Five Months Later, a Report on the AdvaMed Six

It’s been a bit over five months since Advamed, the trade association of medical device companies, convened the health insurance lobby (America’s Health Insurance Plans, AHIP), the hospital lobby (American Hospital Association, AHA), physicians (American Medical Association, AMA), the pharmaceutical industry (Pharmaceutical Research and Manufacturers Association, PhARMA), and labor (Service Employees International Union, SEIU).  These combined groups promised to help shave $2 trillion off our health care bills over the  next ten years.  

Let’s examine the current state of the Advamed constituents, and where they stand on health care reform.   I’ll also examine the implications of this for cost savings as part of the forthcoming health care reform package.

The medical device company is lobbying furiously against proposals that would levy $40 billion in taxes on its products over the next ten years.   CEOs and spokesmen from medical device companies have bemoaned the potential loss of innovation, and congressional delegations from Minnesota (Medtronics)  and Indiana (three large orthopedic implant manufacturers)  and New Jersey  have already signaled their opposition to this tax.   The tax might not be a good idea – it doesn’t really “save” money, unless it would result in lower utilization.  It also looks like a political loser, with Al Franken and Tim Pawlenty both opposing it.

American Hospital Association
The AHA has been generally quiet, but the Senate Finance Committee (Baucus) bill has some terrible news for hospitals.  Hospitals had agreed to “give back” dozens of billions of dollars in potential future spending growth in exchange for assurances that there would be few uninsured for them to subsidize in the future.  The Baucus bill leaves 25 million without insurance.  This happened in Massachusetts, and the result is that “safety net” hospitals are in real financial trouble.  I’d expect volleys of opposition from the for profit and nonprofit hospital sectors if there are not more subsidies to increase the percentage of Americans with coverage.

American Medical Association
The AMA has a single dog in this hunt – to abolish the “sustainable growth revenue” targets that force Congress each year to roll back potential cuts in the physician fee schedule.  For instance, physician Medicare payments would be cut by 21% in January, 2010 if the SGR target was not overturned.  Two of the House bills do abolish the SGR, but they don’t have a clear source of funding.  The Senate bill does not.   The AMA has asked its physicians to “call their representatives.”

The health insurance lobby released what it believed would be a damning Price Waterhouse Cooper report on the potential for health care reform to raise insurance costs substantially on the eve of the Senate Finance Committee vote.  The report raises some legitimate, serious concerns,; in my mind the most serious is that lower penalties might hobble the individual mandate, and we might end up with more uninsured and more adverse selection.  However, PWC did not evaluate some of the bill’s provisions that could cut premium costs – such as increased government subsidies and an “exchange” to allow individuals to purchase insurance as part of a larger group.  

AHIP is now in the administration’s cross-hairs, and Obama railed against it in his Saturday radio/web address.    The health insurance industry made “nice” early on in this process, but serious health insurance industry opposition to health care reform has just begun.  Harry and Louise, however, have already been enlisted to support health care reform.

PhARMA came to the table early with its $80 billion in foregone future increases, and it looks like the administration is not pushing hard for deeper cuts.  PhARMA continues to support health care reform.

The labor movement wants to be sure that its negotiated “Cadillac” health plans are not subject to an excise tax – and the Baucus bill dutifully met this need.   Labor continues to support health care reform, and is pressuring Democrats to include a public option in the final bill. Health care reform, and an effective government option,  would clearly decreaes health care employment growth. This is another paradox – we have to cut the cost of health care, and this might decrease job creation in… health care.   It reminds me of that Council of Economic Advisors report suggesting that “health care is forecasted to remain a large source of job growth in the labor market” 

So, where are the Advamed Six?   Besides for PhARMA, none appear to be clearly “on board.”   Or you might say that they are all still on board, as long as their individual preferences are added to the bill.  Where is the $2 billion?   The $2 billion was never clearly spelled out, and seems more likely it will be extracted through Congressional action rather than offered up by these diverse interest groups.