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?’

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.

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.

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.

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??

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.”