Dec
19

Health reform is a done deal

That’s the word from several senators, at least as of last night. The last holdout, Ben Nelson of Nebraska, is reportedly on board after a lengthy negotiating session that ended late Friday.

The bill is currently being read to the entire Senate on request from GOP Senators, after which the vote will be taken – sometime around 5 o’clock this afternoon. The price for Nelson’s vote was $45 million; the US Senator forced the Federal government to pay for the entire cost of the Medicaid expansion for his home state of Nebraska.
Who would’ve thought Nebraska would need even more pork, or that the Senator would feel no shame in forcing taxpayers from other states to pay for his vote. Since 1983, Nebraska has received more from the Federal government than it has paid in taxes; Nelson’s extortion will skew the numbers in favor of his voters even more.
Things could break down, there could be defections from the ranks of the theoretically-committed, Lieberman could decide he’s not done grandstanding, the House and Senate could run into difficulties in reconciliation, a meteor could hit the earth…suffice it to say there’s a lot that could derail passage, but there’s the beginning of a whiff of inevitability about reform, enough to make it very difficult for anyone to stand in the way of the bill.
In broad terms, the bill will result in a national health insurance exchange where individuals and some small businesses will shop for insurance, provide subsidies to help low-income people buy insurance and expand Medicaid. There are numerous pilot programs to evaluate different forms of reimbursement, cuts in Medicare reimbursement to specific provider groups, elimination of the use of medical underwriting and other ‘risk selection’ tools by insurers, and a host of excise taxes, fee cuts, and other funding mechanisms to help pay for the bill.
I’ll be taking a deeper dive into the bill tomorrow – but I won’t read the entire thing.


Dec
17

Health reform, hospitals, and work comp

As health reform stumbles like an exhausted runner towards the finish line, we are starting to get a clearer picture of the potential changes reform will bring to the health care landscape.
One that bears close watching is the increasing likelihood Medicare will be cutting reimbursement to hospitals. There are two ways this may affect work comp; in those jurisdictions that base reimbursement off Medicare rates, any changes may – or or may not – have a direct impact on comp reimbursement. I’m not expert in the various ways states apply their own formulas to Medicare’s, but will be studying up on it and will repor back in more detail later.
The other, and likely more significant impact may be the result of cost shifting by hospitals if/when Medicare cuts come down from CMS coupled with the expansion of Medicaid. this has plusses and minuses; Hospitals may get more paying and fewer indigent patients if the Medicaid expansion goes thru, but if these were formerly privately insured or if there is a substantial increase in their Medicaid census then their revenue mix may worsen. (Recall Medicaid reimbursement is well below most hospitals’ cost). It is mo likely the MedicUs expansion is a net plus but this will vary across the country.
Potentially more significant would be any major decrease in Medicare reimbursement as medicare is a major payer at most hospitals. Expect hospitals hit hard by a cut to look for other places to make up the lost income, and the softest target around is usually work comp.
Apologies for typos; this post written on my iPhone.


Dec
15

The incredible disappearing health reform plan

Today’s revelation that Joe Lieberman is once again flexing his political muscle to force the Senate Dems to remove the Medicare for 55-64 provision is just the latest evidence of the evisceration of the Senate Health Reform bill.
Here’s a few of the items that were considered for inclusion that have somehow not made it this far (this isn’t to imply or deny an endorsement).
– a meaningful mandate penalty instead of the paltry $750/individual $2250/family in the current Senate plan (the income-indexed penalty in the House plan is better but still not enough…)
– a public plan with reimbursement based on Medicare (if this was mandatory it would definitely have reduced costs – a lot)
– some form of tax on high-value/high benefit plans, aka ‘cadillac’ plans
– a plan that would actually cover the vast majority of Americans (the current plan still leaves 15 million uninsured)
– a clause enabling the Feds to negotiate drug prices for brand medications purchased for Medicare patients
– a non-fungible ban on lifetime caps on medical expenses
– a ‘budget neutral’ plan; although the current Senate plan is indeed budget neutral, it doesn’t include the quarter trillion accumulated deficit in Medicare physician costs. Notably the coming cut to physician reimbursement is addressed in the House bill, where it is eliminated.
What’s next? As Lieberman et al get more and more of the power and influence they so obviously crave, their appetites grow ever more insatiable. Liberals and centrists are getting increasingly desperate to pass something, anything, to deliver on the promise of health reform, and the longer Lieberman et al can put this off, the more press they get and the more their swelling egos demand.
(I’m wondering exactly how far the Senate Dems are going to let Lieberman push them before they decide enough is enough and smack the political crap out of him. He’s become the schoolyard bully to the Democratic weaklings, taking ever more of their lunch money in hope he’ll be nicer next time.)
The current mishmash of giveaways and concessions can only be called ‘reform’ by those willing to hope we can do much over the next decade to rein in costs before they kill our economy. I’m not among those optimists.
It is time to trash the whole thing and start over – preferably with the Wyden-Bennett Healthy Americans Act. (for a comparison of WB HAA to the current mishmash see the Kaiser Family Foundation’s excellent web tool.
But that won’t happen; We’ll likely get something passed in Congress, and President Obama will sign it, and they’ll all declare victory and move on to energy, Afghanistan, and other critical issues. Meanwhile, health care costs will continue to escalate, and in ten years the average family will be paying north of thirty grand for their health insurance and deductibles, and we’ll be reading books about how and why we missed this golden opportunity.
And this from the worst kind of government in existence, except for all the others.


Dec
14

Health reform – better than doing nothing?

I haven’t posted on the reform process not out a lack of interest but because every time I pick up the virtual pen I despair. I’ve been trying to decide if passing this bill is better than a continuation of the status quo, and the more I ponder the less sure I am.

But it’s time.
After months of negotiation, compromise, and horse-trading, we’re getting close to a health reform bill that will come to a vote – probably in the next couple or three weeks. There’s much work to be done to get to the magic sixty Senate votes, but it looks like no compromise, concession, or giveaway is too big to stand in the way of this must-pass (for the Democrats) legislation.
Yet after all this, we’re going to end up with a bill that won’t work – it will not appreciably reduce health care costs today, tomorrow, ever.
Sure, we’ll end up with lots more Americans covered, better/smarter regulation of insurers, and maybe even lower Medicare costs. But ten years from now, the system will be pretty much the same – a fee-for-service based health system with costs increasing well above inflation.
Why, you say? Aren’t there cost controls in the bill? Pilot programs that promise to reduce cost inflation by rationalizing the care delivered to patients?
No, there aren’t. What we have is a mishmash of ideas that have long been on the table, demonstrated to work, and completely without traction. Not to mention the huge costs not addressed in the current bill – like the current quarter-billion dollar deficit in the Medicare physician reimbursement program, a deficit that will have to be added to the total cost of any reform initiative that changes how docs are compensated under Medicare.
Fortunately for Senator Reid, no one is asking what he plans to do about physician compensation, as the Senate bill assumes the 20.5% cut in physician reimbursement goes into effect on January 1, 2010. Does anyone believe that will actually happen?
But that’s just one of the many failings of the current bill.
We have insurance reform with a mandate so weak it will not force anyone to buy coverage they don’t really really want.
– We have pharma still enjoying margins the envy of every other stakeholder in the ‘system’ and a government prohibited from negotiating with pharma for drugs bought with Medicare dollars.
– We have a “fix” that relies on private insurers to control costs, despite overwhelming evidence of the industry’s complete inability to have even the slightest impact on inflation.
– We have tough cost controls and cost reductions that will likely reduce Medicare’s costs over time – but no way for private insurers to stop providers from shifting those costs to them.

Other analysts have complimented Reid et al for trying everything, for not leaving any cost control mechanism, trick, or option out of the bill. That’s precisely the problem – the bill’s ‘experiments’ and pilots are way too little far too late.
Folks, health care costs are increasing a helluva lot faster than inflation. Our economy is increasingly hobbled by legacy and current health care costs, not to mention future liabilities. Governments are going to have to raise taxes – a lot – to deal with retiree health care costs. By the time these pilots and experiments are even ready for dissection in the pages of Health Affairs, (forget broad-based implementation) we’re going to be spending well north of $3 trillion a year on health care.
I’m disgusted by the political grandstanding of people like Joe Lieberman, whose incredibly self-important preening is just the most repulsive example of elected officials using this crisis to show us all how principled and irreplaceable they are. Mitch McConnell’s Medicare advocacy is so blatantly hypocritical it would be laughable if it weren’t so cynical. How he can scream about not cutting Medicare while protesting its expansion to the 55-64 year old cohort is a testament to his complete lack of self-awareness. Meanwhile the Democrats are so eager to expand coverage to as many as possible, they are completely ignoring the future cost of that expansion. The campaign contributions rolling in to Reid and Dodd and other players couldn’t possibly be influencing their legislation…they just don’t think it makes sense to put strong cost controls into health reform.
The public plan advocates have yet to make a compelling case for their statements that it will control costunless Congress requires all providers to participate at or close to Medicare rates, the public option will have zero impact on health care costs. Yet they’re spending untold hours and mountains of political capital trying to include some version of a public option in the reform bill.
Which leads back to the opening question – is the current health reform bill better than the status quo?
Yes, ever so slightly.


Dec
8

The long and the short of health reform’s impact on stock prices

Healthplan stock prices climbed yesterday as a Goldman Sachs analyst upgraded his view on the entire sector, concluding “Key to our view is that an end to health reform uncertainty (in a better-than-worst-case outcome) will be a positive catalyst, bringing investors back into the sector…”
Meanwhile, another analyst downgraded the sector, albeit from “overweight” to “market weight”.
I didn’t get it last month, and I still don’t get it. Unless these gentlemen are just looking at the next few quarters or couple of years at most, their recommendations, even the modest downgrade, don’t jibe with the future for health plans under reform.
Which is pretty damn bleak.
Health plans will be forced to take all comers in the individual market. The penalties for individuals not enrolled in healthplans are essentially insignificant in the Senate bill (starting at $95 individual, $285 family in 2014, increasing over two years to $750 individual/$2250 family), and somewhat tougher in the House bill (2.5% of income).
Pray tell me, with individual premiums above $5,000 and family above $15,000 today, how exactly is a penalty that is going to be less than 15% of the cost of a health insurance policy going to force anyone to buy coverage? Especially when the underwriting restrictions will allow those non-members to sign up whenever they get the flu, fall down skiing, discover they’re pregnant, or contract ebola.
No, what we’ll have is what’s happened – already – and is continuing to happen in Massachusetts – people enroll when they need care, stop paying premiums when they’re better, and health plans are getting murdered.
Perhaps the analysts are not concerned about what happens in 2014, or they are thinking the employer plans will provide enough margin to make up for sure losses in the individual sector. Perhaps they don’t think Congress will pass legislation establishing taxes on excessive health plan profits, or require plans to pay a minimum percentage of premiums towards medical care. Perhaps they’ve bought in to the greater fool theory.
Or perhaps their view is the bad news has been exaggerated, and the problems health plans have had of late are over and better times are coming. Those bad times include big losses in membership, with especially high disenrollment among commercial members.
I don’t see commercial membership increasing any time soon, not with the recent announcement by Aetna that it expects to lose up to 650,000 members in 2010. Those people will need coverage, and the current ‘reform’ bills will allow those people to purchase coverage on an ‘as needed’ basis.
What does this mean for you?
Something to ponder as you view your portfolio.


Dec
2

If private health insurance worked, we wouldn’t need health reform

Lost in the fight over health reform is a single, huge truth – if the private insurance market worked, there would be no need for reform.
We wouldn’t be in this mess if private insurers were able to control cost inflation. And at the end of the day, that’s what they are supposed to do. Sure they have lots of experience in underwriting and risk selection, and some have made some progress in some areas of disease management/mitigation, but UHC and Coventry and Wellpoint and HealthNet et al’s ‘experience’ have not been able to consistently deliver lower health care costs.
I know there are lots of reasons/problems/complicating factors, but the stark reality is when it comes to controlling inflation, none of them have been able to.
Why not?
Several reasons, some good, some not so good, but all worth considering as we contemplate a new world built on one of the bills before Congress.
Health plans’ best interest
As Maggie Mahar so eloquently and persistently reminds us, we live in a culture of ‘Money-driven Medicine’. Health plans, providers, brokers, and suppliers are in this business to make money. For health plans, controlling costs means lower revenues, and this is one of those wonderful industries where top lines grow every year by ten percent plus – regardless of any increase in the number of customers (members). Wall Street loves top line growth and rewards companies that consistently grow their revenues.
Quite simply, it is not in a health plan’s best interest to control cost, as most of their policyholders are going to stick with them regardless of the increase in premiums, and the business they lose they’ll make up by stealing customers from other health plans.
Churn
Employers change plans every three or four years, so any ‘investment’ in reducing long term costs is an expense incurred by the current healthplan for the benefit of a competitor. This is particularly true for smaller groups, and is further exacerbated by the increased mobility of the workforce, which tends to change jobs more now than a couple decades ago.
Mindset
After the great explosion triggered by providers’ negative reactions to capitation and employees’ negative reaction to small provider networks, healthplans, led by UHC, adopted an ‘open access’ model, wherein members could go ‘out of network’ to receive care, albeit at a higher copay rate. Employers are certainly to blame for a failure to explain the logic behind and lack of will to stick with the tighter managed care models, but they’ve certainly paid a high price for their lack of foresight and will. The result of the ‘dimming down’ of managed care is the current employer-based health cost inflation.
Regardless, since the adoption of the open access model in the mid-nineties, consumers have gotten used to, and highly attached to, that model. Undoing that mindset is going to be painful, and health plans don’t succeed by causing pain amongst their members.
Cost control by price control
Listen to health plan execs on their quarterly earnings calls, read their transcripts, review their press releases, look at their product offerings – see much in the way of real cost control? Strong disease management, medical homes, useful data on provider outcomes and costs presented in a way that Joe Sixpack or Maria Martinez can readily use?
Didn’t think so. Sure, a few health plans (Aetna probably being the best among the for-profits) are making an honest effort, but most are not. Instead, health plans rely on price control – squeezing providers down as hard as they can on reimbursement rates for specific procedures – a practice that solves one part of the cost equation but does nothing to control utilization, and may well exacerbate it.

For-profit health plans operate in the best interests of their stockholders – not those of their members, providers, or society. That’s how capitalism works.
And not-for-profit health plans have to compete with the for-profits, a reality that has forced the Kaiser Permanentes and Group Healths to adopt many of the business practices of their competitors.

The net

The reason we need reform is the current ‘free market’ is not fixing society’s problem. The reform we need is real, meaningful reform, with true cost control, not a few pilots here and a bit of disease management there and a couple of billion of comparative effectiveness research sprinkled on top of a layer of slightly-modified fee-for-service reimbursement.


Nov
12

Health plans, stock prices, and reform

There are some things I just don’t get. Bungee jumping, the Ruta de los Conquistadores, body piercing are near the top of the list, just under equity investors’ reactions to health reform.
And it doesn’t look like my health investor puzzlement is going to end any time soon.
Several news items collided in my inbox this week; passage of the House reform bill and multiple analyses thereof; a report that health plans’ medical costs and profitability are worsening, yet many health plan stocks are selling close to their 52-week highs. Huh?
Let’s start with the health plan medical cost report. The good folks at Mark Farrah and Associates published an analysis that, among other things, noted:
– the top eight health plans (covering 59% of the nation’s total insureds) lost 836,000 members in the first half of 2009
commercial membership was down 1.45 million while MA and Medicare Supplement was up 405,000
Medical costs are trending higher, and medical loss ratios are as well
The net – profitability has declined, costs are increasing, and membership is dropping. Yikes.
Now, investors don’t seem too worried about these trends. In fact, as of this morning, they seemed to be enamored with the health plan sector as stock prices are up over nine percent over the last month, compared to an S&P that’s just over flat.
Next, health reform and the recent House and Senate bills. What I see that’s scary is the lack of a strong mandate coupled with an end to most underwriting of medical coverage means people can sign up for health insurance when they need it, stop paying premiums when their care is completed, and then re-up if and when they need care again.
Let’s call this the Massachusetts Problem, after what’s been happening to health plans there.
This isn’t conjecture or theory. It’s reality, and it is taking place in a market with a much stronger mandate than the one in the Senate Finance bill.
Finally, a few selected statements from stock analyst types:
– “There were two recent developments of particular concern to WellPoint investors, since the company is a relatively big player in the small-employer and individual markets. First, the Senate Finance Bill included strict insurance market reforms but a weak individual mandate, which could lead to adverse selection, higher premiums, and a smaller market for individual and small-group policies.” (Morningstar) Yet Morningstar rates WellPoint a five-star stock
– They also may not be hurt as badly by a federal health care overhaul as many analysts first worried. Congress is debating ways to cover the uninsured and reduce costs, and health insurance stocks have been sensitive to this debate for months. Shares sank at the start of the year when the reform debate picked up steam, but they have recovered for the most part as the threat of a strong public option that would compete with insurers faded. A possible tax on insurers based on their market share remains a concern. But overall, analysts say the sector remains on sound footing heading into the next few quarters. [notice no discussion of the impact of the end of underwriting coupled with a weak or nonexistent mandate…perhaps it was edited out] istockanalyst
– “I think they’re getting a really bad shake in the current environment,” FTN Equity Capital Markets analyst Peter Costa said. “But the core businesses are there.” istockanalyst
United Healthcare is also a top rated stock, and is trading near its 52-week high.
Analysts may say health plans are somewhat insulated from the individual market, where the underwriting issue is really problematic. True, but as more companies drop their group plans (a multi-year trend that has accelerated this year), the size of the individual market will grow – and health plans will have to get into or expand their offerings in that market if they are going to increase revenues (a mandatory requirement for publicly traded companies).
So here’s where this all leads. Without a strong individual mandate, health plans are going to lose buckets of money insuring people after they get sick. How that translates into a 52-week high is beyond me.
Disclosure – I’ve sold all my health plan stock holdings and don’t have any financial interest whatsoever in the sector. Not because I don’t think there are some good companies out there in the healthplan business (Aetna’s probably at the top of the list), but because provisions in the two health reform bills will kill off the entire industry.


Nov
12

The Rocky Mountain edition of Health Wonk Review

Friends and colleagues Jay and Louise at Colorado Health Insurance Insider host this week’s edition, featuring the Simpsons explaining all things health policy – as only the Simpsons can.
Great stuff, all in one place for your edification!


Nov
11

Because that’s what it is going to ‘cost’ to replace the current Medicare physician reimbursement scheme with something else. And make no mistake, as Trudy Lieberman of the Columbia Journalism Review points out, most of the nation’s physicians are adamant about ‘fixing’ Medicare reimbursement.
The issue is the Medicare Sustainable Growth Rate (details here). The net is simple – if the SGR formula/process is eliminated, a quarter trillion dollars gets added to the deficit, because that’s the amount the formula/process says has been paid to docs over and above SGR ‘limits’.
Current Congressional protocol requires CBO to ‘score’ any and all health reform proposals; unsurprisingly the SGR ‘fix’ has not been included in any reform measure, because it will push the cost way, way over a trillion dollars.
Thus, thru legislative legerdemain, Congress is avoiding talking about and being held responsible for the real cost of reform.
As long as we have to ‘fix’ the SGR – and I’m not arguing that Part B (physician reimbursement) doesn’t badly need fixing, hows’ about we ‘trade’ SGR elimination for some real reform, like, say, bundled pricing for specific procedures/conditions? Like, maybe, a flat cost for treating an asthmatic patient over a year including facility and physician and lab and other costs?
Or, for those chronic patients with more than one condition, a formula that pays for all their care based on a multiplier indexed to the number, cost, and severity of their conditions?
Or a requirement that all physician bills from practices that don’t have all patients on a share-able electronic medical/health record are paid under a non-fixed SGR, while bills from practices using ‘certified’ EMR are paid under a new schema?
Pretty draconian, you say? Not as draconian as anteing up another quarter trillion bucks, I respond. Sure it will be hard and take some time and isn’t easy and all that other blather. It’s a huge knotty ugly problem, requiring some ugly solutions, and none of them are going to be perfect. But they will be a damn sight more perfect than what we have if we don’t get reform-with-cost-control done this time around – family health care costs above $30,000 within ten years.
It’s time we got more from stakeholders than just their agreement to not block reform. We need a good more arm-twisting and a lot less gentle cajoling.
What’s the net?
Watch to see how Congress and the President handle the SGR redo issue. Do they use SGR as a lever, or do the docs use it as a club?


Nov
10

Big on health, light on reform

Paraphrasing Sen Ron Wyden (D OR) produces the most accurate soundbite description of the House’ health reform bill.
Is this the best we can do?
If the answer is yes, we’re in deeper trouble than even I thought. I’m really disappointed with the Republicans. They are supposed to be the budget hawks, but instead they’ve spent their time railing against abortion funding, illegal immigrants, and death panels, along with scientific research and taxes on device manufacturers. Instead of attempting to govern responsibly, they’ve abandoned all morality in their quest to re-energize the lunatic fringe of their once-dominant party. Now comes news that Maine’s Susan Collins is convening news conferences to rail against the cost of the bill.
With all due respect, Senator, this isn’t exactly new news. Now you’re getting concerned about cost? After nine months of debate, discussion, and appearances on Meet the Press? Not to single out Collins; at least she’s finally saying something rational about cost.
While there’s plenty of blame to pile at the door of the Republicans, it is the Democrats who are to blame for coming up with a huge entitlement program set up to do nothing but grow.
Cost containment as proposed in the bill is in the form of cuts to Medicare totaling about $420 billion, including:
– $155 billion (about) from price cuts to hospitals,
– reductions in Medicare Advantage subsidies,
– increasing drug rebates payable to CMS, and
– requiring CMS to negotiate with pharma for Part D drugs.
Then there’s a potpourri of funding for Accountable Care Organizations, better primary care coordination, research on quality and effectiveness, and other should-have-been-doing-all-along initiatives.
As for real cost containment, methods/techniques/tools that can actually reduce cost over the near term in the public and private sectors? Bupkus. Nada. Zippo.
Sure, at some point in the future this research will result in data we can use to recommend more changes. But by that time we’ll be broke, and China will own everything of substance.
Oh, and when insurance underwriting reform kicks in health plans will have to take all comers, yet at 2.5% of adjusted gross income, the mandate penalty is not tough enough to force compliance. What we’ll get is individuals and families buying coverage when they need it, only to drop it when the condition is fixed/surgery completed/rehab over. And under the terms of the House bill, you could fall off your motorcycle, buy insurance, get treated, and then stop paying premiums when your rehab is over.
I’m no fan of the insurance industry, but that just isn’t fair. And lest you think this isn’t going to happen, talk to Charlie Baker, former CEO of Harvard Pilgrim Health in Mass. It’s happening in Massachusetts today.

Drastic times call for drastic measures.
If we aren’t going to seriously consider Wyden-Bennett – and more’s the tragedy if we don’t, then we need cost containment with teeth.
How about starting with normalizing treatment costs for specific conditions? The huge and wildly inappropriate variation in practice patterns and costs associated with conditions such as COPD and back pain and prostate cancer and diabetes and dozens of other conditions have to stop. Medicare should, and could, gradually ratchet down reimbursements across the country till they are match global reimbursement for care delivered by delivery systems that are demonstrably efficient and deliver quality outcomes – Mayo, Lahey, Geisinger, et al.
Or develop an all-payer fee schedule (similar to the one in Japan) allowing all payers access to the Feds negotiating power.
Crazy? Sure. But the current bills will not reduce cost inflation. And therefore, sure as the sun comes up tomorrow, within ten years you will be paying $30,000 for family coverage. And pretty poor coverage at that.

What does this mean for you?
Despair? Disgust?