The chances that the Congressional Super-Committee will achieve its stated goal of cutting $1.5 trillion from federal expenditures over the next decade are fading fast.
What happens when the six Republicans and six Democrats can’t agree on cuts?
Big – really big – increases in costs for health plans and workers comp payers. I’ll get to that in a minute, but first let’s walk thru what happens if the Supers can’t agree.
Theoretically automatic, almost-across-the-board cuts in military, entitlement program, and ongoing operational budgets go into effect 1/1/2013.
Don’t bet on it.
The threat of across-the-board cuts was supposed to motivate/force the Supers to hammer out their differences and get to a solution. All reports indicate that isn’t going to happen, as the Republicans refuse to contemplate any form of tax increases and Democrats, who believe they’ve given enough on the entitlement side, refuse to go further unless the GOP budges on taxes.
The looming threat of across the board cuts has become a good deal less likely to happen as politicians on both sides acknowledge that the threat is just that – a threat – and not much more. As with any bill passed by Congress, the threat can be overturned when/if Congress passes another bill overturning the original law.
That’s probably what the GOP members are banking on. If they are able to maintain control of the House, take over the majority in the Senate, and win the Presidency in next fall’s elections (a distinct possibility), Republicans will be able to do what they wish. I’d expect immediate action to rescind cuts in military spending, extend the Bush tax cuts for top earners, and slash entitlement spending.
From a political perspective, it’s hard to see the GOP members of the Super Committee agreeing to ANY agreement that could be construed as increasing taxes. And that’s exactly what is required to reach a deal with their Democratic colleagues.
So, what does this mean for health care?
My sense is the biggest short term effect may well be on Medicare physician reimbursement. Remember, there’s no solution on the table for the 27.5% cut in Medicare physician reimbursement scheduled to take effect in exactly six weeks. There’s little focus on this as all eyes are on the Supers, but that will change in early December as the AMA marshals its forces to attack Congress. I don’t see a solution before the end of the year, so get ready for an increasingly nasty and public screaming match as politicians of all stripes seek to blame someone else.
If this gets really vitriolic, we could be looking at massive physician ‘dis-enrollment’ from Medicare.
Both parties will try to develop short term solutions to kick the can even further down the road, but the SGR issue (the shorthand term for Medicare’s physician reimbursement ‘methodology’), as big as it is, is nowhere near as significant, nor as important politically, as the budget battle.
What does this mean for you?
If the cuts go into effect, cost-shifting to private payers is going to explode from today’s already outrageous level to one that will drive trend rates through the roof.

There’s been much discussion of the impact of the health reform bill – the NFIB and GOP Presidential candidates claiming the ACA has already caused insurance premiums to climb, while others are deriding President Obama for his statements that ACA would reduce premiums.
What’s true, and what’s BS?
One way to separate the fertilizer from the poop is to turn to independent sources, such as FactCheck. Another is to go back and see what the President actually said reform would do.
First, FactCheck. In their view, “The [health reform] law has caused only about a 1 percent to 3 percent increase in premiums, according to several independent experts.”
That finding is consistent with reports from other sources, and is based on the changes already in place due to ACA – no upper monetary limits on benefits, covering children to age 26 with no pre-ex exclusions, and no cost preventive care. There’s lots of sources in the link above that verify the 1 – 3 percent figure, including former Bush appointee Gail Wilensky.
Now on to President Obama’s blown promise that reform would reduce premiums. Let’s see what he actually said:
“On Monday I met with representatives of the insurance and the drug companies, doctors and hospitals, and labor unions, groups that included some of the strongest critics of past comprehensive reform proposals. We discussed how they’re pledging to do their part to reduce our nation’s health care spending by 1.5 percent per year. Coupled with comprehensive reform, this could result in our nation saving over $2 trillion over the next 10 years, and that could save families $2,500 in the coming years — $2,500 per family.”
I’d note that the President was making two points;
1) reform and cost reductions from stakeholders would reduce spending by 1.5 percent. Not reform alone.
2) this statement indicates the cost reduction, when spread across every American family, would equate to a reduction of $2500 per family over ten years.
Obama did NOT say that family premiums would drop by $2500 per year, and in his other statements, the President made it clear reform would reduce the RATE OF INCREASE by 1.5 points, not total spending.
That said, it is still premature for any conclusions re the impact of reform on health care premiums, other than the one noted above – initial, already-implemented measures have increased premiums by 1 – 3 percent.
That still doesn’t address why premiums went up nine percent. And I’d argue that the data indicates the differential has much more to do with insurers’ desire to generate margin than any real increase in underlying costs.

To hear the current GOP presidential candidates describe it, former Gov. Mitt Romney’s support for the 2006 Massachusetts health care reform initiative was the worst thing since the Spanish Flu.
We can chalk a lot of the hyperbole up to campaigning, but the critics raise some good points.
First, costs have gone up. That’s not surprising as more people are covered, many of whom didn’t have coverage before and therefore likely had medical issues that, once they were insured, they addressed. Moreover, Mass’ per-capita health care costs have been higher than the national average for a long time – this is a structural issue as much – if not more – than a result of reform.
Second, the individual mandate turned out to be a rather unsatisfactory ‘solution’. I’d argue that the problem with the mandate’s design was two-fold – the penalty for failing to obtain health insurance wasn’t stiff enough to drive high enrollment and the individual market was hammered by adverse selection. Some may argue that actual participation results may indicate my pessimism re the low penalty was misplaced.
In the individual market, people could enroll in, and then drop coverage at any time, resulting in some pretty serious adverse selection issues. Someone would need care, sign up for insurance, get the treatment, then stop paying premiums. This was a big problem in the individual market (and I’d argue supports my point about the inadequacy of the penalty).
There’s no question that the big problem is the cost issue – especially in today’s tough economic environment. (I’ll leave aside the ‘should government be this activist’ argument for now)
There are some pretty interesting solutions to the cost problem emerging in Massachusetts, solutions with broader implications for the country.
A couple years back the Mass Blues set up a program basing reimbursement in their HMOs in part on quality; this plan covered over a half-million members and looks to be expanding. Known as an Alternative Quality Contract, the program involves:
“A global, risk-adjusted, fixed payment per patient, with annual increases in line with inflation; and
Performance-based incentives linked to nationally-recognized measures of quality, efficiency and patient experience.”
There’s a pretty thorough description of the program in the link and it’s well worth reading.
With several years’ experience on which to build, Massachusetts’ politicians, health plans, and providers are gradually adopting new business practices, pricing models, and reimbursement methodologies designed to address long-term system costs. The legislation under consideration would put global payments in place for about a quarter of Massachusetts residents covered by Medicaid and state-subsidized insurance and state employees.
One of the more promising steps is a legislative initiative to enable/encourage global payments to provider organizations instead of the current fee-for-service reimbursement system. The concept, which is associated with Accountable Care Organizations, is based on the idea that incentivizing physicians and other providers to maintain and improve the health of members is more cost effective than paying them for each visit and procedure.
While relations between the dominant health care systems and insurers have been pretty combative, there appears to be a thaw in the air. Partners Healthcare, the largest system in eastern Massachusetts, just signed on to the program in a deal that appears to be a major win for cost cutters.
Lest we forget, the Massachusetts reform plan has achieved remarkable success in expanding coverage – a mere two percent of residents are uninsured along with less than one percent of kids.
What does this mean?
Mass’ legislators decided to pass reform first and tackle costs later. There’s no question costs have gone up, in part driven by expanded coverage. There’s also no question that providers and insurers are working together to “bend the cost curve” and their efforts look promising for both lower trend and better care.
Are there lessons we can take for the country as a whole?
Yes. Unsurprisingly, expanding coverage increases costs. But over time, stakeholders, prodded by intelligent legislation and forced to compete not on the basis of risk selection but quality and cost, can and will figure out how to control costs.

The latest meteor crossing thru the GOP presidential race firmament is Herman Cain, the Godfather of pizza.
Only in America.
As difficult as it may be, I’m actually going to attempt to take Cain seriously. Leaving aside his bizarre tax plan, one that would actually dramatically increase taxes on consumption smack dab in the middle of an economic recovery, (that’s been adequately eviscerated by others far more knowledgeable than I in the implications of tax policy) I’ll examine Cain’s rather thin health care resume and policy plans.
That said, one should note that the 9-9-9 is just an interim step in Cain’s three-step process, which concludes with a flat 30% tax on all goods and services – and no other taxes of any kind.
Cain does have a long track record on health care issues – he led the National Restaurant Association back in the early nineties and was a vocal opponent of the Clinton reform efforts. That said, his website and other public statements are long on sound bites and short on substance.
He advocates:
– treating employer and individual contributions for health insurance the same for tax purposes
– repealing the Accountable Care Act and replacing it with expanded tax credits for personal savings accounts for health care
– tort reform
– switch from the current Medicare system to some type of voucher for Medicare – how this works is uncertain as there are precious few details, but when you end payroll taxes, you end Medicare…
So what would happen with Cain as President?
Well, health care services and products and procedures and treatments would be taxed at nine percent. Yep, everything from appendectomies to pills, proctological exams, psychological counseling, and PET scans.
Next, Medicare would disappear to be replaced by some form of voucher, where people would try to by coverage from private insurers on the free market. How this would work is…uncertain. I’m not sure how many private insurers would jump at the chance to provide coverage to senior citizens with Alzheimer’s, cancer, heart disease, or osteoporosis…
What did I just write?
I should have said NO private insurers…
That’s about all we can conclude at this point. Until – or rather unless – we get more detail from the Godfather of Pizza, there’s just not enough substance to his soundbites.

The announcements this week that the United States Preventive Services Task Force has decided healthy men shouldn’t get the P.S.A. blood test is long overdue, but nonetheless very welcome news.
The test, which ostensibly screens for prostate cancer, is notoriously inaccurate, delivering a high rate of false positives and false negatives. And, men who get these tests have no greater chance of surviving the test than men who don’t.
Seventy percent of positive PSA tests are false positives; the patient does not have prostate cancer. Worse, these false positive tests often result in more tests and treatments that then result in impotence and incontinence and in some cases, premature death. According to the chair of the Task Force, “This test cannot tell the difference between cancers that will and will not affect a man during his natural lifetime. We need to find one that does.”
Over a twenty year period, about a million men got prostate surgery, radiation, or a combination as a result of a PSA test. Of those, about 5000 died soon after surgery, and from 10,000 to 70,000 suffered serious complications, and 200,000 to 300,000 were incontinent, impotent, or both. The dimension of the problem was starkly illustrated when the test’s developer called its widespread use “a public health disaster.”
There are passionate and dedicated folks who will argue vehemently that PSA tests are necessary and save lives. Unfortunately, many have become part of a campaign financed almost entirely by the pharmaceutical industry. I engaged in a dialogue for some time with one of them, and despite my best efforts, his conclusion is that the test saved his life and therefore others should get it as well.
It’s one thing to talk population health and an entirely different thing when one is talking about the health of one’s family or self. Unfortunately, well-meaning people often confuse the two – and this is what has led them to advocate for a test that is:
– costly (PSA tests range in cost from $70 – $200, plus the office visits, or about $3 billion a year just for the tests in the US);
– results in surgery that kills about five thousand men over a twenty year period and
– causes impotence and/or incontinence in 20% to 30% of patients
Some will argue that more recent developments in surgery have delivered better results – I’d say it’s too early to tell, which is why the Task Force used a database that would allow them to see effects over the long term.
What’s the net?
PSA testing is a great example of business masquerading as good medicine, funded by businesses who profit from the test, who arguably, are partially responsible for the deaths and suffering of thousands of men.
It’s also a great lesson on why we need more science education in our schools, so so many of us would actually understand what a disaster the PSA test has become.

Exactly what role should government have in health care? What does Rick Perry think? And more importantly, what has Perry done?
There’s a good deal of evidence that Perry used his position and influence to award millions in taxpayer dollars to his financial supporters, even when those awards were not in keeping with conservative ideology or didn’t make much business sense.
According to a lengthy and well-researched piece [sub req] in the New Republic, Perry’s been a big supporter of health care ventures, especially when those ventures are tied to people who’ve been big supporters of Perry. That’s not unusual: politicians help those who help them.
What may be a bit unusual is the extent of Gov. Perry’s use of taxpayer funds to support selected health care entrepreneurs, and the abysmal performance of several of those lucky entrepreneurs. A couple of examples (there are more) are instructive.
Perry awarded $50 million of taxpayer funds to the Texas Institute for Genomic Medicine (TIGM) at his alma mater, Texas A&M. Most of the $50 million went to supplies and software from Lexicon Genetics – a company in which one of his major contributors was an investor. After several years, the TIGM has little, if anything, to show for the investment; it has ten (10) employees who appear to spend much of their time doing not much. (When the President of Texas A&M complained about the ongoing annual $2 million expense, she was summarily dismissed by the Perry-controlled Board of Regents)
Another $50 million went into the National Institute of Therapeutics Manufacturing (again at the direction of Perry and his associates, and also at Texas A&M). The NITM is still in development, and is closely allied with several of Perry’s financial supporters.
Then there’s the furor over Perry’s support for mandatory HPV vaccines for Texas’ girls, a furor generated in part because Perry’s former chief of staff was lobbying for Merck, the vaccine’s manufacturer and direct contributor of some thirty thousand dollars to Perry over the years plus perhaps a few hundred thousand more via other channels. http://www.washingtonpost.com/politics/perry-has-deep-financial-ties-to-maker-of-hpv-vaccine/2011/09/13/gIQAVKKqPK_story.html
Finally, one would do well to remember that Perry, who advocates repeal of the health reform bill and leaving reform to the states, presides over the state with the highest percentage (28%) of people without health insurance. Over a quarter of the state’s population has no coverage.
That’s eleven points higher than the national average.
So, what?
Perry doesn’t seem to be a conservative as much as a politician of the old school; rewarding friends and financial backers and hammering enemies regardless of their political ideology.

Merrill Goozner’s piece on the FDA’s decision to pull a stent from the market after it was shown “2 1/2 times (14.7%) more people either died or had a repeat stroke after receiving the stent than those who received drugs and counseling (5.8%).” shows how science can – and should – be brought to what is all-too-often the “art” of medicine.
The stent was approved based on a rather limited study by manufacturer Stryker, but fortunately only approved for use if it that use was as part of an evaluative study.
That study was stopped early due to the higher death/repeat stroke rate; unfortunately it appears that use of the stent may have played a role in patients dying and/or having more strokes.
The good news is the stent is, or soon will be, off the market. The bad news – outside of that delivered to the families of those who died possibly as a result of the stent – is that this is actually “news”.
The reason this device was pulled from the market is because it was only approved on a limited basis by the FDA, who could pull that approval relatively easily. For devices and drugs and treatments already approved by, or not subject to approval by, the FDA (or any other regulatory authority) it is much more difficult to get them off the market. And it’s impossible for Medicare to factor effectiveness into payment.
If we are to gain any measure of control over health care costs, we have to start by paying for performance – not just for docs, but for drugs and devices as well. One wouldn’t think that would require the proverbial “Act of Congress’, but it does.
Perhaps the Super-Committee can decide that one way to attack the deficit is to stop paying for unproven treatments, or at least stop paying so much if the treatments aren’t proven to be effective. Can you imagine what that would do to health care? Actually paying for good stuff rather than paying for anything that gets prescribed for/inserted into/done to a patient?

Everyone seems convinced there’s a ton of fraud in Medicare. And they may be right. What there wasn’t, for far too long, was much emphasis on finding and prosecuting the criminals stealing from taxpayers by defrauding Medicare.
Well, looks like that’s changed. This ‘story’ was first broken a week ago by Merrill Goozner, one of the more insightful observers of the health care scene. Here’s a piece from an OIG release quoted in Merrill’s post:
“Since their inception in March 2007, [CMS anti-fraud] Strike Force operations in nine locations have charged more than 1,000 individuals who collectively have falsely billed the Medicare program for more than $2.3 billion.”
CMS’ anti-fraud efforts are finally getting some press. For instance, prosecutions are up 85% over last year. Compared to five years ago, there’s been a 71% increase. It takes quite a bit of time to develop a prosecute a health care fraud case, as laws and regulations are quite complex and often confusingly contradictory; following the paper trail is difficult at best; and company ownership and fiduciary responsibility usually hard to identify and even more difficult to prove; thus it’s no surprise it’s taken a couple years for the Obama Administration to start to produce major results.
According to the piece in FierceHealthcare;
“The government prosecuted 903 cases of healthcare fraud, up 24 percent from last year, reports USA Today. The increased numbers come from more investigations under the close attention of the Federal Bureau of Investigation (FBI) and the Medicare Fraud Task Force, as well as the participation of whistleblowers. The FBI recently changed their focus to target criminal enterprises, including hospitals. In 2010, the government paid out $300 million to whistleblowers.”
Health care geeks may recall that the PPACA was supposed to deliver $4.9 billion in savings over ten years due to better controls over fraud and abuse. Looks like that was a ‘gimme’, as the GAO reported savings in 2010 alone were $4 billion.
These prosecutions often netted criminals defrauding commercial insurers as well as we taxpayers – one case in Puerto Rico nailed hundreds of crooks who stole $7 million from AFLAC.
Another CMS-led effort earlier this year resulted in indictments of 111 individuals for allegedly defrauding Medicare of $225 million.
That’s all to the good – perhaps as much for the ‘Sentinel Effect’ as for catching these thieves. Others who may be tempted to steal from the Feds or commercial payers may be a bit de-motivated when they hear about prison terms and hefty fines levied against others with the same idea.
There’s no question Medicare is a prime target for crooks large and small. After all, it’s a program that pays out billions each year, so there’s bound to be fraud. Commercial health plans, workers comp insurers, and other payers are certainly vulnerable and often victimized as well. Here’s hoping the recent press attention leads to even more attention on fraud, and more convictions as well.
What does this mean for you?
Are your SIU people tied into the CMS Strike Forces, sharing information and collaborating on investigations?

In MCM’s ongoing effort to keep our loyal readers apprised of things that will affect their businesses, it’s time to remind one and all that the Super-Committee’s budget cuts are due in less than three months.
Yep, in 83 days or so, six Republicans and six Democrats are supposed to come up with (at least) $1.2 trillion in cuts. If they don’t, automatic cuts will be triggered beginning in 2013, including a two percent cut in Medicare (and that’s assuming the pending SGR cuts hit on January 1…)
Couple of key points that bear mentioning;
1. the $1.2 trillion is spread over the next decade. Cuts could be back-loaded to minimize political fallout – and probably will be (if the group reaches agreement)
2. the automatic cuts take effect January 2013 – a lifetime away in political terms. Congress could do something else to prevent some of the automatic, or Group of Twelve cuts from occurring, modify the cuts, or pass a “fooled you, we were just kidding” law.
Back to the committee. As we’ve noted, it’s difficult to see how they can hit their target unless health care is addressed.
There’s no consensus on whether the twelve will manage to reach consensus or not. With an election year coming up, it’s hard to see how the GOP’s folks will agree to any kind of revenue increases, while Dems have been quite public about their intent to prevent cuts to entitlements. And if they don’t, as Steve Davis noted in an online piece on AISHealth, “Across-the-board reductions in Medicare payment could translate to more cost shifting by providers, which could lead to higher premiums charged by commercial plans and/or increased cost shifting onto employee-based coverage”.
That said, there’s some hope that statesmen-like traits will somehow take hold in the group and we’ll actually see them arrive at a grand bargain. If such a happy event occurs, expect to see:
– subsidies for Medicare Advantage programs cut
– a potential increase in eligibility age for Medicare recipients
– decrease in hospital reimbursement under Medicare
– means testing premiums for Medicare
You’ll note these are all focused on Medicare. Medicaid is unlikely to be cut dramatically – but then again, we just don’t know.
This all supposes the SGR cuts to physician reimbursement actually take effect on January 1 2012 – which is about as likely as our house getting power this week (no chance at all). If it doesn’t, there’s another $300 million or so in cuts that will have to be made.
What does this mean for you?
Watch carefully what happens with the Super Committee…It WILL affect you.