Oh, Ease Up on Joe Already

The Democratic rhetoric coming from Capitol Hill today beating on Joe Lieberman is, in the least, disingenuous.The public option has not been tenable for months. It was not just Lieberman that has been against it in all forms--robust Medicare-like or the neutered variety in the House and Senate bills.All of the liberals claiming they weren't going to vote for a health bill without a public option

The Medicare Buy-In Is Dead--The Liberals Are Now the Swing Votes in Health Care

The Medicare buy-in idea is dead. After Democratic Congressman Weiner's candid comment, “Never mind the camel’s nose, we’ve got his head and neck in the tent," no senator from the likes of Arkansas or Indiana is going to vote for this.Add to that yesterday's critical Washington Post editorial and the sharp response from the various doc and hospital lobbies and this was dead before Reid's request

Selling Insurance Across State Lines--Now the Dems Are Pushing the Idea--Why It Won't Work

A favorite Republican health care soundbite calls for making the health insurance system more efficient by letting health plans sell across state lines.Now Democrats are jumping on that idea. The latest public option idea would have the Office of Personnel Management (OPM) contract with national not-for-profit health plans and introduce those plans into local insurance exchanges--that would be

Liberal Demands Over Giving Up the Public Option Threaten Health Care Deals

I actually feel for Harry Reid this morning.He was on his way. He had mastered an incredibly fine balance in his health care bill.No it wasn’t real health care reform and it wasn’t going to bend any curves but the Dems long ago gave up on that looking for one big political “W” instead.The liberals were finally backing off on the public option there never were the votes for. But even the “neutered

The Latest Version of the Public Option—The Democrats Could Have Saved Us Lot of Time If This is What They Call a “Public Option”

If the latest version of the public option is something that will give its proponents reason to argue they still have a way to "make the health insurance market much more competitive," then a motor scooter is a Ferrari.The details are still fuzzy but the word is that senators are working toward a compromise over the controversial public option that would create something that:Would be run by the

Health Care's Actual Costs Versus Their Reasonable Costs: Insights From the New England Journal

You can't fight City Hall, the State Capital or Washington. Not when it's not 'reasonable.'

Right after an embarrassingly self-promoting and one-sided political treatise by Senator Max Baucus (the link is undeserved, that's how awful this is), there is a far more telling November 5 New England Journal of Medicine article by Wendy Parmet titled 'Litigation Amidst Reform - The Boston Medical Center Case.' It reviews how BMC elected to go to court even as Massachusetts' ballyhooed health reforms were being implemented.

BMC, unlike its more profitable neighbor hospitals, has a mission of treating the poor, the uninsured and, by extension, those with Medicaid. When the State altered the safety net hospitals' payment methodology as part of its reform, BMC decided to sue. It used several arguments: 1) safety net funds that had been previously authorized were still owed, 2) demanding services without just compensation is akin to the taking of property and 3) there is legal precedent that requires that the State meet the hospitals' financial requirements.

Not so says Massachusetts. Its filings in response to the suit indicate that the funds that have been authorized have been paid in full. What's more, they argue that BMC has long agreed to accept Medicaid payment rates - period. What really caught the Disease Management Care Blog's eye, however was another novel arugment from the State: the law only requires that hospitals be paid their reasonable costs, not their actual costs.

Ms. Parmet suggests BMC has an uphill fight on its hands. State courts have been generally deferential to their health agencies in these matters. Many scholars have pointed out that the Constitutional prohibition against the unreasonable seizure of property does not extend to 'services.' Finally, while there was a part of Federal law that required 'reasonable and adequate' payment rates under the 'Boren Admendment,' that inconvenience was repealed years ago.

The distinction between reasonable and actual has been enough to give the DMCB a head cramp. If a course of treatment for cancer 'costs' $100,000, should the reasonable cost or the actual cost be covered? While commerical insurers and their slim 3.3% profit margins may pay a negotiated payment for $100,000 services (which essentially boils down to an actual cost), should a government with sovereign immunity be allowed to define reasonable payment levels? If the government deems a hospital bill as 'unreasonable,' should commerical insurers have the same option? What precisely is the definition of 'reasonable' anyway? Cost of capital and labor plus a small profit margin (like 3.3%)? Or, anything that results in an extension of life at a price equal to or less than consensus opinion? If many insurer-provider contracts are based on a percent of prevailing Medicare rates, what happens if the AMA Relative Value Scale Update Committee turns from being 'fair and accurate' to being 'reasonable?' While the current legislation before Congress has the proposed Public Plan negotiating rates with providers, is there any chance that elements of that will be repealed like the Boren Amendment?

While the DMCB was struggling with this, it turned again to the DMCB spouse for her always unique insights. Pointing out that the DMCB has needs, it asked if its actual or reasonable needs should be met.

Her unhelpful response: there is an important difference between 'needs' and 'wants' and both are only sometimes reasonable.

The Neutered Public Option—Where’s the Rage?

The public option contained in the House Democratic health care bill is hardly more than a neutered version of the “robust” public option one House Democrat after another said was a minimum requirement to keep their vote on health care reform. After threatening for months to fall on their swords if they didn’t get the “robust Medicare-like” version, there was nothing but enthusiastic support for

“The Public Option Is Back in Play”—That Depends Upon Your Definition of the Word “Is”

It appears that Harry Reid is going to include a robust Medicare-like public option in his Senate draft. Speaker Pelosi is also doing her best to put as robust a public option in her House version as she can get the votes for.One press report after another has proclaimed the return of the public option.I’d like to see some of these reporters to do a vote count.No doubt the hype over the public

Medicare For All, i.e., the Public Option Can Cause Cost Shifting. It Is Possible.

Commercial health insurers are arguing that a government run ‘public option,’ if included in health reform, will force a take-it-or-leave-it’ low-ball fee schedule on hospitals and physicians. This, in turn, will lead the providers to recoup their losses by charging the competing private insurers correspondingly more for the same services. This phenomenon is known as ‘cost shifting.’

Various luminaries have dismissed this as pernicious (former Secretary of Labor Robert Reich) a misrepresentation (Nobel Prize winning Paul Krugman) and taxing credulity (Princeton health care economist Uwe Reinhardt). Absent any data that prove that this really happens, critics of the evil, recessioning, care-denying and robber baron health insurers charge there they go again: they’re trying to pull a fast one on the unsuspecting public.

In its past life in the managed care industry, the Disease Management Care Blog remembers hospital administrators repeatedly arguing that they needed the commercial insurers to pay their institutions higher rates than Medicare to remain in business. Since Robert, Paul and Uwe suggest this was just a negotiating ploy, the DMCB did what it usually does when it’s confused. It looked at some peer-reviewed literature.

It didn’t take much to find three articles in a health policy journal named Health Affairs that is not known for excess partisanship or biased authors.

This 2003 article by Lee and colleagues points out that when Medicare’s DRG payment system ‘gets it right,’ by correctly paying hospitals, there is no need for hospitals to cost shift. The authors seem to imply that when Medicare underpays hospitals, they turn to cost shifting to make up the difference.

In this 2003 article, Paul Ginsburg argues that there is a lack of evidence of the phenomenon but, on theoretical grounds, it is quite possible to assemble a ‘conceptual basis’ for cost shifting. He shows it can certainly happen in geographic areas where one health care provider has market dominance and the health insurers have no choice but to agree to their terms. In the DMCB’s experience, this monopolistic behavior is common in rural areas where there is only one hospital per county, or anywhere when a medical specialty’s services (like high end cardiology) are otherwise not available.

In this 2006 article Jack Zwanziger and Anil Bamezai examined the relationship between Medicare and Medicaid rates versus private insurance rates in California and found an inverse financial correlation in rates to the tune of a 0.17% increase for every 1% decrease by Medicare. While the relationship is not necessarily causal, the association suggests that the phenomenon of cost shifting is real. It's not dollar for dollar, but the 'signal' was out there.

The DMCB concludes that cost shifting is quite possible under the public option. It also wonders if it is missing something and why such smart people are so dismissive of any likelihood that it could happen.

There Will Not Be Health Care Reform in 2009 Without Republican Leadership

I will suggest that there is an opportunity for the Republicans to score a huge political and policy win. It can be done in a bipartisan way and it can be done in a way that does not sell out the core principles that either Republicans or Democrats believe in.It would require a new effort—a clean sheet—this time initiated by the Republicans.The Republicans have won August. No doubt about it. But

Splitting the Bills? The Democratic Leadership and the White House Staff Really Need a Vacation

The latest word is that the Democratic leadership and the White House see a “60% chance” they will split their health care bill into two parts—one a budget bill that would be eligible for the 51-vote Senate rule and the other the operational non-budget portions that will need 60 votes. This is all intended to get around the Byrd Rule—which allows the use of reconciliation

The Obama Admistration Would Do Well to Read the Senate Rules and the Polls

The latest reports are that the White House is getting ready to ditch any thoughts about a bipartisan health care bill and just ram the Democratic bills through the Senate with bare majorities. Readers of this blog know that I don’t think it is ever possible to ram anything so big as health care through with slim Congressional majorities and even less public support. I

Co-Ops Are the Single Dumbest Idea I Have Heard in the Health Care Debate in Twenty Years

This is a repost from June 23--sort of like regifting...I am sure you have heard the story about the committee that was charged with designing a horse but, because of the bureaucratic ways of the committee process, instead ended up creating a camel.We will not see a Medicare-like public health plan as part of any health care reform bill in 2009. I know proponents don’t want to hear that but it is

Are Democrats Getting Ready to Ditch the Public Option? But They Would Still Be Challenged by the Trillion Dollar Price Tag

It looks to me like the popular objections to a health care bill being expressed by voters this month are concentrated in two primary areas:A concern about “government control of the health care system”—mostly around the public plan option.The trillion-dollar cost of a health care bill at a time deficits are swelling and worries about who will really end up paying for it.As a result of the first

Insurance Companies Say They Can't Compete With a Public Option--But FedEx and UPS Do Pretty Well Against the Post Office--What's the Difference?

The Post Office doesn’t get to unilaterally fix the cost of all of the things it buys that go into its services--Medicare and Medicaid do.What critics of the public health plan option often fear is that, like Medicare, a public option health plan would be able to unilaterally set what it pays doctors, hospitals, drug companies, and other providers. Private health insurers often pay providers 20%

The Public Plan Option: Litmus Tests Are Never a Good Sign

Before now, I can think of only one “litmus test” in American politics—abortion.That is an issue that simply polarizes the nation—and our political system. On a good day, people on one side or the other just agree to disagree and move on.But I think we are seeing another litmus test issue emerge—the public health plan option.I have no doubt that there are not the votes to pass a public plan

A Public Plan Worst Case Scenario

President Obama has "steadfastly" favored a public plan because it’s supposed to keep “the insurance companies honest.” The Disease Management Care Blog needs to better understand what our Chief Executive means by ‘honest.’ It suspects he means not gouging unsuspecting consumers with low quality and high premiums.

Quality? Years back, the DMCB recalls dealing with a large employer group that ended up buying a competing plan. The difference was that my company pitched a plan with first dollar coverage of colon cancer screening with some other preventive care benefits, while the competition offered a more stripped down insurance plan without any meaningful coverage for cancer screening.

We lost out over price. The cheaper plan won out over a few dollars per member per month.

That’s why the DMCB thinks amount of the monthly premium level is the first, the second and the third most important factors used by consumers when it comes to buying health insurance. So, whether the President knows it or not, the competition between the proposed public plan option and the private insurers is very likely to hinge on price.

Which may be what he and the other proponents of the public plan want all along. After all, a public plan will be able to dictate terms to providers, carry far less administrative overhead and not have to worry about additional cost shifting to the private insurers.

A worse case scenario? Competing private insurers will retrench by:

a) looking for other complex regulatory loopholes and cozy relationships that permit continuing bad behavior: even stricter interpretation of the medical benefit (denials), tougher contracting with providers (low ball fee schedules) and more aggressive underwriting whenever they can get away with it. Think the arms race, gamesmanship and bombast between the politicians and private insurers will cease with the passage of an HR 3200? Think again.

b) additional consolidation by health insurers into polyglot multi-state behemoths that have the kind of huge surpluses, investment income and other lines of business that generate the cash flow necessary to fight back against a low cost public insurer. Many small not-for-profit regional insurance plans will be assimilated by the too-big-to-fail insurance Borg.

c) offering a benefit package that is similar to the public plan. Private insurers won’t be able to get away with offering a poorer benefit (no one will buy it if the public plan offers more coverage) or offering a richer benefit (because it will be more expensive and priced out of contention). Health insurance consumers will have a choice of any benefit plan they want, so long as it’s patterned after the vanilla public plan.

An Examination of the Public Plan Option

The Disease Management Care Blog really liked this efficiently written Wall Street Journal piece on healthcare reform. While it didn't agree with everything, the inspiration led this humble blogger to review the main arguments in favor of the public plan, which are paraphrased below.

A public plan will keep the private insurers honest.

Given the prior Administration’s failures, it seems comforting to believe that a change in leadership means the Federal government’s track record in healthcare is destined for change. Yet, Veterans and American Indians have been disappointed by broken promises from both sides of the aisle for decades. Alternatively, if we agree that the D.C. mandarins are imperfect, it’s hard to understand how they are necessarily less so than many smaller and honorable not-for profit plans that remain largely unmentioned by the national media.

Private insurers have broken the public trust

While we can thank some incredibly tone-deaf plans for introducing the word ‘rescission’ into the popular vocabulary, buying insurance only when its needed and driving up premium rates for those of us who play by the rules has a more familiar word to describe it: fraud. The specter of coverage denials is also understandably frightening to healthcare consumers/voters, but the other side of the story is our collective sense of boundless entitlement and unwillingness to read and grasp the small print in a binding contract, especially when it's too good to be true. Yet somehow, we’ve been led to decide between these two extremes by abdicating a huge slice of our economy to a dysfunctional political club that relies on bombast, political expediency and unread legislation to govern.

Public insurance has a lower overhead, which means savings for consumers

The notion that government can do anything more efficiently strains credulity. What’s more, comparing Medicare and commercial insurance is like comparing the alternative universes of Nancy Pelosi and Sarah Palin. While commercial insurance has its own set of issues, the truth is that government-run programs like Medicare rely on an arcane thicket of Federal regulations subject to desultory retroactive IRS-like enforcement by the underfunded Office of the Inspector General, which is only spurred to action when the problem becomes ‘staggering.’ Add this 10% waste factor to CMS' considerable hidden overhead and the transfer of many expenses to the providers and the government doesn't look like such a good deal anymore.

The public option will control costs

The logic here is that the Federal government will be able to use its purchasing power to force a better deal for healthcare consumers. A better possibility is that the long-standing pattern of underpayment to hospitals and physicians by Medicare and Medicaid will spread to new sector of the healthcare market, leaving hospitals and doctors with nowhere else to go to recoup their costs. The end result will be price controls, which are economically indistinguishable from queues and rationing.

If you have insurance you like, you can keep it.

The insurance you like now won’t disappear overnight, but its demise in the coming years, thanks to inevitable crowd-out, hostile tax policies, clumsy regulations, Congressional meddling and unintended consequences will likely lead to a three tier system: underfunded Medicaid at the bottom, the one-size-fits-all middle public plan and the gold plated plans only available to our highest paid elites with the best benefits. Care to guess which one will be used by our political leaders?

The Co-op Version of the Public Plan—It’s a Camel!

I am sure you have heard the story about the committee that was charged with designing a horse but, because of the bureaucratic ways of the committee process, instead ended up creating a camel.We will not see a Medicare-like public health plan as part of any health care reform bill in 2009. I know proponents don’t want to hear that but it is crystal clear to me there simply are not the Democratic

It’s NOT the Prices Stupid!

Out here on Kent Island, the federal government says that I like to watch the Baltimore TV stations and therefore forbids my satellite provider to give me access to the local DC channels. (We’re about an hour from both Baltimore and DC.)There is reason number one never to put the government in charge of any more than absolutely necessary.While my new digital converter box had been working just