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Oberlander – our elusive search for health care cost control

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Oberlander – our elusive search for health care cost control

Throwing Darts: Americans’ Elusive Search for Health Care Cost Control

By Jonathan Oberlander
Journal of Health Politics, Policy and Law, June 2011

During the 2009 – 2010 health reform debate, secretary of Health and Human Services Kathleen Sebelius contended that “every cost-cutting idea that every health economist has brought to the table is in this bill” (Gregory et al. 2010).

That assertion had considerable merit. The Patient Protection and Affordable Care Act (ACA) contained numerous items on health services researchers’ and health economists’ wish lists, including policies to promote accountable care organizations (ACOs), primary care medical homes, bundled payment, pay for performance (P4P), comparative effectiveness research (CER), and health information technology (HIT). Even economists’ longtime holy grail — limiting the tax exclusion for employer-sponsored insurance — made it, against the political odds, into the ACA. So too did proposals to create an independent Medicare commission and an innovation center, while the Obama administration additionally promised to authorize an Institute of Medicine study on reducing the geographic disparities in Medicare payment made (in)famous by Dartmouth researchers (Wennberg, Fisher, and Skinner 2002).

Not surprisingly, many policy analysts lavished praise on the new law’s promise to “bend the cost curve.”

Is there, then, reason to believe that the ACA will decisively rein in U.S. medical care spending? Alas, probably not. The enthusiasm for the cost-containment provisions in health reform is striking precisely because so many of those provisions are tepid. Put simply, the Affordable Care Act lacks systemwide, reliable cost control. It is in fact a retreat from the cost-control ambitions of the 1993 – 1994 Clinton plan, which had, whatever one thinks of managed competition, a serious theory of how to slow health care spending, and, beyond that, a National Health Board and a budget to enforce expenditure targets. That some analysts believe the new law encompasses all available cost-containment ideas says more about the parochialism of U.S. health policy and its inattention to international experience than it does about the robustness of the ACA’s spending limits.

But slowing federal expenditures on Medicare is not the same as controlling spending in the broader U.S. health care system that encompasses private insurance and other public programs (Marmor and Oberlander 2009). Outside of asserting Medicare’s powers, the ACA has three major policies that purport to control costs. The establishment of health insurance exchanges is expected to generate savings by concentrating purchasing power, reducing administrative costs, and promoting competition among health insurers. Yet the scope of the exchanges, and consequently their likely impact on national health expenditures, is limited: the Congressional Budget Office (CBO 2010) projects 24 million Americans will participate in them by 2019 (though enrollment could expand significantly over time). Moreover, Massachusetts’s experience to date with its Health Connector program provides little ground for believing that the exchanges will slow spending in the broader health system.

The second major cost-control instrument is the 40 percent marginal tax that will be imposed on high-cost insurance plans (policies exceeding $10,200 for individuals and $27,500 for families). The so-called Cadillac tax reflects many economists’ deeply held belief that insulating patients from costs leads to overconsumption of and higher spending on medical care (Vladeck and Rice 2009). That other nations spend much less than the United States on health care despite having comprehensive benefits and, in some cases, no cost sharing has so far not disturbed the view that moral hazard is the root of our high costs. Tax health insurance, advocates believe, and insurers and employers will trim overly generous benefits, patients will consume less medical care, and national health spending will slow.

The final piece of the ACA’s cost-control strategy is delivery system reform. Here the idea is to “modernize” U.S. medical care (Buntin and Cutler 2009) by providing better information and new incentives (CER, HIT), reorganizing how care is delivered (ACOs, medical homes), and changing how it is paid for (bundled payment, P4P). In addition, the law embraces prevention, including a new requirement that insurers must cover recommended preventive services without any cost sharing.

However, little evidence exists that any of these reforms — as politically appealing as their promise to improve health outcomes and health care delivery may be — will generate sizable savings in the short term (Marmor, Oberlander, and White 2009; Tanenbaum 2009). Moreover, in many cases the reforms are initially envisioned only as Medicare pilots and demonstrations, with the hope that they would spread throughout the program and then to the rest of the health system. This strategy for controlling costs is akin to throwing darts. Evidently, the idea is that since we don’t know how well any of these policies will work, we should try them all at once and see which ones actually stick.

There is good reason to be skeptical that delivery system reform will by itself provide reliable cost control. After all, other Organisation for Economic Co-operation and Development nations that spend less on medical care than the United States do so largely through concentrated purchasing, budgeting, and price regulation (Jost, Dawson, and den Exter 2006; Marmor, Oberlander, and White 2009; Vladeck and Rice 2009; White 1995, 2010). The ACA does not move the United States closer to that international standard (White 1995) as much as it maintains the American tradition of searching for technical fixes to the fundamentally political problem of slowing the flow of income to the health care industry (Barer and Evans 1992; Morone 1990; Reinhardt 1990; Vladeck and Rice 2009).

Thus many American policy analysts continue to lament fee-for-service payment and argue for the “necessity” of switching to a “fee-for-value” system if costs are to be controlled — never mind that other nations that pay doctors fee-for-service, including Canada, control costs much better than we do. The American debate has lost sight of a crucial fact: it is not just about how you pay for medical care, but how much you pay for services. Rather than emulating policies that actually work to constrain spending abroad (e.g., global budgets, fee schedules) the United States seems intent on reinventing and reorganizing its way out of the cost crisis. Yesterday’s conviction that capitation and integrated delivery systems held the key to stemming medical costs has been resurrected in the current fad for accountable care organizations and bundling, with scant acknowledgment that we have been down this road before. An ever-increasing list of abbreviations (HMOs, HSAs, HIT, P4P, and so on) bear witness to Americans’ elusive, and now four-decade-long, search for magic bullets.

Proponents of the ACA have attempted to turn the absence of reliable cost control into a strength. The law is, they contend, diverse and flexible. By trying many approaches, “it does not rely on just one policy for effective cost control” (Orszag and Emanuel 2010: 603). Yet combining a series of potentially ineffective reforms does not make them any more effective. Moreover, the rationale for experimenting with an array of delivery systems and payment reforms reflects a sort of policy agnosticism, since, as Jon Gruber argues, “health policy experts can’t really say for sure how governments should best go about slowing cost growth” (Gruber 2010: 189). But international experience suggests that other nations do know how to slow medical spending; the United States is simply unable or unwilling to adopt those policies. Americans are, in other words, det
ermined to try all available cost-control options — except those that actually succeed elsewhere. Ultimately, the insistence that the United States has to try everything because nothing is certain to contain medical costs sounds less like agnosticism or intellectual curiosity and more like ignorance.

http://jhppl.dukejournals.org/cgi/reprint/36/3/477

Comment: 

By Don McCanne, MD

Read these excerpts from Jonathan Oberlander’s article, and you’ll understand much better why the Affordable Care Act will fail to control health care costs. Has our reform been driven by ignorance, as he suggests? With the great body of health policy literature available to us, how could that be? It seems more likely that ego and greed are much more powerful policy drivers.

Good Samaritan sets example for health care

By James Fieseher, M.D.
Letters, Portsmouth (N.H.) Herald, June 23, 2011

Recently, a patient told me he was against a government-run health care system because it meant he would be paying for “deadbeats” who sponge off of hard-working people to get free health care. He had a point. He had a difficult job, and worked hard to make ends meet and pay for his own health care. Why should he pay for someone “too lazy to work and take care of himself?”

Unfortunately, he is already paying for health care for the uninsured and indigent, and at a very high rate. People without health insurance tend to avoid any sort of health care, especially preventative care, because they can’t afford it. When they get sick or injured, most will try to take care of things on their own until the problems becomes so bad that they have to go to the Emergency Department. At that point, their care becomes so expensive that they are unable to come close to paying the bill. When this happens, the hospital picks up the cost of care and passes it along to other patients, with usually a 20 percent “administrative fee.” For those of us who are insured, our insurance then pays that cost, but they pass that along to us the policy holders with an additional 30 percent “administrative charge.” So, in fact, we are paying the most expensive care (emergency room charges) for the uninsured with a 50 percent administrative fee tacked on. Ouch!

Remember the parable of the Good Samaritan? The victim was beaten and robbed and left to die at the side of the road. A doctor and a clergyman chose to ignore him, but a foreigner (a Samaritan) picked him up, cared for him and paid to nurse him back to health. Ironically, this is an example of a more economical delivery of health care than we have today in the United States! The Samaritan incurred no emergency room expenses, no hospital fees and no administrative charges. Of course, there were no hospitals, emergency departments and health insurance companies back then, but that makes the Samaritan’s actions all the more remarkable.

If my practice is any indication, most of my uninsured patients are hard-working people who have jobs that don’t offer insurance or have lost their jobs due to the economy or because of an injury they incurred when they were working. The term “deadbeat” is not only an inaccurate characterization, it is an injustice.

A system of health care that depends upon employment puts a burden on businesses (especially small businesses), the self-employed and people with a pre-existing medical condition. From a purely preventative care point of view, it is counterproductive to try and prevent illness in one pocket of society while living in a country with a sizable population that gets no preventative care at all. In the 1950s and ’60s, we were able to eradicate smallpox because we vaccinated everyone whether or not they had private health insurance.

If we truly want to save money on health care, we would be wise to follow the example of the Good Samaritan. Generosity in health care will actually save each of us money in the long run.

If you are not prepared to have a nonprofit or government-run system distributing our health care dollars for a universal health care system, then you should give generously to private organizations such as SeaCare, Families First or Avis Goodwin to ensure that these organizations continue to give care to our family members, friends and neighbors without insurance. The alternative method to save money is to walk away from the uninsured and give no care at all as the clergyman and doctor did in the original Good Samaritan story. In that case, let us hope we don’t become the victim.

Dr. James Fieseher practices family medicine in Portsmouth, N.H.

http://www.seacoastonline.com/articles/20110623-OPINION-106230387?cid=sitesearch

Obama administration revises insurance appeal rules – to benefit insurers

HHS Scales Back Rules On Health Insurance Appeals

By Susan Jaffe
Kaiser Health News, June 23, 2011

The Obama administration announced Wednesday that it is scaling back some of its earlier rules under the 2010 health law that governed consumers’ right to appeal denials by health plans, disappointing patient advocates and earning praise from industry groups.

The health overhaul gives members in group and individual health plans the right – many for the first time — to appeal the denial of coverage to an independent review panel. But the administration’s new rules provide beneficiaries less time to prepare their appeal, less information about why their claim was denied and limit what type of denials can be challenged.

A spokesman for America’s Health Insurance Plans, which had pressed the administration for changes, said the trade group was still reviewing the 95-page document, but the group’s overall impression was positive.

“The new regulations take important steps to simplify and streamline the appeals process so that patients can receive the most accurate and timely decision about their medical claims,” said the spokesman, Robert Zirkelbach.

Stephen Finan, senior policy director at the American Cancer Society Cancer Action Network, said Wednesday’s announcement would have the opposite effect. “Transparency and independence are critical to ensure that a fair and objective appeal is conducted,” he said. “Unfortunately, there are numerous barriers and burdens placed on the consumer that could prevent a timely and objective resolution to a denial.”

http://www.kaiserhealthnews.org/Stories/2011/June/22/External-Appeals-Reg-Jaffe.aspx

And…

Group Health Plans and Health Insurance Issuers: Rules Relating to Internal Claims and Appeals and External Review Processes

Department of the Treasury
Department of Labor
Department of Health and Human Services

SUMMARY: This document contains amendments to interim final regulations implementing the requirements regarding internal claims and appeals and external review processes for group health plans and health insurance coverage in the group and individual markets under provisions of the Affordable Care Act. These rules are intended to respond to feedback from a wide range of stakeholders on the interim final regulations and to assist plans and issuers in coming into full compliance with the law through an orderly and expeditious implementation process.

(Following is one example of the revised rules)

II. Overview of Amendments to the Interim Final Regulations
A. Internal Claims and Appeals
1. Expedited notification of benefit determinations involving urgent care (paragraph
(b)(2)(ii)(B) of the July 2010 regulations).

The July 2010 regulations provided that a plan or issuer must notify a claimant of a benefit determination (whether adverse or not) with respect to a claim involving urgent care (as defined in the DOL claims procedure regulation) as soon as possible, taking into account the medical exigencies, but not later than 24 hours after the receipt of the claim by the plan or issuer, unless the claimant fails to provide sufficient information to determine whether, or to what extent, benefits are covered or payable under the plan or health insurance coverage. This was a change from the DOL claims procedure regulation, which generally requires a determination not later than 72 hours after receipt of the claim by a group health plan for urgent care claims. The preamble to the July 2010 regulations stated that the Departments expected electronic communication would enable faster decision-making than in the year 2000, when the DOL claims procedure regulation was issued.

While some commenters supported the 24-hour rule (particularly consumer advocates and medical associations, including mental health providers who noted the 24-hour standard was especially important for people in psychiatric crisis), concerns were raised by many plans and issuers regarding the burden of a 24-hour turnaround. Some commenters argued that some of the claims constituting “urgent care” and thus qualifying for the expedited timeframe really do not need to be made within 24 hours. Moreover, a number of commenters highlighted that the 72-hour provision was intended only to serve as a “backstop”; as the general rule under both the July 2010 regulations and the DOL claims procedure regulation requires a decision as soon as possible consistent with the medical exigencies involved, making the change to a 24-hour timeframe unnecessary for the most serious medical cases. Some commenters cited the Emergency Medical Treatment and Labor Act (EMTALA), which generally requires hospitals to provide emergency care to individuals with or without insurance or preauthorization and, therefore, mitigates the need for expedited pre-service emergency claims determinations in many situations. Finally, some commenters stated that a firm 24-hour turnaround for urgent care claims will adversely affect claimants, as plans and issuers will not have sufficient time to properly review a claim, adversely affecting the quality of the review process in cases where the provider cannot be consulted in time, and leading to unnecessary denials of claims.

After considering the comments, and the costs and benefits of an absolute 24-hour decision-making deadline for pre-service urgent care claims, this amendment permits plans and issuers to follow the original rule in the DOL claims procedure regulation (requiring decision making in the context of pre-service urgent care claims as soon as possible consistent with the medical exigencies involved but in no event later than 72 hours), provided that the plan or issuer defers to the attending provider with respect to the decision as to whether a claim constitutes “urgent care.” At the same time, the Departments underscore that the 72-hour timeframe remains only an outside limit and that, in cases where a decision must be made more quickly based on the medical exigencies involved, the requirement remains that the decision should be made sooner than 72 hours after receipt of the claim.

http://www.ofr.gov/(X(1)S(jsllnf4ps0f4ieewh0fb4pee))/OFRUpload/OFRData/2011-15890_PI.pdf

Comment: 

By Don McCanne, MD

Was reform intended to benefit patients or insurers? As the reform process evolved, the insurers were dictating the policies. Understandably, they took care of their own interests first. Their lack of concern for patients is confirmed by the fact that their policies will leave 23 million people without any coverage and tens of millions more with inadequate coverage.

Officials of the Obama administration, along with leaders in Congress, were complicit with the insurers during the legislative process that led to the Affordable Care Act. You might think that they would show some remorse by tailoring the provisions of the act to better benefit patients. No.

The example of the rule change for determinations involving urgent care shows where their heart is. If a patient requires urgent care, the system should be designed to ensure that the necessary care is provided immediately. Yet read the contorted explanation leading to the revised rule above. It is being revised to ensure that the insurers are allowed three days instead of one to make a decision. That might even save them money should the patient die in the interim.

The administration’s rule: first do no harm – to the insurance company. And the patients? Who’s making these rules anyway? The patients need to butt out.

What would be the appeals process for a determination of urgent care under a single pa
yer national health program? Appeals? What are you talking about? If the patient urgently needs care, the patient gets care – now! Period.

Public Health Care in Crisis: 1960s – present

an author discussion with David Ansell & John Dittmer

Introductions by Dr. Quentin Young
Thursday, July 28, 2011
at Grace Place, 637 S. Dearborn, Chicago, IL
5:30 to 8:00 p.m.

Chicago activist, David Ansell, MD, author of County: Life, Death and Politics at Chicago’s Public Hospital

DePauw University historian, John Dittmer, PhD, author of The Good Doctors: The Medical Committee for Human Rights and the Struggle for Social Justice in Health Care

Books will be available for purchase and signing.
Wine, beer and light refreshments will be served. For more information and to RSVP call Ann at 312.372.4292 ext. 21 or email aduffy@hmprg.org.

Grace Place is located within Grace Episcopal Church, between Harrison & Polk on Dearborn (one block north of Dearborn Station), CTA accessible by the Red Line (Harrison), Brown, Orange and Purple Line (Library/State or Van Buren) or Blue Line (LaSalle) or by the #22, #36 or #62, #24, or #29 buses.
   
Sponsored by

PNHP logo   

Click here to download a printable flyer for the event

Massachusetts Attorney General Drops Health Reform Bombshell

By Carey Goldberg and Rachel Zimmerman
WBUR, June 22, 2011

“Our examination found that paying providers on a global basis has not resulted in lower total medical expenses.”

It’s just a short, no-frills sentence, but it amounts to a bombshell dropped on a central tenet of the Massachusetts governor’s plan for the next phase of health reform.

That finding anchors a report issued this morning by state Attorney General Martha Coakley. And it appears to contradict Gov. Deval Patrick’s argument that shifting to global payments is a key to “cracking the code” of ever-spiraling medical costs.

The attorney general also found that wide price disparities unrelated to the quality of care still persist from one Massachusetts hospital to another, largely dependent on the providers’ clout in the marketplace. And the report unearthed a counterintuitive trend: residents from the richest zip codes in the state are spending on average far more on health care than people living in poorer neighborhoods. Yet premiums vary little, so in effect, it appears that lower-income people are subsidizing the care of the wealthy.

Global payments are supposed to re-align doctors’ incentives and put a stop to the rise in costs. Under such a global system, instead of being paid for each specific treatment, health care providers are put on an overarching budget for every patient. At the end of a year, if they’re within the budget and meet quality standards, they can win bonuses; if not, they risk penalties. The Patrick administration and private insurers have been pushing doctors toward this model, saying it leads to better, thriftier practices.

But Martha Coakley says: “Our investigation shows that a move to global payments is not the panacea to controlling costs.” The attorney general’s report suggests that in fact, thus far, care has tended to end up costing more under global budgets rather than less.

AG’s report

For example, in five medical groups in Blue Cross Blue Shield’s much-touted global payment plan, known as the Alternative Quality Contract, medical expenses rose by an average of 10 percent from 2008-9, in sharp contrast to non-global groups where expenses went up by less than 2 percent. Among those five groups were two that were already among the state’s better-paid before they joined the global-payment plan.

At two globally paid provider groups, Mount Auburn Cambridge Independent Practice Association and Signature, payments skyrocketed by more than 36% between 2008 and 2009, the report finds.

AG’s report

The report offers several possible explanations for the rises, and it would make sense that in order to persuade doctors to take the financial risks involved in an AQC, Blue Cross had to sweeten the deals it offered.

Blue Cross says that it’s not fair to look at just 2008-9, the first year of the AQC, because they did not expect savings in the first of the five-year contracts. But in fact, they did lower the overall trend in medical spending by 1% in the first year in AQC groups. However, when you add in the bonus payments that the physician groups received, the AQC did not actually save any money.

The report predicts that the AQC costs will not fall, at least not by 2013.

It’s not that global payment reform is unwise, the report says. It’s that the health care market is so deeply dysfunctional, with negotiating leverage varying so radically from provider to provider, that those disparities must be corrected before any hard push toward payment reform. A shift to global payment without fundamental market changes, the report says, “may not only fail to control cost, but may exacerbate market dysfunction.”

It calls for “more immediate action” to “shore up the foundation of the health care market by addressing the historic market dysfunction that results in greater amounts being paid to certain providers for similar services, and contributes to greater amounts being spent on the care of higher income residents.”

Among the fixes it suggests:
-Promote health insurance plans that include more limits and encourage people to care more about how much health care costs.

-Temporarily control health care prices by law, until the market improves.

– Persuade more people to center their health care around a primary care provider.

In an interview yesterday, Harvard Pilgrim Health Care president Eric Schultz happened to express sentiments that were strikingly similar to the attorney general’s. The global payment model is a “useful tool,” he said, but “it is not in and of itself a strategy that will bring about substantial savings.” It must be coupled with strategies to get consumers to care more about health care costs, he said.

“It’s not the be-all and end-all to lower cost trends,” he said. Though “It is an essential component.”

CommonHealth will continue coverage of the report and reactions to it throughout today. Please stay tuned.

http://commonhealth.wbur.org/2011/06/massachusetts-attorney-general-drops-health-reform-bombshell/

Okma – A European Perspective of U.S. Health Reform

Obama’s Health Reform in European Perspective

By Kieke G. H. Okma
Journal of Health Politics, Policy and Law, June, 2011

It is hard to understand the European perspective on the current health reform debate in the United States without calibrating the left-right “scale” of politics in the two continents. If we were to rank political parties in Europe from, say, 1 to 10, the similar scale in America would run from 5 to 15. Thus, Europe’s middle is located at or close to America’s (extreme) left; likewise, America’s far right is way off the European chart. (That also explains why Europeans have a hard time understanding or taking seriously the Tea Party Movement.)

That political convergence of the main political parties in Europe, combined with “corporatist” policy making where governments share the responsibility for social policy making with organized stakeholders, explains why there is much less political polarization than in the United States — particularly on health care issues. European citizens, in the last quarter of the twentieth century, expected and accepted government intervention to make sure everyone has access to health care via state- sponsored or state provided arrangements. They still do. Once in place, welfare programs tend to create their own constituencies. It is hard, politically speaking, to reduce entitlements of existing programs. Even in times of economic downturn and fiscal strains, few European politicians have proposed serious cutbacks in public health spending. Leveling of growth rates of health expenditure, yes, perhaps. Experiments with a modest degree of “markets” based on consumer choice and much government regulation, maybe. But a substantial delisting of entitlements or major increases in user fees are not seriously on the agenda anywhere, especially not when such cuts would affect the elderly or people with chronic illness.

The vast majority of Europeans warmly embraced Obama’s election promise to enact universal health financing. They see universal access to health care as a social right, a crucial element of a decent society.

Two common misperceptions have generated disappointment, however. It is now clear that the 2010 health reform legislation will leave substantial numbers of Americans uninsured. The first error arose from applying the wrong political scale. The U.S. “middle of the road” is much more conservative than that in Europe, and no U.S. president can afford to be seen at the far left of the American scale. The second misunderstanding concerns the power of the American presidency. Surely, Europeans believe, the president of the most powerful country in the world can do what he sets out to do (and surely, no one could be against universal health care either). They find it hard to accept that the president’s power is bound by political institutions that make major change very difficult if not impossible.

The Patient Protection and Affordable Care Act signed by Obama on March 23, 2010, takes on many problems. The health reform law will reduce the number of uninsured by expanding access to Medicaid and imposing restrictions on private insurers (the law also contains many other provisions that only weakly relate to health insurance reform). The step toward universal coverage, however, with effective cost control that would require a form of collective action, was one bridge too far.

http://jhppl.dukejournals.org/cgi/reprint/36/3/577?etoc

Comment: 

By Don McCanne, MD

Policy is easy. Politics isn’t. For the United States, the politics of collective action on health reform has been one bridge too far. Let’s now build that bridge.

Massachusetts: ACOs, global payments don’t lower costs

By Mass-Care staff
June 22, 2011

Today’s “Commonhealth” blog at WBUR, Boston’s NPR news station, has a flashy headline article titled “Massachusetts Attorney General Drops Health Reform Bombshell.”
 
What’s the bombshell? That the state’s proposal to control health care costs by moving people into accountable care organizations (ACOs) is unlikely to work, because patients who are currently covered by similar arrangements receive care that is just as expensive as everyone else.
 
ACOs are supposed to control costs using old managed-care tactics that led to patient and provider revolts in the 1990s: forcing patients into limited networks where they have a limited choice of doctors and hospitals, and paying providers on a “capitated” basis.
 
Capitation means that providers get paid a fixed amount for treating a patient for a whole year, regardless of how much or how little it ends up costing to treat them. The theory is that this will remove the incentives for providers to overuse certain types of care, since they actually lose money by providing more care. The reality is that it gives providers an incentive to avoid people with serious health issues, and to provide less care (appropriate and inappropriate) to those they do cover.
 
WBUR could have added a subtitle, “Commonwealth of Massachusetts Drops Health Reform Bombshell,” because the governor’s administration also just released a report showing that health care costs for people with private insurance is going through the roof — a 10 percent increase from 2008 to 2009, more than twice the national average, and more than five times the rate of inflation.
 
Did the state find that these costs were due to over-use of care and growing utilization? No — the report states that it is rising prices for receiving the same care, not growing use of care, that explains virtually all of the rising health care costs in private insurance. In other words, preventing overuse of care, which is what ACOs are supposed to do, will not address the problem of rising costs.
 
WBUR could have added yet another subtitle, “Massachusetts Attorney General and Commonwealth of Massachusetts Dropped Health Reform Bombshell Last Year, but We Weren’t Paying Attention,” because both of these agencies included the same finding when they released their annual reports in 2010. At Mass-Care, we were struck by how the state’s research was diametrically at odds with the direction the state was moving on health policy, and reported on it here:
 
http://bluemassgroup.com/2010/10/health-reform-part-2-cost-control-and-accountable-care-organizations/
 
Winston Churchill has a famous saying: “You can always count on Americans to do the right thing — after they’ve tried everything else.” It would seem that when the state has to resort to trying to implement, again, the follies of managed care from two decades ago — attempting to solve the cost problem by limiting patients’ use of care — we have tried everything else but single payer.
 
You can find the WBUR article, which contains two graphs and a table, here: http://commonhealth.wbur.org/2011/06/massachusetts-attorney-general-drops-health-reform-bombshell/
 
You can find the state’s report on health care cost trends here: http://www.mass.gov/?pageID=eohhs2terminal&L=4&L0=Home&L1=Government&L2=Departments+and+Divisions&L3=Division+of+Health+Care+Finance+percent26+Policy&sid=Eeohhs2&b=terminalcontent&f=dhcfp_researcher_cost_trends_2011_cost_trends_03&csid=Eeohhs2
 
Mass-Care (masscare.org) is a grassroots organizing umbrella for more than 100 groups in Massachusetts, representing over 500,000 residents in the state, who are fighting to make health care a right, i.e. to establish a single-payer health care system.

Vermont’s health reform law: A five part series

(Vermont’s Super MedPAC, Federal and ERISA plans, Pharma, Anti-trust, and Financing)

By Kevin Outterson, Professor of Law and Health Policy at Boston University
The Incidental Economist on-line, May 6, 2011

H.202 passed the House 94-49 yesterday and Governor Shumlin promises to sign it.  The Vermont law deserves some careful attention, but doesn’t appear to be creating much of a stir in Vermont itself – the lead story in this morning’s Burlington Free Press was flooding on Lake Champlain and the most popular story on the website was UVM students in an annual clothing-optional rite of spring.

I’ve read the law (142 pages, a joy by federal standards) and will post throughout next week:

Vermont’s Super MedPAC

While Washington continues to debate the federal IPAB, Vermont has now passed a much more powerful version at the state level, the Green Mountain Care (GMC) Board.  Among its powers (18 VSA §9375) are rule making authority that IPAB can only dream about:

Implement by rule, pursuant to 3 V.S.A. chapter 25, methodologies for achieving payment reform and containing costs, which may include the creation of health care professional cost-containment targets, global payments, bundled payments, global budgets, risk-adjusted capitated payments, or other uniform payment methods and amounts for integrated delivery systems, health care professionals, or other provider arrangements.

Notice the absence of exceptions for doctors and hospitals. Rate setting figures prominently:

Set rates for health care professionals [including drugs and devices] pursuant to section 9376 of this title, to be implemented over time, and make adjustments to the rules on reimbursement methodologies as needed.

They also have oversight review for:

  • Benefit packages;
  • Insurance rate increases;
  • Hospital budgets;
  • CONs; and
  • Quality and performance outcome measures

Fun fact:  the Chair of GMC board is paid $116,688 (plus free health care!)  (Sec 33a)

Federal and ERISA plans in Vermont’s GMC

Vermont’s single payment system law (Green Mountain Care or GMC) will certainly include all state and municipal employees, everyone in the VT exchange, and individual and small group markets directly regulated by the state.

The law also intends to cover state workers’ compensation injuries – a historic move towards full integration.

For federal entitlement plans – Medicare and Medicaid – Vermont will ask the Obama Administration for waivers so that all of these federal funds are paid directly to Green Mountain Care, with all federal rules waived, including Part D formularies.  If these waivers are granted, all Medicare and Medicaid reimbursement rules would be suspended in Vermont and all providers paid solely under GMC.

Other federal plans  – TRICARE, VA and FEHBP – are left for another day, as are employees of foreign governments.

The last category includes private ERISA plans, which are shielded from state law to various degrees (fully self-insured plans enjoy the greatest freedom).  Vermont can’t force these plans to conform to GMC (as the Supreme Court has made abundantly clear in almost two dozen ERISA opinions), but these employers could voluntarily choose to participate.  Vermont is considering a “pay whether or not you play” tax on all employers to fund GMC, which would certainly encourage ERISA plans to either join GMC or leave the state altogether.  (One prominent employer in Burlington with a self-insured ERISA plan has put a “for lease” sign up at the local office).  The Governor’s job over the next few months is to persuade these employers to voluntarily participate in GMC, with this tax being the stick.  The carrot is the promise of a cheaper health care system that actually works.

Bad news for PhRMA in VT

Marjorie Powell is PhRMA’s point person for state legislation. Vermont is one of her problem children – and not just Vermont. States in the northeast seem to love legislation that the drug industry hates.  The Maine Rx program was litigated to the Supreme Court back in 2003 (PhRMA v. Walsh), with the drug industry losing 6-3. More recently, the anti-data mining statutes in Maine, New Hampshire and Vermont triggered split decisions in the First and Second Circuits and an appeal to SCOTUS earlier this year.  Oral arguments were heard in April.

Part of the story is that the northeast is an incubator for innovative prescription drug policy, supported in no small part by the National Legislative Association on Prescription Drug Pricing (NLARx).  Their website is a cornucopia of model legislation and policy papers; what we’d expect from NCSL if it was totally free from drug company influence.  (Disclosure:  I’ve donated time to NLARx over the years).

Which brings us to Vermont’s single-payment system (GMC).  Several items in this law will keep Marjorie and her friend busy.  This not a final plan yet, but simply a framework of things drug companies don’t like:

  • Evaluate a single state-wide drug formulary – recommendation due by Jan 15, 2012.  Expect every drug-company supported patient advocacy group to testify against this.  (See the excellent Pro Publica report on PhRMA support to patient advocacy groups).  In any event, it is not clear that a single formulary would save money. Much more flexible formulary rules and aggressive generic & therapeutic substitution might. (Health Affairs ungated).
  • Dramatically expand use of 340B pricing, potentially for all drugs in GMC.  I don’t know how this is possible – 340B was designed for low-income populations, not entire states.  Expanding 340B to all eligible populations is a great idea, since the prices are quite low, but making it universal will threaten access for the free clinics that were the historic base for 340B.  (I’ve written about price discrimination in prescription drug markets in US Senate testimony and the Yale Journal of Health Policy, Law & Ethics).
  • VT may request a full part D waiver, rolling all Part D drug purchasing into GMC.  This would bypass the debate on CMS “negotiating” Part D drug prices by letting the state try.
  • VT will also consider buying all GMC drugs through Medicaid, with the statutory and supplemental rebates.  I don’t know how a state could buy drugs through Medicaid for non-Medicaid populations. This also threatens to undermine the US price disc
    rimination scheme. In any event, PhRMA can offset the rebates by raising prices.
  • A single mechanism for negotiating rebates and discounts, concentrating and leveraging the state’s buying power, creating a monopsony to negotiate with monopolies.
  • Expanding anti-datamining, gift ban, & transparency rules. Not in the legislation at present, but expect it to be added if the Supreme Court strikes down the current version of the VT anti-datamining law in Sorrell v. IMS.
  • Importation from Canada. Also missing from the list, but a perennial option frequently discussed in VT.

The state action doctrine under the Vermont single payment system

The Vermont single-payment system legislation requires competitors to work together in a collaborative fashion generally prohibited by federal antitrust laws.  The Act protects Vermont providers and others from federal antitrust scrutiny through the “state action” doctrine, which grants antitrust immunity to actions by US states.  If a state wants to create monopolies in cable television, toll roads or public utilities, the federal antitrust statutes won’t stand in the way.

Some implications in Vermont:

  • Anything the State does directly is immune; and
  • Acts by private parties (payers, providers, etc.) may be immune if they are acting pursuant to a clearly articulated state policy and are closely supervised by the State.

18 VSA §9376(d) (§3 of the Act) intentionally provides state action immunity:

(d) To the extent required to avoid federal antitrust violations and in furtherance of the policy identified in subsection (a) of this section, the [GMC] board shall facilitate and supervise the participation of health care professionals and health care provider bargaining groups in the process described in subsection (b) of this section.

Also in §9377(a):

It is also the intent of the general assembly to ensure sufficient state involvement and action in the design and implementation of the payment reform pilot projects described in this section to comply with federal and state antitrust provisions by replacing competition between payers and others with state-supervised cooperation and regulation.

Other similar provisions are in 18 VSA §§9377(c) (§3 of the Act), 18 VSA §724 (§3c of the Act).

Financing the VT single-payment system

H.202 builds the framework for a single-payment system in VT, but doesn’t pull the trigger yet. Two financing plans will be presented to the Legislature by January 15, 2013 (see sec.9). For background, skip the legislation and look at the official report by Hsiao, Kappel and Gruber.

The current model is a payroll tax, on both employers and employees, with exemptions for low-income workers.  In fundamental design, this is similar to Social Security or Medicare. The tax rate numbers are not set in stone, but one estimate is 11% for employers and 3% for employees. If Vermont can pay for health care with just 14% of wages, that will be a remarkable bargain.

The tax applies whether or not the employee accepts GMC.  This is a “pay whether or not you play” tax – quite different from the “pay or play” laws in Maryland or SF.  As a prominent Vermont employer said, no one wants to pay for health care twice, so this structure encourages the self-insured ERISA plans to voluntarily join GMC.

In defense of Canada

By Aaron Carroll
The Incidental Economist, June 5, 2011

Paul Krugman has been on a tear the last few days with a number of posts defending Canada’s Medicare. This was all leading up to his latest column, where he questioned why Medicare should be unsustainable in this country, when it’s sustainable there.

I’m sure we’re going to now face the usual howls of protest, comparing Canada’s health care system to a death sentence.  So let me summarize a few of my past posts to try and pre-empt some of the false rhetoric.

1) Doctors in Canada are not flocking to the US to practice

So when emigration “spiked,” 400-500 doctors were leaving Canada for the United States.  There are more than 800,000 physicians in the U.S. right now, so I’m skeptical that every doctor knows one of those emigres. But I’d especially like you to pay attention to the yellow line, which is the net loss of doctors to Canada.

In 2003, net emigration became net immigration. Let me say that again. More doctors were moving into Canada than were moving out.

2) Canadians are not flocking here to get care

Look, I’m not denying that some people with means might come to the United States for care.  If I needed a heart/lung transplant, there’s no place I’d rather be.  But for the vast, vast majority of people, that’s not happening.  You shouldn’t use the anecdote to describe things at a population level.  This study showed you three different methodologies, all with solid rationales behind them, all showing that this meme is mostly apocryphal.

3) Doctors are not less satisfied practicing in Canada than the US

How satisfied are physicians with their practice?  It’s not a perfect measure, but it’s an important one:

Given the rhetoric of how much physicians hate reform, you would think doctors were very happy before reform passed.  You’d be wrong.  With the exception of Austria and Germany, fewer doctors were satisfied with practicing medicine [in the US] than any other surveyed country.

4) Claiming that hip replacements and cataract surgeries happen faster in the US does not prove that a single payer system doesn’t work

When people want to demonize single payer systems, they always wind up going after rationing, and more often than you’d think with hip replacements…

It’s not true.  They don’t deny hip replacements to the elderly.  But there’s more.

Do you know who gets most of the hip replacements in the United States?  The elderly.

Do you know who pays for care for the elderly in the United States?  Medicare.

Do you know what Medicare is?  A single-payer system.

5) Canada’s wait times aren’t due to its being a singe-payer system

The wait times that Canada might experience are not caused by its being a single payer system.

Do you know who pays for care for the elderly in the United States?  Medicare.

Do you know what Medicare is?  A single-payer system.

So our single-payer system manages not to have the wait times issue theirs does. There must be some other reason for the wait times. There is, of course. It’s this:

Canada isn’t some dictatorship. They aren’t oppressed. In 1966, the democratically elected government enacted their single-payer health care system (also known as Medicare). Since then, as a country, they have made a conscious decision to hold down costs. One of the ways they do that is by limiting supply, mostly for elective things, which can create wait times. Their outcomes are otherwise comparable to ours.

Please understand, the wait times could be overcome. They could spend more. They don’t want to. We can choose to dislike wait times in principle, but they are a byproduct of Canada’s choice to be fiscally conservative.  They chose this. In a rational world, those who are concerned about health care costs and what they mean to the economy might respect that course of action. But instead, we attack.

6) Since Canada adopted their single payer system, infant mortality has dropped below that of the US

Many people have told me that infant mortality used to be higher in Canada than in the US, but since the passage of (Canadian) Medicare, that hasn’t been the case.  The chart above, which I made from OECD data, would tend to agree.

I know the usual knocks against infant mortality as a population metric of quality.  But I’d like to hear a good alternate explanation (if one exists) for the trend you see above.  Links to evidence or data supporting your theory will get you extra points.

7) In Canada, they may “ration” by making some people wait for some things, but here in the US we also “ration” – by cost

About one third of Americans report that they didn’t go to the doctor when sick, didn’t get recommended care when needed, did not fill
a prescription, or skipped doses of medications in the last year because of cost.

So feel free to have a discussion about the relative merits of the Canadian health care system compared to ours.  Just keep it to facts.

http://theincidentaleconomist.com/wordpress/in-defense-of-canada/

Protesters Rally Against Health Insurers

By Katharine Mieszkowski
The Bay Citizen (San Francisco), June 16, 2011

More than 100 protesters from community and labor groups rallied outside the Moscone Center in downtown San Francisco Thursday morning to call for the end of private health insurance and for “Medicare for all,” while members of the America’s Health Insurance Plans met at their national convention inside.

“There is no reason to have a health insurance industry. It only serves them. It doesn’t serve the public,” said Arthur Persyko, a volunteer with Single Payer Now, a San Francisco-based health care reform advocacy group. “They are there to make their bottom line happy. They deny care to people who need it. They are a useless, destructive part of our health care system. It’s a crime, really.”

State Sen. Mark Leno is sponsoring legislation, SB 810, that would establish a universal health care system in California. A similar bill passed the legislature in 2006 and again in 2008, but was vetoed both times by then-Gov. Arnold Schwarzenegger. Advocates say with a Democrat now in the governor’s seat, this time could be different. But even if the bill does ultimately pass, it does not include funding for such a system.

“Separate legislation or a ballot measure would have to finance it,” said Anthony Wright, executive director of Health Access, a consumer advocacy group.

http://www.baycitizen.org/blogs/pulse-of-the-bay/protests-rally-against-health-insurers/

Single-Payer Hopefuls Press Their Cause

By David Gorn
California Healthline, June 17, 2011

Only in San Francisco can a guy wearing a rainbow rasta wig be a voice of reason.

But there he was, among an estimated 400 boisterous protesters, trying to keep the sidewalk clear so pedestrians could pass through the colorful event. Event organizer Don Bechler also was busy keeping the gathering legal and peaceful.

“America deserves a health care system that’s not broken,” said Bechler, chair of California-based Single Payer Now. “We want to get rid of the insurance companies and their bureaucracy of denial. It’s crazy that doctors need to spend so much time dealing with insurance companies — that’s madness to deal with that kind of bureaucracy.”

Health care providers, labor groups and single-payer advocates turned out on the street outside of the annual convention of America’s Health Insurance Plans, a national trade group of health insurers.

Inside, political luminaries addressed the health care insurance industry — from former Senator Tom Daschle, a Democrat from South Dakota, to Republican presidential hopeful and Minnesota Gov. Tim Pawlenty.

Outside, protesters chanted, speakers orated, a pair of giant puppets battled each other (nominally an American citizen taking on insurance groups, but you really had to use your imagination) — and at one point the crowd was treated to the singing of a well-dressed group of ladies who called themselves the Raging Grannies of the Peninsula. They held signs reading “Survival of the Richest” and “Let Them Eat Advil.”

It was good theater, but critical care nurse Bobby Roberts came from San Pablo for more serious reasons.

“I see it all the time, insurers turning down health claims left and right. You see that they’re more worried about profits than patients,” Roberts said. “I have stories and stories, I could go on for days.”

National health care reform is a start, Roberts said, but he’s hoping to one day see the end of health insurance companies altogether. “It’s too much,” he said. “Too much profit, too much paperwork, too many people not getting the care they need. The insurance companies are fleecing us, that’s just so clear.”

Organizers estimated the crowd at about 400 people. San Francisco police reported no complaints.

Read more: http://www.californiahealthline.org/capitol-desk/2011/6/loud-protest-greets-national-health-insurers.aspx#ixzz1PpIvizsc

Single-payer rally ‘welcomes’ insurance industry group

By Marilyn Bechtel
People’s World, June 17, 2011

SAN FRANCISCO – This city is known for its hospitality. So it’s no surprise that this week’s meeting of America’s Health Insurance Plans, the health insurance industry’s national trade association, was greeted by a “welcoming committee.”

But that committee, several hundred strong June 16 on the sidewalk in front of Moscone Center downtown, had a message that AHIP members probably didn’t want to hear.

“Everybody in, nobody out!” they chorused, demanding passage of SB 810, a state single payer-health care bill now before the California legislature, and “Medicare for All” across the nation.

“I’m here today because no one in America should have to worry about whether they can afford health care for themselves or their families,” said California Nurses Association Co-President DeAnn McEwen. “Healthy people are our country’s greatest national resource.”

United Educators of San Francisco President Dennis Kelly galvanized the crowd with his account of the Montana town that, in the wake of a terrible industrial accident, now has single-payer health care for all its residents.

When pollution from an asbestos mine sickened residents of Libby and surrounding areas, Kelly said, Sen. Max Baucus, D-Mont., turned to Medicare. “They declared that the entire town was eligible for Medicare. Because it is single payer, it was the only way to get coverage for absolutely everyone. If Baucus can do that, that’s what we must do in California and the nation.”

(Interestingly, Baucus opposed including single payer in negotiations for last year’s health care reform bill.)

In a statement presented by aide Kim Alvarenga, State Assembly member Tom Ammiano, D-San Francisco, emphasized the importance of covering everyone, including immigrants, documented and undocumented. He said SB 810 “provides universal health care for every single resident of the state … Every person in this country, regardless of race, gender identity, age, disability or legal status has a human right to quality affordable health care.”

Several members of the Chinese Progressive Association’s Youth MOJO (Youth Movement of Justice Organizing) told how losing health coverage has affected them and their families, and described their work for universal health care, immigrant rights and other social justice issues.

Among the speakers and the crowd were members of many unions and community organizations, including the California Alliance for Retired Americans.

The California legislature has previously passed single-payer legislation, only to see it vetoed by former Governor Arnold Schwarzenegger. This year, State Senator Mark Leno, D-San Francisco, introduced SB 810, which has nine cosponsors in the Senate and 20 in the Assembly.

Last month, Vermont Gov. Peter Shumlin, a Democrat who campaigned on the issue, signed a bill taking the first step toward
establishing a statewide single-payer system. In coming years, the legislature will flesh out the program, which is to take effect in 2017.

http://peoplesworld.org/single-payer-rally-welcomes-insurance-industry-group/

‘Medicare for All,’ Activists Tell Insurance Convention

By Jonathan Nack
Indybay.org, June 17, 2011

OAKLAND, Calif. – Protesters greeted the national convention of America’s Health Insurance Plans, held in San Francisco, with their demands for a government run single-payer health care system modeled on Medicare that would cover everyone. The protest took place at Moscone Center in San Francisco, Thursday, June 16, 2011.

Groups participating in the protest included: Single Payer Now, the California Nurses Association, the California Alliance for Retired Americans, Healthcare For All, the S. F. Chinese Progressive Association, the Santa Clara County Single Payer Healthcare Coalition, the Gray Panthers, the Wellstone Democratic Club, and the Alameda County Green Party.

Several photos:
http://www.indybay.org/newsitems/2011/06/17/18682115.php