Health Affairs

Medicare+Choice: Doubling Or Disappearing? by Robert A. Berenson

Robert A. Berenson, senior advisor at the Academy for Health Services Research and Health Policy:

Abstract:

Although the changes in the program created by the Balanced Budget Act are often viewed as the reason for the current instability in the Medicare+Choice (M+C) program, in fact, health plans are having difficulties in all of their markets, not just in Medicare. It may be time to reconsider the purpose of the program and to fundamentally redesign how payments are made to managed care organizations contracting with Medicare. Two alternative approaches are suggested: treating M+C like another provider type by severing the payment linkage to spending under traditional Medicare, and overhauling the program by creating a value-based purchasing orientation rewarding plans that provide higher-quality care to beneficiaries with chronic diseases.

http://www.healthaffairs.org/

Comment: Although all objective evaluations to date have revealed that the Medicare + Choice program has failed miserably in its goal to reduce costs and improve quality, our policy leaders continue to flog this dead horse. Costs have been higher for comparable patients in the Medicare + Choice (M+C) plans than they have been in the traditional fee-for-service (FFS) Medicare program. The quest for quality has eluded the M+C plans with several studies suggesting that the level of quality may actually be lower.

Ignoring the rigor mortis of this horse, Robert Berenson has proposed two life saving measures. Suggesting that the plans be rewarded for advancing quality is an admirable recommendation. But rewarding quality should not be the exclusive domain of the M+C plans. Once we have adequate methods of evaluating quality, a reward system can and should be applied to all patient care, certainly including that in the FFS program. Thus quality rewards should not be considered to be a specific reason to extend the M+C options.

His other recommendation is much more problematic. It is clear that it is impossible to show that M+C will ever be able to save the taxpayers money as long as the fiscal mechanisms are linked to the traditional FFS program. By their very design, costs of administering private plans (e.g., M+C) will always be higher than publicly administered programs (e.g., FFS Medicare). Also, they have now proven that aggressive managing of care is not capable of achieving savings that will offset the higher administrative costs.

Yet, Berenson recommends that the link of M+C options to the FFS program be eliminated so that M+C options can be evaluated on a stand-alone basis. This might hide the inefficiencies of the M+C plans, but it will never create a new model which would, in fact, reduce costs below the FFS model. Hiding inefficiencies through creative accounting is hardly a solution to the fatal flaws in the M+C program.

This report, appearing in the web version of Health Affairs, brings up another painful issue. Health Affairs is considered by many to be the leading journal of health policy. As such, it has a responsibility to cover the spectrum of ideas in traditional and innovative health policy. In this instance, the editor invited five different responses to Berenson’s proposals. This should fulfill the editor’s responsibilities in providing a spectrum of opinions. But what happened here?

The five responses all, to some degree, discuss mechanisms for salvaging the M+C program. There was not even a hint that the program should be terminated based on its now-proven failure (though one suggested utilizing a “payment to organizations” authority, allowing private plans to survive in a FFS model). The decision of the editor to continue to publish articles heavily biased toward market solutions should be challenged. To assemble five pro-market solutions, while excluding consideration of the option of terminating the M+C program (while repairing the publicly administered FFS program), in my opinion constitutes editorial malpractice. To maintain its academic integrity, Health Affairs needs to open its coverage to all reasonable health care policy options. Managing editorial policy based on sightings on the political radar screen is not acceptable.

Don McCanne

by Rudolph Mueller, M.D.
Olin Frederick, Inc., 2001

Rudolph Mueller, M.D., from the Introduction:

“This is the story of the American healthcare system at the turn of the millennium from my perspective as a primary care and geriatric physician.”

“The premise of this book is that the American healthcare system is sick, As Sick As It Gets. It is a system with a confused purpose and mission, contaminated by its focus on money and its exploitation of the massive cash flow that modern medical technology has created. Its mission should be to maximize the well-being and health of every individual and our society as a whole, as well as to prevent illness and relieve pain.”

“This book includes the true stories of real-life illnesses of people who cannot afford adequate healthcare or who are denied it and my everyday experiences with them. It also includes stories about the system, the pharmaceutical industry, the insurance industry and HMOs, and the providers. These accounts are from one practice of one primary care physician… ”

http://www.olinfrederick.com/Our_Bookshelf/our_bookshelf.html

Comment: Dr. Mueller defines the problems of our sick health care system in terms of his real life patients and our current flawed policies that impair their care. He provides an economic picture of the great wealth in our system which has been distributed with a misdirected mission of enhancing the personal wealth of the few, rather than improving the health of the many. He then explains why a single payer, national health care program is the imperative solution.

The link above will provide the publisher’s information about this very readable and informative account. It should provide lay audiences and advocates with an excellent understanding of what really has gone wrong with our health care system and what we can do about it.

The Detroit News
November 27, 2001
by Sarah A. Webster

“DaimlerChrysler AG’s Chrysler Group has invited about 4,000 of its direct suppliers into a new program aimed at helping them reduce prescription drug costs. The new initiative may help the suppliers realize annual cost savings up to 10 percent through group purchasing.”

“Chrysler will get an undisclosed brokerage fee for referring business to Merck-Medco, the pharmacy benefit manager that will administer the program.”

http://detnews.com/2001/autos/0111/27/c01-352809.htm

Comment: In health care, discounts for favored groups result in increased costs for vulnerable groups. In this instance, DaimlerChrysler is shifting its pharmaceutical costs to the cash-paying senior subsisting on a modest retirement income. Even worse, DaimlerChrysler is becoming yet another middleman in the health care system by taking a cut of the action as it includes its suppliers in on the deal.

To prove that they have not entirely abandoned ethical principles, I’m sure that they will pass the financial benefit on as lower prices for their Mercedes line of automobiles. Or maybe not. They have a new ethical dilemma. Does this cost shift funded by pensioners accrue to the wealthy Mercedes purchasers, or to the wealthy shareholders?

Los Angeles Times
November 26, 2001

The cuts in funding to California’s “safety net” hospitals will certainly affect the poor (Nov. 21). But even if one is cynical enough to ignore the plight of the uninsured and underinsured, the impact upon services that we all take for granted will be devastating. If well-insured individuals are involved in an automobile crash and there is no trauma center, where will they go? If a wealthy couple’s newborn needs emergency surgery and there is no children’s hospital, what will they do? We can no longer deny the crisis situation in our health care infrastructure. Support of the “safety net” is not in the business interests of the insurance industry. Until a publicly administered system of universal coverage is enacted we will continue to drift closer to a health care meltdown.

Gerald Gollin MD Asst. Prof. of Pediatric Surgery Loma Linda University

by John P. Geyman, M.D. Butterworth-Heinemann, 2002

John P. Geyman, M.D., Professor Emeritus of Family Medicine, University of Washington School of Medicine, Seattle:

“It is easy to become discouraged by the lack of real progress toward structural reform in our ailing health care system after at least 20 years’ failure of the competitive marketplace approach. How much more time should be given to the experiment, and what real signs are there that it could yet work? The answers, in my view, are none and none. The stakeholders in the present system persist in their optimistic claims that the private sector marketplace will sort out the system’s problems, but all the evidence is to the contrary. We have a multitiered health care system that is not sustainable. It is filled with inequities and waste and falls far short of what is possible and needed for the nation. Corporatization of health care now dominates the health care landscape and has become the problem rather than a solution.”

Comment: In “Health Care in America,” Dr. Geyman has masterfully assembled the current literature on the status of our health care system, especially its failures in access, quality, and cost containment. It is a sad story.

But then he discusses the options available. Quoting Dr. Geyman, “Both near-term and long-term scenarios are unhealthy unless incrementalism is abandoned as ineffective and a national effort launched toward systemic reform. Some oxen in the commons oppose that level of reform and need to be gored (even if a sacred cow) if they stand in the way of the reform required to assure universal access to cost-effective care of the best quality achievable within available resources.”

“Health Care in America” is an excellent resource for organizing thoughts and updating our perceptions of the health care system in the United States. It is also an invaluable academic reference for facts about our ailing system. Information on this text is available at the website of the publisher, Butterworth-Heinemann:

http://www.bhusa.com and under “Medical and Health Professions” click “Primary Care,” and then click on the title, “Health Care in America – Can Our Ailing System Be Healed?”

This requires a political strategy. The insurance industry will fight it every step of the way. So many reputable organizations like League of Women Voters, AAUW, AARP, Neighbor to Neighbor, and organized Labor would be willing to work on reaching a consensus on a national health plan. You have your 10 million right there. Once consensus is reached you storm the doors of Congress and the White House. It took the League 2 years to reach consensus on universal health care which states:

(Please go to this link for the position of the League of Women Voters: http://www.lwv.org/where/creating/healthcare_read.html)

I agree with Dr. LeBow. I was waiting for the other shoe to drop. One of my professors once said, “Don’t let analysis lead to paralysis.” What would it take for the National Coalition on Health Care to address the issue of achieving universal health care in the United States?

Aaron Beckerman

Professor Emeritus Yeshiva University

Adjunct Associate Professor of Medicine New York University Medical Center

Philip Pollner, M.D. and Nancy Wooten, Ph.D. of Unity for NHI (national health insurance) respond to Joel Miller (“A Perfect Storm”) and to Robert LeBow’s comments:

While we are trying, as we have for decades, to make single payer “marketable” to the kinds of organizations and individuals that Joel Miller represents, it would be far better (and probably easier) without “an appearance of some private sector involvement” to market it to those who have the most to gain – the uninsured, underinsured and even the insured who have witnessed the dark side of the present health care system. It would, as a colleague has stated, take only ten minutes to empower such individuals to agree. If only ten million of them were mobilized nationally, our movement would have three times the membership of the powerful NRA (3.5 million members); at those numbers and political clout we would finally achieve our goal. Unity for NHI is struggling to reach out to educate and empower large numbers of the grassroots into a formidable voting bloc. We need the support of all of those activists who wish to make the vision of universal health care a reality.

Philip Pollner, MD
Nancy Wooten, PhD

I agree with Dr. LeBow. I was waiting for the other shoe to drop. One of my professors once said, “Don’t let analysis lead to paralysis.” What would it take for the National Coalition on Health Care to address the issue of achieving universal health care in the United States?

Aaron Beckerman

Professor Emeritus Yeshiva University

Adjunct Associate Professor of Medicine New York University Medical Center

Philip Pollner, M.D. and Nancy Wooten, Ph.D. of Unity for NHI (national health insurance) respond to Joel Miller (“A Perfect Storm”) and to Robert LeBow’s comments:

While we are trying, as we have for decades, to make single payer “marketable” to the kinds of organizations and individuals that Joel Miller represents, it would be far better (and probably easier) without “an appearance of some private sector involvement” to market it to those who have the most to gain – the uninsured, underinsured and even the insured who have witnessed the dark side of the present health care system. It would, as a colleague has stated, take only ten minutes to empower such individuals to agree. If only ten million of them were mobilized nationally, our movement would have three times the membership of the powerful NRA (3.5 million members); at those numbers and political clout we would finally achieve our goal. Unity for NHI is struggling to reach out to educate and empower large numbers of the grassroots into a formidable voting bloc. We need the support of all of those activists who wish to make the vision of universal health care a reality.

Philip Pollner, MD
Nancy Wooten, PhD

Robert LeBow, M.D., a former president of Physicians for a National Health Program:

Joel Miller’s essay is great. It gives much useful data and well thought-out projections. Its conclusions supporting universal coverage are succinct and right on. But its shortcoming, like that of the organization he works for, the National Coalition on Health Care, is that he states the obvious (“We need universal coverage for all the right reasons”) but stops there. It’s as if they all know what has to be done, but they’re afraid to come out and say it.

When he says, “We must move towards a health system in which every American has health insurance coverage,” is he endorsing “incremental” change? He must know, and we know, that unless we have universal coverage — and not just tweaking this group or that group to increase the number of insured Americans — none of what he’s advocating for will happen. Risk avoidance will not go away. Profit-seeking and high administrative costs will continue. The most vulnerable will continue to be the most vulnerable. Costs will not be controlled.

So why doesn’t he…and the organization he represents…finally come out and say it? We need one risk pool with everybody in and nobody out. The euphemistic way of saying single payer or its equivalent. Maybe we need to find some way of getting people to accept single payer for what it is by giving it an appearance of some private sector involvement so it’s more marketable to people and groups that make up the kinds of organizations that Joel Miller represents. They’re good people, but I get the feeling their hands are tied. It would be wonderful if the National Coalition on Health Care could come out and say what they know has to happen to solve the dilemma of health care in America.

Bob LeBow

Professor Theodore Marmor responds to Professor James Robinson (Nov. 20 quote – the end of managed care and the introduction of consumerism, which “consumers will hate”):

I agree with your reaction, Don. This commentary is in most ways a comment of nihilism.

TED

Robert LeBow, M.D., a former president of Physicians for a National Health Program:

Joel Miller’s essay is great. It gives much useful data and well thought-out projections. Its conclusions supporting universal coverage are succinct and right on. But its shortcoming, like that of the organization he works for, the National Coalition on Health Care, is that he states the obvious (“We need universal coverage for all the right reasons”) but stops there. It’s as if they all know what has to be done, but they’re afraid to come out and say it.

When he says, “We must move towards a health system in which every American has health insurance coverage,” is he endorsing “incremental” change? He must know, and we know, that unless we have universal coverage — and not just tweaking this group or that group to increase the number of insured Americans — none of what he’s advocating for will happen. Risk avoidance will not go away. Profit-seeking and high administrative costs will continue. The most vulnerable will continue to be the most vulnerable. Costs will not be controlled.

So why doesn’t he…and the organization he represents…finally come out and say it? We need one risk pool with everybody in and nobody out. The euphemistic way of saying single payer or its equivalent. Maybe we need to find some way of getting people to accept single payer for what it is by giving it an appearance of some private sector involvement so it’s more marketable to people and groups that make up the kinds of organizations that Joel Miller represents. They’re good people, but I get the feeling their hands are tied. It would be wonderful if the National Coalition on Health Care could come out and say what they know has to happen to solve the dilemma of health care in America.

Bob LeBow

Professor Theodore Marmor responds to Professor James Robinson (Nov. 20 quote – the end of managed care and the introduction of consumerism, which “consumers will hate”):

I agree with your reaction, Don. This commentary is in most ways a comment of nihilism.

TED

National Coalition on Health Care
November 15, 2001
by Joel E. Miller, Director of Policy

“What we are about to witness is a fundamental sea change with the storm’s aftermath leaving a significant number of middle-class people uninsured in the foreseeable future. In 2000, health insurance coverage rates decreased for those with household incomes between $50,000 and $75,000. This drop occurred during good economic times. With the economy in a recession, this drop for middle-income people will become even more pronounced.”

“A sustained recession over the next few years would very likely exacerbate the decline in employer-based coverage. In the absence of government or private sector intervention, the erosion of employer-based health insurance coverage will be significant. The situation will not self-correct. We need to protect all Americans who are in the storm’s path. Steps must be taken to ensure that the number of uninsured Americans does not increase, and instead is reduced over time. We must move towards a health system in which EVERY American has health insurance coverage, health care costs are contained, and quality of care is assured.”

“The three major problems plaguing our health system today – mounting costs, the growing number of uninsured, uneven quality of care – are interrelated. Without universal coverage, you cannot assure equity or quality, and in the absence of quality, you cannot contain costs. In addition, without universal coverage you can neither make the system less complex administratively, control costs, stop risk selection and cost-shifting, achieve a level playing field of equitable financing, or create a truly competitive market-based system. It is thus a vicious cycle.”

http://www.nchc.org/APerfectStorm.pdf

Comment: We have seen the numerous analyses of health care coverage and costs, and we have seen the gloomy predictions. Joel Miller has assembled these current studies and forecasts and has weaved them into a rousing treatise using the appropriate analogy of “A Perfect Storm,” with the antecedent calm, the storm, the tidal wave, the sea change, and finally the need for a safe harbor of health insurance. It is a tragic story up to this point, but it has not ended. He shows us that we still can find the safe harbor of universal coverage.

California Medical Association Fifth Annual Leadership Academy
La Quinta, CA
November 16-18, 2001

James C. Robinson, PhD, MPH, Professor of Health Economics, UC Berkeley:

“I think that we are heading into a more consumer driven system… Why? Because the other four candidates – government, employer, insurer, and physician organization – have all bailed… In the end, it is going to be the consumer who is going to have to make the decisions of who gets what and how much am I going to pay? Insurance is going to have a role in that, but clearly we’re going to be placing a lot of this on the consumer, and that’s going to be problematic. Some consumers are great decision makers. Some consumers have disposable income. Others are lousy decision makers. Others are in a coma. You know, they don’t fit the profile of a shopper that well. This is no one’s idea of a perfect system. There is no happy ending to this story.”

Question from audience: “… I’m interested to find out what your theory is on medical savings accounts where the individual takes responsibility for their own health care.”

Prof. Robinson: “What about MSAs? More broadly, the notion of the consumer paying more out of pocket. I do believe that it is going to be a major part of our system going forward. Deductibles are rising like crazy. The big new Aetna product – the high deductible MSA-type product… This is happening very, very fast. This is considered part of consumerism. I think that consumers are going to hate consumerism… I think that deductibles can be really good. All of us should be more cost conscious. But the problem is that they discriminate against the poor, against the sick. Aside from that, they’re great.”

Comment: Our next great experiment in health care funding is consumerism, and consumers are going to hate it. And yet we will continue to discriminate against the poor and sick. Do we really have to complete this experiment which we already know is doomed to fail? Instead, can’t we just go ahead now and introduce equity into health care by adopting a publicly administered program of universal health insurance? If, in advance, we agree to maintain our current generous level of funding, patients would emphatically support our system. And, after all, isn’t health care really about patients?