Principles for the Homestretch

House and Senate leaders will soon have to reconcile several different versions of health reform bills. The bills are complex, but some simple principles should guide the process of integrating them into a final product. As the press reports on a whirlwind of proposed laws, we need to ask of any particular proposal: Does it . . .

1) Increase productive competition in health care? Everyone talks about “increasing competition” among insurers and providers, but there are many ways to compete. Hospitals and doctors can game the reimbursement system. Insurers may not directly discriminate against the sick, but can find other ways to keep high-risk patients out of their plans, as even the most market-oriented health policy experts realize:

[T]o avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania’s Wharton School.

Both the Netherlands and Switzerland have already experienced problems in this area, even though the Netherlands has implemented risk-adjustment methods (which attempt to deter such “cherrypicking” and “lemondropping”) far more serious than anything proposed in current bills in the US. As Karen Pollitz has repeatedly argued, we’re going to need a much greater investment in insurance regulation to make any reform bill work.

2) Make it easier for uninsured or underinsured individuals to buy coverage? Many of the proposals for allocating and awarding subsidies for coverage sound exceedingly complex. We’re hearing about serious limitations on access to exchanges, subexchanges, burdensome “free rider” provisions, etc. Any particular provision may sound good in the abstract, but taken as a whole they could become an obstacle course that makes obtaining insurance coverage a miserable and exasperating experience for those supposedly aided by reform. During the second Bush administration, hundreds of thousands of children eligible for subsidized health insurance were not enrolled because states failed to make enrollment convenient enough for time- and cash-strapped parents. As Liebman and Zeckhauser remind us, “we must design systems for mere mortals, not the people who inhabit the models of traditional economists.” What seems easy to one of DC’s privileged elite can be very hard for an overworked mom or minimum wage-earning service worker.

I believe that the main reason a solid 2/3 to 3/4 of the country supports a public option is because it is a straightforward, transparent way to provide a backstop of health insurance for everyone. If Congress both rejects a public option and makes subsidies for private insurance as complex as the tax code, health reform risks becoming a model case of government failure. Last week’s negative votes on Rockefeller’s strong and Schumer’s weak public options could easily become a “you broke it, you bought it” moment for centrist Democrats and Republicans on the Senate Finance Committee.

3) Fairly distribute the burdens of reforming the health care system? This is the tax and finance question, and it promises to generate some epic battles on Capitol Hill. However the Senate Finance proposal ultimately evolves, it will be in tension with a House of Representatives that sees progressive taxation as a foundation for financing reform. The Baucus proposal to tax “high end”/Cadillac/”gold-plated” health plans may seem progressive, but it promises to gradually engulf even normal plans. While David Leonhardt offers some good economic arguments for such a tax, policymakers should be guided by Leonhardt’s observations on the propriety of taxing those at the very top of the income scale, who have disproportionately benefited from economic trends and tax cuts of the past decade.

4) Provide incentives for long-term cost-saving and preventive medicine? Comparative effectiveness research is a crucial tool for focusing pharmaceutical research on drugs that save lives. We have a shortage of primary care doctors vis a vis specialists. Reimbursement systems are too easy to game. Insurance markets are concentrated and need more competition and transparency. Any bill that ignores these problems (or fails to empower HHS or another agency to address them) can’t lead to truly sustainable universal coverage.

The health reform fight has been bruising, disappointing, and frustrating for many who care about health policy. Many unwise assumptions are already baked into leading bills. In the Senate, ostensibly Democratic lawmakers are promoting what are essentially Republican ideas and granting enormous subsidies to industries that may well betray them at the next electoral cycle. Nevertheless, there remain many opportunities for improving the final product at the beginning of the end of the legislative process.

The Truth About Young Invincibles

Recently released data has indicated that young people don’t care about health care reform.  Or at least not in large numbers. The poll, released by Gallup, says that only 34% between the ages of 18 and 34 want their Congress members to vote for reform legislation.

But this conclusion, drawn by so many, may be somewhat at odds with what the underlying situation might realistically be: that young people actually do care about health care reform itself– but are reluctant to bear the costs for not only themselves–but aging boomers as well–especially as young people have borne disproportionately the effects of the economic crisis.  For those of us who are in between still being dependents on our parents’ insurance and having health coverage of our own through employment, health care coverage is important –and we’re not so stubborn so as to not admit it– but the cost of insurance at the onset of a working life can be a significant barrier.

Why is there a problem of young uninsured people anyway?  19 years of age seems to be the limit for when young people in our country can still get medical coverage under their parents’ policies.  Although many states have altered this equation, many have not. For many private insurance companies as well as Medicaid, young people are cut off from coverage at the age of 19 or when they graduate from high school.  Many insurance companies cover those dependents that go on to college, and many college insurance plans provide some level of coverage. But those who choose to join the workforce  directly following high school graduation are largely left without.  In addition, once a “young and invincible” graduates from college, most are severed from insurance coverage altogether (that is, if they weren’t already).

Again, what might lend itself to misconstrual among all the data on health care legislation support is the difference between young people wanting health reform and being able to afford it– even if we get it.  According to the Commonwealth Fund, the majority of the uninsured young adult population (ages 19-29) are from low-income households.  Also, more than 2.5 million recent college graduates are unemployed.  Important to remember is the fact that recent graduates simultaneously face the difficulty of paying off college loan debt.  Thankfully, President Obama has not forgotten that fact.

Some policymakers think that because young people are so “invincible” we make an ideal group to add into the health care insurance pool: we are healthy, cheap to cover, and take up a small percentage of overall costs on health care.  For them, it makes perfect sense to add a relatively healthy group to the larger pool of Americans requiring insurance so as to drive premiums down overall and/or increase the profitability of insurers.  Ideas like this overlook (or disregard) the resultant fact that young people will then bear the responsibility of subsidizing health care costs of older generations– counterintuitive and somewhat contraindicated  when we look at wage status and unemployment numbers for recent high school and college graduates entering the workforce, don’t you think?

Importantly, besides the issue of unemployment, the types of work young people are usually able to secure affect their chances of getting health coverage too.  Those who are able to obtain jobs usually start off working part-time or lower-wage jobs, ones which typically do not offer benefits such as medical insurance.  Read the story about this young woman who was highlighted in the LA Times; she was unlucky enough to need an operation to remove a cyst while she was still in the introductory period as a new-hire (no insurance until you prove yourself, of course).  The only way she was able to cover the out-of-pocket expense of $12,000 was through her parents’ refinancing of their home.

Implicit in all this is age rating. For many reasons beyond its potential negative effects on both young and old, age rating should be divorced from actual health care reform.  Age rating would allow insurance companies to actively discriminate against its beneficiaries based on age alone.  For young people, such proposed age-rated, young-invincible plans are not even comprehensive; they would only cover medical care in times of emergencies or extreme illness, giving the plans the name of “catastrophic insurance.”  That sounds enticing.  Hard to believe young people wouldn’t be banging down the doors of their elected officials, adamantly demanding “catastrophic insurance,” right?

Better plans would incorporate the real needs of young people: preventive care, prescription benefits, and affordability.  These issues are not just unique to older generations.  If we want to keep the so-called invincibles healthy, we have to give them better options than just care in times of dire need.  Keeping young people on their parents’ insurance until a certain age limit is a good idea, as long as it plays out in practice too.  Anything is better than forcing young people to get coverage they can’t afford.  If you want our support for health care reform, try tailoring some of the reform bills to what we actually need.

The 85% Solution and Health Costs

Reform may be bogging down over cost issues.

Blue Dogs and Republicans argue that the cost of reform is too high.  Attempting to predict what large expenditures set off fiscal responsibility alarms is chancy (Financial bailout? Iraq war? Health coverage for all?).   Public money should be spent wisely, but outrage at the scale of the thing — about $100 billion per year to bring equity and sense to a system that cost $2.4 trillion in 2008, and is projected to cost $4.4 trillion by 2018 — doesn’t scan well.  Time lines have been stretched.  The level of political energy has ratcheted up, with the President fully engaged, and business and the health industry  more publicly pushing back.

It may be time to think back to a catch-phrase of the last health reform period.  It was common at that time for objectors to assert that reformers were applying a 100% solution to a 15% problem — that is, that comprehensive reform was unnecessary to address a problem affecting “only” the 15% of the population without health coverage.  There are glimmers of a similar argument this time, with objectors asking whether it is worth it for the haves (taxpayers) to provide for the have-nots (the uninsured).  This argument would be flawed definitionally, as plenty of the working poor without insurance pay a higher total tax rate than better-off insured people.  More significantly, the message should be rejected on its merits: this round of reform is necessary for everyone, and not just the uninsured.

So, what’s the 85% solution?  The figure 85% pops up in a couple of interesting places in the health reform debate.  First, a NYT/CBS poll last month found that about 85% of Americans believe that the American health system needs to be “fundamentally changed or completely rebuilt,” numbers that match well with an EBRI Issue Brief published earlier this month.  This number demonstrates the inclination of the insured to support reform.  After all, the other place the figure 85% pops up in insurance coverage rates — 85% of Americans are insured, and 85% of Americans recently told Gallup that their own health care as “excellent” or “good.”  In the sharpening public debate, progressives should keep this group in focus.  They’re empathetic toward the uninsured, but that empathy is doing too much work.  They should be engaged, in addition, by the fact that health reform is in their direct interest.  They need reform for at least three reasons: our system is fiscally unsustainable and will run off the rails in coming years without comprehensive reform; our system encourages procedure-driven medical practice that serves patients poorly, and even harms them; and the basis for competition in the private insurance market is less on quality and service, and more on seeking out “good risks,” driving into public programs or uninsurance those who most need care, inefficiently increasing taxes or health insurance premiums for the 85%.  Those rallying support for reform should pay heed to these issues.

Attention to an 85% solution is not in tension with covering the 15%.  Uninsurance kills people, and extending coverage to all is critical.  Most Americans clearly care about universal coverage, but the negative blitz will be intense, and it will be helpful to also emphasize that reform helps the 85% as well as the 15%.  Benefit to the 85% sometimes gets underplayed, allowing nay-sayers to create a divisive us-them dynamic.  Today’s reform efforts are necessary because the system is broken with respect to all participants.

All of the health reform draft bills address the key issues of cost, practice reform, and risk selection to greater or lesser degrees.  They could, of course, be improved in these areas. But too often, the debate tends to be reported as though sponsors are advocates only for the uninsured, while Blue Dogs and Republicans fight a rear-guard action to protect those with insurance.  If the struggle is so mischaracterized, reform is unlikely to pass.  We need reform that contains cost for all, restores incentives to practice humane medicine, and reduces as much as possible insurers’ incentives to avoid covering those most in need of care.  Below are some quick thoughts on comparative effectiveness analysis as cost containment, in this spirit.  I hope to touch, in coming days, on the need for reimbursement reform and for an end to insurance competition on the basis of risk.

Cost containment: Health Technology Assessment

There’s been a lot of talk about how to “bend the curve” of health care cost projections.  Containing cost increases helps everyone, of course.  It would be tragic indeed for Congress to expand coverage to all only to find in a few years that we can’t sustain the new program.  One important, and controversial, aspect of cost containment is comparative effectiveness research (CER).   CER is often demonized as rationing.  The Institute of Medicine’s recent work in this area defines this hobgoblin, however, in terms that seem positively pro-patient:

[CER] is the generation and synthesis of evidence that compares the benefits and harms of alternative methods to prevent, diagnose, treat, and monitor a clinical condition or to improve the delivery of care.  The purpose of CER is to assist consumers, clinicians, purchasers, and policy makers to make informed decisions that will improve health care at both the individual and population levels.

Shouldn’t we care about whether expensive new devices and procedures improve health?  The scare tactics should be taken on in two ways.  First, as the IOM makes clear, most CER is directed toward choosing the clinically appropriate alternative.  A second, rhetorically more difficult task, is to point out (as have both my colleague Frank Pasquale and economist Uwe Reinhardt ) that “rationing” is not a swear word, but rather a description of a method for allocating scarce resources.  The choice isn’t whether rationing to some degree will occur, but rather whether it will be done through a transparent process rather than on the basis of ability to pay — or on the basis of an insurer’s preference.

That good health technology assessment should be a concern for the 85% was made clear by David Leonhardt’s recent NYT piece on slow-growing, early stage prostate cancer.  Leonhardt describes the five forms of treatment commonly prescribed, ranging from “watchful waiting” to proton radiation therapy.  The price, he reports, ranges from “a few thousand dollars” to over $100,000.  Which works best?  No one knows.  Remember — the question posed by the article isn’t which produces the most QALYs per unit cost; rather, it reveals that there is no real scientific basis to choose among the options.  Shouldn’t we encourage research to allow us, and our doctors, to choose wisely?

Price-Gouging by Doctors and Hospitals

Mark A. Hall, Professor of Law and Public Health, Wake Forest University

Carl E. Schneider, Professor of Law and Internal Medicine, University of Michigan

[Ed. note: As noted above, we are very pleased to welcome Professors Mark Hall and Carl Schneider to the blog today.]

We cannot reform health care intelligently unless we understand the medical marketplace well. Debates about reform have scrutinized the health-insurance market, but they have neglected a crucially defective feature of the medical marketplace — the way doctors and hospitals charge patients when prices are not set by regulation or by negotiation with insurers.

The Problem

When patients are not protected by large private or public insurers, doctors and hospitals charge them astonishingly more than patients with Medicare or managed-care insurance.  Some price difference would make sense, because insurers offer providers large volume and economies of scale.  But we are not talking about discounts of 10, or 20, or even 30 percent.  Providers routinely double, triple, or even quadruple prices for unprotected patients.  Such huge mark-ups can only be regarded as price-gouging — exploiting market power to charge prices virtually unrelated to actual cost or market value.

A comprehensive analysis of data hospitals report to Medicare shows that, on average, hospitals charge uninsured patients two-and-a-half times more than they charge insured patients and three times more than their actual costs.  In some states mark-ups average four-fold.

Data for physicians’ prices are less comprehensive, but information from office management systems is disturbing.  Across a range of diagnostic and invasive specialty services (echocardiography, coronary catheterization, liver biopsy, upper GI endoscopy, circumcision, flexible sigmoidoscopies, hysterectomy, appendectomy, gall bladder removal, and arthroscopic knee surgery), many physicians in 2003 charged uninsured patients roughly two to two-and-a-half times what insurers paid.  Only primary care physicians appear to be staying within plausible bounds.  They typically charge uninsured patients only one-third to one-half more for basic office or hospital visits than they received from insurers.

Some Excuses

Providers defend themselves in several ways.  First, they call these price differences steep discounts rather than huge mark-ups.  This is almost laughable.  Most providers charge “list prices” to only a small minority of patients (10-20%), so these are hardly a genuine baseline.  Second, providers argue that because they often cannot collect list prices, they are on balance receiving little more than they would receive from insurers.  However, when patients cannot pay inflated bills, doctors and hospitals regularly send them to collection agencies, ruining patients’ credit and bankrupting millions of them.

Third, providers blame the government by claiming that program and accounting rules require them to bill this way.  But governmental agencies have declared that this is not true, and while some rules may still be irksome, rules about billing certainly do not require providers to set their prices as high as they do.  Many tax-exempt (non-profit) hospitals recently wilted under scrutiny and adopted sliding-scale policies for low-income uninsured patients, but these policies do little to help insured patients who are receiving care out-of-network or uninsured patients from the broad middle class.

The Solution

Insurers’ attempts to stop price gouging have failed.  Some large insurers have refused to reimburse out-of-network providers for the full amounts they charge on the grounds that those amounts are not “usual, customary, and reasonable.”  But New York’s Attorney General called this “consumer fraud” because patients were left owing the full bill.  Courts have been little help.  Consumer class-action lawsuits have attacked price gouging by non-profit hospitals, but courts have dismissed most of these cases on various technical grounds.

Government regulation has inhibited price gouging, but only for people covered by government programs.  Medicare, for instance, prohibits doctors from charging Medicare patients more than about 10% over Medicare-approved rates.  But inflated pricing still afflicts the uninsured and privately insured people buying care out of network.  Some reformers simply advocate greater price transparency so that patients know better what to expect when seeking care without the protection of insurers.  But transparency will not fix the structural dynamics of market power that allow providers to charge almost whatever they want.

To help medical markets work better, the government should cap what doctors, hospitals, and other providers may charge patients who are not protected by regulated or negotiated discounts.  The details can be debated and refined, but one approach is to cap charges at, say, 150% of a normal reference rate.  The reference rate could be what Medicare pays, or a weighted average of what larger private insurers normally pay across a region.  Doctors with boutique practices could still charge what they wished for extra concierge services, or perhaps doctors who don’t accept any insurance should be exempted.  Design features are important and tricky, but they should not keep us from setting reasonable bounds within which markets can function.

Substance: Obama names Regina Benjamin, MD, MBA, to Surgeon General Post

In a week that has us considering personal experience as it relates to job performance as regards a seat on the Nation’s Highest Bench, I’ve found myself considering the well worn aphorism of Oliver Wendell Holmes: “The life of the law has not been logic: it has been experience….The law embodies the story of a nation’s development through many centuries, and it cannot be dealt with as if it contained only the axioms and corollaries of a book of mathematics.”

And it has occurred to me that perhaps Holmes’ rubric lends something to a consideration of health care reform and President Obama’s pick for Surgeon General, Regina Benjamin, MD, MBA.

Although much in healthcare (and healthcare reform) can be (and perhaps must be) the complex and dismal mathematics of zero sum, gored oxen and have and have not—as Holmes reminds us: the math is not all. Yesterday, in a post by Professor Kathleen M. Boozang, we looked at health reform through the lens of Catholic social doctrine: a proposition leading to the conclusion that

We must pursue a system in which each of us has access to health care, which necessarily requires that, in solidarity for our fellow being, those of greater fortune accept the responsibility for those who do not, giving the gift of an opportunity for the basic good of health.

In a recent post considering Atul Gawande’s article on McAllen, Texas, which lamented Medicine performed as a sheer business proposition (McAllen is “one of the most expensive health-care markets in the country” and suffers from what Gawande sees as an all too prevalent, treat the patient as though they were an ATM mentality), we came face to face with Immanuel Kant’s Categorical Imperative:  “Act in such a way that you treat humanity, whether in your own person or in the person of any other, always at the same time as an end and never merely as a means to an end.”

We noted then that we found it “passing strange to find ourselves, in the midst of such daunting medical, technical, and financial data contained within the  proposed solutions and counter-solutions to arrive at this–a simple (but difficult) age old moral truth.”

And that it had “struck me while reading that what Gawande finds is essentially a medical culture functioning, and incentivized, contrary to Kant’s categorical imperative (see above): the simple moral admonition that one must not merely “use” others.”

And then there’s Dr. Benjamin.

She is the founder and CEO of the Bayou La Batre Rural Health Clinic in Bayou La Batre, Alabama (if the name of the town sounds vaguely familiar, think Forrest Gump, shrimping boat). Emily P. Walker, Washington Correspondent, MedPage Today reports:

A major supplier of charity care, Dr. Benjamin has provided medical care to patients in the Gulf Coast regardless of insurance status.

“I decided I would treat patients regardless of their ability to pay,” she said when she accepted the president’s nomination in the Rose Garden on Monday. “It should not be this hard for doctors and other providers to provide care for their patients.”

Dr. Benjamin’s practice was destroyed several times by hurricanes, and once by a fire, but she always rebuilt, sometimes by refinancing her home and maxing out her personal credit cards, President Obama said Monday.” (emphasis added).

She is also said to have “had to moonlight in an emergency department and nursing homes to keep her practice open.”

It is notable that while Congress argues over where the money will come from to fund health care reform, when faced with the need to rebuild the clinic she herself had started– which offers care regardless of ability to pay–Dr. Benjamin, despite the MBA which follows her name, maxed out her credit cards, mortgaged her house and took a part-time job.

Extraordinary and beyond the call. Perhaps beyond Kant, and certainly beyond the math. According to the NY Times, “Dr. Benjamin is a devout Roman Catholic.”

By no means am I advocating this degree of personal risk and sacrifice as a paradigm for health care reform. It is much too much to ask or expect–as it seems Dr. Benjamin herself well understands: “It should not be this hard for doctors and other providers to provide care for their patients.” Agreed.

As noted in the post,  “Why McAllen Texas Kant be the Answer to Health Reform,”

Pragmatically, as one looks upon the current system of health care and health care finance,  it is well worth quoting Harold Luft from today’s Washington Times: “A redesigned system must create new incentives for those entities so their self-interested behavior leads to a better societal outcome.” Gawande offers examples of systems which provide an infrastructure conducive to Mr. Kant’s imperative.

Dr. Benjamin offers an example of personal commitment despite extraordinary disincentives. The Huffington Post reports

She said she would combat preventable diseases. Her father died with diabetes and high blood pressure, her only brother of HIV. Her mother died of lung cancer because as a girl “she wanted to smoke just like her twin brother,” an uncle now on oxygen.

“I cannot change my family’s past. I can be a voice in the movement to improve our nation’s health care and our nation’s health,” Benjamin said. “I want to be sure that no one falls through the cracks as we improve our health care system.”

Sounds like the voice of experience.

Jost on Cooperatives

In the last post, I introduced Timothy S. Jost and his case for a public insurance plan option. Jost has also recently addressed the new “middle ground” between a public option and the status quo: cooperatives. I’m honored to print his analysis below on our blog.

Are Cooperatives a Reasonable Alternative to a Public Plan?
by Timothy S. Jost

First, a word about history. We have tried cooperatives before. During the 1930s and 1940s, the heyday of the cooperative movement in the United States, the Farm Security Administration encouraged the development of health cooperatives. At one point, 600,000 mainly low-income rural Americans belonged to health cooperatives. The movement failed. The cooperatives were small and undercapitalized. Physicians opposed the cooperative movement and boycotted cooperatives. When the FSA removed support in 1947, the movement collapsed. Only the Group Health Cooperative of Puget Sound survived. Over time, moreover, even Group Health, though nominally a cooperative, has become indistinguishable from commercial insurers–it underwrites based on health status, pays high executive salaries, and accumulates large surpluses rather than lower its rates.

The Blue Cross/Blue Shield movement, which also began in the 1930s, shared some of the characteristics of cooperatives. Although the Blue Cross plans were initiated and long-dominated by the hospitals and the Blue Shield plans by physicians, they did have a goal of community service. The plans were established under special state legislation independent from commercial plans. They were non-profit and, in many states, exempt from premium taxes. They were exempt from reserve requirements in some states because they were service-benefit rather than indemnity plans and because the hospitals and physicians stood behind the plans. They were exempt from federal income tax until the 1980s. In turn, they initially offered community-rated plans and offered services to the community, such as health fairs. In some states their premiums were regulated and they were generally regarded as the insurer of last resort for the individual market.

Over time, however, the Blues lost their focus on community service and began to look more and more like their competitors. They abandoned community rating (which, realistically, they could not maintain when faced with competition from experience-rated commercial plans) and began to impose underwriting and cost-sharing requirements indistinguishable from the private plans. Although providers lost control of the Blue plans, the plans never took a leadership role in bargaining aggressively with providers, despite their market dominance in many states. Many of the largest Blue plans became for-profit, and those that remain non-profit are largely indistinguishable from commercial insurers. Although the national Blue Cross/Blue Shield association offers some coordination services to local plans, it has not resisted the move of Blue plans away from a community-service toward a for-profit orientation. Lacking a national focus on public service, state and regional plans have become indistinguishable from their commercial competitors.

Blue plans are not the only non-profit insurers that survive. Many church and fraternal organizations have their own non-profit plans. Although these plans often try to serve their communities, they usually have a small presence and little bargaining power in most communities in which they operate; tend to insure individuals and small groups, the most costly market; are often the victims of adverse selection; usually underwrite much like commercial plans; and tend to offer low value, high cost-sharing policies. They are not a model on which to build national reform. Mutual insurers are also in theory owned by their members. They also, however, are indistinguishable from for-profit insurers in most states.

What can we learn from this history? First, health care cooperatives are, in fact, an American response to health care reform. Cooperatives and non-profit insurers were there before for-profit commercial insurers entered the health insurance business, and we could try to revive the idea again.

But why would state or locally-run cooperatives be any more successful now than they were when we tried them before?

First, it is hard to imagine how they would get underway. Capitalization and critical size were problems before and would likely be problems again. Senator Conrad’s recent draft suggests that members of the coops would elect their boards, and that the coops would then obtain state licensure as mutual insurers, meeting state standards for solvency and reinsurance (with the help of federal seed money). But there is a chicken and egg problem here. Until the coops had members they could not have a board. Until they had a board, how would they meet licensure requirements? The state coops, moreover, would, under Conrad’s proposal be supervised by a national board, but the national board would be elected by the state coops. Again, the state coops would presumably not be able to get underway until the national board provided policy guidance, but the national board could not get underway until the state coops were formed to elect it. None of this makes sense.

Second, there is every reason to believe that small, state run coops would fail like their predecessors did in the 1930s and 1940s. Unless they reached the critical mass necessary to bargain effectively with providers, to accumulate reserves, and to compete with national private insurance plans, they would be doomed to failure. Even if they managed to succeed here and there, they would contribute nothing to a national effort to control costs, drive value, and make affordable care accessible.

Third, if state-run coops in fact, against all odds, became large, successful competitors for insurance business, what would keep them from following the course of the Blue and mutual plans before them? Without strong Congressional direction and a unifying national leadership, what could keep them focused on cost control, quality improvement, transparency, and service rather than simply becoming indistinguishable from their commercial competitors? How would they drive the delivery system change we need?

Fourth, how does setting up cooperatives on a state-by-state basis drive national health care reform? Each state currently can set up cooperatives if it wishes to, but none have done so. Why would states suddenly embrace this concept? And what assurance do we have that they would pursue anything like a common strategy? To approach this issue on a state-by-state basis is simply to surrender on national health care reform. A federal fallback plan to be implemented in the future is also unlikely to work. HIPAA contained a federal fallback plan for states that failed to implement reforms in the individual market, but it was poorly implemented and eventually abandoned. To revert to a state-by-state approach is to surrender on national health care reform.

What Would Make the Cooperative Concept Work?

In fact the cooperative idea in itself is promising. The proposed cooperatives look much like the social insurance funds of Germany and of other central European states. Those funds are governed by their members and do a comparatively good job of keeping health care costs in check. But they operate in a strong framework of national laws and under the guidance of national leadership.

The only viable strategy is Senator Conrad’s Option 2–-a federal charter to license and regulate a national non-profit coop, with coop governance prescribed by Congress. Leadership could initially be appointed as directed by Congress to represent consumer, labor, and small business interests, and thereafter be elected by the membership. The federal government could provide seed funding to assure initial solvency, but thereafter the coop could be self-supporting. It would be financed through premiums, and compete on a level playing field with private insurers (although some account would have to be taken of the fact that private insurers, no matter what underwriting rules were imposed, would still dump high-risk insureds into the coop). Some administrative functions could be delegated to the regional level, much as Medicare Advantage or drug plans are administered at the regional level. Regional councils could also be elected by members, who could have a role in selecting the national board and an influence on national policy.

A national cooperative could perhaps compete effectively with national private insurers. It could perhaps bargain effectively with providers, including global pharmaceutical firms and national hospital chains. It is possible that it could drive creative national quality initiatives and provide national data on health care use. It would not be government-run insurance, the great fear of the American right. But it could perhaps provide a national solution for a national problem. It will not happen on its own, however. It will only work with concerted and probably long-lasting support from the federal government.

Jost on the Public Plan

Timothy S. Jost is one of the leading figures of the American health law academy. He has unparalleled knowledge of comparative health law, which he’s applied to the American debate in an impressive series of articles and books.

When I heard that Jost was writing on current debates, I really wanted his insights on our blog. Here is the first part of an essay he wrote making a case for a public option, which 83% of Americans support.

Why Public Plan Choice?
by Timothy Stoltzfus Jost

One of the most significant and innovative proposals of the 2009 health-reform debate has been the concept of public plan choice. Although the exact features of a public plan have not been specified, the public plan concept offers several significant benefits:

Cost control. Health reform cannot happen unless we can control the continual upwards spiral of health care costs. The public plan would control costs in three ways. First, it would be able to keep its costs down by not having to make a profit and by avoiding many of the administrative costs incurred by private insurers. Second, it would introduce competition into the health insurance industry. Although there may be, as Karl Rove asserted yesterday, 1300 health insurers in the United States, health insurance markets are segmented into the large group, small group, and nongroup markets and within each of those categories competition is exceedingly local. In 36 states, 65% of the small group market is controlled by 3 insurers; in 16 states one insurer controls half of the market. In any one locality, moreover, the market is even more concentrated. In my home town of Harrisonburg, Va., one insurer controls 86% of the market.

Private insurers simply do not compete; they simply take prices from providers and pass them on to consumers, driving the health care price spiral. A national public plan would introduce vigorous competition into every part of the country, forcing private insurers to compete for business and to bring down their premiums. Third, a national public plan would also have the bargaining clout to make providers moderate the increase in their prices, bringing down the cost of health care itself.

Choice. Right now the only choice available to most Americans is private insurance and, in many markets, small businesses have only a choice of one or two insurers. Americans want to have alternatives to choose among to best meet their needs. A public plan offers this.

Delivery System Reform. A national public plan could drive delivery system reform and improve the quality of care, as Medicare has been doing through its demonstration projects, payment reforms, and consumer information initiatives.

Transparency and Accountability. One of the most important developments in the health care reform debate over the past decade has been the data that has emerged from the Dartmouth research group on variations in health care spending. This data, discussed by Atul Gawande in his widely noted recent article on health care costs and the President in his speech at Green Bay, could only be collected because Medicare data are available to researchers. No comparable research can be done on the under 65 population because private insurers regard whatever data they have to be proprietary. Private insurers are also much more secretive about their coverage and utilization review policies. A public plan could make anonymized data available to researchers and be open with its subscribers about coverage and utilization policies.

A National Strategy. We have waited for decades for the states to make affordable health care available to Americans. A few have tried, most have failed. None have developed an effective alternative to private insurance. All Americans are experiencing the same problems with health care–lack of access, high costs, and uneven quality. We need a national strategy for health care reform that will help all Americans, not just some. We also need a national public plan that offers uniform benefits to all Americans and national bargaining power.

Market Entry by Health Care Cooperatives: Neither Quick Nor Easy

The idea of establishing regional cooperatives, advanced as an alternative to President Obama’s public plan option, has attracted attention as a means of assuring that health reform legislation contains some means to improve competition among health plans around the nation. But the proposal, which may have superficial appeal as a “middle ground” between a public plan option and an unchecked private market, is ill-equipped to fix the key problems a public plan would address. In addition, recent experience teaches that timely and effective entry by such plans is unlikely.

The first issue is whether a cooperative, organized by consumers or other groups, can effectively deal with the shortcomings of the existing delivery system and insurance market. Thus far, the proposal advanced by Senator Conrad is pretty sketchy, but are grounds for skepticism. A central reason for having government sponsored plans is to allow the efficiencies of Medicare’s well-established administrative structure and innovative payment experiments to carry over to the private sector. Coops provide no such advantage. A second advantage of public plans is that they would likely achieve some bargaining leverage by virtue of their probable role as insurer for people representing higher risks whom private insurers find some methods to avoid. Hospitals and physicians will be hard pressed to bypass such a significant presence in the market and the public plan can thereby exert market-wide pressure to keep provider and pharmaceutical costs down. Whether co-ops will be willing to undertake the role of covering such individuals or able to sponsor innovative delivery systems to treat them is far from certain.

In any event, it is hard to envision numerous regional coops gathering the necessary data, experience and reputation to serve as a benchmark or counterweight to dominant hospitals and provider groups across the country. Further, there is a serious question regarding the independence and mission of coops. It is a mistake to assume that nonprofit entities will necessarily work to the advantage of the public. Unfortunately, our experience with nonprofit hospitals and HMOs suggest that they can easily be persuaded to play along with other providers and may not always vigorously pursue their charitable mission. Keeping cooperatives’ eye on the ball would require close attention to the control and governance of such entities.

The second objection is based on timing and practical considerations. There is ample evidence from our experience with health insurance markets that developing effective coop-sponsored plans will not come easily or quickly. It is clear that new entrants into health insurance markets face a host of obstacles. The prevalence and magnitude of entry barriers is evidenced by the dominance and profitability of existing insurance plans. One or a handful of companies dominate most health insurance markets around the country and these firms have enjoyed consistent and robust profits. Economic theory would suggest that such profit opportunities should have invited entry by rivals eager to capture some of the profits available in those markets.

Additional proof of the obstacles to entry are found in the investigations by insurance commissioners into proposed mergers in their states. In Pennsylvania for example, the proposed merger of Highmark and Independence Blue Cross would have combined the dominant insurers in two large distinct geographic regions of the state. Evidence provided to the State indicated that numerous attempts by regional and national firms such as Aetna and Coventry to enter both markets had proved unsuccessful over the years. Expert studies suggested that a variety of factors including brand loyalty, difficulties in securing physician and hospital network contracts, regulatory and information gathering costs, and obstacles created by the contracting practices of incumbent providers, thwarted entry. Newly formed coops needing to acquire expertise and develop networks will surely face enormous difficulties penetrating markets.

AMA to Lobby Against Public Plan– Again

The New York Times reports that the AMA has announced that it will lobby against the inclusion of a Public Plan in health care reform legislation.  Merril Goozner over at GoozNews has posted an interesting Real Politik analysis worth a view, and at least one physician, Dr. Chris McCoy, Policy Chair for the National Physicians Alliance, has publicly quit the AMA in response. In his post over at the Huffington Post, “Dear AMA: I Quit!,” Dr. McCoy points out the inconsistencies in the AMA’s position in regard to its own research, and the group’s less than progressive history when it comes to health reform. The piece is well worth quoting at length:

But this should not have surprised me: when health care reform has been necessary, the AMA has always stood on the wrong side of history. The AMA opposed the creation of Medicare in the 1930s, when it was first proposed as part of Social Security. The AMA opposed Medicare again in the 1960s, going as far as to hire an actor named Ronald Reagan to read a script to the AMA Auxiliary declaring Medicare as the first step toward socialism, and concluding with the statement that if Medicare were to become law, “One day, we will awake to find that we have socialism…. One of these days, you and I will to spend our sunset years telling our children, and our children’s children, what it was once like in America when men were free.”

That was 50 years ago … and none of that has come to pass. And yet this year, the AMA argues that a public health insurance plan will destroy the private insurance market. I challenge the AMA leadership to cite a single example of an industry where involvement by the government has lead to the elimination of private enterprise. This has not been the case with the creation of public police forces in the second half of the 1800’s (private security companies still exist), we have a robust system of public and private colleges existing the same market, and bookstores still sell books despite the presence of public libraries. A mix of public and private enterprises in the market is a truly American solution to ensuring equal access, as well as competition to drive quality improvement. In fact, the creation of the public health insurance option will *increase* competition, as demonstrated by the AMA’s own studies showing that 94% of health insurance markets only have 1 or 2 providers in the market.

It would appear that the AMA’s position against the public health insurance market is driven by out-dated political ideology that blindly supports private industry rather than a careful examination of the facts of the current situation.

Senate Compromise on Public Plan Begins to Emerge. Half-a-loaf?

The Associated Press reports that a possible compromise has emerged in the Senate with regard to the “public plan” for health insurance:

The compromise offered by Sen. Kent Conrad, D-N.D., would create health care cooperatives owned by groups of residents and small businesses, similar to how electric or other cooperatives operate.

They’d be nonprofit, and without the government involvement that troubles Republicans and business groups about the public plan options.

This attempt at compromise seeks to address the purposeful omission of the issue of a public plan option from Senator Ted Kennedy’s 615 page health reform draft bill. The draft bill, by Kennedy and Democrats from his Health, Education, Labor and Pensions Committee, was said by the LA Times to have faced “furious criticism from even moderate Republicans” when it was released on Tuesday. This despite the attempts to avoid such by the Democrats through the omission of the contentious public plan option.

Kaiser Health News describes the Kennedy Plan as follows:

The plan “would require all Americans to get medical insurance, establish complex new insurance exchanges to facilitate near-universal coverage, and dramatically step up government oversight of the insurance industry.” The plan skips over - for now - the two issues Republicans have most vocally opposed, a government-run insurance option and a mandate for businesses to insure employees. Nevertheless,  the “Republican response was sharply negative” (Levey, 6/10).

The public plan compromise proffered by Senator Conrad, at least in principle (details have yet to surface) has garnered some tentative approval. AP reports that

The chairman of the Senate Finance Committee, Sen. Max Baucus of Montana, said Wednesday the idea could be key to a bipartisan health bill. Baucus raised it in a meeting with President Barack Obama, saying later that Obama showed interest. Baucus’ Republican counterpart, Sen. Chuck Grassley of Iowa, also said the concept had potential.

“It’s a way to bridge the gap,” Baucus told reporters.

AP reports  the outline of the  Conrad compromise as follows:

Profit-making insurance companies wouldn’t run the show, but there also wouldn’t be the federal government backing that Republicans fear would eliminate fair competition with private companies. The co-ops could get federal seed money, Conrad said, but that would be the end of federal involvement. The co-ops would negotiate directly with medical providers.

Study: 62% of All Bankruptcies are Medical Related

The Los Angeles Times and the Wall St. Journal Health Blog report that a new study by Harvard researchers shows that medical-related bankruptcies have increased. The researchers did a similar study for 2001 which found that medical bills, the loss of wages and cost of care attributed to illness contributed to 55% of bankruptcies. For 2007, the number is 62%.

Importantly, this rise in 2007 comes, as the study authors note, despite Congress having “tightened the bankruptcy laws” in 2005. In addition, the LA Times notes that “the latest study probably understates the current burden of medical expenses because it is based on bankruptcies filed before the recession hit.”

The WSJ Health Blog reports it thus:

Some 62% of all bankruptcies filed in 2007 were due in part to medical expenses, according to a new study. Even more striking: 78% of those individuals had insurance.

Most people hit by such bankruptcies were considered middle-class, college-educated and owned homes, according to the study published online by the American Journal of Medicine. By the time they filed bankruptcy, those without insurance reported average medical bills of $26,971 and those with insurance, expenses of $17,749.

The LA Times reports that

Hospital bills were the largest expense for about half the families that filed health-related bankruptcies.

It would be interesting to know what percentage of those hospital bills were claimed by nonprofit hospitals to be a “community benefit” under 501(c)(3).

Location. Location. Location. 13% of Much Heralded Retail Health Clinics are in Medically Underserved Neighborhoods

Retail health clinics have sprouted up across America as of late. They can be found in grocery stores and pharmacies, are open nights and weekends, often (wisely) utilize the services of nurse practitioners for minor ailments and feature a clearly listed schedule of fees. According to the Washington Times, “visits typically cost $40 to $75,” and “people pay cash or use insurance.”

CVS Caremark Corp. and Walgreens Co. are the leading purveyors of retail clinics. At present, there are said to be more than 1200 of these clinics spread out across the nation; at issue here is how they are spread.

A new study authored by Dr. Craig Pollack of the University of Pennsylvania which was published in the Archives of Internal Medicine shows that a little more than 13% (123) of the 930 retail clinics operating last year were found to be “in areas defined by the federal government as medically underserved.”

The Washington Times states:

The researchers mapped 930 retail clinics operating last year, then used U.S. census data to describe the income and racial makeup of the neighborhoods. In counties with at least one retail clinic, the researchers compared census tracts with and without retail clinics.

Only 123 clinics were in areas defined by the federal government as medically underserved. Tracts with clinics had lower percentages of black and Hispanic residents, lower rates of poverty, higher rates of homeownership and higher median incomes.

The Washington Times reported that Dr. Pollack said that “The study’s results suggest financial incentives may be needed to lure the clinics to low-income neighborhoods.”

There are, I think, a few points to be derived form this article. First things first: the Washington Times article headline to the Associated Press story, “Few retail clinics found serving poor,” is an inference not necessarily substantiated by the underlying research. The research goes to the location of the clinics, not the economic status of the clientele. Importantly, other news outlets which ran the story, such as the Seattle Times, the Times Leader, and the A.P itself,  were careful to run the story under the title of “Study: Few retail clinics in poor neighborhoods.” It may well be that poor people do not frequent the retail clinics outside the neighborhoods in which they live, but the study does not purport to answer that question. It merely tells us where the centers are. The article states:

The poor and uninsured do make their way to retail clinics, said Margaret Laws, director of the California Healthcare Foundation’s Innovations for the Underserved program.

“People go out of their neighborhoods to work and shop,” she said. “I don’t think we should make the assumption that they won’t go out of neighborhoods to seek health care if it offers customer service, better hours and transparent prices.”

Ms. Laws makes a point worth noting, and although the Washington Times included this point in the article, it is unfortunate from a journalistic standpoint that the article’s title failed to reflect it.

In addition, it should be noted that another impetus for travel outside of one’s neighborhood is free health care. Which is exactly what Walgreens has offered to many this year. As we posted last month

Walgreens is offering free health care at its in-store Take Care clinics to patients (and their uninsured children and spouses) who have lost their jobs.  This program, called the Take Care Clinic Take Care Recovery Plan, is designed to assist current and future patients who lose their jobs and health coverage on or after March 31, 2009.

Limited as the program self-admittedly is, it is free. It is also worth mentioning that as a for profit enterprise, Walgreens is under no obligation besides their sense of good will to offer it. But as a for profit enterprise, they (and other retail clinics) can hardly be faulted for placing the majority of their clinics in areas they deem will be profitable. At the risk of beating a dead horse (primarily because I am met constantly by those who insist the horse is not dead and that we will soon be riding it to health reform and universal coverage ) a reliance upon for profit corporate America to undertake the unprofitable without government regulation and/or sponsorship is a misguided one. The primary duty of a corporation is to its shareholders; the primary duty of the government is to its people.

“Many people have promoted retail clinics as a cure for access to care for the underserved,” said Dr. Ateev Mehrotra of the University of Pittsburgh, who studies retail clinics but wasn’t involved in the new research. “These findings show that’s unlikely to happen.”

Dr. Pollock and his co-author, Dr. Katrina Armstrong, suggest that to further expand the reach of retail clinics “municipalities should consider offering incentives to store operators to open clinics in underserved areas where they already operate retail outlets. Currently, nearly a third of all chain stores are located in medically underserved areas.”

“There may be a real opportunity to put up clinics in underserved areas where there’s already supermarkets and drug stores” Armstrong says.

New Mammography Van Unveiled in Newark, NJ

The City of Newark, NJ, the University of Medicine and Dentistry of New Jersey (UMDNJ), and the Susan G. Komen for the Cure North Jersey recently unveiled a new and expanded Mobile Mammography Van, aptly called “Mammography in Motion.”  According to UMDNJ, “The Mammography in Motion mobile van provides access to screening mammograms, clinical breast exams and educational information for uninsured and underinsured residents in Newark and other northern New Jersey communities.”

As I reported earlier, studies have indicated that uninsured women are diagnosed with larger tumors and at later stages than otherwise similar, but insured women. The cause of this later and larger diagnosis may be attributable, in part, to a lack of mammography providers — an indication of just how critical the van is to the Newark community.

The new van was funded through the North Jersey Affiliate of Susan G. Komen for the Cure and is markedly more advanced and comfortable than its predecessor, which was a retro-fitted recreational vehicle that provide analog, as opposed to digital, mammography.  The van is a part of the New Jersey CEED (Cancer Education and Early Detection) S.A.V.E. (Screening Access of Value to Essex) Women and Men Project.  According to Catherine Marcial, Project Coordinator for S.A.V.E. Women, the new van is bigger and more pleasant.  It now has an exam room, changing room, reception area and all updated equipment.   She also pointed out that providers on the van — a physician or physician assistant and a mammography technician from UMDNJ — offer pelvic exams, PAP Smears (cervical cancer screenings) and recommend colorectal cancer screenings when warranted.  Deborah Q. Belfatto, Komen North Jersey Affiliate co-founder and executive director, commented that, “The Mammography in Motion program will provide state-of-the-art breast health screening services for women right in their own neighborhoods.  This is a giant step in addressing access to care for all women, especially those with no readily available resources.”  This is especially true given the prediction that the demand for mammography, and other outpatient diagnostic imaging, is expected to increase by double digits over the next three years.  Further, there is strong evidence that the provision of cancer education and screening programs serves to significantly reduce cancer rates in Newark, as was evidenced by a study on cervical cancer in the city.  This study found that “the ratio of in situ to invasive cervical cancer increased and decreased in a striking parallel with the provision and subsequent cessation of funding.”

Finally, it should be noted that cancer screenings are only the beginning of the battle for improving cancer outcomes for the un- and underinsured, Read more

Common Denominator in Failed State Health Reform: Budget Woes

But the states may be a different story.  A round up of failed– or at least disappointing– health reform state initiatives over the past two weeks shows a consistent factor in the process: budget woes.  Many states have shown themselves to be not willing to overlook state budget crises in favor of immediate health reform.

Case in point: Washington State.  The state’s House approved a bill last week that would remove thousands of beneficiaries from basic state health care.  State officials would have authority to remove residents receiving separate benefits from the state’s Department of Social and Health Services, as well as discretionary removal of residents based on income, perceived access to private insurance, and how long a particular resident has received basic state health care.  The bill, according to the AP/Seatle Post-Intelligender, is likely to save the state $250 million (of the $9 billion annual budget gap that the state hopes to close).  The proposal is currently awaiting a vote in the state Senate.

Washington also recently imposed a new rule that would cut Medicaid reimbursements for brand-name prescription drugs– an intended savings of $1 million dollars a month.  However, two weeks ago the AP/Seattle Post-Intelligencer reported that a federal judge imposed a ban on enforcement of the new measure over concerns that it would restrict access to prescription drugs.  A hearing on May 18^th will determine whether the ban will be lifted or stayed.  Read more

Health Care Reform and the Public Insurance Plan: “Framing the Debate,” and Fording the Corporate Dam of Shareholder Wealth Maximization

Kaiser.org has recently noted that “Liberal and conservative interest groups ‘have begun a fierce ideological battle, with each side trying to shape the public’s perception of a public insurance plan,’ the Christian Science Monitor reports.”

Kaiser states:

The Health Policy Consensus Group, a coalition of conservative interest groups spearheaded by the Heritage Foundation, listed the creation of a public insurance option as the No. 1 “deal killer” for health care reform. The group argues that the government would use its “regulatory, pricing, and taxing authority” to make it nearly impossible for private insurers to compete, leaving U.S. residents without a private alternative.”

Let’s attempt to understand the argument against a public insurance plan. To do so, I would suggest that it will be of some help to understand the nature of a “public plan,” and, perhaps just as importantly, where the interests lie.

When we speak of “a public insurance plan,” we speak essentially of expansion, not creation: Medicare, Medicaid and SCHIP are “public plans,” as are those administered by the Veterans Administration and the Indian Health Service.  At present, however, these plans are tailored to bring medical care to people who meet certain criteria. At present, this country is estimated to have close to 50 million people who are uninsured: primarily people who either lack the money or employment requisite to obtain private health insurance or who fail to meet the criteria requisite for enrollment in any of the public plans as they are presently configured.

The “public plan” proposal would expand the criteria for enrollment in extant “public plans” and perhaps constitute other service providers to administer to the need.   So…the argument against a public plan is essentially an argument against making these plans (or very similar plans) available to a greater number of people. Why? Simply put, those who would be serviced by an expanded “public plan” would thereby be rendered unavailable to Private Insurers as customers and generally speaking, less customers = less profit.

Understandably, those who oppose a “public plan,” such as America’s Health Insurance Plans (AHIP), have proposed that as a means of achieving universal coverage, all Americans should be forced (”mandated”) to purchase health insurance from, well, Private Insurers. The plan calls for the Government to subsidize this purchase of private insurance. Given that there are close to 50 million uninsured, this would result in an increase of tens of millions of paying customers for Private Insurers.  This proposal has been rather aptly compared by Jeff Emanuel of The American Spectator to an automaker bailout which would require each American to buy a car.

The Heritage Foundation’s Health Policy Consensus Group, opposed to a public plan, is said to argue that with the advent of an expanded public plan

“the government would use its “regulatory, pricing, and taxing authority” to make it nearly impossible for private insurers to compete….”

Read more

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