Did Sen. Baucus Just use a Jedi Mind Trick to Confuse About the Public Plan?

The word coming out of Washington over the last few days dealing with healthcare reform legislation reminds me somewhat of the Jedi hand wave mind trick from the original 1977 Star Wars movie.

Luke, Obi-Wan, and the two droids are entering the village where they hoped to find a pilot who can help them escape the Imperial blockade, but they are stopped at a roadblock by Stormtroopers searching for the two droids.

Stormtrooper: Let me see your identification.

Obi-Wan: [with a small wave of his hand] You don’t need to see his identification.

Stormtrooper: We don’t need to see his identification.

Obi-Wan: These aren’t the droids you’re looking for.

Stormtrooper: These aren’t the droids we’re looking for.

Obi-Wan: He can go about his business.

Stormtrooper: You can go about your business.

Obi-Wan: Move along.

Stormtrooper: Move along… move along.

After being confronted by a number of Democrats in the House last week over possibly getting soft on adding the so called “Public Plan” in health care reform legislation, Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, told a press briefing “will get to this a little later.”

It was not reported whether, or not he waved his hand, but Baucus went on to say he wants to get a “little momentum” behind health reform legislation before the committee tackles such a divisive issue.

“Cool it,” Baucus said. “We don’t have to deal with it now. It’s kind of a hot-button item.” (Maybe another little wave of the hand?)

Essentially, Baucus said he will temporarily set aside talks on a new public insurance option to focus on maintaining employer self-insurance plans.

According to CQ Today, Baucus turned attention to large self-insured employers saying he would aim to preserve this self-insurance system while expanding private coverage and public programs such as Medicaid. He said, “We’ll end up with more private insurance and more public insurance.”

As for the creation of a new public insurance option, Baucus said that it is “on the table,” adding that it “might be to the side a little bit, … but it’s still on the table.” He added, “We’re trying to get momentum going. We’ll get to the public option a little later. Let’s not forget: There’s an awful lot more here than the public option” (Young, The Hill, 4/24).

Move along… move along…

Are Democrats in the Midst of a Family Feud over the Public Plan for Healthcare?

For those of us who are trying to read the health reform tea leaves, things got a bit more interesting this week with signs of a rift in the Democratic Party over the “public plan.”

First we had the chairmen of two Senate committees with jurisdiction over health care reform legislation (Baucus and Kennedy) say that their committees will mark up the two healthcare bills in early June and, following committee action, quickly merge them into a single bill for consideration by the full Senate.

Not so fast, said liberal advocacy groups such as Consumer Watchdog which accused the Obama administration and congressional Democrats of negotiating a deal with industry lobbyists at the expense of average Americans.

Next, two top administration officials suggested that President Obama is open to compromise on the public plan, comments that set off alarm bells in some corners of his party.

This, according to a story in today’s Washington Post has prompted more than 70 House Democrats to warn party leaders that they will not support a broad health reform bill that does not offer consumers a government-sponsored policy, and two unions withdrew from a high-profile health coalition because it would not endorse a public plan.

“That’s what got the left nervous. I took that as a signal to Senator Grassley” that Obama is willing to negotiate around an issue Grassley has vehemently opposed, Len Nichols, health policy director at the New America Foundation, a nonprofit think tank, told the Post, referring to Sen. Charles E. Grassley (R-Iowa). “It was the first time the president indicated he could live without it.”

Nichols, who has proposed creating a semi-public option that would have publicly appointed managers but no rate-setting authority, told the Post the disagreement signals a new phase in the overall debate. As he put it: “We’ve gotten past the kumbaya phase.”

This is starting to get interesting.

Health Insurance Premiums Now Cost More Than Rent in New York City.

This is really hard for me to believe. In fact, I had to read it a couple of times to make sure the numbers said what I thought they said.

According to a New York Post analysis of new data from the state Insurance Department, it now costs New Yorkers more to buy health insurance than it does to rent a two-bedroom apartment.

The newspaper found that the average monthly premium for family health coverage is $4,354, up 13% from last year. That’s more than the $3,947 monthly rent for a place in a no-doorman building downtown.

The report said that the jaw-dropping price follows years of double-digit rate increases as tens of thousands of healthy New Yorkers have opted to drop coverage, leaving insurers with a sicker, costlier client pool – the so called “death spiral.”

Experts, the Post says, expect rates to rise again this year when companies pass along more than $853 million in insurance-related taxes included in the state budget.

According to the Post, of the eight companies still writing health policies in the Big Apple — down from 13 in 2004 — all but two have raised their rates in the past 12 months, the Post analysis found.

The article said the insurance industry blames the rate hikes on the generous coverage mandated by state law and a co-pay structure last changed in the mid-1990s.

This is a very graphic example of the results of over regulating an industry and not encouraging market forces to drive change and innovation, and is another clear argument for consumer-driven health plans.

These types of health plans provide coverage for serious illnesses, while allowing policy holders to pay for routine expenses using tax-preferred savings accounts. A family could pay for a lot of routine medical care with $4,300 a month and still have money left over to buy a health plan to cover the unexpected expenses.

19.7: Average Elapsed Time Between Major Windows of Opportunity for Health Reform.

In his latest column the Kaiser Family Foundation’s President and CEO Drew Altman calculates a key number from health reform efforts since World War.

Here is a killer number: 19.7. That’s the average number of years between major attempts at health reform since Harry Truman made health reform a top priority and his plan was branded a socialist plot and soundly defeated in 1950. Altman even produced a chart that chronicles the four major moments of opportunity for health reform from Truman to the present day, as well as some other major legislative successes (Medicare and Medicaid) and failures (Jimmy Carter’s attempt at cost containment) since World War Two.

You can check out Altman’s column and the chart by clicking here.

PA Hospitals Blame Consumer-driven Health Plans for Financial, Health Woes.

A group of hospital officials in Pennsylvania came out this week with statements saying that consumer-driven health plans are making people sicker, not healthier, and hurting the financial health of hospitals.

According to a news story that originally appeared in The Patriot-News, Carolyn F. Scanlan, the president and CEO of the Hospital and Healthsystem Association of Pennsylvania, along with executives of PinnacleHealth System and Penn State Milton S. Hershey Medical Center, had met with the paper’s editorial board to discuss the impact of the nation’s economic crisis on hospitals.

The paper reported that a major concern of the group was the impact of consumer-driven health plans. Such plans typically have high deductibles and co-pays, making patients responsible for larger portions of bills than under traditional plans.

A goal of the plans is to motivate consumers to spend more carefully, and give them a financial incentive to take better care of themselves so they don’t need as much health care.

But, the story noted, Pinnacle and Hershey Medical Center officials said the plans are causing people to avoid health care.

They cited declines in preventive care such as mammograms, and elective surgeries such as hip and knee replacements that might not be medically necessary, but improve patients’ lives.

The hospital officials reportedly told the newspaper that patients with consumer-directed plans often don’t realize how large their shares of bills will be and that it’s common for patients to cancel procedures upon learning how much they will have to pay.

Another concern of the hospitals is rising charity care and bad debt, the paper reported. Hershey Medical Center has spent $13 million on charity care during the fiscal year that ends in June. Bill Pugh, the chief financial officer at Pinnacle, said bad debt rose 25 percent there in 2008.

There is little doubt that the recession is causing health coverage issues for many Americans, but to blame consumer-driven health plans is simply short-sighted on the part of the hospitals.

The plans that carry higher deductibles may cause people to think twice about seeking elective surgeries – that is what they are intended to do. But there should not be an impact on prevention as most consumer-driven plans pay 100% for preventative services. In fact, the Blue Cross Blue Shield Association and others with considerable statistical data to back them up say that persons with consumer-driven plans are taking better care of themselves than do those with more traditional plans.

There is also no reason to suspect that these types of plans are increasing bad debt to the degree that the hospitals are witnessing. Again, while most consumer-driven health plans carry a little higher deductible, they also include features like Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) that help members fund the deductibles with pre-tax dollars, in many cases some or all of these dollars are furnished by the employer. Furthermore, once the deductible is reached these plans usually pay for 100% of covered services as opposed to traditional plans that have long co-payment corridors where the cost of care continues to be shared by the patient long after the deductible has been satisfied.

No, the health plans are not to blame for the woes of the hospitals. Instead, I would suggest that it’s the hospital’s dependence on a system where there is no pricing transparency and where rich benefit plans provide no incentives for the hospitals to become more efficient.

Here’s a news flash: The money is running out. There will be no more first-dollar plans that completely insulate the patient from the cost of the service.

Instead, these facilities need to embrace the change and become more consumer-focused. Lasicks eye surgery is a great example of an elective procedure that is not typically covered by health insurance. Over the years the price has come down considerably and the quality has improved.

Rather than blame a health plan design for their troubles, perhaps these hospitals should spend some time with the Geisinger Health System just down the road from them. As was noted recently in this blog, Geisinger, located in the coal country of Pennsylvania, offers a 90-day warranty on elective heart surgery, promising to get it right the first time, for a flat fee.

Not only does the health system guarantee its work, but heart patients have fared measurably better, and the health system has cut its bypass surgery costs by 15 percent. Today, Geisinger has extended the program to half a dozen other procedures.

As I pointed out in my post about Geisinger, it is disappointing to learn that “best practices” like those being demonstrated at Geisinger are not being embraced by the health care industry.

“Public Plan” Still Big Part of Obama Healthcare Reform Agenda.

Nancy-Ann DeParle, director of the White House health reform office, is certainly getting her share of press today as healthcare writers try to unwind what she had to say during a forty minute discussion with reporters that was sponsored yesterday by the Kaiser Family Foundation.

President Barack Obama’s top health care adviser said that work on healthcare reform has been quietly continuing on Capitol Hill despite the Easter recess. She said that she has been spending 60% to 75% of her time there talking with congressional members and staff who appear far more receptive to a reform package than they did more than 15 years ago. She also says that many other healthcare stakeholders are more open to reform efforts, including healthcare providers, employers, and business groups.

When the event was opened up for questions, several reporters asked DeParle about the so called “public plan” which has been a part of the Obama administration’s health reform plan since the Presidential campaign.

Offering the option of government coverage to workers and their families has become one of the most contentious issues in the debate about overhauling health care to cover the uninsured and curb costs. Obama has proposed a public plan, and liberals insist it be part of any final deal. Conservatives and businesses fear that could open the door for a government takeover of the system. Some republicans have said that a public plan is a deal breaker when it comes to health care reform legislation.

When asked about her definition of a “public plan,” DeParle said it would be a plan sponsored by the government with very low administration costs, paying no commissions to brokers and creating no profits for insurers.

DeParle repeatedly told the group that the Obama administration was open to any plan that would achieve the lower costs that would lead to the ability to cover more people.

“There are ways to get around policy concerns. That is why we think we can reach agreement,” she said. But, she noted that ideological objections to government’s role would be hard to overcome.

Also yesterday in the Wall Street Journal, Kerry Weems and Benjamin Sasse brought attention to the public plan by writing that the comparison between public and private plans is a false comparison.

They wrote that, “Private insurance and public benefits are not the same business. For all its warts, private insurance tries to manage care. Medicare is mostly about paying the bills presented to it.”

The two went on to list four reasons why the administrative expenses of private insurance plans represent money well spent for their members. They are:

  1. Provider networks that can include high-value providers and exclude low-quality providers while Medicare is forbidden from excluding poor quality providers.
  2. Private insurers must negotiate rates instead of just fixing prices using a statutorily.
  3. Private insurers must combat fraud — or go out of business. The two wrote that the total amount of Medicare fraud is unknown. “The government does not measure or estimate fraud in its programs; instead, it measures payments made ‘in error.’ According to Medicare’s own most recent data, payments made in error amount to over $10 billion annually. (Medicaid’s payment errors in 2007 equaled a whopping $32.7 billion, according to a report by the Department of Health and Human Services.)”
  4. Private insurers must incur the administrative cost of marketing. They point out that a public plan competing with other alternatives would also have to market itself to the public, and this means tax dollars used to advertise against private plans. Or the public plan could ‘compete’ by using heavily subsidized marketing channels not available to private insurers, such as Social Security mailings, welfare offices, unemployment check stuffers, and the constellation of government-funded “advocacy organizations.”

As Weems and Sasse concluded in their WSJ piece there should be an honest discussion of administrative costs and their value. Those who believe that health care should have no profit should be open with their views and not hide behind the false economy of Medicare.

To view a web cast of Nancy-Ann DeParle’s remarks, click here.

New Study Says Companies Continue to Add Wellness and Health Management

A new study released today said that, despite the recession and recent cutbacks in some benefit programs, companies continue to add wellness and health management programs to promote healthier behaviors among their workers.

The survey conducted by Watson Wyatt, a leading global consulting firm, and the National Business Group on Health (NBGH), an association of more than 300 mostly large employers also found that companies are finding greater success by offering workers financial incentives for participation in these programs.

Employer interest in programs that promote a healthier workforce continues to increase, the survey found. For example, nearly six in 10 companies (58 percent) offer lifestyle improvement programs, up from 43 percent in 2007, while 56 percent offer health coaches compared with 44 percent in 2007. The number of weight management programs is also on the rise, offered by 52 percent of companies, up from 42 percent in 2007. Also, health risk appraisals are offered by 80 percent of companies, up from 72 percent in 2007, according to the survey of 489 large U.S. employers conducted in January.

Companies that offer financial incentives report significantly higher participation in lifestyle management and wellness programs, according to the survey. Incentives for health risk appraisals are on the rise, offered by 61 percent of employers, up from 53 percent in 2008. Other programs that frequently offer incentives to encourage use include those for smoking cessation (offered by 40 percent of employers in both 2008 and 2009), weight management (offered by 34 percent of employers, up from 31 percent in 2008) and full coverage of preventive services (offered by 73 percent, up from 53 percent last year).

According to the survey, even moderate incentives can help engage employees in healthy behaviors. Financial incentives between $51 and $100 can boost participation in smoking cessation and weight management programs and encourage workers to get biometric screenings. Higher participation in health risk appraisals is associated with incentives greater than $100.

This survey coincides with another report out today that quoted Safeway Inc. president Steven Burd. He said that making employees at the third-largest North American supermarket chain accountable for their weight, smoking, cholesterol and blood pressure, has saved millions. Burd proposed the highly praised program used by his company as a model not only to other companies, but to the federal government.

“If you are part of a large organization, you really don’t have to wait for government to do anything,” Burd told the World Health Care Congress being held in Washington. “You can design your own healthcare reform.

Healthcare costs Safeway $1 billion a year for 200,000 employees, Burd said, adding that the program had held those costs level since 2005.

Once again we find that some of the most effective ways to reform healthcare is to reform ourselves.

To view the 14th annual NBGH/Watson Wyatt report, visit www.watsonwyatt.com/2009nbghsurvey.

Proposed “Public Plan” would Hurt Private Carriers, Providers.

The Lewin Group released a report yesterday that shows the possible impact that a “public health plan” like the one that appears in many of the health care reform proposals would have on private insurance carriers. While a public plan would have the desired effect of lowering premium costs and creating greater access to insurance coverage, it would have an adverse effect on private insurance carriers, providers and possibly even large employers. The report does not address the cost to the federal budget.

The report titled The Cost and Coverage Impacts of a Public Plan: Alternative Design Options,” examines potential impacts that a public health plan might have in competing for enrollment with the private insurance industry.

A team led by John Sheils assumed that the new public plan would offer a plan design and benefits similar to those of the plan that covers members of Congress, with $15 co-payments for in-network care and a $250 deductible for out-of-network care. The report estimates the impact on cost and coverage based on different levels of eligibility and reimbursement rates.

On price, the study concludes that if Medicare payment levels are used in the public plan, premiums would be up to 30 percent less than premiums for comparable private coverage. On average, the study says the monthly premium in the public plan for a typical benefits package would be $761 per family compared with an average of $970 per family in the private market for the same coverage.

This savings, the report says, is possible because provider payment levels for hospital services under Medicare are equal to only about 71 percent of what is paid by private health plans for the same services. In fact, the report notes, Medicare payments to hospitals are actually equal to only between 92 percent and 95 percent of the cost of the services provided by hospitals. For physician services, Medicare pays only about 81 percent of what is paid by private health plans for the same services.

The report also assumed that administrative costs are also expected to be lower for the public plan than under private insurance, reflecting that the public plan would not include an allowance for insurer profit and insurance agent and broker commissions and fees.

Here are the enrollment projections based on various scenarios:

  • If as the President proposed, eligibility is limited to only small employers, individuals and the self-employed, public plan enrollment would reach 42.9 million people. The number of people with private coverage would fall by 32.0 million people. If private payer reimbursement levels are used by the public plan, enrollment would be lower, with only 10.4 million people switching to the public plan from private insurance.
  • If the public plan is opened to all employers as proposed by former Senators Clinton and Edwards, at Medicare payment levels the report estimates that about 131.2 million people would enroll in the public plan. The number of people with private health insurance would decline by 119.1 million people. This would be a two-thirds reduction in the number of people with private coverage (currently 170 million people). Here again, if the higher private payer levels are used, enrollment in private insurance would decline by only 12.5 million people.

Keep in mind that these shifts from private coverage to the public plan are predicted by the study despite the fact that it has assumed that:

  • Medicaid eligibility would be expanded to include all adults living below 150 percent of the Federal Poverty Level (FPL), including able-bodied adults without custodial responsibilities for children;
  • Tax credits would be provided to people purchasing private insurance who live between 150 percent and 400 percent of the FPL;
  • Medical underwriting and health status rating would be eliminated in all insurance markets, but rating by age is permitted; and
  • Large employers would be required to offer insurance or pay a payroll tax; and
  • Tax credits are provided to small employers (fewer than 10 workers) with low-wage workers for up to 50 percent of employer spending for worker coverage.

Now for the impact on providers: Assuming Medicare reimbursement rates and eligibility for all individuals and employers, provider net income would decline under this public plan proposal, even after accounting for reduced uncompensated care and increased utilization for the newly insured. Net hospital revenues would fall by $36 billion (4.6 percent), and physician net income would fall by $33 billion (6.8 percent). If eligibility is restricted to individuals and small firms, net hospital revenues would actually increase by $11.3 billion due to the increase in newly insured individuals. But net physician incomes would decline by $3.0 billion.

There is little wonder that the so called public plan has become a major sticking point for health care reform in Washington. The Democrats have included the idea in their reform proposals while key Republicans, Like Sen. Charles Grassley, are saying a public plan is a deal breaker. Meanwhile, the health insurance industry is saying that it will support dropping medical underwriting if coverage is mandated and the idea of adopting a public plan are dropped.

The devil is in the detail they say, and right now the public health plan offering is a very big detail

Does Personalized Medicine Create a Role for Comparative Effectiveness Research?

An article appeared today in the Drug Benefits News, that draws attention to a situation where health plans are struggling to keep up with evolving technology. The article, written by Neal Learner, notes that the pace of personalized medicine is accelerating, with roughly a dozen new therapies expected to hit the market between now and mid-2010 that will be paired with a genetic test.

Learner writes that proponents of the use of personalized medicine are saying that it will become increasingly popular in the coming years as both providers and payers recognize the ability of tailored therapies to enhance the practice of medicine and reduce costs over time, including by avoiding adverse events.

Felix Frueh, vice president of personalized medicine research and development at Medco Health Solutions, Inc., is quoted in the article as saying that potential savings from the use of genomic testing include a reduction in the number of hospitalizations and physician visits because patients are put on the right medication at the right dose earlier.

The question now is which of these tests have benefit and which do not.

Learner writes that Frueh told the told a Feb. 26 AIS audioconference on personalized medicine that, “Pharmacogenomic outcome studies are key and critically important, and they are also growing in number. In the next few years, we will see the results of many of these studies [that] really help us make decisions on whether or not the clinical impact is sufficient and the economic considerations are affordable.”

Health plans will be paying close attention to the results of these studies to determine which of these tests to cover under their health policies. Learner notes that Lynn Nishida, director of pharmacy services at Regence says the value of many marketed genetic tests is unknown, adding that the tests may range in price from $50 to $2,000 and higher.

In designing policies, health plans should first identify the tests that can be automatically approved, she said. “What you’re trying to do is narrow down your focus to those genetic tests that you are going to have a more thorough review for medical records,” she said of the tests that may be considered investigational or have not yet been shown to have value.

Like any new technology, insurance companies will struggle with which genomic tests to approve, under what circumstances. This will no doubt create controversy and once again draw charges of carriers playing “god” in making coverage decisions. Could this be a place where comparative effectiveness research conducted at the national level could lead to some consistency among health plans while it creates efficiencies by eliminating the need for each carrier to conduct their own research?

Critics will say that this the government rationing care, but someone — carriers or the government — will need to develop standards for these types of tests. In 2007, Regence received 55,100 medical claims for genetic tests, representing more than $5 million in billed claims, and this is just the tip of the ice burg.