Health Absent from State of the Union Speech

Today’s Managing Health Care Costs Indicator is 5

I listened to the State of the Union address last night (transcript) and I was worried my attention had wandered when Obama discussed health care reform – the signature achievement of a very productive first Congress of this presidency.

Turns out I didn’t miss it at all – there was virtually no mention of health care reform in the speech.  Here are the five times he used the word “health.”

Today, the discoveries taking place in our federally financed labs and universities could lead to new treatments that kill cancer cells but leave healthy ones untouched. 

 Because America will develop this resource [gas]without putting the health and safety of our citizens at risk.

 I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny your coverage, or charge women differently than men.

 Now, I recognize that people watching tonight have differing views about taxes and debt, energy and health care.

 That’s why our health care law relies on a reformed private market, not a government program.

In fairness, there were two mentions of “medical” in the speech, too.  One was about “faulty medical devices,” and the other regarding “medical research.”  It’s hard not to be against one of these and for the other!

There were a lot of opportunities to celebrate in health care over this past year.   Health care premium increases were lower this year, and those of us with young adult children can leave them on our health plan as they weather this terrible job market.  The National Institute of Medicine has confirmed that birth control is an essential benefit.  Massachusetts  continues to retain a high rate of insurance and premiums and costs have leveled out here, too.  Health plans in Texas with low medical loss ratios will have to offer big refunds.  Providers are coalescing to participate in accountable care organizations, and electronic records are proliferating. Public reporting continues to improve, and we’ve discovered that proper treatment of HIV positive patients doesn’t just prolong their high quality lives, but prevents transmission, too.

There’s a lot to worry about too.   Many states are getting nowhere in developing their exchanges, and the Supremes are getting ready to hear oral arguments about the constitutionality of the individual mandate and of federal requirements to maintain future Medicaid funding. EMRs don’t talk to each other, and health care has not become especially patient-centric. The Accountable Care Organizations haven't yet saved money, and there's always a danger they will lead to higher costs through market consolidation.  Health care still costs too much, and advances often lead to very slightly higher quality for a few in exchange for massive increases in cost for all.

Perhaps when all of these issues are resolved health care will feature more prominently in a future state of the union address.

(My post on the CBO “pay for value” demonstration projects isn’t yet complete – hopefully tomorrow)

Read More

Losers

Today’s Managing Health Care Costs Indicator is $320 billion

Barack Obama’s plans to pay for the American Jobs Act would lead to a $4 trillion drop in the deficit –through a combination of decreased expenditures and increased revenue collection (a.k.a. taxes).   Because of the elimination of some current tax expenditures (also a.k.a. tax increases), many feel that this bill is dead on arrival in the Republican-controlled House of Representatives.  Still, this is likely to be the foundation on which an eventual compromised is reached – so we could think of this as the opening bid on the Democratic side.

The Obama proposal includes $320 billion in decreased health care costs, $248 billion from Medicare, and $72 billion from Medicaid.  In all instances, these cuts prevent growth – not cutting existing costs.  There are few winners in these proposals – since they save serious dollars.  My take on impact of these proposals on various stakeholders:

Proposal	Patients	Physicians	Hospitals	Pharma	Home Care
Cut $135 billion in pharmaceutical expenses by making the dual-eligibles (Medicare and Medicaid) eligible for Medicaid-level pricing. This returns prescriptions for these members to the Medicaid schedule – as they were before Medicare Part D was enacted in 2003
Cut $3.5 billion from a public health and disease prevention fund
Institute $100 copay for home care (more than 5 visits) beginning in 2017. (This will yield $400 million in savings) Part of the goal of this is to reduce fraud by making Medicare beneficiaries more cognizant of home care bills
15% surcharge on “rich” Medigap plans, which will yield $2.5 billion in new federal revenue This will raise revenue –but it will also discourage “first dollar” coverage, which many believes leads to overutilization. Providers will likely see increased price sensitivity
Raise Medicare premiums for those who are well off ($20 billion over a decade)
Change Medicaid state reimbursement formulas ($14.9 billion over 10 years).  This will advantage states with high rates of enrolling Medicaid eligibles. Medicaid is the weakest element of the Affordable Care Act – since the states can choose not to fund this
Fix the physician SGR (Sustainable Growth Revenue) formula, so that there would not be massive cuts in Medicare physician fees ($300 billion cost over a decade) This reflects political and other reality – a 29.6% fee schedule cut in January would lead to substantial access issues for Medicare members
Post acute care (rehab hospitals, home care, nursing homes) cuts ($42 billion over ten years. This is consistent with recommendations of MedPAC.  Some worry it could take away the ability of some frail elderly to avoid institutionalization
Bring biosimilar equivalents to market sooner

Read More

WHAT?!!

Yesterday’s USA Today reports that Barack Obama had coronary C-T angiography and a virtual colonoscopy to evaluate the status of his coronary arteries and to screen for colon cancer.

This is truly distressing.   There is good evidence that using CT scans to screen for cardiac disease finds coronary disease but does not improve outcomes – so why is our president getting this test?   Colonoscopies are recommended for those 50 and over (Obama is 49), and virtual colonoscopy via CT scan is not recommended as an alternative to actual colonoscopy at this point. (It does not allow biopsy – and while it does not require insertion of a fiberoptic scope, it still requires the unpleasant preparation.)  Both tests use CT scans – with nontrivial radiation exposure.

I’m sure the President’s physicians feel like they were offering Obama exceptional care.   Doing more high tech “noninvasive” tests gives the ‘sense’ of decreasing uncertainty, although we often end up with more data that is difficult to incorporate into a plan of care. If we want to convince the public to accept the results of comparative effectiveness studies which might constrain future care, we should start at the top by not providing non-recommended care to our President.

Read More

Obama Health Care Reform Proposal: New Life, or Last Gasp?

The Obama White House released its health care proposal today in advance of the Thursday bipartisan summit.   The proposal builds off the bill passed by the Senate.  The White House also gave a special nod to Republican ideas incorporated in the proposal.  In this post, I’ll briefly review the proposal, and then review why I believe that many of the parties that embraced the initial legislation will lose interest, and be happy to see this proposal die on the vine.

Main elements:

-          Eliminate the provisions for special deals for Nebraska (and presumably Louisiana)

-          Offer more subsidies to make insurance affordable for the working class

-          Eliminate the ‘donut hole’ for senior citizen prescriptions more rapidly

-          Provide more subsidies to community health centers

-          Create a Health Insurance Rate Authority to oversee health insurance premium increases

-          Regulate health insurers to prohibit some of the worst abuses, including recission , and require more appeals process

-          Decrease the penalty for violating the individual mandate to purchase insurance

-          Impose a payroll tax for employers of over 50 whose employees get tax credits to purchase health insurance

-          $40 billion in new tax credit for small businesses to encourage insurance

-          Crack down harder on fraud and abuse, including better use of databases, harsher penalties, and holding Medicare intermediaries more accountable.

-          Prohibit brand name drug company payments to generic drugmakers to delay marketing of new generic medications

-          Delay of new fees on medical device companies, which would be framed as excise taxes

-          Decrease Medicare Advantage payments to health plans by more, including penalizing those health plans which submit coding suggesting increased illness burden when claims suggest that this is not true

-          Initiate the “Cadillac tax” for high value health plans later, omit dental and vision care, and adjust for age and gender

-          Increase Medicare inpatient tax for high income taxpayers.

-          $10 billion more in fees from pharmaceutical companies (Total $33 billion over 10 years)

-          Increase funding for state Medicaid programs, and make this uniform

-          $1 billion for implementation.

Much of this represents finding a “middle ground” between the House and Senate bills.  Giving administrators the tools to better fight fraud is a good idea, and more subsidies for the working class and small businesses will make it more likely this bill would really decrease the level of uninsured. 

Notably absent is malpractice reform – which would not save big dollars , but could help the bill gain more support. 

The White House estimates that this bill would help insure an additional 31 million Americans, and would decrease the deficit by $100 billion over 10 years.

But I’ve become pessimistic.

Many months ago, before anyone had heard of Scott Brown and when the Democrats got their 60^th Senate seat, passage of health reform seemed close to a certainty. In that environment, the stakeholders came to the table and made real concessions (even if some, including me, pointed out that some of these concessions were self-serving – like pharmas which promised $80 billion in prescription discounts in exchange for far more in new business . The insurers agreed to rein in rate increases in exchange for more membership. The physicians and hospitals agreed to lower rate increases in exchange for fewer uninsured patients. AARP agreed to Medicare cuts.  None of these concessions felt painless to these stakeholders, but they were willing to come to the table when it appeared that health care reform was inevitable.  They made concessions because the alternative appeared to be worse – being left out and potentially suffering more severe cuts.

The current rate of health care cost increases is economically unsustainable – but we have what in game theory is called a “Nash Equilibrium”  where none of the players in a multiplayer game are willing to change their strategy for fear other players will not change theirs.  When it looked like everyone would change their strategy – the logjam appeared to be broken. 

Today, the political world is a different place.  Some commentators are talking about a failed Obama presidency, and the Tea Party convention (with its 600 attendees) commanded two days of news attention.   The Republicans are dead-set against deficits, but denounce any attempt to cut Medicare spending by encouraging evidence-based medicine as “death panels.”

Health care cost inflation isn’t sustainable –  and so we will come to a crisis that will break this logjam.  It looked like the Obama administration and its allies in Congress would have broken the Nash Equilibrium in late 2009.  It’s not looking any easier in early 2010.

By the way, the Kaiser Family Foundation has put together a great side-by-side summary of the different health plan proposals.  

-           

Read More