trillion offer as "Fairy dust just waiting to turn to gold."

That $2 trillion offer has yet to move the health care reform meter past $300 billion.

But boy are there some people on the spot!

Recent related posts:

"Trust But Verify"--Health Care Stakeholders to Pledge $2 Trillion in Reductions

An Open Letter to the Men and Women Over at the CBO--Hang In There!

Sunday, May 10, 2009

"Trust But Verify"--Health Care Stakeholders to Pledge $2 Trillion in Reductions

This from the Wall Street Journal on Sunday:
Major health-care providers are planning to pledge Monday to President Barack Obama that they will work to reduce cost increases in the nation's health-care system by $2 trillion over the next decade, officials said…

Groups representing hospitals, health-insurance companies, doctors, drug makers, medical-device makers and labor are joining in Monday's announcement. According to a letter from the groups, reviewed by The Wall Street Journal, they will promise to help reduce the growth of national health-care spending by 1.5 percentage points in each of the next 10 years. "The times demand and the nation expects that we, as health care leaders, work with you to reform the health care system," the letter says.
Is it possible for these stakeholders to find $2 trillion in excess health care costs over the next ten years?

Are there ice cubes in Antarctica?

During the next ten years, we are on track to spend something approaching $40 trillion on health care in America. The stakeholders need to be proposing something that is more than a rounding error--it needs to actually make a difference toward making entitlements and private health insurance affordable.

According to CMS, the U.S. is projected to spend over $2.5 trillion on health are in 2009—or 17.6% of GDP.

In 1970, U.S. health care spending was about $75 billion—7.2% of GDP.

Health care costs have risen about 2.4 percentage points faster than GDP since 1970.

In 2018, CMS projects that we will spend more than $4.3 trillion on health care—20.3% of GDP.

So, these key stakeholders are going to visit the White House tomorrow and tell us that after 39 straight years of blowing the lid off of GDP they are now going to control costs?

That is if the President and the Congress mandate that everybody buy their health insurance products and therefore get funding to visit their doctors offices and hospitals as well as buy their drugs and devices.

OK.

But I would suggest some hard questions:
  1. What measurable and verifiable benchmarks are the stakeholders willing to set?
  2. What consequences are they going to suffer if they don’t make a real difference in controlling costs?
I think Ronald Reagan had it right when he was negotiating disarmament with the Soviets—“Trust but verify.”

Is this $2 trillion offer a big deal?

Is it more than just a rounding error in the grand scheme of things?

Is it is measurable, verifiable, and are there consequences for falling short?


If the answer is “Yes” to each of these elements, then it is scorable.

If the answer is “No” it’s just good PR.

One other thing is clear--the pressure is building on the Congressional Budget Office to agree on some health care reform savings. Recent post: An Open Letter to the Men and Women Over at the CBO--Hang In There!

Thursday, May 7, 2009

An Open Letter to the Men and Women Over at the CBO--Hang In There!

Last November I did a post: To the Congressional Budget Office: Please Keep Playing it Straight!

In it I said:
I hope the CBO doesn't cave to political pressure and keeps doing its non-partisan down-the-middle job.

If I hear the politicians whining and the special interests squealing about CBO's conclusions about how these cost containment "lite" proposals...don't save much money I know the CBO pros are doing their job.
I also said:
It looks to me like the nebulous "pay-for-performance" initiatives often proposed as part of Medicare physician payment reform are too often ways of avoiding the really heavy lifting that has to be done to fix that doc payment system. Since no one seems to agree on what quality is and a way to measure it I don't have a lot of faith there are big fixes here. If all of the docs are enthusiastic about pay-for-performance proposals in exchange for avoiding fee cuts you know it isn't accomplishing a lot!

Wellness programs very similar to the ones we see today were around in the late 1980s and never accomplished a lot.

Health information technology progress and patient medical records are very important--particularly for improving quality--but have a lot of upfront costs and take years to payoff. Ask any doctor now struggling with them.

The disease management and coordinated care programs now being proposed are, like most cost containment "lite" proposals we are seeing today, helpful but only incremental extensions for what is going on in the market anyway. No silver bullets.
So, six months later lawmakers are sending one of these "cost containment lite" proposals after another over to the the CBO and the CBO is sending them back stamped, "insufficient funds."

And there's lots of whining about it now going on atop the Hill where people are desperate to find easy money for health care reform.

It will take more than $1.2 trillion to pay for health care reform and the Obama budget cuts have only identified about $300 billion toward that goal.

We will not reform the health care system unless we really reform the health care system.

The only thing standing between BS reform and real reform are the men and women--real men and real women--over at the CBO.

Proud of you.

Hang in there!!!!

Tuesday, May 5, 2009

"An Open Letter to the New National Coordinator for Health IT: Part 3 -- Certification As The Elephant in Health IT's Living Room"

by DAVID C. KIBBE and BRIAN KLEPPER

In the first and second parts of this series we talked about how and why there is no universal definition for the term "EHR." Instead there is a legitimate, growing debate about the features and functions that "EHR technologies" should offer physicians seeking to qualify for HITECH incentive payments. We explored the layers of network technology, suggesting that federal regulators should "separate the data from the applications."

We also argued that there is much to learn from development platforms, recently and in the distant past, that have used standards to open the aperture of innovation. The best of these standards have reflected the experience of what works rather than specifying how to make it work. Defining the standards for data, devices, and network technologies too restrictively could choke off innovation, rendering HITECH's offerings whose expense and complexity are a barrier to, rather than an incentive for, adoption by physicians. Incoming National Coordinator for HIT David Blumenthal, MD seems to have been considering just this concern when he recently wrote:
"... [M]any certified EHRs are neither user-friendly nor designed to meet HITECH’s ambitious goal of improving quality and efficiency in the health care system. Tightening the certification process is a critical early challenge for ONCHIT."
We're not sure what "tightening the certification process" means. But if the new Administration hopes to entice physicians to embrace health IT, we'll need a different process entirely than the one developed through the Bush Administration's sole-source contract with the Commission on Certification for Health IT (CCHIT), an organization originally founded and staffed by HIMSS (The Health Information Management Systems Society) and dominated by large, legacy-based technology firms.

Concern about whether current certification process is fair and configured to promote the common interest is hardly isolated or out of the mainstream. Last week the Markle Foundation issued a report - both of us served on the panel that developed it, but there were also many representatives from prominent industry groups - with this comment:

A broader view of IT would seed innovation rather than lock in adoption of technology based on what is available today. Health information services and technologies need to innovate and evolve rapidly, as other sectors have transformed themselves by embracing and building upon the internet...To support meaningful use, HHS should endorse a simple specification for a minimal set of open technical standards for secure transport as well as a core set of data types. By creating an obvious and achievable starting place, HHS will enable many options for clinicians and consumers to retrieve and use information to accomplish the meaningful use objectives.

And in a slightly blunter and more acerbic assessment in a Healthcare Informatics interview, Intermountain Healthcare's CIO Mark Probst, newly appointed to the HIT Policy Committee formed by HITECH to advise the National Coordinator, said:
I mean it’s sure nice for Epic or Cerner or Eclipsys to tell their clientele that if they want to add new functions, you’ve got to go through them. So my guess is standards are somewhat threatening to them. Do we want 15 different gauges of railroad going around the United States or half the country driving on the left and half on the right? I mean you’ve got to have some standards if you want to get some of the benefits out of the systems.
*****

HITECH lists the following "meaningful uses" of EHR technology:
  1. The ability to do ePrescribing.
  2. Engagement in health information exchange to improve quality of care, e.g. care coordination.
  3. Reporting of quality and performance metrics, in a manner to be specified by the Secretary of HHS.
The common link between these three seemingly different uses of EHR technology is health data connectivity of health data to improve service quality.

E-Prescribing is essentially designed to promote care coordination between patients, doctors, and pharmacists. It uses EHR technology that is dedicated to exchange of data between physicians ordering medications, pharmacists who are filling these prescription orders, and patients who request refills and are dispensed medications for treatment of their conditions and diseases. All of these processes are easier, safer, more convenient, and less costly to perform using EHR technology than by paper or fax, and therefore we agree that this is a "meaningful use" of such technology.

Health information exchange between and among providers, especially when these providers are independent entities or exist in separate geographical locations, helps create continuity of patients' experience by providing continuity of information flow and access where once there were only isolated silos of health data. There is widespread belief that health data sharing could improve care, safety, and decrease waste and duplication.

And quality reports are, in essence, statistical analyses of patient experience, sorted across many different variables: e.g., condition, acuity, physician, location. Providers submit the raw data for analysis and feedback, another kind of care coordination and communication activity, although the results are removed in many cases from direct patient care. Here too, we see that this feedback holds significant potential for improving care and eliminating unnecessary costs.

As National Coordinator David Blumenthal has pointed out, the current CCHIT certified products were not designed for these purposes. And that begs several questions:
Should already certified products be de-certified unless they can demonstrate their ability to meet the new HITECH criteria of meaningful use?
  • What would health IT that was designed to carry out these tasks look like?
  • How might it be distributed and sold?
  • Should pricing criteria be included in the certification process?
  • How might it be able to accommodate new features and functions as these become desirable?
  • What tools do the nation's best performing groups provide to their staffs to empower them to provide high-quality and efficient care?
*****

A new certification process could be streamlined in ways that encourage rather than stifle innovation. Certifying entities should be neutral, dispelling the perception of many in the industry that CCHIT's ties to HIMSS are conflicted. (Note that we are not arguing for disbanding or dismissing CCHIT. We are simply suggesting that it should not have a monopoly over the specification of certification criteria. Like other organizations, CCHIT could choose to apply to become one of the certifying entities under the new process.)

Most importantly, the criteria for achieving certification should be closely linked to the "meaningful uses" specified by Congress in HITECH as ways physicians and hospitals can demonstrate improved performance associated with the tools, as justification for HITECH subsidies.

This could be easily achieved. ONC could interpret EHR technology as any software with the basic capability to create, protect (privacy and integrity), store, interpret, and exchange (i.e., import and export) a designated health data set, using existing, tested, and appropriate standards for this purpose. The designated health data set would be initiated with a small number of data elements that are already widely digitized and coded, such as problems and diagnoses, medication list and history, vital signs, and laboratory test results. Over time, and as exchange of this summary health data becomes routine, additional data elements could be added, as could new capabilities (e.g., decision support) for using the data.

Begin with a technological crawl, then walk, and eventually run. Build a platform capable of future extension beyond current transactions and technical specifications. Leave a lot of room for innovation.
*****
We believe that the market is moving inexorably to answer these questions, but that consideration of them by Dr. Blumenthal and ONC is a rare opportunity to accelerate the market response. By doing so, serious "new thinking" would likely be introduced into health IT. One of the consequences might be an entirely new process of qualification or certification of EHR technology from that currently proposed by HIMSS and CCHIT.

That "new thinking" would reflect the changes that have occurred in computing over the past few years since CCHIT defined EHR technology based on a client-server model that was dated even in 2004. For example, we have seen a major trend towards Internet-based applications, the so-called "cloud computing" revolution. In essence, this is the idea that one can access software applications as a service available over the Internet, instead of having to put the software programs on one's computer. Web-based software applications mean that customers need less specialized hardware and software to get more functionality at lower cost. Cloud computing allows us to make airline and hotel reservations over the Internet; to run word processing and spreadsheet applications, email, and contact database applications from a thin laptop computer or a cell phone; and to be free of dependence on particular devices or brands of hardware in order to participate in data exchange and communications.

A model of computing is emerging called Software as a Service, SaaS, in which the technology provides a platform into which multiple service applications can be "plugged" or "added" -- and often from competing companies that are also not the same as the company that owns the platform. Google Apps and the iPhone are the two primary examples of platforms that allow independent developers to create applications that can run on the platform, and in some cases interact with other applications. These applications may even be substitutable and be replaced by the user who is basing his/her choice of which app to use on the basis of pricing and value. Users of a Google home page can populate it with widgets (e.g. apps for weather, calendaring, email) from Yahoo.

Finally, the Internet and World Wide Web are increasingly being used as social media. From blogs, to Wikipedia, to Facebook and Twitter, online tools for communication and social interaction are transforming the way business is conducted and how society gets its information. Group efforts that used to require the filters of relatively rigid institutional structures, due primarily to the complexity of managing groups, are now as easy to organize as hitting the "Reply All" button on an email. We would guess that the number of physician exchanges taking place within Sermo and Ozmosis , two of the leading physician-based social networking sites, exceed by an order of magnitude the communications that take place through medical specialty societies taken all together. These new communications tools are creating unprecedented opportunities for people to express themselves, and medicine/health care is a primary cultural area being affected. People are regularly immersing themselves in virtual communities, like Patients Like Me or Diabetes Connect, organized around particular diseases; cyberspace is used to provide medical advice and visits with clinicians (see American Well or TelaDoc ); and more and more patients/consumer are expecting their doctors to have an online presence through web portals and secure communications channels.

By contrast, the CCHIT-certified EHRs are overwhelmingly practice- and physician-centric software applications that pre-date the Internet. They were not designed with participatory medicine or consumer-generated health care in mind.
Shedding the bloated feature set now required for certification in favor of a "thin certification" based on data exchange and management would immediately stimulate the health IT economy. It would also focus Congress' understanding of "meaningful uses" that it hopes will encourage health IT among physicians and hospitals. Opening the aperture for innovation might easily create new jobs for new EHR technology products and services in e-Prescribing, care coordination, health data exchanges, and quality/cost performance reporting.
*****

HITECH is hugely important because it is the Obama Administration's first major step toward health care reform. The stimulus funds for health IT aspire to lay in a modern national health IT foundation that can facilitate the better care at lower cost our nation so desperately needs.

If the process moves forward as it is currently configured, a not-for-profit agency that is dominated by industry interests and that promotes technology that is largely outdated will have succeeded through its policy influence in securing much of that funding while holding newer, less costly, better technologies at bay. If that occurs, it will not only be yet another serious compromise for American health care's future, but it will signal that other important elements of meaningful health care change - universal coverage, a re-empowerment of primary care, greater quality/cost transparency, paying for results instead of procedures - will be equally elusive.

David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on health care professional and consumer technologies. Brian Klepper PhD is a health care market analyst and a Founding Principal of Health 2.0 Advisors, Inc. Their collected collaborative columns may be found here.

Monday, May 4, 2009

A Side Deal on the Medicare Physician Fee Cuts? What Does That Say About the Chances for Health Care Reform?

John Reichard has dug deeper than anyone else into the Medicare physician payment problem in an important article in today's CQ HealthBeat.

He reports that the Blue Dog Dems (about 50 House moderate and conservative deficit hawks) may be willing to give the docs a pass by not requiring offsets for a two-year patch for their upcoming fee cuts--including the 21% fee cut due on January 1st. They are also reportedly willing to give the same pass for a three year alternative minimum tax (AMT) fix that would otherwise hit the middle-class hard.

A two-year "patch" for the Medicare physicians would cost $38 billion.

Reichard reports that the Blue Dogs' price is a statutory pay-go requirement--legislation that would require spending cuts or new revenue on any other legislation that would add to federal spending. He also reports that, "House Democratic leaders insist they'll back up the Blue Dogs on statutory pay-go and that if it isn't passed will demand offsets for the doctor fix..."

Which all begs a question: If these same Democratic leaders are so confident we will get health care reform this year, why are they doing a deal for a two-year doctor patch?

As I have been reporting here for months, health care reform is stuck in the mud over how to find the money to pay for it.

That Democratic leaders in the House are willing to find a two-year patch for the Medicare docs just reenforces the notion health care reform--and physician payment reform for that matter--is floundering for a lack of a clear course to do either.

Saturday, May 2, 2009

CBO Proving to be an "Obstacle" to Health Care Reform--I Hope They Don't Cave!

Looks like it's "in season" for shooting the messenger up on Capitol Hill!

Senate Finance Chair Max Baucus was heard to complain this week about that pesky Congressional Budget Office (CBO) saying that, "The slight challenge we have is getting numbers and estimates from CBO,“ he went on, "Otherwise, health care reform is in jeopardy. The learning curve for all of us is fairly steep."

Well Senator, perhaps you missed the CBO's December report outlining 150 options for reform and the CBOs pricing of each.

There are really two problems here for eager health care reformers:
  1. The CBO is playing it straight. Their numbers are realistic and they aren't looking the other way every time a politician, including the Senate Fianance Committee chair, would like them to price billions of savings from things like, "waste fraud and abuse."
  2. The CBO is the official referee for the Congress on budget matters. Their projections are the ones everyone must use to score legislation, or vote in favor of ignoring it in the light of day.
What the CBO says is further complicated because:
  1. All of the Democratic Congressional leaders, the White House, and the recent budget resolutions from the House and the Senate, all say health care reform has to be pay-go--they have to offset every new spending dollar with either cuts or revenue from somewhere else.
  2. The new Office of Management and Budget Director for President Obama--Peter Orszag--signed that December document as the then CBO director. Kind of hard to say the CBO doesn't know what they are talking about.
Democrats have painted themselves into one big box here.

And I am glad they have.

In my mind, health care reform means fixing the system so we stop spending/wasting so much more than every other industrial nation on health care thereby making our system more affordable and effective.

If the CBO just rolls over and lets Congress make up excuses just to spend more for health care we will not have reform--we will only have a bigger fiscal disaster on our hands. How do you reform entitlements by pretending?

Oh, that pesky CBO!

Perhaps this December post on the CBO's scoring of 150 health care reform options applies to Senator Baucus: CBO to Health Care Reformers: Naive Policy Makers Need Not Apply
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