If Everyone Hates Baucus' Plan, Does That Mean It's Good?

Howls of complaints from the left and the right might make you believe that the Baucus health plan is downright good.  I mean, if it aggravates both sides that much – it must be good, right?

The Congressional Budget Office has already weighed in –and there are some surprises here.  The Baucus plans lowers (that’s right, lowers!) the federal deficit over the next 10 years – while cutting the number of uninsured by over half.  How does it do this?

The Baucus plan does not offer especially rich subsidies for the middle class, and includes a flawed employer mandate (maximum penalty, $400, framed so that employers who hire low wage workers might be disproportionately penalized) and a robust individual mandate (penalties up to $3800 per family, which could scare many supporters off). 

What does the Baucus bill say about managing health care costs?

Not a lot.  (WSJ Headline: “Proposal’s Cost Savings Seem to be Elusive.”)

Here is the CBO ten year estimate of impacts of the Baucus bill. As always, the CBO’s focus is the impact on the federal deficit.

New costs (subsidies, etc)                                    $774 billion             

Excise taxes on high premium plans                 $215 billion

Other revenue                                                     $59 billion

Spending changes                                              $409 billion

Other taxes                                                         $139 billion           

That $409 billion is the actual decrease in federal spending on health care – whereas all the other changes represent only shifts of costs.

The CBO estimates cuts of $182 in fee schedule payment updates, $123 billion in cuts to Medicare Advantage programs, $48 billion in cuts to hospitals that care for a disproportionate share of the poor, $23 billion in cuts based on recommendations of a future Medicare Commission, and $33 billion in other spending cuts. 

The Washington Post estimated that the total cuts to hospitals are $155 billion, to nursing homes is $40 billion, and cuts to other providers are smaller.  

How would this work?

The Massachusetts experience with cuts to “disproportionate share” hospitals is troubling – the government subsidies evaporated more quickly than insurance for the impoverished kicked in.  The insurance industry  has been vilified by the Obama administration in recent weeks, and it’s likely that pushback against Medicare Advantage cuts will continue.   Hospitals, as I’ve mentioned before,  are the largest employer in most communities –and these kind of cuts will really hurt.  I see a lot of community nonprofit trustees making a pilgrimage to talk to their congressional representatives.

There is a lot of good in this bill - including consumer protections, a pool for those difficult to insure, and value-based Medicare purchasing for starters.   There is a lot that’s mediocre in the bill too – such as support to start up health cooperatives – which is unlikely to make much difference in the insurance market. There are some real worries - like the potential that cross-state health plans could undermine meaningful consumer protections currently available in states like Massachusetts which have had activist consumer-friently Divisions of Insurance.

The Baucus plan (with 0/3 Republican cosponsors) is off to a rocky start in Washington today.   Hopefully, the ultimate bill will include more provisions that are likely to actually diminish the rate of health care inflation.

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Retail Clinics Save Money; Patient Centered Medical Home....Does Not (But Improves Quality)

Two studies about innovation in health care delivery were published in the last week.

An excellent study in the September 1 Annals of Internal Medicine examined 700 matched patients seen in retail clinics, physician offices, urgent care centers, and emergency departments who had ear infections, sore throats, and urinary tract infections.  The study showed that retail clinics were substantially less expensive ($110 total cost compared to $156-166 in urgent care and physician offices and $570 in emergency departments).  Three critical concerns about retail clinics are elegantly addressed in this study.

1) Rates of prescribing antibiotics was no higher in the retail clinics. Because these clinics are usually housed in pharmacies, some had worried that nurse practitioners would overprescribe.   This problem is in any event no worse than in conventional medical settings.

2) Quality appeared equivalent (using standardized RAND measures).

3) Patients were no LESS likely to have a preventive service in the following 90 days (and a bit more likely, not reaching statistical significance).  Some physicians have worried that retail clinics will disrupt continuity of care; this article refutes that concern.

This study covered three diagnoses that represent about half of all visits to retail clinics -- and the results are unequivocal.  Retail clinics, a "disruptive innovation" in health care delivery, save money with no sacrifice in quality or continuity.   

Reports on another innovation in health care delivery, the Patient Centered Medical Home, show improved quality with no increase in cost (but without the decrease in costs promised by advocates of patient centered medical homes.)  Group Health Cooperative designated one of its centers as a "patient centered medical home," and determined that compared to other centers, this center had

- Lower staff burnout

- Better patient satisfaction

- More specialist visits

- Fewer emergency department visits

- More web and telephonic visits

- Increased composite quality score

There was no substantial difference in cost of caring for patient; higher costs of primary and specialty care were about equivalent to savings in emergency department.

It's possible that this is a premature report -- we're only looking at a year of data.  This study was performed at Group Health Cooperative, an excellent and progressive group where the 19 control clinics were pretty advanced, and  showed large quality improvements during the study period.  However, GHC chose one of its best clinics as the trial site - so it's disappointing not to see any cost savings.   Reading the case, it's also clear just how much work and investment went into setting up this patient-centered medical home.

We need innovations in health care delivery. Retail clinics save money, with no significant loss of quality, and medical home improves quality without increased cost (but a lot of increased effort).  The hope is to define interventions that will raise quality and lower costs simultaneously.

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President Obama and the Price of Health Care Reform

Barack Obama addressed Congress this evening; the full text of his speech is available at this link. 

It was a long speech – setting the historical stage and rebutting many of the arguments against health care reform.  Obama delivered some real specifics, including an endorsement of individual and employer mandates (like Massachusetts’ system), tax credits to help lower income Americans afford coverage, a public option for those ineligible for private health insurance and increasing insurance regulation to protect consumers.

Obama promises that health care reform will meet three objectives:

(1) Provide more security and stability to those who have health insurance.
(2) Provide insurance to those who don't.
(3) Slow the growth of health care costs

Many others will be commenting on the first two objectives;  this blog addresses the third.

Obama spends a few paragraphs talking about paying for this expansion of coverage.  A few key quotes:

“Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan.”

Waste and inefficiency are rampant in health care.  Some have commented that 30% of all medical dollars are wasted. While I don’t disagree – the savings from decreasing variation and increasing the integration of the provider community are not going to come quickly.   This link  is to a past posting, where I note that if we immediately cut all this waste we would cut so many jobs that we would create Detroits all over the country.

“Much of the rest would be paid for with revenues from the very same drug and insurance companies that stand to benefit from tens of millions of new customers.”

This represents what Victor Fuchs calls cost shifting.   I have no disagreement with Obama – new revenue will be needed to pay for expanded access.  But this tax will be passed on as higher premiums to others – and will not lower the cost of health care.

“Reforming our medical malpractice laws”

This got a big cheer from the Republican side of the aisle. The real costs of torts include substantial defensive medicine, so tort reform is a good idea.  Savings will take a long time, though.

“Medicare is such a big part of the health care system, making the program more efficient can help usher in changes in the way we deliver health care that can reduce costs for everybody.”

True that!  Medicare is such a large payer for most hospitals and many physicians that reforming the way Medicare pays can have an enormous positive impact on the health care delivery system.  There will be losers, though, so this won’t be easy.  Obama is wise not to divulge too many details of his administration’s thinking on this.

“This reform will charge insurance companies a fee for their most expensive policies.”

Again, this will be passed on to purchasers of health insurance policies – so this doesn’t represent cost savings, but rather a cost shift. Economists on the right and left agree that offering full tax breaks to ridiculously high benefit policies is regressive and a bad idea. But health insurance plans in high cost states (Massachusetts, Florida, New York among them) are much more likely to be subject to such a tax – and our legislators won’t go easily.

So – the speech was inspirational (especially the nod to Ted Kennedy, who wrote a stirring deathbed endorsement of health care reform), and there is serious substance here that forms the heart of a health care reform bill.  It’s not surprising that the President offered far more details on access than on cost saving.  Cost saving is necessary, but won’t be easy to attain.

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