There’s going to be more change in health care this year than in any year in memory.  Here’s what I see coming.

1.  Most states will expand Medicaid.

Despite their protestations to the contrary, governors – even those in redder-than-red states – will accept the federal dollars and expand Medicaid.  The pressure from hospitals and providers will be overwhelming. Expect all but a relative handful to bow to that pressure and take the money.

2.  There will be a lot more M&A at the highest levels – among providers, health care systems, and payers.

Expect the big to get much, much bigger.  They have to – the need for cash to fund innovation and change demands it, and smaller organizations just don’t have enough resources to meet the needs.  Anthem, Aetna, UnitedHealthcare, Express Scripts, Yale-New Haven Hospital, St Luke’s in Boise, CIGNA, Wellpoint; all are actively and aggressively looking to grow through acquisition.

3.  Many more docs will be employed by hospitals by 1/1/2014.

About a third of all physicians are currently working for hospitals/health systems today.  Many more will be in 12 months.  The pace of consolidation is accelerating, driven by the new focus on Accountable Care Organizations, a desperate need to strip out cost, and increasing expenses associated with independent practice.  I’d expect another 5% of docs will be employed by health systems by the end of 2013. 

 4.  Congress will not fix Medicare physician reimbursement

It will add too much to the deficit, plus they are stuck between the rock (really mad physicians) and the hard place (need to cut entitlements) so Congress will do what they do  Oh so well; punt.

5.  The feds and CMS will get even more aggressive on Medicare and Medicaid fraud.

CMS, the FBI, and various other governmental entities have greatly expanded efforts to combat fraud related to Medicare, Medicaid, and other federal health programs over the last few years – ranging from relatively small cases to medium-sized actions to mega-busts. Total in 2012 was about $3 billion; expect a substantial increase in 2013.

We’ll revisit at the end of the year to see how I did.

There’s an easy $200 billion in deficit reduction out there – require CMS to negotiate drug prices with manufacturers, a move that would reduce annual expenditures by over $20 billion – or $200 billion closer to a “cliff”-avoiding deal.

As I’ve noted repeatedly (but unfortunately few in the mass media have), Part D is perhaps the biggest deficit problem we have – the ultimate unfunded liability is now over $20 trillion.  A decade ago the Republican House and Senate  passed the single largest entitlement program since Medicare – the Medicare Part D drug benefit – with no dedicated financing, no offsets and no revenue-generators. Fully three quarters of the total future cost – which is now around sixteen trillion dollars [see page 122] – was simply added to the federal budget deficit. (the rest is paid for by senior’s fees and State transfers).

The cost to taxpayers for Part D in 2011 was $53 billion; over the next ten years, our cost will balloon to $990 billion.

Of course, we could solve the majority of our budget problems by just canceling Part D, but neither the Democrats nor the Republicans will do that.

So, as long as we’re stuck with the damn thing, we ought to make it as inexpensive as possible. The best way to do that is to use the buying power of Part D to negotiate with manufacturers to get the best possible price for drugs that you – the taxpayer – are paying for. Believe it or not, the original Part D legislation expressly forbids negotiation with manufacturers for pricing. 

In a 2006 House analysis, a report “showed that under the new Medicare plan, prices for 10 commonly prescribed drugs were 80% higher than those negotiated by the Veterans Department [emphasis added], 60% above that paid by Canadian consumers and still 3% higher than volume pharmacies such as Costco and Drugstore.com.”
Another study indicated “An annual savings of over $20 billion could be realized if FSS [Federal Supply Schedule] prices could be achieved by the federal government for the majority of drugs used by seniors in 2003-2004…”
Are there problems with this? Absolutely. Reducing prices may impact R&D expenditures and will affect pharma margins – effects that must be balanced against the nation’s long-term financial viability.

Notably, the President’s public statements on the negotiations haven’t mentioned the long term costs of Part D either. It is puzzling indeed that President Obama has not publicly put this chip on the table.  Perhaps it’s because pharma has already “contributed” to paying for health reform with their $80 billion in

That said, Speaker Boehner’s the real hypocrite here. The Orange One could have been courageous – admitting he and his party made a mistake in refusing to allow CMS to negotiate with pharma, and thereby saving taxpayers $200 billion over the next ten years. Sure, he would’ve taken a hit from older Americans who love Part D, but true statesmen, real leaders, know that tough, unpopular stands are necessary some times.

Like now.

What should we do?

Either a) end Part D or

b) allow the Feds to use their buying power to negotiate with pharma. That alone would save about $20 billion a year.

To recommend either, contact Speaker Boehner here and President Obama here.

Canceling Part D won’t happen; neither party is about to tell seniors they can’t have free medicine. If Boehner, McConnell, Tea Party Congresspeople- and the Administration – were really concerned about the deficit, they’d agree to use the government’s buying power to reduce costs and thus lower the deficit. But of course they won’t; that would alienate big pharma and cut into their campaign contributions.

I’d be remiss if I didn’t acknowledge there are a few on the right as angry as I am about this blatant hypocrisy.

Papa John’s Pizza founder and CEO John Schnatter said he’s going to have to raise the price of his pizzas by 10 to 14 cents to cover the added cost of complying with Obamacare’s provisions. (turns out it’s only 3.4 to 4.6 cents per pie…)

Let’s think about that.  Fourteen cents a pizza gets all of his employees excellent health coverage (only about a third are covered now, even though Schnatter says he’d “like” to cover all of them….)  This isn’t to slam Schnatter, who by all accounts is a decent guy who raises money for worthy causes and tries to stay out of public politics.  He does get a bit too aggressive in his marketing efforts, but hey, that’s not the worst thing in the world.

Rather my concern is Schnatter’s perspective – which is consistent with what we’ve heard from other chain food outfits – is myopic – in several ways.

If his company doesn’t provide insurance for his low-paid workers, we taxpayers have to.  That’s the way Obamacare works; folks with incomes below 400% of the FPL (federal poverty level) can get subsidized coverage).  So, if Schnatter cuts his workers’ hours so he doesn’t have to insure them, all of us taxpayers get to pay for their health insurance.  Schnatter is avoiding his responsibility and increasing our tax burden.

Sure, you can protest that you don’t believe in/like Obamacare for whatever reason, but you don’t get to pick and choose where your tax dollars go.  I don’t like paying for subsidies for corn ethanol or grazing rights in Wyoming or all-but-useless medications for seniors or pointless and stupid wars, but “elections have consequences” (yes, that’s two Karl Rove quotes in less than a week…).

There’s a widely held belief that workers without health insurance file claims with workers comp if they get hurt off the job.  Overall, this doesn’t seem to be the case, but there’s no doubt individual workers do try this, and some are successful.  Thus Schnatter’s position may lead to increased workers comp costs, however slight.

Finally, as long as he’s stuck with Obamacare’s coverage requirements, there’s this marketing angle – “you should buy Papa John’s because out pizzas are better than anyone else’s, because our people are happy and healthy.  And we take care of our workers, not like those schmoes at (pick a rival pizza company).”

The ban on medical underwriting and exclusion of pre-existing conditions?

The elimination of lifetime maximums?

The penalty for those who choose not to sign up for insurance?

The expansion of Medicaid to cover those with incomes up to 133% of the federal poverty level?

Requirement that Medicare control its costs or be subjected to stricter controls on useless or dangerous procedures and treatments?

The tax credit for small employers obtaining health insurance?

The requirement that preventive care is covered – at no cost to subscribers?

Tight restrictions on insurers seeking to cancel coverage when subscribers get sick?

It wouldn’t be good policy to eliminate many of these provisions, and, more to the point, it isn’t possible.

First, the policy problem facing Mr Romney.  Let’s take just one example; he’s said he

a) is going to repeal Obamacare on his first day in office, (let’s leave aside that he doesn’t have the ability to do that) while

b) ensuring anyone with pre-existing conditions can get coverage

I don’t see how that works.  In fact, Romney’s “assurances” about coverage for pre-ex are no more than what exists today; as long as you move directly from one insurance plan to another your pre-ex conditions are covered.  For those Americans who haven’t had coverage for a few months, you’re out of luck – insurers won’t have to offer coverage.

Oh, and there are no price limits on what insurers can charge you, so even though Romney says your pre-ex conditions will be covered, it may cost you two, three, even five times more than the list price for that policy.  Which means – really – Romney doesn’t guarantee pre-ex will be covered.

That’s just one provision that’s problematic for Mr Romney.  The reality is there’s a lot to like about Obamacare, as Romney has found – otherwise he wouldn’t be backpedaling on his earlier promise to kill the whole thing. Sure, most folks are only really interested in the one or two provisions that directly affect them – perhaps coverage of kids till they’re 26, or expanded coverage of Medicare drugs.  But he can’t – the practical reality is that unless he gets 60 senators to agree with him, he can’t overturn PPACA or significantly change any of its provisions.

So, the lack of any substantive discussion of health reform in the last debate was appropriate; it’s the law of the land and won’t/can’t be changed despite Romney’s occasional statements to the contrary.

 

 

 

 

 

There’s no question this election presents voters with a stark choice in candidates, and nowhere is that more obvious than health care.
Colleague Bob Laszewski has written an authoritative piece delineating the differences between Obama and Romney’s plans for health reform; here are a few excerpts. I encourage you to read the entire post, it is well worth careful consideration. (emphases added)
“On his first day in office, Mitt Romney will issue an executive order that paves the way for the federal government to issue Obamacare waivers to all fifty states. He will then work with Congress to repeal the full legislation as quickly as possible.”
The Affordable Care Act (ACA) does give the President power to issue states waivers from the Democratic health plan legislation. But, not before 2017 and only if the state can demonstrate that it can cover as many people as the Democratic health care law is covering in the state… If Romney tried this, I would have to believe advocates for the ACA would quickly be in federal court.”
“…it looks like their [Republicans’] health care priorities will be to pass their Medicare and Medicaid reforms and leave dealing with the uninsured to the states.”
Romney places a lot of trust in competition in the market for solutions…
“Romney would empower individuals and small businesses to form purchasing pools. I have actually run such pools–association health plans. It is perfectly legal to start one today. In all of my years running these pools, I never saw them save money–actually they tended to cost more when compared to small group plans…”
Romney would allow consumers to purchase insurance across state lines. The problem he is trying to address is that states have lots of coverage mandates…I have no doubt that some states have fewer mandates and lower individual health insurance prices. However, I know of no state that has truly affordable health insurance. It is hard to see this as any real solution.
If this provision were ever to become law it could have a very negative impact on current state individual insurance markets. Many, and many in the health insurance business, believe this provision will take us back to the days of cherry picking in risk selection. Predatory insurance companies could use this provision to offer a stripped down policy in a state with more mandates. That policy would be cheaper and cover less–and therefore attract more healthy consumers. That would leave a sicker population in the existing state risk pool with rates having to ratchet up for those who need more coverage.”
Bob’s views, as always, are on point.
I’d add that the reason health reform is so complicated, and the bill so long, is to address these – and the myriad other issues that must all be considered if we are to ‘reform’ the health care and health insurance system(s).