Revisiting earlier topics…

•October 21, 2009 • Leave a Comment

If you’ve been reading this briefing, you know that I’ve tried to examine issues that have been overlooked or marginalized in the national debate and media coverage. As you can probably tell, I think this bill is one really ugly baby.  But as I’ve seen a bunch of articles over the past several weeks addressing some of the issues I’ve tried to bring light to, I thought I’d give an update of what’s happened to the other 5 issues I discussed in previous emails.

Doctor Shortage
Kaiser Health News had a story last week about the primary care doc shortage.  It’s a great article and includes a graph (yay!).  “I don’t see anything in the legislation that will greatly increase the primary care pipeline,” said Dr. Russell Robertson, chairman of the Council on Graduate Medical Education, which advises Congress. In addition to making sure patients have access to care, increasing the number and proportion of primary care doctors is crucial to lowering health costs, he said. Primary care doctors make up about a third of all physicians, though in most industrialized nations they make up half.

“We can’t bend the cost curve without increasing primary care providers,” said Robertson, who is also chair of family and community medicine at Northwestern University’s Feinberg School of Medicine in Chicago.

One idea, to increase payments for primary care docs is supported by Dr. Ted Epperly, a Boise, Idaho, family doctor who is president of the American Academy of Family Physicians.  He says family doctors would need about a 30 percent increase in pay to encourage more young physicians to enter primary care.  Some think Medicare should help pay for this raise, but this idea is basically considered dead on arrival, because the money would come from payments to higher-paid specialists.  These guys and their professional societies, aka unions, unsurprisingly oppose the pay cut.  Nothing against them, because we’re all looking out for our best interest, but yeah, that approach won’t work.

The direction we’ve been going with this bill in recent months will grow the numbers of the insured substantially, and expand entitlement programs like Medicare and Medicaid.  After Massachusetts in 2006 required residents to have health insurance, the demand for care totally overwhelmed the state’s doctors.  The only way to get more primary care docs in the pipeline is to increase residency positions for them… Senate Majority Leader Harry Reid is proposing that Medicare pay for 15,000 residency positions — a 15 percent increase that would favor more primary care training.  This was also nixed because of its $10B price tag… an amount that I have to say seems like pocket change compared to the rest of the bill.

Soo no real news here, but check out this article to see the graph:

The Mayo Clinic Model

The Washington Post reported last week that the Mayo Clinic is no longer accepting some Medicare and Medicaid patients.  Suddenly the administration realized that want to temper its enthusiasm for the organization as a model for health care reform. Interestingly, as I pointed out, Mayo is a real stakeholder in this debate – they have an interest here and are a lobbying force unto its own, especially considering its increased celebrity status.

Mayo announced late last week that its flagship facility in Rochester, Minn., will no longer accept Medicaid patients from Nebraska and Montana. The clinic draws patients from across the Midwest and West, but it will now accept Medicaid recipients only from Minnesota and the four states that border it. As it is, 5 percent of Mayo’s patients in Rochester are on Medicaid, well below the average for other big teaching hospitals, and below the 29 percent rate at the other hospital in town.

The WaPo story says, “The model centers have capitalized on their status to insert into health-care legislation provisions that would result in higher Medicare payments for hospitals that do well on the Dartmouth rankings while punishing those elsewhere — mostly, big cities and the South — that spend the most per Medicare patient.”

Mayo of course says this decision to limit Medicare/Medicaid patients was a business decision, saying that they can’t continue to provide the same level of care making do on current Medicare payment rates.  This raises a very important question –  can hospitals and doctors provide top notch care, attract great doctors and pay for the best equipment out there on public sector reimbursement rates?  A recent report by MEDPAC found that hospitals relying most on Medicare and Medicaid, without a big private-payer base, report per-procedure costs in line with Medicare rates — suggesting that those hospitals can make do with Medicare payment levels.

In my opinion, this news story is really small BUT it embodies a central issue — who is going to insist on cost-containment?  The government?  Can the government even do that?  And if so, are businesses going to let it?  And if the government DOESN’T do it, will businesses do it on their own?


This issue mentioned above just doesn’t go away.  The National Journal did an EXCELLENT piece on cost-cutting measures, including a look at the “MEDPAC on steriods” idea.  Here’s the recap: “In the case of Medicare, the question of when to deny treatment has already produced a head-on, intraparty collision between the Senate Finance Committee, backed by Obama, and a powerful minority of House Democrats. The Senate faction is committed to “bending the cost curve” for Medicare and sees the billions to be saved by arming MedPAC to set binding limits as taking precedence over potential complaints from beneficiaries when cuts materialize after 2012. Senate Finance Committee Chairman Max Baucus of Montana, perhaps the quintessential utilitarian Democrat, has dubbed the empowered board the “Medicare Preservation Commission.”

In a letter to House Speaker Nancy Pelosi, 75 members — including 45 Democrats — warned that if MedPAC is strengthened, “Medicare beneficiaries and the range of providers who care for them would be greatly limited in their ability to help develop and implement new policies that improve the health care of our nation’s seniors.”  I mean, this really is sneaky… but if it’s going to happen, it has to be done by an extra-congressional body, and obviously stakeholders hate this.  It’s not the members of Congress that protest, it’s the companies, physicians, hospitals, etc in their districts.  However, the Democratic party is going to face a real problem with this, because cutting costs is absolutely essential to freeing up the money needed to insure more Americans.

Seriously this is a great article, read it:

Individual Mandate

The insurance industry pulled a balls-to-the-wall move (sorry Mom) last week when they released their PWC report saying that the current health care reform bill would cause premiums to skyrocket.  I suppose someone had to say it, but since no one sees a commissioned report as objective, they were immediately on the defensive, and the central message was lost.

To recap, the individual mandate is a component of each of the reform proposals, saying that everyone has to obtain insurance coverage. There is both a moral and a fiscal argument for this — everyone should pay into the pot, and besides, without the communal support of the old and sick, we’ll end up paying through higher taxes anyway.

The Senate Finance Committee included the mandate but they significantly weakened it by making it pretty easy to say that insurance would be a financial hardship, and by making the fines for not getting coverage really weak.  As Kaiser Health News said in an article posted yesterday, “At some point, if the mandate becomes too weak, it ceases to be effective. People ignore it and then we’re back to the problem of young, healthy people opting out of the system. It’s not clear whether the reductions the Senate Finance Committee proposed went that far; experts offer different opinions. But the weakening of the mandate is, at the very least, risky.”

This author’s main point is that if the insurance industry made a good point that needs to be heard.  His other point is that if the insurance industry spent more time demanding more from the drug and hospital industry, and advocating that everyone give up their fair share of profits in order to lower costs, then we might get closer to some real reform.  It’s an interesting point.  Back in February when all the biotech CEOs were preparing for health care reform, everyone said it would be an all-out blood bath, everyone against each other.  This has kind of happened, but its actually just been more a peaceful truce and agreement by everyone to look after their own bottom line or keep quiet.  Here’s that Kaiser article…

Medicaid and the States

Okay finally, the last topic.  As I said last week, the government program that provides healthcare to the poor, Medicaid, would be expanded under health care reform to cover almost one in five Americans (60 million by 2019), which would put some serious pressure on state budgets.  It would change a program aimed mostly at children, people with disabilities and elderly nursing home residents into one that includes more low-income parents and, for the first time in 45 states, adults without children. As the USA Today says, there are three big questions here.

First, can states afford it?

“The federal government paid $258 billion for Medicaid in 2009, about 57% of total costs, but would pay 90% of the expansion. States would pay about $33 billion, according to the Congressional Budget Office.  “If you go to the store and the shoes are 90% off, it doesn’t matter if you can’t afford the 10%,” says Alan Weil of the National Academy for State Health Policy.”

Second, can states handle the expansion? AKA can their ancient computer systems even handle changing eligibility requirements?  That’d be a problem for sure.

Finally, will their be enough doctors?  For this question, refer to my first brieing on the doctor shortage!

So… these topics really did come full circle. In writing these pieces, I realized that all the topics are incredibly interrelated.  It’s been great to have an opportunity to look at each topic in depth, but when I step back I can definitely see where the big questions are, as far as cost-containment, sustainability, the Democratic party trying to get things done, and many, many stakeholders pushing back.  It’s really fascinating.

Thanks again for reading!!!


Medicaid – You already pay for it, and soon you might pay more…

•October 19, 2009 • Leave a Comment

If you’re a Volvo-driving, yoga-practicing, latte-sipping, NPR-listening San Franciscan like myself, then you know what it’s like to contemplate California’s fiscal crisis every morning on the way to work.  This is a joke, but kind of not really.  I live really well, but its unreal how badly much of this state is struggling to get by.  I volunteer with kids who receive state services, but it’s not like they talk to me about it.  One thing I heard frequently, but rarely contemplated before taking this class, is how Medicaid interacts with each state and how important it is that the funding make ends meet for the program.  In California, the Governator and state lawmakers had to make major, major cuts to services like Medicaid (which they call MediCal) to help close the deficit.  However, it’s not just California — this problem is felt all over the country (that’s you CT, MD, and DC).

Background on Medicaid:

The Medicaid program provides healthcare coverage for the poor and the disabled, and the federal government splits the cost with states; but states largely decide who and what services are covered.  Karen Tumulty is covering health care reform for “Time” magazine. She says many people don’t really understand Medicaid. “The Medicaid program was established back in the 1960s, right alongside the Medicare program; but people really don’t understand what it is, said Tumuly. “They think it’s a health care program for the poor; but the fact is that in many, many states, to qualify for Medicaid you have to be poor and something else. You have to be poor and disabled; you have to be poor and pregnant; poor and elderly; or poor and with children.

MediCal in California has almost 7 million enrollees, making it the nations largest Medicaid program.  Like every state, costs are split with the government in varying proportions, and in California’s case 50-50.  On average, the federal government pays 57 percent. The state will spent $11B on the program this year, making it the biggest item in the state’s entire budget.

I could research and write volumes about California’s problems, but instead here I’ll just focus on the macro issue and what some legislators are perhaps overlooking.

First, the good things about Medicaid:

Medicaid is already serving more than 60 million Americans and, depending upon the trajectories of unemployment and health care reform, could hit 100 million in the next decade. It’s a major market leader, and has tremendous purchasing power. As the Health Affairs Blog says, “Medicaid expansion is less expensive (both to government and to the beneficiaries) than subsidized private coverage, and also generally better for the beneficiaries (who get access to more preventive services and prescription drugs). The flexible, state-based variation inherent, by design, in Medicaid programs may minimize the anti-big government argument of some reform opponents. These factors explain why Medicaid enrollment has grown far faster than Medicare’s, even though it is Medicare that has been long touted as the presumed path to universal coverage.”

Medicaid already works to cover the uninsured, records performance and outcomes metrics which can be used as a data mine, reduces racial and ethnic disparities.  In other words, it’s not all bad.  It’s probably true that the costs of expanding Medicaid is peanuts compared to the overall health care cost increases we as a nation are facing….  plus the safety net is a good thing and VERY important to a lot of people, but can the reform bill expand it in a fair and sustainable way?

2009 So Far and Medicaid:

Today, nearing the end of 2009, Medicaid in many states is running on fumes and stimulus dollars.  Typically Medicaid programs are funded by taxes, and as we know tax revenue declined this year with the loss of jobs.  (In California this was magnified because we tax the highest earners the most, and since this recession affected everyone including high-wage industries, we lost a LOT.)  When cuts need to be made, states usually trim or freeze the rates doctors are paid to see Medicaid patients, and restrict their benefits, like doing away with dental care.

States are freaking out a little right now because as the federal stimulus funds run out at the end of next year, more cuts will likely have to be made.  A report by the Kaiser Family Foundation released on Sept. 30 said, Medicaid enrollment grew by 5.4% in fiscal 2009 — the highest rate in six years — while total program spending increased by 7.9%, the fastest pace in five years. Meanwhile, state revenues plummeted: Tax collections dropped by 16.6% in the 12 months leading up to June 2009, according to U.S. Census Bureau statistics. This contributed to a 6.3% decline in the state portion of Medicaid spending — the first in the program’s history.”

Although legislatures have closed billions in budget gaps, they could face combined deficits of $350 billion in their 2010 and 2011 budgets, according to Robin Rudowitz, principal policy analyst for the Kaiser Commission on Medicaid and the Uninsured.

Health Care Reform and Medicaid:

As we know, the central tenet of this year’s health care reform proposals is to expand access to health coverage and health care.  Health reform proposals in both the House and Senate would expand Medicaid by allowing anyone who makes less than $14,000 per year (133% of the federal poverty line to sign up. Currently the threshold is $10,830.  According to the San Jose Mercury News, “The governor’s staff estimates that Medi-Cal rolls could jump by 1.6 million as a result; nationwide, 11 million new people are expected to sign up for Medicaid if either of the Democratic proposals becomes law, according to the nonpartisan Congressional Budget Office.”

The House bill would pay for the expansion using only federal funds, but the pending Senate bill would provide less federal support to states.  In fact, it would actually penalize states that have already enacted Medicaid expansions, by providing them less money.  One of the reasons the Senate Finance bill is less expensive than some of the prior versions is because the Senate Finance Committee chose to push more of the costs onto the states.

Because states have to balance their budgets each year, this is a big freaking deal.  It will likely result in higher state income, sales, and property taxes, which will have a disproportionate impact on the middle class.

The state of Tennessee has estimated the bill would add about $1 billion in extra Medicaid costs for the first five years after expansion, while California has estimated the expansion could cost around $8 billion each year.  With numbers in the trillions being thrown around left and right, a billion or $8 billion might not sound like a lot, but for a state that has to get back to zero each and every year, it really is.

When states get less money through state taxes, federal funds dry up, AND more people enroll, the only thing they can do is cut benefits.  When benefits can’t be cut any further, the only thing they can do is reduce what doctor’s are paid.  As a result, as the “Health Care Policy and Marketplace Blog” says, “Lower income residents had greater difficulty finding a physician, according to the study, as 24% of residents enrolled in state-subsidized health plans were told a doctor didn’t accept their insurance, compared with 7% of residents with private coverage. So while the legislation may be successful in adding 10 million people to the Medicaid rolls, it isn’t clear that physicians have the capacity and willingness to serve all the newly insured members, particularly if they are being paid at Medicaid reimbursement rates.”

The middle class, who will be shouldered with having to pay for a big part of this expansion, don’t really have a voice in the discussion.  What about the states?  The National Governor’s Association speaks for them, and predictibly this organization spends a lot of time talking about Medicaid.  Here’s their policy statement:

Governors believe that a national strategy for sustainable financing of long-term care services and supports for elderly and people with disabilities, regardless of income, must be developed. The absence of any national strategy has thrust the responsibility to states and to the Medicaid program specifically. Enhancing the quality of care and containing costs are also critically important. Governors believe that Medicaid reform must be driven by good public policy.

In other words, please ensure stability and enact a secure long-term financing mechanism so at the very least, we know what to expect.  You can read this NY Times article to see quotes from both Democratic and Republican governors, but basically both sides of the aisle think this is a heinous solution.  The Merc (you probably don’t even know what that is) says that, “Congressional leaders say they’re mindful of the problem, although they’re caught between competing imperatives: ensuring that health care reform doesn’t add to the deficit but doing so in a way that doesn’t heap unfair costs on states and individuals.”   Anyway, it’s a damn good thing for Congress that the governors don’t vote for bills!

BTW: If you can find me a Republican alternative iea related to Medicaid, I’ll be really pumped.  All I can find is suggestions to retract Medicaid and provide discounts and subsidies for private insurance for poor people, reserving Medicaid for the blind and disabled.

What the Outcome might look like:

The final bill will probably have some expanded federal assistance for the Medicaid expansion, but some states will get more than others and after about 5 years all states will be forced to take on the majority of the burden.  Barbara Boxer, clearly very aware that she  is facing a big election next year, has a little extra incentive to remember her constituents.  She said in a statement last week that she received a verbal commitment from Senate Majority Leader Harry Reid that California would be included among a handful of “high need” states when it comes to Medicaid costs stemming from health care reform.  This agreement would be great if it holds up.  It doesn’t say much for the other states however… we shall see….

The Individual Mandate

•October 6, 2009 • Leave a Comment

The theme for this posting is “Please Forgive My Negativity.”

My goal is to discuss the voluntary uninsured and the individual mandate without getting into a values and “rights” debate with myself because honestly, this topic is one thing that really makes my head spin.  I hate it, but I also think that current coverage of this issue is totally missing the point.  (See this article).

I’m writing this while sitting in a middle seat on a plane at the gate at Logan Airport, where we’ve been waiting for the past 90 minutes because of a broken light bulb in the Exit sign, so I’ll probably be more cynical than usual.  However, I will make an effort…

Most serious policy people agree that absent a single-payer health care system, you can’t have universal coverage without an individual mandate to have insurance. In the case of the Senate Finance bill, it will either be through the workplace (supposedly) or through an open-market “exchange” which the government would regulate.  In order to coerce or provide motivation for individuals to shell out money for insurance, the federal government will lord over them a fee for noncompliance (details of which are being figured out).  The Daily Kos actually has a pretty good but out-dated pros/cons discussion of the mandate here.  The essence of it is that “The individual mandate would require that everyone carry some kind of minimal, catastrophic insurance aimed at preventing these kinds of unpayable medical bills when the unthinkable happens, from a split-second automobile accident to a previously undetected cancer.”

The House Bill calls for a penalty of a 2.5% additional tax on income.  The Senate HELP Committee and House bill would both impose a mandate on employers to provide coverage.  The Senate Finance Committee bill would fine families depending on their income.

If implemented, this would bring a large percentage of the 47 million uninsured into the insurance market, providing a boon to the insurance industry.  In exchange, the insurance companies will adopt less discriminatory ratings practices.  Over in her own world is Senator Olympia Snowe (R-ME).  She believes that insurance companies should be forced to adopt nondiscriminatory practices (i.e. no pre-existing conditions as part of rating) without having any fees at all for people who choose not to have insurance.

The reason this is straight impossible is that insurance companies operate for profit. If they have to accept people blindly, whether or not they have a history of getting admitted to hospitals 3 times a year, they are probably going to take a financial hit for it.  Because they are in business for $$, they either need a guarantee of more money in the pay-out pot (through the coverage mandate) or they will raise the rates on the rest of us.  If this ends up happening, now you know which Senator to call…

While conservatives are busy shouting “Keep the government out of my health care!” the non-partisan Urban Institute is saying that the “evidence is strong that voluntary measures alone would leave large numbers of people uninsured.  Voluntary measures would tend to enroll disproportionate numbers of individuals with higher-cost health problems, creating high premiums and instability in the insurance pool in which they are enrolled, unless further government subsidization is provided.”  Fine Print: Higher Taxes.

Did you say TAXES?!
Yes, and speaking of which, George Stephan-helmethair-opolous tried valiantly to get the President to agree that the individual mandate in the Senate Finance Bill is, in practice, a tax.  The President told Stephanopolous that “That’s not true.  For us to say that you’ve got to take responsibility to get health insurance is absolutely not a tax increase.”  GS came back with a Webster’s definition of a tax – “a charge, usually of money, imposed by authority on persons or property for public purposes.”  Without getting into the definition of what “is” is, let’s just say that this side-debate, along with Georgia Republican Phil Gringrey’s assertion the other day that a mandate is just plain unconstitutional, may present some political and judicial problems down the line.

The President is trying to accomplish universal coverage, but can’t do it with single-payer, and since he made a campaign pledge not to raise taxes on low and mid-income earners, in the eyes of many he also can’t do it with an individual mandate.  This is Quagmire Number One.

Quagmire Number Two is what to do about the evidence that an individual mandate might not be feasible or solve all our problems anyway. As Michael Cannon at the CATO Institute says, “Evidence from state experiments with individual mandates – Massachusetts, in particular-suggests that people will still forgo insurance…. If you want to eliminate free riding, an individual mandate won’t get you there.” This guy is a pretty hardcore Libertarian, I’ll admit, but he does have a point.  An AP Story this morning makes the situation clear:

“Determined to get as many people as possible covered, lawmakers first proposed fines of as much as $3,800 per family for health insurance scofflaws. But they have been steadily scaling back the penalties, with the Senate Finance Committee last week dropping them to $1,500 maximum per family in their version of a health care bill. The committee also phased the penalties in over five years with no fines at all in the first year and eliminated all criminal and most civil punishments for failure to pay.

The industry — counting on millions of more Americans buying insurance — says the penalties are now so weak they practically beg to be ignored. The result, the companies warn, is that people would wait until they get sick to buy coverage. That would raise premiums for everyone else, since Congress’ health care overhaul would also require insurers to take all applicants.”

Quagmire Number Three is introduced in the form of what happens if there IS an individual mandate.  Two not so good things:

1. The government will have to create a “minimum benefits package” so that the uninsured won’t go get a $20 plan that covers bandaids and nothing else, and call it a day.  This package will be seen as a big opportunity for special interests (e.g. pharma, physicians, hospitals).  I heard recently that more and more government affairs professionals in DC are being corporately classified as business development associates.  Makes a lot of sense!

Anyway, this minimum benefits package probably won’t be small, and could potentially drive up premium costs.  This would definitely be counterproductive to easing the burden.

2. If an employer knows that you, as an individual, can buy insurance on an exchange, they might dump you (don’t take it personally), and get out of the health care business all together.  This issue would necessitate an employer mandate, stipulating that your boss must continue to provide coverage unless it’s truly financially prohibitive.  Employer mandates are tough territory because they put small businesses at a competitive disadvantage to larger ones who have lots of bargaining power and a larger pool to bring down rates.

So Obama is facing some really ugly decisions.  The essence of public policy is that not everybody is happy, but in this case it’s not clear anyone will be happy, except maybe the Senators that get elected to replace the ones who got caught on the wrong side of too many interest groups.

Backing up a minute, let’s look at who is actually voluntarily uninsured anyway. The answer is that they’re out there, but no one knows exactly how many could afford coverage if they wanted it, and who would be worse off if they had to shoulder this extra monthly bill.  As an NPR segment on Sunday said, “An Employment Policies Institute study found that 43 % of the uninsured – about 20 million people – earn more than 2.5 times the federal poverty level… Though some uninsured people may appear well-to-do on paper, other factors could still push insurance costs out of reach.  Around 7.5 million uninsured Americans have family incomes higher than $75,000 but premiums might be high because of health status, age, cost of living, and geography.”

Regarding the “young invincibles,” they too are out there, but it’s not clear how many could have it through their employer if they wanted it, and how many would be joining this individual market.

Dr. Jane O’Neill, who was the head of the Congressional Budget Office in the late 90’s coauthored the EPI report mentioned above.  She says: “We urge policymakers not to rush the healthcare debate.  This study shows that we need to better understand America’s uninsured population and the factors affecting both coverage and access to care.” Her point is that information that this study presents is valuable and could be useful in designing a targeted, state-by-state approach to increasing access.

While slowing down the process isn’t an option here, at the risk of editorializing, I have to say that she may be right.

Without either a) a conversion to single-payer or b) a full-blown market-driven, transparency-all-the-way approach, the individual mandate seems to highlight problems with the current system instead of changing it. It’ll be interesting to see how this unfolds.  Rumors are floating that Obama is still secretly lobbying for a public option in the Senate bill, which would purportedly bring down premium costs.  Senators might not be as easily intimidated by Rahm Emanuel as Members of the House are though, so we’ll see.

It’s hard to be positive or even neutral about a political situation and a supposed policy solution that are both so bad.  If the individual mandate can’t hold this deal together though, I’m not sure what else can.

If you read this far, I’m ridiculously impressed.  Thanks!

What is MedPAC and Why Should You Care?

•September 29, 2009 • Leave a Comment

MedPAC: It stands for Medicare Payment Advisory Commission; an independent body set up by Congress in 1997 (a Republican Congress) to monitor the Medicare, a federal insurance program. The 17-member MedPAC makes recommendations to Congress about how much doctors and hospitals should be paid for the services they provide. These are the people telling us that Medicare paid 14% less than the Medicare Advantage plans you keep hearing about.
Who are they?

Meet them here:

More about them?

Currently, Congress decides what Medicare will pay hospitals and health care providers, and then puts it in law.  To find advice on the often complex policy, Congress created MedPAC. Ezra Klein of the WaPo explained it pretty well:  “The commission is staffed by experts who are appointed for three-year terms, and its existence is due to a simple insight: Medicare payment policy is too technical for the Congress. There aren’t five senators with an informed opinion on the “equipment use standard” for imaging machines, much less 50, and much less 100.”

So in other words, MedPAC makes recommendations to Congress but cannot directly affect what Medicare does. Between the time when MedPAC makes their recommendations and Congress writes and passes laws, lawmakers sometimes decide they don’t want to heed the suggestions (potentially sometimes perhaps influenced by lobbyists and campaign contributors?? More on that later.)

To recap some stuff about Medicare you might already have heard, Medicare is generally a fee-for-service program, meaning that physicians and hospitals bill the government for each individual service they provide to Medicare beneficiaries. This unfortunately creates a perverse incentive for doctors and hospitals to conduct more tests and procedures than might be necessary. The fee-for-service model is commonly criticized as a large reason that Medicare spending is rising unsustainably.

In many ways MedPAC can be seen as paving the way for reforms.  They are the ones who suggested pursuing comparative effectiveness research; encouraging primary care by raising fees for family doctors and  other generalists; lowering fees for some specialists; and refusing to cover products and services unless we have medical evidence that they are effective. The Obama Administration is taking MedPAC’s recommendations to heart, and Democrats in Congress see the link between Medicare reform and national health care reform.  Recently they took some time to consider testimony and deliberate on the Primary Care physican shortage that I talked about two weeks ago (×800)

Most academics and policy experts agree that MedPAC knows what it’s talking about at least some of the time… the real problem is translating that into real change, and getting it past vocal and powerful interest groups.

For example, due to an increased visibility on the huge Medicare costs in places like McAllen Texas, MedPAC recommended accelerated cuts to home health spending in 2010.  This is really upsetting the National Association for Home Care and Hospice.  Read about it here:

Additionally, MedPAC is suggesting that there be cuts in payments to Medicare Advantage plans (the subsidized private plans that Medicare beneficiaries can opt for instead of the government-sponsored Medicare coverage. MedPAC says, “Although plans are being paid more, the extra payments do not necessarily result in higher quality of care.” It recommends that Congress “level the playing field” by paying private plans the same it would cost them to offer a comparable plan. Dealing with this issue is proving to be a real stumbling block and obstacle for both the President and Congress. (Read a great oped about this from today in USA Today of all places:

Piggy-backing on Atul Gawande’s work (, yesterday, the Government Accountability Office (the GAO) issued a report finding that over-prescription of some medical costs are inexplicably higher in some regions of the country.  “[C]ertain types of physician services, such as advanced imaging and minor procedures, are performed more frequently in potentially overserved areas relative to other areas, suggesting differences in physician practice patterns,” GAO found. Senator Baucus has been taking notes.  He says, “The potential abuse and excessive spending revealed in this report is further evidence the status quo of rising health care costs is unacceptable for America’s seniors and the long-term fiscal health of the Medicare program.”

What’s the Solution?

In response to this looming crisis, proposed pieces of legislation have toyed with the idea of building out the capabilities and authority of MedPAC.  Baucus’ proposal is to establish a *new* independent Medicare advisory committee that would have the authority to put these recommendations into policy.   As Maggie Mahar says, “Some have called the advisory committee a MedPAC on steroids (with steroids meaning actual authority to influence Medicare policy).”  In this way, Obama says, ‘MedPAC’s recommendations on cost reductions would be adopted unless opposed by a joint resolution of the Congress.’ and Baucus views it as one of the key provisions that will actually help bend the cost curve over the long run.”

The new commission would do much of the work Congress now does in figuring out both the best way and how much Medicare should pay providers.  In limiting Congress’ role, it would take on some serious influence in its own roles and duties.

For example, it would send proposals to Congress to reduce Medicare spending by targeted amounts if its costs rose faster than the Consumer Price Index (CPI). Congress could then approve the commission proposals, amend them or develop their own as long as they remained under the spending targets.  These spending targets get more and more difficult to meet every few years.  This is a very controversial issue. One thing I can attest to: biotech, pharma and medical device companies haaaaate this.

The HealthBeatBlog said, “These are exactly the radical but truthful recommendations that would make any well-paid health care lobbyist shudder.  No wonder the Bush administration ignored MedPac’s advice for eight years.” Republicans on the Senate Finance Committee tried to get through an Amendment to the reform bill that would eliminate any potential for the Commission to be created, but it got shot down last week.

In Conclusion….

The Commission, as it exists now, is supposed to be independent, and if their mission is altered into actually implementing their recommendations, and ensuring that Medicare become sustainable, then its role is going to become more public and crucial over time, and therefore vulnerable to political pressure.

Congress seems to have realized that they can’t continue to be influenced so blatantly and transparently… and plus this whole reform thing is way above their pay grade.  Why put themselves at political risk when they can hand of the responsibly of making difficult cuts to guys with PhD’s and JDs?  It’s going to get ugly, and they don’t want to be in the middle of it.

Here’s the thing.  Even if this commission doesn’t end up happening, not many people believe that Medicare spending has any chance of being defeated.  Some might say it’s just a matter of time before Medicare faces funding cuts of unprecedented levels.  The MedPAC we know today is a pretty interesting group, and they are worth paying attention to.  However, the MedPAC of 5 years from now could be a whole lot more interesting, public and powerful.

The Mayo Model: So Hot Right Now

•September 22, 2009 • Leave a Comment

The Mayo Clinic is something that everyone knows about, because they have great brand recognition, and lately has won lots of praise for delivering high quality and low cost care. It seems like they’ve been putting this great brand to use, and have been generating a lot of buzz. If you aren’t familiar, Mayo is a large Minnesota group practice in which physicians are on salary — President Barack Obama frequently singles out the Mayo Clinic as an example of quality, cost-effective health care.
Last week I was talking with Jeff about health care reform and in between asking me to “Please, let’s talk about something else,” he did ask me a great question about why integrated systems weren’t already being widely adopted, if they are so great like everyone claims. I think I said something weak and predictable, like “special interests” resisting it, but decided that there was probably a deeper, more accurate answer..

Background on Mayo and their Model

The Mayo Clinic, Kaiser Permanente, the Cleveland Clinic and the Veterans Administration are all examples of Accountable Care Organizations (ACOs). These are care providers that follow the philosophy salaried care with emphasis on results, as opposed to fee-for-service pay¬ments to physicians, will lead not only to lower medical costs, but higher quality of care. They often use electronic medical records in order to better achieve integrated, collaborative care. “The Mayo Clinic in Rochester, Minn., is famous for some of the best quality and some of the lowest cost,” Obama said in a June speech. “People are healthier coming out of there, they do great.”

A lot of experts are convinced that the Mayo model will solve problems not only of how care is paid for, but also in how people receive it. Doctors get to practice real medicine, profits are made from keeping people healthy, and there are incentives to improve outcomes.

Mayo and Cost Containment

If you have not read “The Cost Conundrum” by Atul Gawande in The New Yorker, you’ve likely at least heard about it. If you work in the White House, apparently it is required reading these days. This article, along with Mayo’s increasingly loud voice in the debate, drives home the point that many people believe over-utilization is the most crucial issue in health care reform. If, as Dr. Gawande indirectly suggests, over-utilization is a big part of the problem, then a solution would be to support companies like Mayo that eliminate incentives to over-treat.

In fact, Mayo and others like it do claim to address this issue by creating economic incentives for favorable patient outcomes. In most health care settings, doctors are paid for how many tests they run, how many surgical procedures they do or how many patients they see. Mayo doctors, however, are salaried employees. This counters the reality that doctors are players in the health care market, maximizing their profit margins like most other professionals. Accountable Care Organizations, by definition, address these financial conflicts of interest by linking payments to the quality and utilization of health services. (This article talks ALL about ACOs:

Reinforcing this assertion, Mayo surgeon Dana Thompson said in an ABC News interview, “I’m not figuring out how do I work most efficiently to get the most out of reimbursement. I’m working most efficiently to figure what are the needs of the patient and delivering quality care.”

Where is the Dispute?

This weekend, The Washington Post did a whole “deep-dive” piece on the Mayo Clinic.

“Few dispute the prowess of Mayo, which brings in $9 billion in revenue a year and hosts 250 surgeries a day. But a battle is underway among health-care experts and lawmakers over whether its success can be so easily replicated. Before embracing a fundamentally new approach to health care, dissenting experts and lawmakers say, Congress should scrutinize the assumption that a Mayo-type model is the answer.

“It is a disparate group of skeptics that is taking on the Mayo mystique: federal health policy analysts, medical administrators and lawmakers in districts that would be hurt by the proposed Medicare reforms, and an informal network of health-care experts.”

Claim: Some people who believe that health care should not be a business (aka single-payer advocates) say that Mayo’s outcomes are due largely to its healthy, wealthy and racially homogenous Midwestern patients.

Response: To rebut this assertion, the Dartmouth Professor published a piece in the New England Journal of Medicine stating that poverty and health status accounted for only about a third of the spending disparities among communities. Mayo also says that Wisconsin, Iowa, and Minnesota residents really aren’t all that healthy, so its not as though the network doesn’t face challenges and obstacles in health care delivery.

Claim: Kaiser Health News says, “It limits the number of procedures it performs per patient, but the rates it charges private insurers and self-paying patients is higher than average, allowing it to thrive despite the lower Medicare spending cited by its supporters.” Translation: It may reduce spending on some fronts, by not totally ripping off Medicare like many other hospitals, but private insurers still get charged a lot, which are costs they would pass on to citizens/employers/individuals.

Response: The models’ leaders say they charge their private payers so much because they are shortchanged by Medicare’s regional formulas. They threaten that if the government allows a “public option” modeled after Medicare, the country will go bankrupt over night (source: Mayo CEO on NPR this morning). This should be no surprise, since Mayo loses hundreds of millions of dollars each year on Medicare patients, because gov’t negotiated rates are “below market.” A person debating this point might say that if Mayo didn’t invest in so much infrastructure and fancy buildings, they wouldn’t need to recoup such high profits on their treatment.

Mayo in DC

Last week, 28 senators led by Minnesota’s Democratic Sen. Amy Klobuchar sent a letter to President Obama calling for renewed emphasis on cost-control measures like those used by Mayo, and once opposing “the public option.” Republicans seized on the letter, noting that the public option was opposed even by hospitals Obama had praised as models. “I’m surprised he holds these groups up because you knew they were going to oppose what he was trying to do,” said Rep. Paul D. Ryan (R-Wis.).  Whooaaa…Snap.

The White House and Congress seem to be listening, however. Obama is no longer insisting on a public option. Lawmakers are also tossing around ideas of a “value index” which would pay cost-efficient hospitals the most.
In digging deeper, I looked at Mayo’s health policy website, where they discussed their ideals.
“Require adults to purchase private health insurance for themselves and their families. Employers could continue to participate by buying insurance for their employees or giving them stipends to purchase it. However, the individual would own the insurance.This will allow for:
• Portability: Individuals could take their insurance to their next job or perhaps even into retirement.
• Choice and control: Individual ownership would allow health insurance to evolve into a service that gives patients more control and choice.”

This sounds a lot like something Senator Ron Wyden would support. Like Mayo, Wyden is also a hot topic in DC these days. He is a Democratic Senator from Oregon on the Senate Finance Committee who wrote a bill with Senator Bennett (R-UT), which is the only truly bipartisan health care reform bill. No one is suggesting this bill would directly be put into law, but Wyden has taken elements of this bill and created an amendment to the Baucus bill, called the Free Choice Proposal. He met with Obama to discuss his ideas last Wednesday, just hours after Baucus unveiled his proposal to extremely lukewarm reception.

The long-and-short of Wyden’s proposal is that people wouldn’t have to accept their employer’s insurance if they weren’t given any other option. If employers only offer one plan, people could go buy their own. Sure enough, Wyden says that under his proposal, “To stay competitive, insurers would need to follow the example of places like the Mayo Clinic and offer good, low-cost coverage.” (Read Wyden’s reasoning here in this op-ed:

Looks like an alliance of ideas here… Wyden and Mayo’s influence seems to be on the rise.

Okaaayy soooo, what’s the real risk of Mayo-type orgs being everywhere?

These networks of hospitals and clinics’ dominance in regional markets is also allowing them dominance in negotiating prices from insurers. This could mean that any savings could be canceled out by higher rates the networks could charge insurers, which would be passed on to beneficiaries like you and me. In fact, a 2005 study of federal employee insurance by the Government Accountability Office found that Wisconsin cities such as La Crosse were charging insurers the highest rates.

NPR’s Linda Wertheimer interviewed Mayo Clinic President and CEO Denis Cortese. Yes, he says, the Mayo model “is transportable–with difficulty.” The key ingredient is instilling a culture among physicians that puts the needs of patients first, he says. (Listen to the NPR story here:

In conclusion, Mayo thrives because of the current system — they have a strong market for people who are willing to pay out of pocket or incur high charges for good outcomes, to offset their unprofitable Medicare patients. Their business interest is in having an individual mandate where everyone is required to purchase insurance in the open market. Expanding the nations safety net worries them, because this would mean more people who are tied to low reimbursement rates, which would lead to higher charges for privately insured patients, which would disrupt their competitive advantage. Bringing everyone into their system might not work, but there are elements of their approach that will probably be lifted.

The Primary Care Doc Shortage

•September 22, 2009 • Leave a Comment

One thing that Republicans, Democrats, and the Administration all seem to agree on is that Bruce Springsteen truly is the one and only Boss (just for you, Mom)…

And also that in order to support America’s health care needs substantially more primary care and family physicians will be needed. Politically it’s an easy and benign thing to say, and that doing something about the shortage is a much more controversial and political process.
Measures in health reform bills currently under consideration in Congress include:
• Income-related premium assistance for individuals living at up to three or four times the federal poverty level.
• The expansion of Medicaid for those at 133 to 150 percent of the poverty level.
• Shared employer responsibility for financing coverage for workers, with assistance provided to small businesses
About 10 million people would newly enroll in Medicaid, with most of those individuals previously lacking any coverage. Additionally, Senator Baucus set forth his proposal last week, which stipulates that “All plans sold to individuals and small businesses would have to cover basic benefits, including primary care, hospitalization and prescription drugs.”

TRANSLATION OF ALL THIS: LOTS MORE PEOPLE WHO WANT CHECK-UPS. LOTS. What is the first thing you do when you get a brand new Golden Ticket for comprehensive care? You go get all aches and pains you’ve been self-medicating or ignoring for years treated at your new primary care doctor. If you can find one. According to a report by the California Healthcare Foundation, the state overall has fewer primary care doctors than needed. California, for example, has 59 primary care doctors per 100,000 active patients, but studies say 60 to 80 are needed.

Massachusetts is also already facing this problem. Reading this NY Times Blog piece yesterday can tell you all about it. As Massachusetts’ experience shows, extending health care to 50 million uninsured Americans will only further stress the system and could force many of those newly insured back into costly emergency rooms for routine care if they can’t find a primary care doctor. According to Dr. Ted Epperly, president of the Kansas-based American Academy of Family Physicians. “It’s like giving everyone free bus passes, but there are only two buses.”

Why doesn’t anyone want to be a primary care physician? (Ali D, we’re all looking at YOU…Just kidding…)

Washington Post writer Ashley Halsey wrote a piece yesterday, “Primary-Care Doctor Shortage May Undermine Reform Efforts,” in which she pointed out that fixing the problem will require fundamental changes in medical education and compensation. Some people (Republicans) will stress that it’s hard to make money in primary care because of the cost of malpractice insurance. This is part of the problem, but it’s another issue for another day. Another less refutable cause is, as Halsey reports, “The disparity results from Medicare-driven compensation that pays more to doctors who do procedures than to those who diagnose illness and dispense prescriptions.” In other words, doctors right now don’t get paid unless they do something to the patient.

President Obama seems to understand, but would rather emphasize the extra-governmental problems. “We’re not producing enough primary-care physicians,” Obama said at a health care forum recently. “The costs of medical education are so high that people feel that they’ve got to specialize. New doctors typically owe more than $140,000 in loans when they graduate.”

If you look at this problem from another angle, there are even more layers of why this is a scary trend. Specialists performing procedures are traditionally reimbursed at a much higher rate than primary-care doctors who rely on reasoning and cognitive skills. In the long run, some would argue that health maintenance, disease prevention, and chronic illness management is where the real medical workforce will be needed. Already, specialists like Orthopedic Surgeons are being displaced by robotic equipment. Doctors may not always be needed for joint replacement, but they will always be needed to diagnose complex diseases involving multiple organ systems.

One doctor in an article in Philadelphia Business Journal says, ““Primary-care doctors feel very much they are at the bottom of the pecking order,” he said. “You also have the hidden curriculum, the neurologist who taps the medical student on the shoulder in a hallway and says, ‘You’re too smart to be in primary care.’”

Possible solutions:

Solution One. Recruiting Primary Care docs from abroad: In its 2006 report on primary-care providers, The US Government Accountability Office said the number of international medical graduates training in primary care had grown from 13,025 in 1995 to 15,565 in 2006.

Solution Two. The Senate Finance Committee bill might have a 5% bonus for reimbursement provided to Primary Care doctors (at the expense of reimbursement for procedures performed by specialsts). Look for a big lobbying fight on this.

Back in January, AMA Board chairman Joseph M. Heyman, MD spoke about this. He said, “We are all on the same page when it comes to investing in primary care in this country. We must present a unified front.” He then lays out their agenda on this issue: “The American Medical Association absolutely supports this important investment in primary care. Payments to primary care physicians must increase. The American Medical Association absolutely opposes applying budget-neutrality rules that confine offsets to the physician payment pool. Congress should not rob Dr. Peter, the surgeon, to pay Dr. Paul, the primary care physician.”

HOWEVER: There is a loop hole here. They could shift payments to primary care functions like prevention and management, but not actually address the cost (i.e. avoid brawling with the AMA). Jeff Goldsmith of Health Futures Inc. says that “Rebalancing Medicare can await the huge Deficit Reduction bill Congress will consider after the Congressional elections in 2010.” (Read his post here.) This is pretty sneaky, but politically it could be just what Democratic leadership is looking for.

Solution Three. The HHS has announced $300 million, to expand the National Health Service Corps, which repays student loans for students dedicated to practicing primary care in communities of greatest need.

Solution Four. Expect also to see doctors push back if Obama’s administration moves forward with a suggestion to allow nurse practitioners and physician assistants to carry out some of the same functions as physicians. Who controls what doctors can do now? Doctors of course. Watch out for AMA, the doctor’s union.

Solution Five. Dr. Georges Benjamin, executive director of the American Public Health Association says that another way to expand primary care is to have some specialists provide the equivalent of primary care. For example, he said obstetrician-gynecologists essentially serve as primary care physicians for many women — a model that could be used for patients who rely on other specialists. This does not actually address the problem however, because OB/GYN’s face shortages as well.


•September 22, 2009 • Leave a Comment

Getting decent information from the news is NOT EASY.  However, there are some really serious proposals under consideration, all having nothing to do with “death panels” or which are not being highlighted in regular media coverage.  My hope is to provide some small amount of insight into 1-2 issues a week that you maybe heard about in passing, but which could have powerful and lasting effects on our Nation, and on our ability to quit being health care underachievers (you can’t argue with this).

What’s your bias?

While I like what I do professionally, and my personal bias is towards disruptive, innovative solutions and deregulation over time, I know there are very, VERY smart people out there who passionately believe otherwise. I am a “decline-to-state” voter (you seriously don’t want to know what the Independent Party really is in California…).  I find myself persuaded by both sides of many arguments.

This year’s reform is a pretty rowdy little sh*tstorm, so I thought I’d give myself a break from just repeating the industry lines for a while, and take some time to understand the other 80 sides of the coin.

Hope this is helpful and at least mildly interesting.