With nine of the twelve spots on the Super-Committee taken, it looks like energy, tax policy, and political connections (now there’s a surprise!) are well-represented. What isn’t is expertise in health care, Medicare, or Medicaid.
With House Democrats scheduled to name their three panelists by Tuesday, it’s possible that someone with real knowledge of healthcare policy will be included, but regardless of who Nancy Pelosi names, there won’t be someone from the GOP side who’s got deep experience in the issue, someone(s) who could engage in a real discussion of the issues, represent the other side’s views, and act as the ‘in-house expert’ and counsel the other members of their party.
With Medicare and Medicaid likely to account for over a quarter of the Federal budget, the absence of deep health care policy expertise is rather stunning.
The implications are well worth considering.
When one doesn’t understand the inner workings of a system, sector, industry, or business, there is a tendency to believe in the power of simple solutions to achieve desired results. For example, economists tout the power of ‘consumerism’ to control health care costs, failing to understand the negative impact of high deductibles on health status due to foregone treatment. That’s not to say we don’t need a stiff dose of personal responsibility if we’re going to control health care utilization, but there’s good – and very bad – ways to inject that personal responsibility.
Price controls are another potentially problematic measure. The SGR (mechanism designed to control Medicare physician reimbursement) has had two obvious downfalls; physicians increase utilization to offset declines in procedure-based reimbursement and politicians kowtow to powerful interests when those interests are threatened.
When those simple solutions are rolled out, the long-term effect can be exactly opposite of the desired result.
For example, back in 2004, California implemented a very low fee schedule for drugs dispensed to workers comp patients – a fee schedule that cut reimbursement by around 40%. Yet costs – which are driven by the price of the pill times the number of pills and the type of pills (e.g. OxyContin v ibuprofen) increased 72% over the next few years.
Why? Anecdotal evidence suggests that pharmacy benefit managers could no longer afford to provide clinical management services, as they were barely breaking even on each script.
Back to the Super Committee. While it’s highly doubtful Pat Toomey et al would stomach price controls, remember it only takes seven votes on that committee to pass their plan. When the horse trading starts, there isn’t anyone who can explain exactly why this or that suggestion would not work in the real, messy health care world. With a very short timetable, their staffs will have a very tough time keeping up with projections and forecasts. As the November 23 deadline nears, the pace will pick up as the pressure builds to deliver something – anything – before the deadline.
Thus we may well end up with Congress voting up or down on a ‘plan’ based not on sound policy and solid analysis but on political expediency.
Then again, that would be different exactly…how?
What does this mean for you?
Watch the Super Committee very, very carefully. And be prepared for anything.

There’s good news and bad news in the latest projections on health care costs; last year, US health spending increased a mere 3.9 percent, due largely to the recently ended recession (people lost health insurance, and those who still had it couldn’t afford their high deductibles, and others switched to Medicaid from their group coverage after losing their jobs).
The total national health bill for 2010 hit $2.6 trillion. While the health spend did increase 3.9%, nominal GDP went up by the same amount, so health care spend as a percentage of GDP didn’t change.
That won’t last very long.
In three short years, national health spending growth is expected to reach 8.3 percent due to several factors:
– implementation of the Affordable Care Act of 2010
– expansion of employer coverage
– increased Medicaid enrollment
– associated increases in spending on drugs and physician care, driven in part by newly-insured individuals seeking care for conditions long neglected.
The year after ACA’s implementation, inflation is expected to decline to 5.3%, as effect of the one-time demand for services by the newly insured tapers off
For details, see the article in Health Affairs

The Medicare drug program – Part D – was the largest expansion of entitlement programs since the Great Society.
And it was – and is – a Republican program. A political masterstroke, Part D undoubtedly helped George W Bush get re-elected along with many GOP legislators, as seniors loved the new program
It was also completely unfunded; short term, long term, any term. The GOP decided to NOT set aside funds, or raise taxes, or cut other programs; they just passed Part D, committed to paying for it out of ‘general funds’ and to hell with the future.
Well, the future is here, and to listen to Eric Cantor, you’d think he had nothing to do with Part D.
The latest Medicare Actuary report indicates the GOP-passed Part D program has contributed $21.5 trillion to the ultimate Federal deficit. (page 146)
I bring this up not to anger my conservative readers, but rather to educate some who aren’t aware that Part D, and the costs of Part D, are the handiwork of Eric Cantor, John Boehner, Mitch McConnell et al.
Yep, the strident voices screaming for cost control were single-handedly responsible for a program that’s added $9.4 trillion to the ultimate deficit.
Here’s how one Libertarian sees the GOP legislators who voted for Part D.
“In particular, anyone who was in a position to vote on it, and voted for it, can simply never, ever be trusted to guard free enterprise or the Constitution against the ravages of Washington’s welfare state…Every single one of these folks, without exception, is in no position to criticize Obamacare or claim to want to beat back the tide of socialism [emphasis added] that supposedly began only two years ago when Obama rose to power. Every single one of them voted to shovel tax dollars to the pharmaceutical industry and the wealthiest age demographic — the elderly — in unambiguous defiance of the Constitution, individual liberty, the free market, fiscal sanity and classical American values.”

While the news this morning is not good, I still don’t think Congress will fail to raise the debt limit; the economic consequences would be catastrophic, and there’s too much political risk for either party to allow it to go that far.
And really, this whole argument is pretty dumb. The fight is about whether or not the United States will pay for debts already incurred to fund defense, Medicare, the CDC, NOAA, the Veteran’s Administration, National Parks, the Corps of Engineers, the FBI… Congresses already authorized those programs and the costs thereof, Presidents signed them into law, and, like any responsible entity, we have to pay for them.
We can’t just tell the world, and our own citizens who hold the nation’s debt, “Never mind, we decided we don’t want to pay you back the money you loaned us.” That’s unethical, immoral, and by my read, illegal.
Lost in the nastiness is the simple fact that those refusing to consider raising the debt limit are going against the Constitution, specifically the Fourteenth Amendment, which reads in part “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” (The Fourteenth Amendment was passed after the Civil War, and this Section (4) was specifically designed to ensure the US paid its war debts, while repudiating those of the Confederate States.)
But, what if?
Here are a few ways a failure to raise the debt limit may impact providers, payers, and the rest of us.
1. payments to providers for services rendered to Medicare recipients could be delayed.
2. transfer of funds to the states for the Federal government’s portion of that state’s Medicaid obligation could be delayed.
3. other Medicare-related funding, including direct payments to hospitals, could be delayed.
4. Medicare fiscal intermediaries (the companies that process Medicare payments) may see their compensation delayed.
5. enforcement actions may be put on hold if they are deemed ‘non-critical’
6. payment of funds for graduate medical education may be put on hold, just in time for the fall academic term
Here’s hoping it doesn’t get that far.

There’s been much publicity around a McKinsey survey that purported to indicate many employers would drop their employee health insurance plans, a finding markedly different from that predicted by several other studies.
Were the other surveys wrong, and is McKinsey right?
Give me a minute…
First, lets examine the McKinsey study. It was conducted by Ipsos, a firm contracted to McKinsey; the survey was done on line
Here are the key findings, as reported by McKinsey:
– Overall, 30 percent of employers will definitely or probably stop offering ESI [employer-sponsored insurance] in the years after 2014.
– Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.
– At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.
Notably, the folks from the highly-regarded consulting firm initially refused to release the details of the survey, the methodology, and information on exactly who was surveyed. That’s weird. After significant pressure from Congress and others, they did provide additional information about the process and methodology, but details on who responded (other than broad characterizations) were not revealed. I read the Survey instrument itself; you can download the pdf http://www.mckinsey.com/en/US_employer_healthcare_survey.aspx.
What’s weird is why McKinsey delayed publishing the details. The instrument and methodology look to be pretty sound; results were weighted to account for differences in the actual employer population; and the survey firm itself is well-regarded. But, here’s the kicker. When asked how much their company paid for health benefits, almost three in five didn’t know. If these respondents were truly decision makers or influencers, you’d think they’d know this rather basic information.
WIth that rather major concern, it is clear this was not some cheap-shot Tea Party-funded hack job.
That said, there are two sets of questions that appear to deliver very different takes on the over-arching question – will employers drop coverage after 1/1/2014. In the initial question re would they maintain or drip coverage, 9.2% said they ‘definitely would’ drop coverage, and another 20.5% said probably. This question was preceded by a detailed description of individual subsidies and employer penalties, however, while the questionnaire (specifically around question 8) did include some details of the employer subsidies/premium support provided under ACA, it appears these were presented in a sidebar on the internet-based survey and may not have been shown to all respondents. Whether folks read this in detail, or understood what they read, is an open question.
The other question (hat tip to Kate Pickert of TIME’s Swampland) asks if the respondents knew what their competitors would do in response to reform. Not surprisingly, 31.4% said they didn’t know, but 27% said continue as is or with minor changes and 24.3% said continue offering coverage but with significant changes.
The folks at the Urban Institute published a response (based on their Health Insurance Policy Simulation Model (HIPSM)) to the McKinsey work in which they refute McKinsey’s central finding. From the report:

• Employers with fewer than 50 employees are expected to experience substantial savings on health care costs due to the benefits of the health insurance exchanges and subsidies for the smallest firms. These employers face no requirements to contribute to the health care costs of their workers under the ACA;
• Savings on premium contributions are offset by employer responsibility assessments for those employers with 50 to 100 workers, which is expected to result in a very small increase in total costs for this group;
• The smallest firms are expected to experience a significant increase in offer rates under the ACA, while offer rates for those with 25 or more employees are expected to remain stable;

Notably, the methodologies were markedly different, but, the conclusions were supported by the underlying data.
Which leads to this conclusion.
We don’t know what employers will do.
That said, here’s what I think. More smaller employers will offer coverage after reform than do today.
Some mid-size (50-100) employers will drop coverage and pay the penalty.
Remember, once people start seeing the benefits of an entitlement program, they are loathe to give it up. Just think about Part D, Medicare, and Social Security, and the unwillingness of (most) politicians to do anything material about these programs.

It’s pretty simple, really.
Once people gain actual real-life experience with a government program, they abandon their fear of the unknown, see its benefits more clearly, and become invested in its future.
We’ve seen that with Medicare, which consistently pleases its beneficiaries. Part D has similar traction, and now we’ve learned that the citizens of Massachusetts are increasingly happy with that state’s health reform.
I’m not arguing that Mass – or Part D or even Medicare itself are perfect, or anywhere close to that goal. That’s not the point of this post. The point is, the GOP’s continued abuse of anyone and anything remotely supportive of the ACA ignores history; once people experience a program, they like it – and more to the point, do NOT like politicians who threaten its existence.
A poll released by the Harvard’s School of Public Health and the Boston Globe indicates strong support for the state’s reform – 63% of residents polled supported the program, a jump of ten points from 2009; 21% – about one in five – oppose Mass’ reform.
The key here is the ten point increase in two years.
While major provisions of ACA will not be implemented for another two-and-a-half years, many have already seen a direct and personal impact. Dependents are covered till age 26. Lifetime maximum limits were eliminated. Kids with pre-existing conditions can now get coverage. Benefits for preventive care and screening have been greatly improved. Part D beneficiaries’ costs have been lowered and benefits improved. Some people previously uninsurable due to pre-existing conditions have obtained coverage.
When reform becomes broadly implemented – in thirty months – the premium subsidies for small employers kick in. Same for lower-income individuals and families. And the list goes on.
This is both a blessing and a curse. The more people know about a program, the better equipped they are to understand it and discuss it – and consider it when voting.
But, the more benefits they see, the harder it is for policy makers to convince voters the program needs to change. That’s where we are with Medicare, with Part D, with every entitlement program.
What does this mean for you?
Reform is here to stay.