Governor signs Ariz. budget-balancing bills

By Casey Newton
The Arizona Republic
March 18, 2010

Gov. Jan Brewer signed the fiscal 2011 budget on Thursday, enacting $1.1 billion in spending cuts and program eliminations.

The budget, passed last week by the Republican-led Legislature on largely party-line votes, drew criticism from opponents for what they called a disproportionate impact on the poor.

“I’m not sure how cutting three-quarters of a billion dollars from public education and kicking 300,000 people off of health care puts our state on the back on the road to recovery,” said Rep. Kyrsten Sinema, D-Phoenix. “In fact, it dismantles what we have been working for years to build in Arizona — a vibrant, healthy state where people want to live and work.”

One aspect of the budget expected to be challenged is a cut of $385 million to the state’s Medicaid program, the Arizona Health Care Cost Containment System.

The budget bills also eliminate KidsCare, which provided health care to 38,599 children of low-income parents.

Hours after she signed the budget, Brewer appeared at a news conference to urge opposition to federal health-care reform. Asked by reporters what the hundreds of thousands of Arizonans set to lose coverage this year should do, Brewer said they should use community health clinics and emergency rooms.

http://www.azcentral.com/news/election/azelections/articles/2010/03/18/20100318brewer-signs-budget-bills-arizona.html

Programs benefiting low income individuals and families, such as Medicaid and CHIP, are politically vulnerable to the whims of conservatives wielding budget cleavers. Gov. Jan Brewer of Arizona has just provided us with a prime example of that.  Yet popular programs benefiting everyone, such as Medicare, are relatively impenetrable to the weapons of the conservatives.

The reform proposal likely to be enacted by Congress is heavily dependent on the expansion of Medicaid. Since it is a federal/state program, it requires the support of the government on both levels. In spite of the proposed increases in federal support, Gov. Brewer continues to urge opposition to the reform proposal. Low income families will remain vulnerable in her state as long as she and her Republican colleagues remain in charge.

Suppose Congress had included single payer in their deliberations and eventually decided that the benefits were too great to pass up ,and so enacted an improved Medicare program that covered everyone. Gov. Brewer and her ilk on the state level would be powerless to stop it. It would be so popular that conservatives who managed to take over the federal government would never be able to shut the program down.

Whether or not the current bill passes, we need to make every effort to replace our expensive, fragmented, often cruel, and relatively ineffectual system of health care financing with one that works for all of us – a single payer national health program – an improved Medicare for everyone.

Or failing that, as Gov. Brewer says, we could all just go to the emergency room when we can’t get into the clinic.

Labor War in the Mojave

By Mike Davis
The Nation
March 29, 2010

The biggest hole in California, with the exception of the current state budget, is Rio Tinto’s huge open-pit mine at the town of Boron, near Edwards Air Force Base, eighty miles northeast of Los Angeles.

The Boron pit, which replaced an underground mine, produces almost half the world’s supply of refined borates.

Once upon a time, there were several thousand mining communities in North America; perhaps fewer than a hundred still exist. Boron (unincorporated, population 2,000) is one of the survivors.

In last year’s contract negotiations, Rio Tinto (the British-Australian multinational acquired its Boron facility, U.S. Borax, in 1968 and renamed it Rio Tinto Borax) stunned members of the International Longshore and Warehouse Union, ILWU, Local 30 (Boron), by demanding abolition of the contractually enshrined seniority system and the surrender of any worker voice in the labor process.

The company wants a contract that would allow it to capriciously promote or demote; to outsource union jobs; to convert full-time to part-time positions with little or no benefits; to reorganize shift schedules without warning; to eliminate existing work rules; to cut holidays, sick leave and pension payments; to impose involuntary overtime; and to heavily penalize the union if workers file grievances against the company with the National Labor Relations Board.

“The company’s proposal,” union negotiators emphasize, “would destroy our union, lower our living standards, and give Borax total control over our jobs.” On January 30, Local 30 members unanimously rejected the concessions demanded by Rio Tinto.

The company deadline expired the next morning, when Terri Judd set off for work as usual with her lunchbox and thermos. At the locked front gate she and other day-shift workers encountered a phalanx of nervous Kern County sheriff’s deputies in full riot gear. Inside the plant, an elite “strike security team” hired by Rio Tinto had taken control of operations.

“Being locked out,” says Terri, “is different from going on strike. Initially there’s disbelief that the company is actually serious about booting you out the door. Hey, my granddad worked in this mine. But then you see that caravan of scabs coming to take your jobs, and the betrayal cuts like a knife in your heart.”

http://www.thenation.com/doc/20100329/davis/single

Empathetic souls will find the full version of this article to be very tough reading. When the 560 wage earners unanimously rejected the demands of Rio Tinto to give up much of their job security, the company terminated all of them in a job lockout. The impact on their small community of Boron is devastating.

Even though this story is not about health care, there is a very important health policy lesson here.

These people lost company support of their health benefits program at termination. With loss of their paychecks, many of these individuals are struggling to pay their rent and to buy food. Extension of health coverage through COBRA, even with subsidies, is of no benefit if they don’t have the funds to pay for it.

And President Obama’s promise of being able to keep the insurance you have if you want to? He left off the part that says you can keep it until your COBRA runs out, and at that only if you can pay your share (and all of the other reasons why hardly anyone still has the insurance they had twenty years ago, even if they wanted to keep it).

The policy lesson is that a health care financing system should be designed to cover absolutely everyone automatically throughout life. Individuals unfortunate enough to lose their jobs shouldn’t be further penalized by losing their health care as well.

The Health Care Letdown

By William F. Pewen
The New York Times
March 15, 2010

Should they succeed in blocking reform, Republicans should take no consolation. When Congress next attempts reform, in a decade or more, health costs and the number of uninsured and underinsured will have escalated — and the likely outcome will be the single-payer system that Republicans most abhor.

(William F. Pewen is a former senior health policy adviser for Senator Olympia Snowe, Republican of Maine.)

http://www.nytimes.com/2010/03/16/opinion/16pewen.html

William Pewen expresses the view of the majority of well informed moderates and conservatives: The likely eventual outcome of further deterioration in health care financing will be a single payer system, like it or not.

Although they may be opposed to single payer based on ideology, they understand simple math. A decade from now a family with an income of $100,000 will not be able to pay an insurance premium of $25,000 plus a $25,000 deductible plus a coinsurance of 30% of the balance of the medical expenses.

The private insurance industry never has been and never will be capable of reining in health care costs. Health care costs are now so high that the reliance on pure market forces can never be effective in ensuring that everyone receives the health care that they should have. Only the government has the capability of slowing spending and improving the allocation of our health care resources so that everyone is taken care of.

A decade from now costs will be so high that almost every informed individual will recognize that we can no longer afford the additional waste inherent in our fragmented, dysfunctional financing system. In all reality, only a single payer system will work. Opposition will be limited to the “I got mine” folk who do not accept the enlightened, civilized view that we are all in this together.

We likely are now about to begin an experiment to see if a combination of greater government regulation of private insurers along with a system of government subsidies can provide everyone with the health care that they need without busting the budgets of families, businesses and the government. It is an unfortunate delay since the results are in before the experiment has even begun. Tens of millions will be left out of the system, and by selecting the most expensive model of reform, budget busting will only compound.

So as William Pewen states, if the bill before Congress is blocked, the likely outcome a decade from now will be a single payer system. But health policy science tells us that, if this bill passes, the likely outcome a decade from now will be a single payer system.

We really don’t have to wait another decade. People already understand that health care costs are too high. What they need to understand is that they cannot rely on being able to keep the insurance they have if it becomes unaffordable for themselves or their employers, and they cannot rely on being able to purchase it though an exchange if the premiums are too high and the subsidies are too low. They also need to understand that, even if they have insurance, the relatively low actuarial value of basic coverage will leave them exposed to financial hardship should they develop significant health care needs, so the insurance they have won’t work as it should.

Regardless of the results of the vote on the reform bill, we need to intensify our efforts to inform the public. Health care justice in America is ultimately their decision.

Massachusetts Hospital Spending Reached 55.4% Per Person Above the U.S. Average in 2007

Most of Excess is Unjustified, and State’s Health Reform Law Is Negligible Factor

Report by Alan Sager and Deborah Socolar
Boston University School of Public Health
March 16, 2010

This report documents and investigates the excess in Massachusetts hospital costs per person above the average for the United States. It examines the recent rise in this excess after a prolonged earlier decline, analyzes the many causes of the excess, assesses their reasonableness, and offers recommendations for addressing the state’s resurgent hospital cost crisis.

http://sph.bu.edu/images/stories/scfiles/healthservices/health_reform/Mass_hospital_cost_55.4_Excess_15Mar10_FINAL.pdf

It is difficult to reduce this complex 211 page report on the very high level of spending by Massachusetts’ hospitals into a few paragraphs, but the title and subtitle alone deliver the dominant messages. For those who would like more insight without reading the full report, there is an excellent 30 page summary at the beginning the report.

For those following the health care reform process, one observation stands out. The Massachusetts health reform – a hybrid model of reform not unlike the proposal before Congress – was not a significant cause of the excesses in hospital costs. More importantly from the perspective of those of us concerned about reform, it played no role in slowing cost increases.

All nations struggle with rising health care costs, but all except the United States have been able to maintain a lower trajectory in those increases. Financing systems do make a difference, and they must enable strong government oversight to be effective. Fragmented hybrid systems such as that in Massachusetts, and, more importantly, that in the proposed federal legislation, are not particularly effective. The authors do not discuss this other than to state that in the United States, “Nationally, neither competitive forces of a market nor regulatory actions by government have succeeded in reining in health care costs generally or hospital costs specifically.”

Sager and Socolar do reemphasize an important point that they have made many times about controlling costs: “it is fundamentally about liberating, enabling, and persuading physicians to spend money more carefully on behalf of their patients.” That sure seems like it would be much easier in a single, publicly administered system devoid of the third party money manipulators.

Actuarial Value: A Method for Comparing Health Plan Benefits

By Roland McDevitt, Ph.D., Director of Health Research, Watson Wyatt Worldwide
California HealthCare Foundation
October 2008

Actuarial value is a summary measure of likely payments by a plan. It measures the percentage of medical expenses paid by a health plan for a standard population, ranging from 0.00 for a plan that pays nothing to 1.00 for a plan that pays all medical expenses.

Actuarial value only measures benefit payments. To fully assess whether a plan is a good purchase, consumers would want to know both the premium and the actuarial value. They may also want to consider other aspects of the plan, such as whether specific benefits like maternity are covered, whether the plan offers a broad choice of providers, and whether the plan has a good record of administrative performance.

Individual market plans in Los Angeles County, 2006
32 plans listed at ehealthinsurance.com
Actuarial value and premium for a 32-year-old

0.86 – $194
0.83 – $289
0.83 – $242
0.82 – $204
0.70 – $257
0.69 – $198
0.67 – $56
0.67 – $448
0.64 – $186
0.63 – $110
0.62 – $62
0.62 – $403
0.59 – $244
0.58 – $222
0.57 – $81
0.56 – $50
0.56 – $69
0.49 – $193
0.49 – $283
0.47 – $244
0.46 – $83
0.46 – $111
0.46 – $278
0.46 – $87
0.45 – $77
0.44 – $298
0.44 – $72
0.44 – $166
0.41 – $93
0.41 – $60
0.39 – $149
0.34 – $75

If the policy goal is to provide a single number that consumers can use to compare the relative value of different benefit packages, actuarial value presents a more robust measure than any single cost-sharing provision.

http://www.chcf.org/documents/insurance/HealthPlanActuarialValue.pdf

And…

H.R. ____

House of Representatives
March –, 2010

To provide for reconciliation…

Table of premium percentage limits and actuarial value percentages based on income tier

Family income of 350% through 400% of federal poverty level (FPL)
Final premium percentage – 11%
Actuarial value percentage – 70%

Reference premium amount – average premium for the 3 basic plans in the area for the plan year with the lowest premium levels

http://budget.house.gov/doc-library/FY2010/03.15.2010_reconciliation2010.PDF

An important finding in this Watson Wyatt report is that the premium paid for a private insurance plan has a very poor correlation with the percentage of medical expenses that are paid by that plan on average, as represented by the actuarial value. In this list from 2006, a plan that paid 86% of the medical expenses had a premium of $194, whereas another plan that paid 44% of expenses had a premium of $298.

Another important observation is that most of these plans in the individual market have a comparatively low actuarial value. Almost half of them don’t even pay one-half of the medical expenses on average. Think of the burden on the typical family of a year’s worth of premiums plus one-half of all medical expenses.

Although following the numbers reminds you of a shell game, it is instructive to look at the reconciliation bill released by the House Budget Committee last night (link above). With a family income of 350% to 400% of the federal poverty level, the family would be required to purchase a plan with an actuarial value of 70%, and they would be required to pay up to 11% of their income for the premium. Thus the family would  be responsible for 11% of their income plus, on average, 30% of the medical expenses covered by the plan, plus all other costs not covered by the plan.

That family also would be limited to providers selected by the private insurer. In addition, that 11% of income cap on premiums applies only to the average of the three cheapest plans with a 70% actuarial value. Seeing the poor correlation with actuarial value, the family may feel compelled to purchase a much more expensive plan with the same 70% actuarial value if the cheapest plans do not include their personal health care professionals with whom they have an established relationship.

Furthermore, most would prefer to have a plan that has benefits closer to typical employer-sponsored plans which until now have had an actuarial value of about 80%, and sometimes more. The family would be responsible for the full additional costs of any such plan if they should upgrade. (Upgrade really isn’t the best choice of terms since all trends today actually constitute a downgrade from the traditional standard.)

The bottom line is that a family at 400% FPL is being priced out of health care, and a major factor contributing to this is that we are relying on an incompetent private insurance industry that can’t even price its products properly. And Congress is… yes… cramming that down our throats!

Grayson Introduces Public Option Act

Congressman Alan Grayson
Press Release
March 9, 2010

Congressman Alan Grayson, D-Fla., today introduced a bill (H.R. 4789) which would give the option to buy into Medicare to every citizen of the United States.  The “Public Option Act,” also known as the “Medicare You Can Buy Into Act,” would open up the Medicare network to anyone who can pay for it.

Congressman Grayson said, “Obviously, America wants and needs more competition in health coverage, and a public option offers that.  But it’s just as important that we offer people not just another choice, but another kind of choice.   A lot of people don’t want to be at the mercy of greedy insurance companies that will make money by denying them the care that they need to stay healthy, or to stay alive.  We deserve to have a real alternative.”

The bill would require the Secretary of Health and Human Services to establish enrollment periods, coverage guidelines, and premiums for the program.  Because premiums would be equal to cost, the program would pay for itself.

“The government spent billions of dollars creating a Medicare network of providers that is only open to one-eighth of the population.  That’s like saying, ‘Only people 65 and over can use federal highways.’  It is a waste of a very valuable resource and it is not fair.  This idea is simple, it makes sense, and it deserves an up-or-down vote,” Congressman Grayson said.

http://grayson.house.gov/News/DocumentSingle.aspx?DocumentID=175363

H.R. 4789 – “Public Option Act” or “Medicare You Can Buy Into Act”:
http://thomas.loc.gov/ Click Bill Number. Enter H.R. 4789. Click Search. From there you can access the text of the legislation (very short bill), cosponsors, and other information.

Video of Grayson’s introduction of H.R. 4789 to House (5 minutes):
http://www.huffingtonpost.com/2010/03/10/grayson-offers-medicare-b_n_492831.html

Article XVIII, Sec. 1818
http://www.ssa.gov/OP_Home/ssact/title18/1818.htm

Article XVIII, Sec. 1818A
http://www.ssa.gov/OP_Home/ssact/title18/1818A.htm

Medicare premiums for 2010
http://questions.medicare.gov/cgi-bin/medicare.cfg/php/enduser/std_adp.php?p_faqid=2260

Throughout the reform process members of Congress have been fighting over whether or not the reform legislation should include the option of purchasing a government-sponsored plan through the proposed insurance exchanges – the so-called “public option.” Since Congressman Alan Grayson introduced the “Public Option Act” or “Medicare You Can Buy Into Act” three days ago, a wave of enthusiastic support has been generated based on the perception that this is the perfect solution. Today’s comment briefly discusses this legislation, and it will sound really great at first blush, but do not draw any firm conclusions until you read through to the end.

Okay. What does this bill do? It simply allows any legal resident of the United States under age 65 to buy into Medicare. The program will be paid for by the premiums to be collected from the individuals purchasing the coverage. Six age brackets are established for purposes of pooling funds. This reduces the financial burden on younger, healthier individuals by requiring older individuals to pay the higher premiums that would be required to fully fund their less healthy risk pool.

Many are not aware of this, but Medicare already has a buy-in program. Under Title XVIII, Sec. 1818, individuals over 65 who have fewer than 40 quarters of Medicare-covered employment who would otherwise not be eligible for Medicare can still participate by paying a full premium for Part A coverage (hospital) or a reduced premium if they have 30 to 39 quarters of Medicare-covered employment. Likewise, under Sec. 1818A, disabled individuals whose entitlement ends due to having earnings that exceed the qualification level can also purchase Medicare Part A. Grayson’s bill adds a new Sec. 1818B to Title XVIII to expand the buy-in option to anyone under 65.

For 2010, the premium under Sec. 1818 and Sec. 1818A to buy into Medicare Part A is $461 per month. The premium for Part B (supplemental medical) is the same as for qualified retirees – $110.50 and up, based on income (ignoring the hold harmless exception). Thus the buy-in is about $571 per month, or more for those with higher incomes.

Although Medicare beneficiaries have a high rate of chronic disease plus the costs of end-of-life care, the risk pool is diluted with a very large number of healthy seniors, thus the premiums are not as high as one might think. On the other hand, it is likely that the risk pools for the older but still under 65 age groups in the Grayson proposal would be subject to adverse selection. Since the premiums must pay all costs, they may be higher, perhaps much higher, than the diluted post 65 risk pool. Grayson has not included any risk adjustment mechanism to compensate for this.

At any rate, the Grayson proposal seems to be the true public option, run by the government, that progressives have been fighting for. So what could be wrong with it?

The greatest concern of all is that it still does not fix our outrageously expensive, administratively wasteful, highly inequitable, fragmented method of financing health care. It merely provides another expensive option in our very sick system of paying for health care. Providing yet one more option that people can’t afford really hasn’t moved the process.

Although Medicare is a very popular program, it is highly flawed. It has an oppressive central bureaucracy. It fails to use more efficient financing systems such as global budgeting for hospitals and negotiation to obtain greater value in health care purchasing. There are serious questions about whether Medicare funds are being distributed equitably and in a manner to promote greater efficiency. Its benefit package is relatively poor, covering only about half of health care costs for our seniors. Most Medicare beneficiaries feel that they essentially are forced either to purchase Medigap plans, which provide the worst value of all private health plans, or to enroll in Medicare Advantage plans, which waste too many tax and premium dollars. It would be both much less expensive for all of us and better for Medicare beneficiaries if the extra benefits of these private plans were rolled into the traditional Medicare program. Part D should be stripped of its private market administrative and profit excesses and also be rolled into the traditional program. Medicare also has failed to introduce beneficial innovative programs such as the British NICE system, which would improve both quality and value in our health care.

When we advocate for an improved Medicare for all, we really aren’t advocating for Medicare with a few tweaks. We are advocating for replacing Medicare with a single payer national health program that covers everyone, which we can still call Medicare, just as the Canadians do. Adding another buy-in program to the two buy-in programs that already exist in our highly dysfunctional system will do virtually nothing to fix these flaws we now have. It does nothing to slow the growth in our national health expenditures, and the high premiums for a package of mediocre benefits will do little to reduce the numbers of uninsured.

For those who say that a Medicare buy-in is an incremental step towards health care utopia, explain precisely how that is going to work. Explain each problem that it solves. Explain how it is going to morph into a universal or near universal system in which each individual is paying the full actuarial value of the coverage. It won’t happen.

Playing with a Medicare buy-in is an unnecessary diversion at a time that we need to get serious about reform. We need to fix Medicare and expand it to cover everyone.  Nothing less will do.

A Partisan Divide On The Uninsured

By Tara Sussman Oakman, Robert J. Blendon, Andrea L. Campbell, Alan M. Zaslavsky and John M. Benson
Health Affairs
March 11, 2010

Abstract

The partisan split in Congress over health reform may reflect a broader divide among the public in attitudes toward the uninsured. Despite expert consensus over the harms suffered by the uninsured as a group, Americans disagree over whether the uninsured get the care they need and whether reform legislation providing universal coverage is necessary. We examined public perceptions of health care access and quality for the uninsured over time, and we found that Democrats are far more likely than Republicans to believe that the uninsured have difficulty gaining access to care. Senior citizens are less aware than others of the problems faced by the uninsured. Even among those Americans who perceive that the uninsured have poor access to care, Republicans are significantly less likely than Democrats to support reform. Thus, our findings indicate that even if political obstacles are overcome and health reform is enacted, future political support for ongoing financing to cover the uninsured could be uncertain.

Attitudes Toward Universal Coverage

Creating a national health insurance system to pay for most forms of health care was significantly more popular among people who perceived that the uninsured are unable to get care (72 percent) or able to get care with great difficulty (75 percent) than it was among those who perceived that it is not too difficult (38 percent) or not at all difficult (31 percent) for the uninsured to get care. Similarly, 63 percent of respondents who perceived that the uninsured do not get the same quality of care as the average insured person also favored national health insurance, as compared to a minority (43 percent) of respondents who said that there is no difference in the care obtained by uninsured and insured people.

These associations persisted even after political party and demographic characteristics were controlled for in multivariate analysis. As expected from prior literature, political party is still a significant predictor of support for reform. The effect of partisanship does not appear to be mediated by the perceptions of how difficult or not it is to obtain care. Republicans are less favorable toward national health insurance than Democrats, even after perceptions of care access or quality for the uninsured are controlled for.

http://content.healthaffairs.org/cgi/content/full/hlthaff.2009.1019v1

Since the failure of the Clinton effort at reform there has been an intense campaign by innumerable entities to educate the nation on the problems with our health care system and the potential impact of the various solutions. The results of the surveys reported in this Health Affairs article are sobering, if not depressing.

A proliferation of studies has demonstrated beyond all doubt that uninsured individuals have difficulty gaining access to health care, and the results of those studies have been widely disseminated. Yet these surveys show that far too many individuals do not believe this is true in spite of the overwhelming evidence presented to them through the years.

This study demonstrated that those less likely to believe the facts about impaired access for the uninsured included Republicans, males, seniors, and the wealthy. What is perhaps most disconcerting of all is that even Republicans who do understand that lack of insurance impairs access still are opposed to creating a national health insurance system. They simply don’t care about the fate of those who must do without adequate health care.

Those supporting the current proposal before Congress should take note of this quotation from the article:

“Even among those who perceive that the uninsured have poor access to care, Republicans are significantly less likely than Democrats to support reform. Further, the elderly, who are a politically influential group because of their high political participation rates, are not cognizant of the problems faced by the uninsured. Thus, our findings indicate that even if President Barack Obama signs health reform into law, its future political support could be uncertain. A shift from Democratic to Republican control of either congressional body could mean the reduction or elimination of funding for insurance subsidies. Subsidies are essential to a coverage expansion that these critical constituencies ultimately deem unnecessary.”

The proposed private insurance subsidies are already so modest that RAND predicts that 25 million people will remain uninsured. When Republicans take control, under the proposed model of reform they wouldn’t even have to repeal the program. All they would have to do is slash the premium subsidies to wipe out the effectiveness of this legislation. Then the next step would be to reduce the actuarial value of the plans supported, thereby requiring sick and injured individuals to pay even more out of pocket than these plans already require.

Try that with a single publicly-financed and publicly-administered program that belongs to the people. The Republicans have already tried that with Medicare, and though they caused some damage, the program barely budged.

We desperately need a single program built on a solid foundation, a program that belongs to all of us – an improved Medicare for all.

Medicine in the dark

By Michael Hochman and Danny McCormick
Los Angeles Times
March 10, 2010

Some doctors treat patients with early-stage prostate cancer with radiation. Others favor surgery, while some advocate only close monitoring. Which approach is most successful? No one knows.

When it comes to diabetes management, doctors don’t have answers to key questions: At what point should insulin be started? Is it safe to lower the blood sugar to normal levels? What is the best way to monitor blood sugar control?

Similarly, endocrinologists don’t know what is the best way to treat patients with hyperactive thyroids. Doctors in Europe typically use medications, while those in the U.S. more frequently give radioactive iodine. Only limited evidence is available to guide the decision.

It may seem perplexing that there is so much uncertainty about these relatively simple questions. All of the above treatments have been around for decades. Shouldn’t we have definitive answers by now?

In this week’s issue of the Journal of the American Medical Assn., we report the results of a study that may help explain why we don’t. In the study, we analyzed 328 medication studies recently published in six top medical journals and found that just 32% were aimed at determining which available treatment is best. The rest were either aimed at bringing a new therapy to market or simply compared a medication with a placebo. Whether the therapy was better or worse than other treatments was simply not addressed.

Research involving new therapies is of course crucial for medical progress, but there is also a need for research that compares the effectiveness of the rapidly growing array of existing therapies and approaches.

So why, then, did only a third of medication studies focus on helping doctors use existing therapies more effectively? The answer lies in the fact that pharmaceutical companies fund nearly half of all medication research, including the lion’s share of large clinical trials. For obvious reasons, commercially funded research is primarily geared toward the development of new and marketable medications and technologies. Once these products have won approval for clinical use, companies no longer have incentives to study exactly how and when they should be used.

In support of this claim, we found that 87% of the comparative effectiveness studies we analyzed were funded entirely or in part by non-commercial sources, such as nonprofit foundations or government institutions. In addition, 91% of studies comparing medications with non-pharmacologic therapies (such as surgery or lifestyle changes) received non-commercial funding, as did 94% of studies comparing different medication strategies (such as different blood sugar targets in patients with diabetes) and 90% of studies comparing the safety profiles of medications. Non-commercial sources funded 100% of studies comparing the cost- effectiveness of different treatments, though only 2% of the studies we reviewed included such analysis.

Congress recently appropriated more than $1 billion in the American Recovery and Reinvestment Act to promote comparative effectiveness research. This is a good first step, but the money will need to be spent carefully. We believe studies that address fundamental clinical decisions — such as when to use medications versus surgery or how to use therapies more effectively — should be favored over those that simply compare two alternative medications. There is also clearly a need for more research on the comparative safety and costs of different treatments. And although many researchers are thankful for the new research funds, it may soon become apparent that $1 billion is far from sufficient.

Reform is also necessary to ensure that commercially funded research is designed in a way that is more helpful to doctors. Our study showed that two-thirds of commercially funded randomized trials compared medications with a placebo rather than with another active therapy. Though placebos are appropriate when no alternative therapies are available, in many of the trials we examined, we suspect alternative therapies could have been used instead. For this reason, we believe that regulatory agencies such as the Food and Drug Administration should only approve new therapies that have been shown to be at least as good as existing therapies whenever such alternatives exist. Alternatively, though more controversial, some experts have proposed that pharmaceutical companies should be allowed to fund — but not design — clinical studies.

As medical science advances, clinical decision-making will only become more complex. Only by expanding public funding for comparative effectiveness research can we hope to put existing medical treatments and healthcare services to their best use. Doing so would ensure that national research priorities are determined by patient needs rather than by corporate agendas.

Michael Hochman, MD, is an assistant professor of clinical medicine at USC’s Keck School of Medicine. Danny McCormick, MD, MPH, is an assistant professor of medicine at Harvard Medical School.

http://www.latimes.com/news/opinion/commentary/la-oe-hochman10-2010mar10,0,3812725.story

JAMA – Characteristics of Published Comparative Effectiveness Studies of Medications, by Michael Hochman, MD and Danny McCormick, MD, MPH:
http://jama.ama-assn.org/cgi/content/full/303/10/951

JAMA editorial – Charting a Path From Comparative Effectiveness Funding to Improved Patient-Centered Health Care, by Patrick H. Conway, MD, MSc and Carolyn Clancy, MD:
http://jama.ama-assn.org/cgi/content/full/303/10/985

Rather than using excerpts from the JAMA article by Hochman and McCormick as today’s qotd, their op-ed in today’s Los Angeles Times provides an even better summary of their findings along with their astute comments.  Their op-ed obviates the need for me to provide any additional commentary.

Health Reform Passes the Cost Test

By David M. Cutler
The Wall Street Journal
March 9, 2010

Many people are worried that the health-care reform proposed by President Obama and congressional Democrats will fail to bend the “cost curve.” A number of commentators are urging no votes because of this, and Republicans have asked the president to start health reform over, focusing squarely on the issue of cost reduction.

These calls overlook the actual legislation. Over the past year of debate, 10 broad ideas have been offered for bending the health-care cost curve. The Democrats’ proposed legislation incorporates virtually every one of them. Here they are:

• Form insurance exchanges. These would help curb underwriting and inefficient marketing practices that raise costs in the small-group and individual insurance markets. This is addressed in all the House and Senate bills, and the president’s proposal. Grade: Full credit.

• Reduce excessive prices, including those of supplemental plans enrolling Medicare beneficiaries. The president’s proposal reduces these Medicare Advantage overpayments and others to different providers, even in the face of Republican claims that reducing such overpayments is tantamount to rationing care for seniors. Grade: Full credit.

• Moving to value-based payment in Medicare. Both Democrats and Republicans have called for moving from a system where volume drives reimbursement to one where value drives reimbursement. The president’s proposal includes virtually every idea offered for doing this. Grade: Full credit.

• Tax generous insurance plans. Health-insurance benefits are excluded from income taxation, providing incentives for excessively generous insurance. Many economists have proposed capping the tax exclusion to reduce these incentives. The president’s proposal taxes some of the most generous policies, though it has deferred the date by which these taxes take effect. Grade: Partial credit.

• Empower an independent Medicare advisory board. Interest-group politics intrudes too deeply within the mechanics of Medicare policy, raising program costs and hindering efforts to improve care. Despite powerful opposition, the president proposes this independent board and a process for fast-tracking such recommendations through Congress. Grade: Full credit.

• Combat Medicare fraud and abuse. The administration has started an active task force to combat these problems. Other ideas to reduce fraud and abuse were presented at the recent health-care summit, and were incorporated in the president’s proposal. Grade: Full credit.

• Malpractice reform. Defensive medicine is a small but important driver of medical spending. The reform proposal makes some headway, encouraging states to experiment with alternative mechanisms to reduce malpractice burdens. More could be done—for example, specialized malpractice courts and a safe harbor for physicians practicing evidence-based medicine—but the president’s proposal makes a start. Grade: Partial credit.

• Invest in information technology. Many studies suggest savings in the tens of billions of dollars from IT investment. The stimulus bill passed a year ago contains funds to wire the medical system over the next few years, and the administration is supplementing this with significant funds to analyze the comparative effectiveness of different treatments—even in the face of “death panel” claims. Grade: Full credit.

• Prevention. The president’s proposal includes significant public-health investments, provides new incentives for physicians to focus on preventive and chronic care, and opens Medicare to finding new ways of supporting prevention. The only area of weakness is the lack of a junk food tax or tax on sugar sweetened beverages. Grade: Partial credit.

• Create a public option. A public insurance option would provide competition for insurers in areas that are nearly a monopoly and provide a path for reforms in Medicare to expand readily in the under-65 population. The public option was eliminated because of Republican opposition, however. Grade: No credit.

So reform gets full credit on six of the 10 ideas, partial credit on three others, and no credit on one. The area of no credit (a public option) is because Republicans opposed the idea. One area receives only partial credit because of Democratic opposition (malpractice reform) and two other areas reflect general hesitancy to increase taxes (taxing Cadillac plans and taxing drivers of obesity).

Why is reform viewed so negatively? In part, it may reflect the perfect being the enemy of the good. If the only passing grade is 10 out of 10, then reform clearly fails. But given where the Republican Party is on a public option, no reform will get a passing grade. If both parties were willing to raise taxes and Republicans negotiated malpractice reform for their overall support, we could probably get a nine out of 10.

Reform is also viewed negatively because official scorekeepers do not believe anything on this list other than reducing prices will save much money. The Congressional Budget Office has consistently estimated that policies built around changing incentives and thus encouraging more efficient care will not have any effect on cost trends. My own calculations, mirrored by other observers and a host of business and provider groups, suggest that the reforms will save nearly $600 billion over the next decade and even more in the subsequent one.

Of course, no one knows precisely how much medical spending increases will moderate. But one cannot doubt the commitment to try. What is on the table is the most significant action on medical spending ever proposed in the United States. Should we really walk away from that?

Mr. Cutler is a professor of economics at Harvard University. He was senior health-care adviser to the Obama presidential campaign.

http://online.wsj.com/article/SB10001424052748703936804575108080266520738.html

There is an important debate taking place as to whether or not the Obama proposal, based on the Senate bill, will control health care costs. President Obama and his supporters contend that every idea on controlling costs is in this bill. The private insurance industry contends that premiums will continue to increase at unsustainable levels because this measure does very little to control rising costs. Who is right?

Harvard economics professor David Cutler served as a health care adviser to the Obama presidential campaign and is well situated to present the arguments in support of the position that the Obama proposal will “bend the cost curve,” slowing the rise in health care costs. Let’s look at the arguments that he presents in this WSJ article.

*  Form insurance exchanges.

Private insurance plans to be offered through the exchanges will have higher premiums than plans currently in the individual market because the increased costs of the required benefits will more than offset any administrative efficiencies of these plans. Since the actuarial value of the exchange plans will be lower than the average of today’s employer-sponsored group plans, patients will have to bear a significant portion of the costs. The exchanges themselves create additional administrative costs which will reduce the savings from administrative efficiencies.

Although the administrative waste in our current fragmented financing system is profound, reform that would recover much of this waste was rejected before the process began. If there is any net savings at all from the exchanges, it will not qualify as even a footnote in the annual report on our national health expenditures (NHE).

*  Reduce excessive prices, including those of supplemental plans enrolling Medicare beneficiaries.

Studies have shown that one of the largest and most important contributors to our health care spending is the very high health care prices in the United States, when compared to other nations. In other nations, the government plays a significant role in pricing, but our legislators rejected any type of administered pricing that was not already in force in our public programs, instead leaving it to market competition of private plans. The fact that we have the highest prices is proof that the private plans have not been capable of controlling prices.

The proposal reduces the overpayments to private plans, but leaves in place their administrative excesses. Spending in Medicare actually could be reduced by eliminating both the Medicare Advantage plans and the Medigap plans. Medigap provides the very worst value of private health plans. It would be far less expensive to roll the extra benefits that are of value in these plans into the traditional Medicare program. That would enable modest savings while providing Medicare beneficiaries with a better program.

*  Moving to value-based payment in Medicare.

Cutler says that the president’s proposal “includes virtually every idea offered” for “moving from a system where volume drives reimbursement to one where value drives reimbursement.” Nice rhetoric, but the plethora of health policy literature provides almost nothing on how to do this. Current measurements of value in health care are very primitive and would have very little impact on our total health care delivery system.

Much of health care is not particularly productive even if provided in large volumes, but it is exceedingly difficult to slash the volume without slashing the truly beneficial services blended into that volume. We should certainly make greater strides in trying to sort out beneficial and non-beneficial services, but that is not dependent on the passage of this bill.

Many of the financing experiments in the proposal are limited to Medicare and wouldn’t even apply to the remaining 85 percent of our population. When we do find out how to obtain greater value in health care, we need to apply those principles to our entire population and not simply to Medicare beneficiaries. To do that would require an improved Medicare-like financing structure that includes everyone, because the fragmented market of private insurance plans could never pull their act together.

*  Tax generous insurance plans.

Employer-sponsored plans formerly provided an actuarial value of about 89 percent, leaving 11 percent of the costs as the responsibility of the employee. In an attempt to control premium increases – not cost increases – more of the costs have been shifted to employees, reducing the average actuarial value to about 80 percent. The exchanges will be offering plans at a 70 percent actuarial value.

In one of the great deceptions of the reform process, plans that actually protect patients from financial hardship are now called “generous insurance plans” which allegedly need to be taxed. The intent of the tax is to ratchet down the actuarial value of employer-sponsored plans to control the premiums, while reducing spending by increasing financial barriers through greater patient cost sharing. We need policies to help get patients the care that they need, not hinder access.

*  Empower an independent Medicare advisory board.

As discussed in a recent Quote of the Day, we do need a greater government role in improving our health care financing, which can help to transform health care delivery into a high performance system, whether that is through an Independent Medicare Advisory Board – an empowered MedPAC – or some other appropriate institution. Again, this should not be a role limited to 15 percent of our population. To be effective it should be applied to an improved Medicare that covers everyone. The Obama plan, since it perpetuates our fragmented system, would not enable such an institution to provide the impact that it should have.

*  Combat Medicare fraud and abuse.

Since the beginning of Medicare everyone knows that fraud and abuse are problems because of all of the reports of the government cracking down on these criminal activities. This legislation is not essential to perpetuate the government oversight that we need to reduce these losses. What we need instead is an expansion of this oversight to our entire health system and not limited to the government programs. The federal government formerly partnered with the private insurers in fraud prosecution, but it doesn’t anymore since the private insurers contributed very little but merely wanted a cut of the recovery. Can you imagine the insurers ever risking offending their network panels by conducting fraud investigations against them?

*  Malpractice reform.

Our malpractice tort system fails to provide most individuals who experience medical injury with any compensation. It isn’t working and needs to be reformed. If we do provide compensation for all victims of medical injury, costs will increase. Although that is appropriate, we can’t pretend that costs will decrease merely because of the enactment of this legislation.

*  Invest in information technology.

Electronic medical records and integrated information technology systems are expensive. Most studies indicate that they increase costs. One study demonstrated that they have enabled upcoding, resulting in higher prices for the same services. Well designed systems may provide some benefit, but don’t look for cost savings, and certainly don’t think that this legislation provides the key to unlock the IT world.

*  Prevention.

Prevention is very important, but overall it does not save money, and it is certainly not dependent on the enactment of this legislation.

*  Create a public option.

There is no public option in the Obama plan. Even if there were, it would not reduce the waste in our dysfunctional health care system, just as Medicare has been largely unable to do. In our fragmented system Medicare is merely an additional player, adding to the complexities and costs of health care financing and health care delivery. As a single entity covering everyone, an improved Medicare would provide the efficiencies that would recover hundreds of billions of dollars that could be used to fully cover the uninsured and underinsured.

Conclusion

The confusion in costs and “bending the curve” has resulted from the fact that the discussion primarily has been limited to consultations with the Congressional Budget Office on the federal budget and not on our national health expenditures. The very modest bending of the curve has related to federal budget projections. Much of that was accomplished by placing a greater financial burden on the people, especially moderate and upper-moderate income individuals and families. We need to fix the problem of our escalating total costs, and then adjust the federal budget to match the solution.

Now do like David Cutler and go back and score these “ten broad ideas that have been offered for bending the health-care cost curve.” Negative scores are not only permitted but should be used when appropriate.

Your final score?  (Ouch!)

Health plans extend their market dominance

By Emily Berry
American Medical News
March 8, 2010

Members of Congress and state lawmakers have called health insurance executives on the carpet to make them explain why their companies are hiking individual insurance rates so steeply across the country. A recently released American Medical Association study of health insurance markets gives one answer: Because they can.

The AMA’s most recent look at the health insurance market — “Competition in health insurance: A comprehensive study of U.S. markets,” released Feb. 23 and based on 2009 data — finds that 99% of 313 metropolitan areas tracked would be considered to have “highly concentrated” insurance markets under guidelines used by the U.S. Dept. of Justice and the Federal Trade Commission. In its 2009 version of the study, the AMA found that 94% of metropolitan areas were ranked “highly concentrated.”

One insurer held 70% or more of the health plan market share in 24 of 43 states measured, up from 18 in 42 states in the previous year’s study. In 92% of the 313 markets in the report, one insurer held at least a 30% share.

In past releases of its survey, the AMA has noted that insurer market dominance has allowed health plans to force physicians into take-it-or-leave-it contracts. But this year the AMA — echoing other experts — noted that market dominance has allowed plans to give patients take-it-or-leave-it pricing.

http://www.ama-assn.org/amednews/2010/03/08/bil20308.htm

And…

A front-line perspective on 2010 commercial price & product trends

Transcript of conference call with Willis
Goldman Sachs
March 3, 2010

Matt Borsch, Goldman Sachs:  Let me jump right in here with, perhaps, the most important question from the standpoint of institutional investors looking at the sector, and that is, what are you seeing in terms of competition between the carriers, specifically relative to last year or two years ago or whatever you want to use as the baseline, has price competition increased or decreased?

Steve Lewis, regional leader for the employee benefits practice of Willis, the third largest insurance broker in the world:  As a specific answer to that, we would say, price competition is down from year ago. An overall theme that we would characterize this year, meaning, when I say this year, the just completed January 1 renewals, and continuing up and through today. We feel this is the most challenging environment for us and our clients in my 20 years in the business.

Not only is price competition down from year ago (when we had characterized last year’s price competition as being down from the prior year), but trend or (healthcare) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes.

And that’s a significant adjustment from last year where we saw aggressive pricing on the renewal front but not so much on the new business front.

http://graphics8.nytimes.com/packages/pdf/health/20100307_GOLDMAN.pdf

So 99 percent of metropolitan areas have “highly concentrated” private insurance markets, and price competition of private insurers continues to decrease as private insurers are “more willing than ever to walk away from existing business.” Competitive pricing has almost disappeared from the private insurance market, so insurance has become a “take it or leave it” proposition.

And precisely what does the legislation before Congress do to ensure a competitive market of private insurance plans? Look at the Senate bill which forms the basis of the Obama proposal. When you read “Part II – Consumer Choices and Insurance Competition through Health Benefit Exchanges,” you will see that this legislation does virtually nothing to expand insurer competition in these concentrated markets.

President Obama and the members of Congress need to give up on the idea that they can legislate a thriving, competitive market of private health plans that will bring affordable health care to all of us. The changes that would be required are not in this bill, and, besides, they would be more complex, more expensive, and less effective than merely replacing the private insurers with a single payer national health program – an improved Medicare for all.

Once again today, in a pep talk at Arcadia University near Philadelphia, President Obama said that they put all ideas on the table, but they didn’t. They left single payer off. He did mention that people on the left wanted single payer, and judging by the cheers, apparently the audience wants single payer as well. Too bad he doesn’t listen.