Whether health reform will pass comes down to one thing, and one thing only – the CBO score.
The Congressional Budget Office is a non-partisan entity that determines (in this case) what legislation will cost. Their numbers have sent Finance Committee members scrambling back to find new sources of revenue for their ‘test’ bill and forced the House to recommend taxing the wealthy for universal coverage.
The CBO determines the cost, and Congress and the President determines if that cost is do-able. Fortunately, so far none of the ideas/bills circulated around the Hill have passed both screens.
As the debate approaches meltdown temperature over the next two weeks, watch for the CBO’s score.
Prediction – none of the current bills will pass, resulting in a desperate attempt to find an alternative, at the end of which smarter heads will finally be heard saying “Hey, What about Wyden Bennett with Laszewski’s Affordability Model?”.
That’s the only way we’ll get reform that we can afford.

MCM will be dark for the next two weeks, as the Paduda clan will be in Africa on a long-awaited and much-anticipated family vacation – photo safari, Olduvai Gorge, and a Bushmen village.
I expect I’ll be back at it August 5 – and no, there’s no truth to the rumor that a certain very large work comp managed care firm sent me a one-way ticket to deepest Africa…

A third of US health care dollars are spent on treatments (see the Dartmouth Atlas) that are questionable/doubtful/could have been avoided if the chronic condition was addressed.
That’s $7 trillion over ten years, and if we could snap our fingers and only pay for what we should, that would cover all Americans, with the rest paying off the war debts and giving every kid a college education.
Back here in the real world, precious little has been done – locally or systemwide or in Congress – to take on this biggest of all issues. Fortunately, the fine folks up in Massachusetts have seen fit to jump into reimbursement restructuring in a major way.
The Special Commission on the Health Care Payment System has come up with a very solid set of recommendations, including (quoting from their report):
* A global payment system in which providers would receive a payment per person, adjusted for patients’ health status [emphasis added] and other factors to ensure that they are compensated fairly for their patients’ health care needs. Payments would also be based on meeting common core performance measures to ensure high quality care.
* An emphasis on patient-centered medicine, with doctors and other providers providing coordinated, evidence-based, high-quality care for patients. In addition to providing more effective care for patients, this approach will also help to reduce health care costs in the longer term.
* A careful transition to global payment within five years, during which “shared savings” would serve as an interim payment model to help some providers become more familiar with global payment with no or reduced exposure to risk. There would also be infrastructure support for providers to facilitate the transition to global payments, including technical assistance and training and information technology.
Say what you will about Massachusetts; while the rest of us are talking endlessly, they are doing something. Not all of it is right, and some is pretty questionable, but I applaud the Commonwealth’s initiative. We are all learning much from their efforts.

The fierce battle over the public plan option is much ado about very little, an epic battle over a useless piece of political ground. It is the health care debate’s version of the Battle of the Hurtgen Forest – a huge waste of time, resources, and talent on a pretty much pointless contest.
The political treasure spent by pro- and o-ponents to date has been huge, and the spending looks likely to increase in the coming days.
For what? How does the public option help, or hurt, health care and the health care system?
The short answer is – it doesn’t.
Democrats see the public option as critical; it adds competition to a mostly non-competitive business, puts pressure on private insurers, and ensures individuals and businesses can get access to good coverage at a reasonable cost.
How? Premium rates are driven by medical costs. Plans with low costs get more members, and take share from plans with higher costs. That’s why the big indemnity carriers of the late eighties (Travelers, Home Life, Great West, Time, Phoenix et al) are mostly out of business and the world is dominated by HMO-based plans – the HMOs’ cost of goods sold was lower.
Costs are the price per service times the volume of services provided to members who get those services times the number of members getting those services – more simply, price x utilization x frequency. Price is the primary reason health care costs here are so much higher than in other countries.
How would a public plan control price per service? It can’t. The Republican bemoaning the ability of a public plan to use Medicare rates (or a similarly low fee schedule) miss the fact that docs and other providers would not have to sign up for this plan – as with Medicare, there’s nothing forcing them to agree to participate. Sure, most providers do accept Medicare, but that’s because it is a huge payer. Which brings us to the second point.
A public plan would begin with zero members. And zero bargaining power. The big health plans have lots of members, which is how they convince providers to agree to discount their services. Without volume, no discount.
Without discount, no price advantage. Without price advantage, higher premiums. With higher premiums, few members. With few members, no volume.
See where we’re going here? A public plan could not compete effectively because it could not get a lower ‘cost of goods sold’.
The opponents of a public plan are equally confused, claiming it would damage the free market, adding unfair competition. The reality is that in most areas, there is no free market in health insurance; markets are already monopsonies.
Almost every market is already dominated by a very few health plans, so much so that in most markets, there really is very little market competition amongst health plans.
Here are a few factoids using 2005 data; if anything there has been more market consolidation, so these percentages are even higher today…
– 96% of HMO/PPO markets are deemed highly concentrated
– 99% of HMO markets are highly concentrated
– in 96% of markets, at least one insurer has share higher than 30%
– in almost two-thirds of the markets, at one insurer has share greater than 50%
– in a quarter of the markets, one insurer has share at or above 70%.
As I said back in January, would a new governmental plan have an advantage over, say, Blue Cross of Alabama, which has market share ranging from 67 percent in Tuscaloosa to 95 percent in Gadsden? Or Blue Cross of Arkansas, with share from 63 percent in Hot Springs to 97 percent in Texarkana? Or the two dominant health plans in Ohio, with combined share ranging from 46 percent to 80 percent?
It wouldn’t; in fact it would be an uphill climb on a very icy slope for a governmental plan to reach market parity, much less market dominance in most of the country’s MSAs. Health plans execs spend every waking hour, and some while asleep, thinking about how they can steal share from their competition. They beat each others’ brains out on a daily basis, fighting over each employer, each member, each new contract. And most are very, very good at it.
Yes, a governmental plan could try to force docs to accept lower fees, and physicians could and would tell the Feds to pound sand. There is precedence for this – try and find a doc who will accept Medicaid in New York. Recall the revolt of physicians last summer when they were facing a dramatic cut in Medicare reimbursement. Physicians do not have to work with any health plan – governmental or private.
There just isn’t any logical basis for the argument that a governmental option would somehow be unfair for competition, or drive out private plans, or lead to a government monopoly. Just as there is no basis for contending that a public plan would add reasonable competition, thereby forcing the ‘market’ to hold down costs.
If the Democrats succeed in passing health reform with a public plan option, it will have very little impact on system cost. And if the GOP and moderate Democrats are able to stop a public plan yet reform still passes, their ‘victory’ will have no impact on system costs.
The health reform war is about cost. The battle over the public plan is a fight over a useless piece of ground.
A huge new governmental program without meaningful, and effective, cost control is a recipe for disaster. We don’t need another Part D with its eight trillion dollar unfunded liability (passed by a Republican Congress and signed by a Republican President.

What we need is health reform that injects competition into a non-competitive business.

That big thud you heard yesterday was the 1,018 pages of the House Health Reform bill hitting the table. America’s Affordable Health Choices Act of 2009 marks the first real, vote-able comprehensive health reform bill in sixteen years. While there is much to complain about, the fact that it made it this far pretty much complete is big news.
There’s still much to do, as the committees with jurisdiction (three at last count) still have to vote on the measure,
Here are the highlights:
– It builds off the current employer-based system, adding an Insurance Exchange to enable those without coverage to gain access to insurance. Subsidies are available u to 400% of the federal poverty limit ($43,000 for individuals, $88k for a four person family)
– Medical underwriting, pre-ex exclusions, lifetime benefit limits, and other risk selection/mitigation tools are banned.
– A modified version of Community rating is mandated, with rates varying only by age (max of 2:1), location, and family size.
– Minimum benefit design standards will be set by an Advisory Committee chaired by the Surgeon General.
– Half the funds to pay for the bill would come from a surtax applied to any adjusted gross income exceeding $280,000 a year for an individual and $350,000 for a couple filing a joint return, with tax rates ranging from 1 percent to 5.4 percent. The tax would take effect in 2011, with a family making $1 million paying an additional $9,000, and one making $500k paying $1500 more. 1.2 percent of families would be affected.
– Essentially all employers would be required to provide health insurance for their employees or pay a penalty of eight percent of wages.
– The CBO estimates the bill would cover an additional 37 million people, leaving about 9 million Americans (and an estimated 8 million illegal immigrants) without coverage.
– The bill includes a public option plan that would begin operation in 2013, with physicians paid at Medicare plus 5 percent, and other providers at Medicare rates.
– The Medicare Advantage subsidies are eliminated.
– The Medicare SGR (physician payment calculation process) is ended and reimbursement for primary care increased.
What does it mean?
First, know this bill isn’t going to become the law of the land in its present form.
Second, watch for the reaction of moderate Democrats (the Blue Dogs), especially those in the Senate. Heads-up – talking about the bill, Sen Ben Nelson (D NE) said “Tax is a four-letter word”…
Third, the horse trading is about to ramp up to fever pitch; if stakeholders start believing reform may actually pass, they are going to renew their efforts to be ‘part of the solution’, also known as ‘do it to yourself before Congress does it to you’.
Want to read the entire bill? Have at it… For those less ambitious, try the summary.

None of the current health care bills/measures/concepts are likely to pass the Senate. And that means health reform is not going to happen.
As I’ve noted ad nauseam, the current efforts don’t do enough to control costs, and without cost control there won’t be moderate Democratic, much less bipartisan, support. And they certainly won’t get by OMB boss Peter Orszag. We’re left with measures to pay for the new entitlement by increasing taxes on the wealthiest Americans, a funding source that President Obama has ‘set aside’ for overall deficit reduction.
If rich folks’ contributions go to health care, there won’t be a deficit reduction. And if health reform as currently conceived passes, we’re going to have expanding, not decreasing, deficits.
As an object lesson, remember Part D – the legislation that dealt only with prescription drugs for seniors – compared to universal coverage, a relatively modest effort. It also left us with an $8 trillion unfunded liability. (note that the current GOP deficit hawks were the ones who passed Part D; perhaps they now see the error of their ways…)
(Let us not forget that the Bush/GOP tax cuts were written and passed with a sunset provision; Bush and the GOP Congress are responsible for their termination, not the current Congress/Administration)
The resistance by the Blue Dogs and Orszag is necessary and appropriate. We don’t need, and can’t afford, health reform that merely perpetuates the dysfunctional, corrupting, and hugely inefficient system we have today.
To date, the Dems have not found the political will to make the changes we need. The ‘concessions’ by hospitals and pharma and the insurance industry are far too modest, include too many concessions by the Administration/Congress, and don’t recognize – or address – the core issues. Congress’ refusal to consider taxing health benefits – at any level – is unhelpful and unrealistic.
It also didn’t play well in the health care industry, where they perceive their efforts to commit to cost reduction, however modest, as an honest effort to contribute to the solution. There’s a sense that all have to feel some pain, and the outright refusal by Congressional Dems to consider taxing health benefits at some level makes a mockery of ‘shared sacrifice’. Instead, they’re looking to jack up taxes on the wealthiest Americans – a relatively small – and these days not-too-popular group.
President Obama has yet to (really) weigh in on health reform. He’s dipped into and out of the discussion, sticking primarily to goal-setting and photo-op’ing. If reform is going to happen, the following will have to occur:
1. Meaningful, score-able cost reduction.
2. A way to pay for the additional coverage that can garner 60 votes in the Senate.
So far, we haven’t gotten close to either. Now’s the time for the President to step into the fray and push the hard choices.
Clearly the current bills are DOA. If we do get health reform, it won’t look much like any of the bills currently under consideration.
And that’s good – very good.

Word from Washington this morning is the 52 members of the House Blue Dog (moderate Democrat) caucus are none too happy with the high cost, employer mandate, and public option provisions of the House bill.
Meanwhile, Politico is applauding the Senate Finance Committee for actually making progress on a bill that they admit will never pass the full Senate. That’s laudable? Seems more like Politico is awarding a medal for showing up for practice…
Among the Blue Dogs there are both short term concerns (can I get re-elected if I vote for a bill that’s going to either a) add a trillion dollars to the deficit over ten years; b) raise taxes to avoid a deficit explosion, or, heaven forbid, c) both, and long term concerns – adding 50 million more people to the rolls of the insured would drive up demand, increasing the nation’s health care costs, and there are no credible cost containment measures in any of the bills (except Wyden Bennett’s Healthy Americans Act) under serious consideration.
It is likely the Blue Dogs, and perhaps a few Republicans as well, could hold their noses and vote for a bill that had a mandate if there were savings that were scored as such by CBO.
Most think there’s going to be a comprehensive health reform bill.
I’m less sure – much less.

Without meaningful cost containment, Senators and Congresspeople will balk at the price tag, and the long term implications for the deficit. As well they should.
The deals struck to date with hospitals and pharma are nowhere near enough to get us where we need to be – a dramatic reduction in medical cost trend. There’s a lot more heavy lifting to be done before we have a bill that’s viable.