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Archives for Medicare

Obama’s Rx for Change

Jun
12
2008

Clinton has quit, Obama has three times McCain’s resources, and the country is fed up with the Republicans’ war, corruption and toadying to corporations. Democrats have won three “safe” Republican house seats in recent months. It’s their election to lose, and assuming that the fences between rivals really are mended, it might be a landslide.

I’ve written previously that I don’t think Obama is serious about pursuing health care reform. But this week in at a Health Care Town Hall held immediately after he clinched the nomination, he repeated that by the end of his first term, there would be universal healthcare.

In an Obama administration, we’ll lower premiums by up to $2,500 for a typical family per year. And we’ll do it by ….covering every single American and making sure that they can take their health care with them if they lose their job…..We’ll do it by the end of my first term as President of the United States……

Coming from someone who had relatively little to say about health care until goaded into it by former rivals John Edwards and Hillary Clinton this counts as a turning up of the rhetoric. So let’s imagine that there is a solid Democratic majority in the House and Senate with a strong Democratic President.

What type of health care reform might actually pass into law?

Obama’s proposed plan is complicated so the plan’s trip through Congress will be tortuous. And some details are still not aligned. Although Obama says most employers would have to provide insurance, he doesn’t mandate that individuals to buy insurance. But then he says we’d get to universal coverage by having people buy insurance, rather than having the government provide it for free.

The Obama theory is that if insurance becomes cheaper, more people will buy it, and those that truly can’t afford it will be subsidized. But that’s not realistic. Ten percent of people account for more than 50 percent of health care costs and the current game in insurance is to avoid covering that 10 percent.

It looks fairly inevitable that the worst excesses of current insurance practices – avoiding people with chronic conditions – will be banned. But the next step, which is spreading that uneven cost of health care across wider populations, means healthy folks who are not paying their “fair share” will have to pay more. That’s necessary if those paying the most – or in reality, currently unable to get insurance – get to pay less. And those who will have to pay more will likely outnumber those getting a better deal right now. So the Obama plan will look like a cost increase to many. This has largely been the experience in the new Massachusetts “universal insurance” plan.

Obama’s way around this is to have the U.S. government subsidize some of the most expensive cases. That’s the source of his $2,500 a family savings. He’ll also allow people to buy into an equivalent of the Medicare system. Both of these safeguard proposals mean big increases in government subsidies that will require more taxes. But this is all likely to be proposed during a recession. The Federal budget is already heading for another record deficit. Add in the opposition from much of the health insurance industry to these reforms (as they will put some of its members out of business), and you can see how hard this will be to pass Congress.

There is one place Obama can go for the money to pay for his plans. The Medicare program continues to run more or less as it did in the 1960s, incenting doctors and hospitals to provide more and more services, at a total cost of some $460 billion in 2008. Remember that Obama says he needs less than $100 billion to cover everybody.

For the past two decades Medicare “reform” has meant paying private plans to take on more of the Medicare population. But more than 80% of Medicare recipients are still in the traditional program, and worse, it’s turned out that it costs Medicare more overall to send a senior into a private plan. So serious reforms of the mainstream Medicare program are going to be necessary.

Any such reforms will have winners and losers. Losers will presumably be those making money providing “too much” acute care now. You can imagine the ability of those “loser” hospitals and doctors to rally political support. So although there be reallocation of funds within Medicare and for the rest of Obama’s plan to work there’ll need also to be an overall reduction in Medicare spending to help pay for the expansion of subsidies to cover more of the uninsured.

So my quick forecast, regardless of who wins in November: We’ll see cuts in Medicare as part of a series of necessary and positive changes in how we pay for health care services. If Obama wins, we’ll also see greater regulation of insurers to prevent the bad behavior we’ve seen in the last few years.

Whether we’ll see real efforts to “cover every single American” is much less likely.

Posted by Matt Holt at 8:22 AM | Permalink

Health Plans Behaving Badly

Oct
18
2007

It’s not been too pretty a picture for America’s health insurers lately. Sure they’re still turning decent profits, but for the past two years their stocks have barely been matching the S&P 500 Index. What went wrong? Well, you can blame Wall Street. The Street is concerned with two things. Money now and money later.
Since 2001 the big health plans have managed to increase the percentage they keep of fast-growing health care premiums (which have been going up at 3 to 4 times the rate of inflation), a number known to stock analysts as the ‘Medical Loss Ratio’ (MLR). It used to be that for most big insurers roughly 82-87% of premiums went out the door to pay for actual doctors, hospitals, drugs et al. Now the MLR is generally below 80%, and in some cases below 75% meaning less money’s out the door and more is on the bottom line of the health plans.
But the health insurer party that’s been going on for most of this decade may be coming to an end. But perhaps being busted by the cops and being told to tidy the house might be the best thing that ever happened to the insurers. Let me explain.
Wall Street is demanding. It expects continued growth in profits at health plans. So either the MLR must continue to go down or premiums must keep going up. But higher premiums makes customers grumpy and less likely to buy insurance. And lower MLRs makes doctors and hospitals grumpier and less likely to honor insurers. So insurers have had to find new paying customers to keep growing their businesses.
They didn’t have to go far. The U.S. government, in particular the Medicare program, stepped up to the plate. In three years, from late 2003 to mid 2007, Medicare enrollment in private health plans has almost doubled, going from about 11 percent to a eye-popping 18 percent of the number of folks eligible for Medicare, according to the Congressional Budget Office. How’d this happen?

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Posted by Matt Holt at 2:07 PM | Permalink

The AMA: Pushing Patients Around

Sep
13
2006

It is time to dip into some murky waters here at Spot-on. Like it or not, it’s time to see what the American Medical Association (AMA) is up to. Why so murky? Well, the AMA is the group most responsible of any for ensuring that America does not have universal health insurance for every citizen, and also for the fact that the quality and even type of health care patients receive varies dramatically.

It lobbies for a number of causes – reduced salt in our diets, for instance, in addition to the work it does on behalf of individual doctors so it’s hard to really get a handle on the type of real work the AMA does. But, well, that’s why I’m here: To put it all in perspective.

Recently the association conducted a public opinion poll, one designed to strengthen its arguments on Capitol Hill against cutting phycians fees. Guess what it said? Most Americans are alarmed by impending Medicare cuts that will harm seniors’ access to care!

Well actually most Americans had never heard of the cuts, and most Americans believe that health care is way too expensive and would presumably like to pay less for it. But leave that aside. After the pollsters told them that Medicare fees would be cut, the next question was obvious. It was something like “Doctors say that if you pay them less they won’t take Medicare patients, who will be left on the street to die. Then their bodies will be eaten by wolves. Are you worried that this will impact access for grandma to her doctor?” And you can guess what the answer will be.

This is the typical semi-fraudulent poll you’d expect from a self-interested lobbying group. And the AMA, of course, is able to say that it’s not fighting to maintain its members’ incomes, it’s fighting to preserve access to care for grandma. The real problem physicians are complaining about is that in real terms their incomes have gone down over the past decade, although most of the fall was in the 1990s, and they’re starting to pick up again now. But when you’re talking about an average income of about $200,000 a year it’s pretty hard to get public sympathy for your cause. And on top of that, the poll’s assertions are supported by real life. Doctors may say they’re not going to take anymore Medicare patients if fees go down, but the real data shows that they continue to treat Medicare patients. Earlier fee reductions made essentially no difference in the number of physicians taking Medicare patients. And that’s only logical: Elderly Medicare patients are, by far, the biggest users of health care and therefore doctors’ biggest customers. But those seniors are being scared into protesting by the physician lobby, and that will likely get those fee cuts put off for yet another year.

How did the AMA end up using patients to lobby for policies which are not really in their best interests, let alone the interests of taxpayers, employees and consumers paying for health care? It’s a long and sordid story. By far the best analysis of the development of physicians as a distinct and highly privileged trade guild was written by Paul Starr whose seminal work, The Social Transformation of American Medicine, tells the story of how allopathic physicians distinguished themselves from various other types of medical practitioners and quacks in the latter years of the 19th century.

They managed to use their growing social status and the political influence of their major membership organization, the AMA and its state chapters, to resist the ability of corporations to overrun their status as independent small businessman (as happened to most craftsmen and many other professionals). They also prevented the government from closely regulating how they actually practiced medicine and from creating a social insurance scheme, which presumably they’d be forced to work under. That’s why attempts to introduce universal health care reform failed in 1917, 1934, 1948, 1965, 1974 and 1994 (although by 1994 the AMA had help).

Suffice it to say this was a remarkable triumph both socially and politically. And when the government did finally get a halfway-house social insurance scheme in place – the introduction of Medicare for the elderly in 1965 – the power of the AMA was sufficient to make sure that for the next 20 years, physicians were able to bill the government essentially as much as they liked, and received no interference in what they were billing for.

Eventually though these good times couldn’t last.

(more…)

Posted by Matt Holt at 8:21 AM | Permalink

Less Is Good But More Does Better

Aug
23
2006

One of the biggest elephants in the drawing room of the American health care system goes by the polite name “practice variation.” For decades practice variation was only popular with obscure health services researchers – yeah, I’ve got a Masters degree in that obscure ouvre – so I guess I cared. But no one else really did.

But now that concern about health care costs is becoming a more pressing political issue, things have changed. The esoteric concerns of a few are now the political issues of a growing group of people. So what the hell is “practice variation” and why does it matter as long as you’re getting better?

Simply put, practice variation is what happens when the same patient with exactly the same symptoms or disease receives radically different treatment based only upon where they live, or in many cases, on precisely which doctor they see. What you say, medicine is supposed to be a science so shouldn’t the same patient get the same care wherever they are? The answer ought to be, essentially “yes”. But the reality is that the services patients receive are markedly, markedly different. The brilliant academic who first discovered this phenomenon back in the early 1970s, John Wennberg, says that in health care, “geography is destiny” and doctors have hated him ever since.

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Posted by Matt Holt at 7:48 PM | Permalink

The Real Politic$-As-U$ual of Health Care

Aug
10
2006

The politics of health care is really all about the divvying up of federal tax dollars.
It’s is not about solving the problems of the uninsured or the general problem that ever-increasing costs pushes onto the rest of the economy. Day to day, it’s about redistributing the money.
Take San Francisco, which has finally passed its health insurance plan into law. At its most basic, the plan involves re-funneling the money the city spends on health care and hitting up employers and citizens who can pay something, for their insurance to pay the bills of the uninsured.
In the meantime, I sat in on a lecture from a rational Republican. Yes, I know you don’t believe I wrote that sentence but the Republican in question works for Massachusetts Governor Mitt Romney, so he’s not a “real” Republican. Among other things, he thinks uninsurance is actually a problem. Why? Because in Massachusetts, uninsurance is a problem for the state’s politicians. Health care spending in the state is the highest in America (and therefore the world), and the political power of the big teaching hospitals – Partners (the corporate entity that runs Mass General and Brigham and Womens) is the best known but there are a bunch more – in the state is huge. The uninsurance rate is among the lowest in America. What’s happened as a result? With a special combination of Federal money and a series of “lies” that politicians tell about how transferring costs from one group to another is not a tax increase, Massachusetts might succeed in reducing uninsurance. And if ways can be found along the way of sending more money to the big teaching hospitals, so much the better!
Those are local examples but right about now, the health care conversation is about to go into a very contentious little moment of money redistribution. Yup. We’re talking about Medicare, the big, rich federal program that pays for the care of the elderly.

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Posted by Matt Holt at 12:00 AM | Permalink

Medicare and HSAs: Ready for Their Close-Ups

Jan
25
2006

Well it’s a heady time to be a health care policy wonk. Not four weeks ago I was telling you all about how health care was going to be the big political issue in 2008 or may be 2010 … and all of a sudden it’s the biggest news of 2006 with almost daily stories about Medicare “Part D” and something called Health Savings Accounts. Both are concoctions of the pay-to-play Bush Administration and both will have a serious impact on politics and the health care system.

So, as ever, for the Spot-on crowd, a bit of a history lesson is in order. Back in the dark days of late 2003, now-disgraced former Majority Leader Rep. Tom DeLay got a quite extraordinary bill past the House of Representatives. The vote was held open for 5 days and included payola, whippings and public beheadings on the floor to get the necessary votes— OK not quite but pretty close.

This was the bill that finally provided Medicare recipients – that’s those of us over 65, and the disabled – with coverage for their prescription drugs. It’s was something that had been wanting for decades but was still contentious. Why? The estimate for the cost of the program was way higher than the few fiscal conservatives in the Republican party wanted. And that was before it was revealed that the actual estimated cost was nearly double what Congress was told, and that the head of Medicare – former for-profit hospital lobbyist Tom Scully who was out the door immediately after the Bill’s passage to return to K street – had threatened the agency’s chief actuary with firing if he told Congress the truth. 

What was really going on here? Well American drug companies have forever been able to charge much higher prices for their drugs here than elsewhere in the world because they didn’t face a monopsony (e.g. the government). So as long as there has been talk of a prescription drug benefit for Medicare, Pharmaceutical companies have been terrified that the Federal government would fix prices the same way it does for the other services it buys for Medicare. That would inevitably lead to lower profit margins.

So, as the pressure grew for Medicare drug coverage over the years, Big Pharma didn’t quite know what to do. But then they hit on a old trick. The shipped a a boatload of money into key Congressional districts in the 2002 election, When Congress convened, Big Pharma got a big win: A bill that would guarantee drug coverage for at least poorer seniors (after a fashion) but in a way that they could handle. That’s why Medicare Part D (the prescription program) is administered by private sector intermediaries called Participating Drug Plans and the government is expressly banned from directly negotiating prices.

But that’s not all that was in the bill, which was a kind of eternal Christmas for Big Pharma and other parts of the health care system. Also included were support for a program pioneened by a small Indianapolis insurance company called Golden Rule. Golden Rule allowed the establishment of tax-free savings accounts similar to IRAs and in the 2003 legislation, these programs were massively extended so that any American can have a Health Savings Account.

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Posted by Matt Holt at 12:25 AM | Permalink

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