Rep Ryan has taken what, by any definition, is a very bold and aggressive position regarding Medicare. He has – quite rightly – acknowledged that Medicare’s current financial trajectory is unsustainable. While one can argue with Ryan’s solution, one cannot disagree with the diagnosis.
He has also been in the forefront of the deficit debate, again rightly describing the fiscal disaster that awaits if we fail to control entitlement spending.
Paul Ryan’s faith in the free market is obvious, and is evident in his approach to resolving the Medicare cost problem.
One of the tenets of that faith in the free market is that better/cheaper products and services will win out over costlier/less effective alternatives. The thinking is, over time consumers will force suppliers to improve their products and reduce the cost of those products.
Unfortunately, Ryan has specifically voted against basing payment on a product’s effectiveness, and in so doing, has undoubtedly helped increase medical costs while not improving outcomes.
I’m referring to the Medicare Modernization Act of 2003, which Rep Ryan supported.
MMA does not allow CMS to alter reimbursement on the basis of efficacy.
If a new drug or device comes on the market and is only 1 percent as effective as the existing drug or device, CMS cannot consider that effectiveness when determining reimbursement.
Here’s how the Kaiser Foundation described it:
“The Centers for Medicare and Medicaid Services (CMS) was precluded by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) from incorporating results from the comparative effectiveness [CE] research authorized under MMA into its coverage decisions for Medicare.”
The pertinent language from the Act reads as follows – CMS will pay for items or services “reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member” (Fed Reg 65-95, p 31124- 31129, 2003 MMA); there is no mention of cost).
So, we taxpayers funded CE research, yet the feds can’t use that to ensure our taxpayer dollars are spent appropriately. And they can’t because the people who voted for MMA – including Paul Ryan – forbade it.
There’s more.
One of the other impacts of the Medicare Modernization Act was the reclassification of 6.2 million Medicaid recipients; low-income elderly and disabled people who had been receiving drug coverage through Medicaid were moved into Part D, where they got the same drugs, just at higher prices.
Medicaid negotiates with manufacturers and gets about a 26% price cut, under MMA Medicare is prohibited from doing so, so we taxpayers only get about 8 points off the cost. As a result of this language in the Act, pharma’s profits increased a bit under $3 billion dollars per year – a direct transfer from taxpayers to private industry.
The difference between Rep Ryan’s avowed belief in the free market and laser-like focus on deficit reduction and his strong support for MMA is striking.
It isn’t just a difference, it is Jekyll-and-Hyde like.
The vote for MMA increased the deficit and eliminated pay for performance, while his current persona rails against that very behavior.

Mitt Romney’s naming of Wisconsin Rep Paul Ryan (R) as his running mate will place Ryan’s record under a microscope. That doesn’t mean most observers will understand, or realize the implications of what they see.
Before we take our turn at the viewing lens, a couple quick points.
1. I have NO problem with politicians advocating unpopular positions. They often cause the rest of us to rethink our positions and challenge commonly-held opinions.
2. I agree – absolutely – with the need to rein in entitlement spending.
3. I’m sure all of us abhor hypocrisy, particularly when it involves flip-flopping on political issues to gain votes.
Ryan has become the darling of conservative intellectuals for his “bold” budgetary proposals and willingness to “take on entitlement spending”, as well as his plan to slash taxes, particularly on investment income.
It’s one thing to advocate policy, come out with plans and proposals. To really understand a politician it is best to examine their record – so that’s what we’ll do.
We’ll start with the biggest expansion of entitlement spending since 1964 – Medicare Part D.
Eight years ago Ryan and the GOP passed the Medicare Part D drug benefit with no dedicated financing, no offsets and no revenue-generators. Three-quarters of the ultimate cost – which is now around nineteen trillion dollars – was simply added to the federal budget deficit.
The latest Medicare Actuaries’ report states the “estimated present value of Part D expenditures through the infinite horizon of $19.2 trillion, of which $9.1 trillion would occur during the first 75 years.” (see page 129)
I’d note that Ryan’s recent budget proposals and speeches are silent on Part D’s ultimate cost, funding, and impact on the deficit. At least I couldn’t find any references. The comments I could find touted the decline in projected costs – in fact, cost projections have come down over the last couple years – which is a good thing. However, unless they come down to zero – a long way from $19 trillion to be sure – the fact is Ryan voted for a huge expansion in entitlement spending and continues to stand behind that vote.
Squaring that position with Ryan’s current status as a budgetary hawk is going to be a bit of a challenge…
There’s just a little more. Ryan also voted against allowing the Feds to use their bargaining power to negotiate drug prices for Part D, a move that would have reduced costs by about $20 billion per year.
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…”
That’s defensible – perhaps – from a purely ideological position. It provides useful insight into Ryan’s priorities; when balancing his political ideology and, one might argue political expediency against an avowed commitment to budgetary discipline, the budget appears to lose.

A job-killing socialistic government-run abandonment of the free market and abuse of federal power – that’s pretty much on the far end of the “awful” scale.
If that was true, we’d all be up in arms. But it isn’t.
I’m continually puzzled by the level of anger directed at “Obamacare”; listening to some of the more vitriolic detractors you’d think it was single-payer with death panels and mandated reimbursement levels and no privacy protection with care delivered by former gulag employees…
in Gulag facilities…

What “Obamacare” is…is not “government-run” health insurance; the vast majority of newly covered folks will get their care from private insurers, who will negotiate with providers on their own terms, and set their medical management policies themselves.
What Obamacare is not – is a “job-killer”. Recall Massachusetts enacted legislation very similar to PPACA back in 2009.
Overall, employment gains in healthcare Massachusetts outstripped the rest of the country by four points; Mass added 9.5% more health care jobs since passage of reform while the rest of the nation averaged 5.5%.
But the impact wasn’t just on health care job counts. While the rest of the country saw a 2.9% drop in employment since Massachusetts passed reform, Mass’ employment dropped by a mere 0.2%.
While some jobs will likely be lost, the jobs that will be gained will be high-paying, professional ones.
According to the NFIB – no friend of Obamacare, “The employer mandate would boost demand for healthcare goods and services, thereby increasing employment in healthcare-related sectors. [emphasis added] The number of ambulatory healthcare professionals (physicians, dentists, and other healthcare practitioners) needed will increase by 330,000. An additional 327,000 staff will be required to work in hospitals. Some 157,000 more nurses (net of retirements) will be needed to staff doctors’ offices, outpatient clinics, and other provider locations. And payrolls at insurance companies will expand by 76,000 workers.”
(Note this study focused on the original mandate, not the one that exempted employers with fewer than 50 workers – and this would have created 890,000 jobs. (NFIB hasn’t updated their numbers to reflect the lack of mandate for small employers, which may well have reduced the number of jobs lost in retail and services.)
Okay, so we have 330,000 more jobs for docs and dentists, and 157,000 net new openings for nurses. That’s almost half a million new high-paying jobs; these aren’t retail clerks, burger flippers or car wash attendees, these are folks making from $50,000 to $400,000.
That pretty much takes care of the government-run and job-killing issues.
That leaves, let’s see, children are covered till age 26; exclusion of pre-existing conditions won’t be permitted; no lifetime caps on coverage; seniors won’t have to worry about the “donut hole”…
What’s left? What’s really wrong with Obamacare? No fact-free rants please.

Health Wonk Review is hosting a special edition today compiling the views of the health bloggers on the Supreme Court’s decision on PPACA.
By now all know the Court upheld the Affordable Care Act by the narrowest of margins, with Chief Justice John Roberts the swing vote and author of the majority opinion. The quick synopsis from MCM (that’s me). Everything stands except the Feds’ ability to require states to expand Medicaid coverage or lose all their Medicaid dollars.
While there will still be a significant expansion of coverage, if some states opt out the number of uninsureds will not drop below 18 million as originally forecast. I don’t see a lot of states standing on principle and rejecting the money – which covers up to 90% of the cost for the first few years, and 50% thereafter. Then again, stranger things have happened. The basis for Justice Roberts’ opinion lay not with the Commerce Clause but rather the Constitutional power of taxation. We’re going to start with the legalities.
Which are much more than just “legalities.”
Several contributors explore the issue albeit from different perspectives.
David Harlow of Healthblawg fame finds the dissenting opinions rich in content and entertainment value, especially Justice Ginsburg’s statement “no one would offer the hypothetical and unreal possibility of a vegetarian state as a credible reason to deny Congress the authority ever to ban the possession and sale of goods. The Chief Justice accepts just such specious logic when he cites the broccoli horrible as a reason to deny Congress the power to pass the individual mandate.”
Yowza.
At Health Affairs, Tim Jost digs into the Roberts opinion, citing this key statement: “proper respect for a co-ordinate branch of government requires that we strike down an Act of Congress only if the lack of constitutional authority to pass [the] act in question is clearly demonstrated.” Clearly Roberts felt the “demonstration”, to the extent there was one, was not clear enough.
We welcome back HWR co-founder Matthew Holt to these digital pages. Matthew sees the tie to taxation as a watershed moment; “In any rational society health care ought to be a public good financed through taxation and distributed in some manner that makes rational sense. America has never officially believed that. [emphasis added] Now it at least has affirmed the concept.”
Jason Shafrin sees this from his economist’s perspective; saying the mandate-as-tax logic “is one that economists would support (whether economists support the mandate is a separate issue). All regulation is a form of a tax in that it restricts one’s choices and imposes a cost on consumers and/or producers.”
And Ezra Klein thinks Roberts toed the conservative line; “The 5-4 language suggests that Roberts agreed with the liberals. But for the most part, he didn’t. If you read the opinions, he sided with the conservative bloc on every major legal question before the court…Roberts’s coup in writing an opinion that has found support on both sides must inspire some grudging respect.”
Maggie Mahar – and we are happy to see her back at her signature Health Beat blog – was not only unsurprised by today’s ruling – she called it. Read why she was sure the law would not be overturned in her post, Today, the Supremes sang
At Workers’ Comp Insider, Julie Ferguson did a little live blogging of the Supreme Court ruling, catching some of the major media in “Dewey wins” moment. CEO Tom Lynch weighed in with some analysis of the impact today’s decision.
Jay at Colorado Health Insurance Insider sees Roberts’ decision as not inconsistent with the government activism of the Bush administration. Jay opines “While the individual mandate and wire tapping seem on the surface to be completely different topics, they’re both on the spectrum of government involvement in our lives, and government utilizing its powers to promote an agenda that it views as good for society at large…”
The only part of the ACA seriously affected by the decision was the expansion of Medicaid, which, according to Sara Rosenbaum, was to “reshape Medicaid from a program covering certain categories of the poor into one that offers universal public insurance for all non-elderly low income citizens and long-term legal residents living in poverty.” Rosenbaum believes Roberts was able to convince other Justices to split Medicaid into “two spending programs,” thereby preserving the existing programs while placating the states’ rights advocates.
The implications for Medicaid are succinctly summarized by David Williams in his podcast interview with Avalere Health CEO Dan Mendelson.
While David’s got the high level view, Liz Borkowski sees a lot of uncertainty at the Pump Handle; “If some states decide not to go along with the now-optional Medicaid expansion, their poorest residents who don’t already qualify for Medicaid will have neither Medicaid coverage nor subsidies to help them get private coverage.”
Hank Stern’s had it with all this reform and Obama-stuff; he’s ready to pack up and leave, and suggests the medical tourism folks may be big beneficiaries of the Roberts decision
Roy Poses notes the decision – and the PPACA – suffer from a lamentable lack of attention on the concentration and abuse of power that still pervades our health care system; without addressing those issues, we’re unlikely to see any real and lasting improvement.
And of course, there’s the internet’s ability to quickly give us the reaction of the public, Jon Stewart,
and, of course, President Obama…

One of the concerns expressed about health reform and the additional financial burden it places on employers – particularly smaller employers – is that it will lead to fewer jobs as bosses cut employees to reduce expense.
Fortunately, thanks to the forethought of Massachusetts’ legislators and then-governor Romney, we have a “lab’ that’s providing real-world information on the cost and impact of health reform.
On the employment issue, it appears there’s no negative effect in Massachusetts. [opens pdf] According to research published by the Robert Wood Johnson Foundation, Massachusetts’ employment data indicates the employment picture post-reform was not negatively affected by that reform;

• “Declines in private-sector employment were consistent across the states–falling 4.4 percentage points in Massachusetts, compared to 4.8 percentage points, on average, in the rest of the nation.
• The employment ratio in medium-sized firms with 50-499 employees fell by 1.9 percentage points, compared to 2.2 percentage points in the rest of the nation.
• Even when accounting for firm size, industry, and job and worker characteristics, the trends in Massachusetts are similar to those in the nation as a whole.”

The study itself was quite robust, delving into worker types, skill levels, age, full time v part time, and education level. Across the board, there did not appear to be any difference in employment trends – after implementation of health reform – between Massachusetts and the four states used as a comparison basis.
There’s another aspect to this issue that bears mention.
Small employers, and sole proprietorships (like my firm) are finding it increasingly difficult to get insurance coverage due to insurance underwriting, pre-ex exclusions, and rating practices. And let’s not get into the application process, which is akin to applying to college and for US citizenship in terms of the information required and length of the process.
At some point these individuals and firms may move to Mass to ensure ongoing access to health insurance. They’ll bring their tax dollars too. I know of one new company forming in Mass specifically to ensure the partners’ families have access to insurance without exclusions.
What does this mean for you?
Unintended consequences can be good, too.

As we consider what to do about health care costs and coverage, there are a couple data points worthy of our attention.
First, Medicare and Medicaid trends – which are looking better these days. As Maggie Mahar noted, “From 2000 through 2009, Medicare’s outlays climbed by an average of 9.7 percent a year. By contrast, since the beginning of 2010, Medicare spending has been rising by less than 4 percent a year.”
And this trend looks like it will continue; according to research published by the Urban Institute, both the Centers for Medicare and Medicaid Services (CMS) and the Congressional Budget Office (CBO) “annual growth in spending per enrollee in both programs over this decade (2011-2020) is projected to be less than the growth in private insurance spending and close to the growth in per capita GDP.”
Note this is per-capita growth, which is more accurate when comparing different payer types as it accounts for enrollment changes.
Another data point – Massachusetts. As we noted a few weeks back, commercial insurance rate increases have dropped dramatically over the last year, driven by payers and providers working together to better manage cost and quality. Small group insurance premiums were up just over one percent last quarter, the second quarter in a row where rates have gone up less than 2 percent. Moreover, two large health plans filed for rate decreases…
Why? What’s made this happen?
Glad you asked. According to Kaiser Health News/NP5,
“…two years ago, the governor [Patrick Deval] directed his insurance commissioner to exercise a little-used power to turn down a requested rate increase because it was excessive. Not every state has this power.
Insurance companies were outraged. But [CEO Andrew} Dreyfus of Blue Cross Blue Shield now says it was a pivotal point.
“It sent a message to the entire health care community and the business community that we had to change,” Dreyfus says.
And change seems to be happening. Insurers have torn up their contracts with hospitals calling for annual reimbursement increases of 8 percent and 10 percent, and negotiated agreements providing for 3 percent, 2 percent and even zero percent increases.”
Meanwhile, employers’ health care costs are up 5.9% this year, and would have increased more if not for a significant increase in cost-shifting to employees (up over 19% from 2011 – 2012); employees are now paying over a third of their health care costs.
What does this mean for you?
If private insurers can’t do a better job controlling costs, it will be increasingly hard to argue against government intervention, whether in the form of top-down Massachusetts-style price control or delivery of care via governmental programs.

As our country confronts rising health care costs, it is incumbent on all of us to take responsibility for our actions and not rely on others to pay for our “freedoms”. One small way to address this is for motorcyclists who ride without helmets to buy health insurance to cover the costs of injuries.
In response to my post on that subject yesterday, I heard from Pete terHorst of the American Motorcycle Association (AMA) who took issue with my recommendation. Pete was courteous, responsive and is likely an excellent debater. He made a couple of points that I do not agree with – here’s the summary.
My central point was this: Those who seek personal freedom should bear the cost of that freedom. Simple, basic idea, right?
– medical costs for helmetless cyclists involved in crashes are substantially higher than for those riding with helmets;
– many don’t have health insurance and thus uncompensated providers, taxpayers and private insureds cover their costs;
– if states want to repeal helmet laws, then require those riding without helmets to buy medical insurance to cover all potential costs.
Not so simple, according to the AMA.
Pete’s initial comment cited some old research re the cost of motorcyclist trauma care relative to auto injury care and the percentage of riders covered v drivers. This was, in my view, not germane to my central point – so I asked Pete “do you think helmetless riders should not be required to have insurance coverage?. After some back and forthing and Pete’s diversion into discussion of helmet mandates v accident prevention, I tried to steer the conversation back to the central issue, to wit:
“It is appropriate behavior for those individuals to assume the responsibility that goes with their freedom to ride without a helmet.”
Here, are a couple of Pete’s responses:
What the AMA and its members expect is fairness. When the insurance
industry singles out and seeks additional revenue from motorcyclists
for behaviors it considers risky, the logical extension of that
mindset is that the insurance industry would do the same for other
so-called risky behavior. [I’d note that nowhere did I suggest the insurance industry single anyone out, but rather legislators pass a bill mandating medical insurance for helmetless riders] But it does not, because singling what is
risky and what is not is a very slippery slope to tread, and involves
taking on mainstream segments of society that currently represent a
significant revenue stream for insurance industry. [again, I didn’t say anything about insurance companies supporting, backing or conceiving of any such plan] Conversely,
motorcycling is not an activity that most Americans participate in,
and it is a visible and easy target for those who do not understand
its appeal. Bottom line: The AMA does not expect special treatment for
motorcyclists, it expects — and advocates for — fair treatment… The AMA doesn’t favor requiring unhelmeted motorcyclists carry additional medical insurance that is not required of other road users.
If I follow the logic, as long as others are allowed to be “free riders”, the AMA wants motorcyclists to be free riders as well.
Somehow that doesn’t seem right. Here’s a group who wants the freedom to ride without helmets but doesn’t want to pay the cost for that – unless every other participant in risky behavior is also forced to do so. That strikes me as selfish and irresponsible; “just because he gets away with it I want to get away with it too.”
Pete also argued that requiring helmetless riders to get medical coverage would somehow be unfair, and it would head us down a slippery slope – I don’t see this at all; my recommendation would be handled under traffic/motor vehicle laws, and it is abundantly clear (check the sources in the post yesterday) that riders without helmets in accidents are much more expensive to care for than helmeted riders.
What does this mean for you?
Watch our for free riders…

While death rates from auto accidents have been steadily decreasing, that’s not the case for motorcycles. There were 1.7% fewer motor vehicle fatalities last year, but motorcyclist deaths didn’t drop at all.
What’s going on? Well, after states laws mandating helmet usage were repealed, death rates climbed dramatically, up 21% in Arkansas, 81% in Florida, 58% in Kentucky, 108% in Louisiana, and 31% in Texas.

So why should you care?
Well, when these freedom-loving riders smack their heads into the pavement, dying or even worse incurring a traumatic brain injury, who pays for the heroic – and very expensive – efforts to save their lives?
Turns out less than half had health insurance coverage.
If they don’t have private insurance, that would be you and me. Research indicates taxpayers pick up about 40% of the medical costs from helmetless riders; cost-shifting to private insurers is certainly high as well.
Here’s a simple solution that should be added to any bill repealing a state’s helmet law.
Those who want to ride without a helmet have to buy insurance that reflects that decision. That insurance must provide comprehensive coverage for medical care for accidents associated with the covered individual, including long term custodial care, with a really high limit – say $10 million, that is indexed to the medical CPI to account for inflation.
Upon showing proof of coverage, they get a special license plate. Insurance companies take the risk, society does not get harmed due to the adverse consequence of a personal decision, and those who want to ride with their hair blowing in the wind are free to do so.
Oh, and they should be required to be organ donors as well.

In what will be one of the more entertaining episodes in Presidential campaigning, GOP presumptive nominee Mitt Romney will have to disavow his success in passing health reform in Massachusetts that now looks to be a major success.
Reform was intended to cover more people and reduce or at least mitigate cost increases.
While coverage did expand, for several years costs went up dramatically as well, leading some to point to the Mass “experiment” as a failure.
First, coverage. The latest data indicate 95% of citizens are insured, compared to 84% of the national population.
The latest information suggests those decrying the Mass reform may have been a bit premature in their assessment.
Small group insurance premiums were up just over one percent last quarter, the second quarter in a row where rates have gone up less than 2 percent. Moreover, two large health plans filed for rate decreases…
Why? What’s made this happen?
Glad you asked. According to Kaiser Health News/NP5,
“…two years ago, the governor directed his insurance commissioner to exercise a little-used power to turn down a requested rate increase because it was excessive. Not every state has this power.
Insurance companies were outraged. But [CEO Andrew} Dreyfus of Blue Cross Blue Shield now says it was a pivotal point.
“It sent a message to the entire health care community and the business community that we had to change,” Dreyfus says.
And change seems to be happening. Insurers have torn up their contracts with hospitals calling for annual reimbursement increases of 8 percent and 10 percent, and negotiated agreements providing for 3 percent, 2 percent and even zero percent increases.”
What does this mean for you?
While there’s no question governments can screw up lots of things in lots of ways, this appears to be one of those times where governmental authority, intelligently applied, is actually solving a problem.
What does this mean for Mitt?
Let’s see; if he takes credit for the result, he’ll be pilloried by the free market/Tea Partiers. Ouch.
If he says it doesn’t work, he’ll be, well, admitting he screwed up.
If he says it will only work in Massachusetts, he’ll be admitting other states aren’t able to fix this problem.

When it comes to health reform, perhaps the only thing Congressional Republicans agree on is they hate ObamaCare.
There’s no agreement on a basic framework much less consensus on an actual bill. Moreover, there are parts of ObamaCare that enjoy solid support amongst many Republicans, complicating the GOP’s efforts to develop an alternative without conceding political ground.
Their dilemma is certainly understandable; as anyone who followed the tortuous path of the PPACA (aka Obamacare), there was precious little consensus among the Democrats who passed the bill. While most had serious issues with various bits and pieces, they held their noses and voted “aye” when pressed.
Now that there’s a distinct possibility that the Supremes will overturn part/some/all of reform, there’s pressure on the GOP to come up with an alternative.
Here’s a few of the more contentious issues.
– requiring insurers accept all applicants is favored by most Republicans (according to Politico) but a) some senior Republicans hate the idea and b) there’s zero consensus re how to actually make that work. Do they forbid upcharging for older/sicker people? Adopt some form of risk-adjustment and/or financial transfer among/between insurers based on the risk profile of their members? Or allow the free market to operate, hoping that insurers will somehow figure out how to insure people with pre-existing conditions at affordable rates?
– taxation is a big issue; one bill sponsored by Rep. Paul Broun (R-Ga.) allows taxpayers to deduct all of their health care costs, while others cite the tax-free status of health insurance as a major cost driver. What looks like the leading bill (at least at this point) also uses the tax code to encourage people to buy insurance.
– most GOP-authored bills allow people to shop for insurance across state lines, which seems to be at odds with other GOP concerns that health insurance should be the purview of the states, and the Feds ought not to be involved
– the elimination of coverage for young adults and kids with pre-ex conditions is a concern to Rep Tom Price, who stated: “That would present a significant void and vacuum in health policy…There will be a need to have some things to fill that vacuum.” Again, many first-term Republicans see no role for the Federal government in health care, making any caucus-wide consensus on the issue doubtful.
– most of the plans on offer include some thyme of malpractice reform, however there’s ample evidence that malpractice reform would have a negligible impact – at best – on system costs. (One authoritative study indicated a 10% reduction in malpractice rates was associated with about a 0.132% decrease in the overall cost of care.)
If the GOP decides it must act, the challenge will be to first convince the Tea Part Republicans that Congress has the authority to do so. While the Republican Party used to be pretty disciplined (especially when compared to the Democrats), last summer’s debt-ceiling fiasco was ample warning that Boehner doesn’t control his membership.
If and when that’s done, next step is to come up with a plan that doesn’t look an awful lot like/have a lot of the same provisions in ObamaCare and make sure it actually expands coverage and reduces costs, as scored by the CBO.
This should be interesting…
Hat tip to California Healthline for the head’s up.