Nov
24

When the Chinese stop buying our bonds

That’s the answer to the question posed by Bob Laszewski in a post this morning; to paraphrase:
When will the US get serious about controlling health care costs?
Right after the bond market collapse…

Health care is the single largest contributor to our deficit, as well as being a huge drag on our international industrial competitiveness. For now, foreign countries and investors are seemingly fine with the historically-low rates of return they get from governmental bonds.
For now.
But not forever.
When the Chinese – or the Germans – or the Scandinavians – decide they want a better return, we may well see the collapse of the bond market. Ivestors will demand much higher returns, which will lead to intolerable budgetary pressure as debt service costs skyrocket.
In turn, this will force us to adopt draconian measures to rein in spending.
Which will – inevitably – lead to big cuts in Medicare, Medicaid, Part D, and other entitlement programs.
What does this mean for you?
It’s not a question of ‘If?’ but ‘When?’


Nov
22

Body scans and reforming health care – good luck with that

To understand how hard it is going to be to control health care costs, one merely has to consider the outrage surrounding TSA’s recent roll-out of ‘enhanced security’ measures – measures which include ‘enhanced pat downs’ and full body scans.
Videos of boys getting patted down personified the problem. But the upset and outrage and anger visible today will be nothing if another airplane gets blown out of the sky; then we’ll see – and hear – about the gross negligence that allowed the terrorists access to a plane full of people.
We want to have our cake, eat it too, and not get fat.
Folks, we need to get the deficit under control. We can’t afford the future bills for health care entitlements. Yet many of the same deficit hawks outraged by government spending are also the loudest voices protesting cuts to Medicare and angry about reducing physician reimbursement.
This is going to hurt everyone – you, me, my ninety-year old mom, doctors, the poor, the wealthy, hospitals, supply companies, pharma – you name it. We can either whine about how unfair and awful this is, or get serious.
A good place to start is the President’s deficit commission’s approach.
Here are a few things to consider
– Speed up cuts to Medicare Advantage and charity care payments to hospitals, both provisions in the ACA.
– Beef up and empower the Independent Payment Advisory Board, the newly created commission charged with slowing the growth in Medicare spending.
– Means-test seniors’ contributions towards their health care
– Quickly implement a strict cap on the amount of employer-provided health insurance expenses that are tax deductible – a much lower cap than called for under the ACA (that kick in until 2018).
And here are a few ideas from your author:
– Raise Medicare-specific taxes. Much as I dislike paying taxes, I dislike dumping the costs on my – and your – kids even more.
– Allow the federal government to negotiate prices with pharma for Part D; either that or cancel the program altogether. That’s $15 trillion right there.
– Require Medicare to alter payment based on the effectiveness and efficacy of various treatments – a rather obvious step that – believe it or not – is illegal today.
– Require individuals with modifiable risk factors to pay more – or get less – if they refuse to work to get healthier.
What does this mean for you?
This is about shared sacrifice. While the ‘enemy’ isn’t as easily personified as a terrorist or nuclear power, it is every bit as dangerous and threatening. Real, verifiable, tough steps are necessary. We’ve handled this before, and we can do so again, but only if we get serious.
Alas, the cynic in me doesn’t think we will get serious. The deficit crisis isn’t going to manifest itself in a highly-visible televised explosion or plane falling out of the sky; no pictures of bloody victims staggering away from a dust-filled street, no shattered buildings with blown-out windows and screaming sirens.
Just a deeper and deeper hole sinkhole that will slowly – but surely – swallow our future.

Sinkhole-in-Guatemala-2010.jpg


Nov
18

Provider bargaining power is growing – and that’s a problem

A new study by Paul Ginsburg at the Center for Health System Change reveals what we on the inside of the insurance industry have long ‘known’:
The balance of power in rate negotiations has moved decisively from payers to providers
and
Payers without market share have higher medical costs and little chance of improving their position.

Let’s focus on the second point.
According to Ginsburg, “Average inpatient payment rates in the eight market areas varied widely, ranging from 147 percent of Medicare rates in Miami to 210 percent in San Francisco…San Francisco had the highest average rate across the four insurers, it was the highest-priced market for only two insurers. Presumably, this reflects such factors as health plans’ differing market shares…”
The implication is clear – the dominant payers in San Francisco were able to negotiate reimbursement deals that were much more favorable than those payers with little share.
What does this mean?
If competition is to flourish, there has to be some way for new entrants to compete effectively. In the health insurance business, success is largely driven by price; payers with lower cost structures win and grow; payers with higher cost structures shrink and disappear. If a payer doesn’t have enough share in a market – defined as membership – then providers will find little need to give them significant discounts, to comply with onerous utilization review processes, to provide quality data and vary their treatment, scheduling, and billing practices to accommodate an insurer that delivers few patients to their office/imaging facility/hospital.
One of the flaws of the ACA (health reform bill) was it did little to address this fundamental problem. The ‘free’ market hasn’t solved the problem, so some form of regulatory intervention is necessary if new competitors are going to have a chance to compete with the big health plans.


Nov
18

How to ‘fix’ health reform – part one

There’s no question the Accountable Care Act needs work – everyone agrees on that.
So let’s talk about the specifics – what needs fixing, why, and how can we get those fixes passed.
First, let’s understand how bad our current ‘system’ is. Some who want to repeal and/or replace the ACA continue to publicly state we have ‘the best health care in the world’. (here, and herel)

While that may – or may not – have been true at some point, it is increasingly clear that the US health care system is not anywhere close to ‘best in class’. A just-released study done by the Commonwealth Fund compares our system to those in ten other industrialized countries, with sobering results.
Here are key findings:
– Adults in the United States are far more likely than those in 10 other industrialized nations to go without health care because of costs, have trouble paying medical bills, encounter high medical bills even when insured, and have disputes with their insurers or discover insurance wouldn’t pay as they expected.
– One third (33%) of U.S. adults went without recommended care, did not see a doctor when sick, or failed to fill prescriptions because of costs, compared to as few as 5 percent to 6 percent in the Netherlands and the U.K.
– One-fifth of U.S. adults had major problems paying medical bills, compared to 9 percent in France, the next highest country, 2 percent in the U.K., 3 percent in Germany, and 4 percent in the Netherlands.  
One finding is particulary scary – “Although the uninsured were at highest risk for skipping needed care, working-age U.S. adults with below-average incomes who were insured all year were significantly more likely than those with above-average incomes to go without needed care because of costs and have serious problems paying medical bills–nearly half (46%) went without needed care and one third had one bill problem, double the rates reported by above-average income insured adults.”
You read that right – having insurance does not mean you get health care, and if you do, you still have to pay a substantial portion of the bill out of your own pocket. 
The study examined health care and health insurance in eleven countries, all with much lower costs than the US – a differential that undoubtedly helps them compete in international markets. As globalization continues, American companies will find the disparity in health care costs will be a growing problem, diminishing their ability to compete with companies from Germany, Japan, Korea, and Switzerland.
That said, ACA is anything but perfect. Let’s start our discussion with something that isn’t in the bill – Medicare physician payment reform.
Fixing Medicare’s horrendously broken physician reimbursement ‘scheme’ known as RBRVS is critical. Congress has to come up with a long term solution that:
a) better recognizes the primary importance of primary care;
b) incentivizes outcomes rather than pays for piece work:
c) is less likely to be abused by Congressional cowardice and ineptitude.
A big part of the solution is already in place – the Independent Payment Advisory Board (IPAB). This from California Healthline:
“Beginning in 2014, IPAB must recommend Medicare spending cuts if the program’s growth rate exceeds the average of the consumer price index and the Medical Care CPI. Barring congressional action to make equivalent cuts, IPAB’s recommendations would become law. The board would exempt decisions affecting hospitals and other provider groups until 2020, but the Congressional Budget Office estimates that IPAB still could hold down Medicare spending by $15.5 billion between 2015 and 2019, according to a new report from Stephen Zuckerman of the Urban Institute.”
A good start to be sure, but just a start. And note that we’ve still got to wait ten years before IPAB can address hospital costs, ten years that will likely produce significant inflation driven by technology, utilization, and price increases. We’re already seeing hospitals successfully thwart the new severity-adusted DRGs through more sophisticated coding…
Instead, we should move up IPAB’s effective date by at least a year, and ideally two for physicians and perhaps seven years for facilities.
If we are serious about deficits, then let’s get serious. What the new Congress does about IPAB will tell us a lot about whether it will live up to the oft-voiced commitment to reduce government spending.
What does this mean for you?
Watch what Congress does about physician payment reform. If this isn’t addressed in a meaningful, comprehensive, and sustainable way than there’s little chance Medicare costs will be controlled until IPAB goes into effect.


Nov
16

Fifty-nine million uninsured – and growing

The recession, coupled with increasingly unaffordable health insurance premiums, pushed the number of those without insurance for some part of 2009 over the fifty-nine million mark.
Here are a few relevant findings from a new CDC report:
– the number of uninsured has increased by over a million for each of the last few years
– 40% of the uninsured had at least one chronic condition such as diabetes, hypertension or asthma
– those with a chronic condition were more likely than insured people to go without necessary care
– 50 million were adults, the rest dependents
– One-third of middle-income adults weren’t covered for some part of the year. Fully half of the increase in the uninsured were middle income adults.
– for those fortunate enough to have coverage, 26.6% of those under age 65 years were enrolled in a high deductible health plan (HDHP); past research indicates many of them didn’t have enough funds set aside to cover their deductible.
For all of its warts, the Affordable Care Act will dramatically reduce the number of uninsured, covering an additional 32 million Americans.
One can – and some loyal readers certainly will – argue that this somehow ‘overstates’ the problem of uninsurance as it includes people who went without insurance for only a few days or weeks. In reality, the data show 33.9 million Americans had been without insurance for more than a year at the time of the interview – over eleven percent of the population.
Which raises a very difficult question. If the new Congress is looking to ‘repeal and replace’ the ACA, what replacement will stem the rising tide of uninsurance?
Anyone??


Nov
2

The GOP and Medicare deficits – this is gonna hurt

It looks like the GOP is going to win, and win big today, their success driven in large part by voter outrage about taxes and spending, with concern about the cost of reform a strong supporting actor.
If those voting for the GOP think they’re about to see restraint in spending, they are going to be sorely disappointed. We need look no further than Medicare Part D, which, according to a piece in Forbes, the mouthpiece of American Liberals for generations, “U.S. Comptroller General David Walker called “the most fiscally irresponsible piece of legislation since the 1960s.”
The Forbes piece went on to say “Recall the situation in 2003. The Bush administration was already projecting the largest deficit in American history–$475 billion in fiscal year 2004, according to the July 2003 mid-session budget review. But a big election was coming up that Bush and his party were desperately fearful of losing. So they decided to win it by buying the votes of America’s seniors by giving them an expensive new program to pay for their prescription drugs.”
Here’s how Walker put it in an interview with CBS:
“…we promise way more than we can afford to keep. Eight trillion dollars added to what was already a 15 to $20 trillion under-funding. We’re not being realistic. We can’t afford the promises we’ve already made, much less to be able, piling on top of ’em.”
With one stroke of the pen, Walker says, the federal government increased existing Medicare obligations nearly 40 percent over the next 75 years. [emphasis added]
“We’d have to have eight trillion dollars today, invested in treasury rates, to deliver on that promise,” Walker explains.
Asked how much we actually have, Walker says, “Zip.”
So where’s that money going to come from?
“Well it’s gonna come from additional taxes, or it’s gonna come from restructuring these promises, or it’s gonna come from cutting other spending,” Walker says.
Forbes again:
Moreover, there is a critical distinction [between Part D and reform]–the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit, whereas the health reform measures now being debated will be paid for with a combination of spending cuts and tax increases, adding nothing to the deficit over the next 10 years, [emphasis added] according to the Congressional Budget Office…the unfunded drug benefit, which added $15.5 trillion (in present value terms) to our nation’s indebtedness, according to Medicare’s trustees, was worth sacrificing his [Rep Trent Franks (R) of Arizona] integrity to enact into law. But legislation expanding health coverage to the uninsured–which is deficit-neutral–somehow or other adds an unacceptable debt burden to future generations.”
Readers may recall Part D passed in the dead of night and only after GOP leader Tom Delay (currently on trial for money laundering) strong-armed three GOP Representatives into switching their ‘nays’ to ‘yeas’, thereby ensuring your kids, and my kids, would be saddled by an unfunded debt of $8 trillion.
(BTW, all but 16 Democrats voted AGAINST the Part D bill…)
One of the vote-switchers was Trent Franks, who is now a top contender for Hypocrite of the Year. Here’s what Franks said about health reform: “I would remind my Democrat colleagues that their children, and every generation thereafter, will bear the burden caused by this bill. They will be the ones asked to pay off the incredible debt”.
As bad as he is, Franks has some tough competition for the HotY award; Among the GOP deficit hawks who voted for Part D, and are now outraged by the cost of health reform are Senators McConnell (KY), Cornyn (TX), Crapo (ID), Hatch (UT), Grassley (IA), Hutchinson (TX), Sessions (AL), Enzi (WY), Roberts (KS), and Inhofe (OK).
If you think these conservative deficit hawks are going to do anything different this time around, you’re delusional – at best.
I am continually amazed by the inability of the American voter to separate fact from fiction, lies from truth, pandering from honesty. Some, including me, will argue that the Democrats have done a lousy job of pointing out the ‘inconsistency’ on the part of these Republicans.
But at some point the people pulling the levers in the voting booth have to take responsibility.
And that time is now. The reason – the only reason – we have huge deficits and no path to paying for them is because the American voter is too damn lazy to engage.
As HL Mencken said: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”
And this one is gonna hurt.


Oct
28

How Medicare changes physician reimbursement

The Wall Street Journal has an excellent report on the key step in determining Medicare physician reimbursement.
Here’s the intro:
“Three times a year, 29 doctors gather around a table in a hotel meeting room. Their job is an unusual one: divvying up billions of Medicare dollars.
The group, convened by the American Medical Association, has no official government standing. Members are mostly selected by medical-specialty trade groups. Anyone who attends its meetings must sign a confidentiality agreement.
Yet the influence of the secretive panel, known as the Relative Value Scale Update Committee, is enormous. The Centers for Medicare and Medicaid Services, which oversee Medicare, typically follow at least 90% of its recommendations[emphasis added] in figuring out how much to pay doctors for their work. Medicare spends over $60 billion a year on doctors and other practitioners. Many private insurers and Medicaid programs also use the federal system in creating their own fee schedules.”
The link probably expires tomorrow, so read it now, or print and read it on a plane later.
thanks to Advisen for the tip.


Oct
19

The Blue Cross of Michigan suit – yes, it affects you

Yesterday the NYTimes reported the Justice Department is suing Blue Cross Blue Shield of Michigan for allegedly violating antitrust laws. BCBSMI is accused of requiring hospitals to give BCBSMI ‘most favored nation’ pricing, thereby increasing the prices paid by other health plans and stifling competition.
According to the Times, the Blues contracts had “clauses stipulating that no insurance companies could obtain better rates from the providers than Blue Cross. Some of these contract provisions, known as “most favored nation” clauses, require hospitals to charge other insurers a specified percentage more than they charge Blue Cross — in some cases, 30 to 40 percent more, the lawsuit said.”
Christine Varney, the head of the antitrust division in the Justice Department, said “Our lawsuit alleges that the intent and effect of Blue Cross Blue Shield of Michigan’s contracts is to raise hospital costs for competing health plans…”
The lawsuit also claims that Blue Cross agreed to pay higher prices to certain hospitals to get them to agree to the “most favored nation” clauses.
There are three issues here that deserve your attention.
First, there is no ‘free market’ in health insurance. Most markets are dominated by a single, or at most two, health plans. This is clearly an effort by the Feds to make a statement, to force big health plans and their co-operating health systems and hospital groups to back off and ‘let’ smaller insurers into the market. No one, least of all big insurance companies, likes to be sued by the Federal government, and this very public case has undoubtedly started many health plan legal departments scrambling to prepare briefs for their CEOs detailing their potential liability for the same ‘offenses’.
As a corollary, smaller health plans cannot compete with the big boys because they don’t have the medical dollars required for bargaining purposes. Why would St Tony’s Hospital give a big discount to Mom and Pop’s Health Plan? The answer is simple – they wouldn’t, because they don’t have to – Mom and Pop don’t have any patient dollars that they would (potentially) move to another hospital, so there’s no reason for St Tony to do a deal.
(This basic fact is lost on those politicians and pundits who think that selling health insurance across state lines is a panacea. Health plans’ costs are primarily, and overwhelmingly, determined by the medical costs in the areas they operate – and legalizing cross-border sales of insurance will do nothing to reduce premiums or improve access)
The suit is apparently an effort by the Feds to address this reality, and may well be part of a larger strategy to improve competition ahead of implementing health reform.
Second, many health plans and insurers have most favored nation clauses in their contracts – workers comp payers too. This suit may – and most certainly should – encourage those payers to reconsider the purpose of and risk in those clauses.
I hasten to add that the accusations against BCBSMI go beyond simple MFN clauses; according to the Times, “the Justice Department said that Blue Cross required two hospitals in Saginaw, Mich., to charge most other insurers at least 39 percent more than the hospitals charged Blue Cross. Likewise, it said, in the Detroit area, the contract required three hospitals to “charge Blue Cross’s significant competitors at least 25 percent more than they charge Blue Cross.”
Finally, this highlights the symbiotic payer – provider relationship that is the fabric of our current health system – dominant health plans and dominant health systems working very closely together. If we as a society decide this isn’t the health system we want, than we’re going to have to get very litigious for a very long time. It has taken a century for the system to evolve to this point, and will take decades for any material change. In some instances this works very, very well – think Geisinger, Mayo, Marshfield.
In others, it may well ‘stifle competition’ But lets get serious – how effectively could a newcomer, or even a second tier health plan, really compete without the huge dollars necessary for investments in IT; care management; provider contracting, analysis, and relations; marketing and brand development; and distribution?
It couldn’t, and it can’t.
Like it or not, competing in health insurance, as in many industries, puts a premium on size and scale.
What does this mean for you?
We can already see this, as smaller health plans are being snapped up by bigger competitors, their management all-too-clearly reading the writing on the wall that survival in the post-reform world will require size, and scale, and money far beyond the grasp of most smaller health plans.
Note – A subsidiary of BCBSMI is a consulting client of HSA. While I have no knowledge that in any way pertains to this action, I do know that as an organization BCBSMI is quite sensitive to and cautious about any actions that might be construed to harm competition or interfere in provider practice.


Sep
23

Where were those deficit hawks when Part D was passed?

Today’s pending announcement that the GOP will introduce a ‘Pledge for America’ includes rhetoric about cutting taxes, reducing the size of the government, repealing health reform, and eliminating $100 billion in discretionary spending among other chestnuts.
It’s good to hear talk about fiscal restraint. Too bad they didn’t hew to those principals when they were in power. Here’s a brief reprise of a post from a ways back.
This from the party that added over $9 trillion to the deficit the last time they passed a health care bill.
Let’s return, for just a moment, to the early and mid oughts, the halcyon days of the Bush Administration, when the entire government was under the firm control of the fiscally prudent.
Here’s what those wise stewards of the nation’s wealth did.
Pass Medicare Part D with no funding – short term, long term, any term. Hell, they would’ve been more fiscally prudent if they’d included a few hundred million to bet on the horses. At least that would have shown some desire to pay for the thing. But no, 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.
The latest Medicare Actuary report indicates the GOP-passed Part D program has contributed $9.4 trillion to the $38 trillion Federal healthcare deficit. (page 126)
The Bush-era GOP makes President Obama, Pelosi, Reid, and the rest of those spendthrift Dems look like a bunch of cheapskates; even a GOP analysis finds “the new reform law will raise the deficit by more than $500 billion during the first ten years and by nearly $1.5 trillion in the following decade.”
It remains to be seen if the voters will be duped by this blatantly political ploy. So far, it looks like it’s succeeding.
As HL Mencken said, “People deserve the government they get, and they deserve to get it good and hard.”


Sep
7

Defensive medicine – a non-factor in health care costs

Medical malpractice is one of the cost drivers about which there is much disagreement, some contend it is a major contributor to overall system costs, while others view med mal as a relatively minor factor.
A new study [abstract only] reported in this morning’s Health Affairs makes a compelling case for the latter view, and adds valuable insight into what is a politically-charged issue, one rife with misinformation and sloppy math.
The study found “Overall annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending.” [emphasis added]
Recall total system costs are in excess of $2.2 trillion. While $55 billion is a lot of money, compared to total system costs of $2.3 trillion, it, well, isn’t much.
In fact, costs would be much higher if the real toll of medical malpractice – lousy care, incompetent providers, poorly managed facilities, was adequately accounted for. Solid research indicates the vast majority of medical malpractice problems are never litigated. One study indicated that the cost of ‘adverse events approached 5% of total health care costs; over a hundred billion dollars in today’s world.
The med mal reform issue has been raised by opponents of health reform, who contend the failure to include med mal reform in the Accountable Care Act was a missed opportunity to significantly reduce costs Of note, the study estimated the most significant cost associated with medical malpractice was defensive medicine, which accounted for $45.6 billion of the total, most of which was spent on hospital services.
In an email conversation, I asked the study’s principal author, Michelle M. Mello, PhD, to clarify the study’s findings re the impact of med mal on defensive medicine – the theory that physicians change the way they practice to protect themselves against medical malpractice by prescribing more tests and studies.
Here’s Dr Mello’s response.
“There are two ways to measure defensive medicine. One is to ask physicians, using surveys, how often they order extra tests, procedures, and referrals primarily because of liability pressure. We didn’t use this method because it has two major shortcomings: (1) physicians may consciously or unconsciously overreport defensive practices because they want to help build the case for taking action to solve what they perceive as a problem with the liability environment; and (2) they may not be able to separate out different motivations they have for ordering services. In many cases, they may feel that ordering an extra test is a good idea both because it’s in the patient’s best interest and because it helps them reduce their liability risk.
The other method — the one we used — is to compare rates of health services that we think are indicative of defensive medicine in areas of high and low liability risk. If rates are higher in high-liability areas, and we can rule out other explanations for the differences, we can conclude that there is an association between liability and physician practices. The main challenge associated with this method is adequately controlling for other factors that could explain the differences. Researchers have extensively documented that physicians in different geographic areas have different practice styles, and it is believed that this is due to many factors, of which liability concern may be one.
We based our defensive medicine estimates for hospital services on previous analyses by Dan Kessler & Mark McClellan. Having reviewed the literature extensively as it has evolved over the past decade, our firm belief is that the Kessler & McClellan analyses provide the best available figures. Their statistical design enabled the researchers to control for other sources of variation in physician practices.
The main weakness of the Kessler & McClellan analysis, as we discuss in the paper, is that it was based on a narrow range of health services (cardiac care services) provided to a specific type of patient (Medicare beneficiaries). Is it appropriate to generalize from these data to all services provided to all patients? We have some concern about that, and consequently characterize the quality of the evidence supporting our defensive medicine estimate as low. Other kinds of health services may be less subject to physician discretion over treatment intensity than the cardiac services that Kessler & McClellan studied, so it’s possible that extrapolating to all services yields an estimate of defensive medicine costs that is too high. Nevertheless, we believe Kessler & McClellan’s analysis of the strongest one available.”
The paper provides additional background on the methodology used, and the challenges with that methodology. While it isn’t perfect, one has to compare it to the methods used by others who contend the tort system is a major driver of health care costs. Those ‘methods’ are rather less rigorous.
What does this mean for you?
One has to view the cost of medical malpractice in context – and the fact is there’s far too much lousy medicine, and far too little accountability.