Highlights from the Reconciliation Bill, and Maggie’s Comments on the Changes

Overall, the changes in the reconciliation bill will make the Senate bill more progressive—and fairer.

My prediction: the bill will pass. Those who oppose universal coverage are becoming angrier, louder, more abusive, and more frantic. This is because they realize that they are losing, and now they are just flailing about.

This evening (Thursday) I heard Bart Stupak acknowledge, on “Hardball with Chris Matthews”, that while the Democrats may not have the votes today, by Sunday, they could well have them. On this, I agree with Stupak.

Below, the details of the new bill, and my comments in red.

Under the new reconciliation bill:

• Low-income and middle-income families will have an easier time affording premiums. The tax credits for health insurance premiums are more generous for individuals and families with incomes between 250% and 400% of the federal poverty level (FPL)—i.e.  individuals earning less than $41,500,  or a family of three earning less than $70,400. When compared to the Senate bill, the legislation also cuts cost-sharing for individuals and families with incomes between 100% and 250% FPL.

Comment:  Research shows  that when a low-income family of four (for instance a family earning less than $22,000) is required to share in health care costs, too often they delay needed care.  For these families, even a $15 co-pay can be a barrier. Fifteen dollars will buy groceries for two dinners for a family of four (e.g. spaghetti with tomato sauce and bread).  Middle-income families who don’t have help from an employer also need the higher subsidies that the new bill provides.

• Six months after the bill is enacted, all existing health insurance plans are prohibited from imposing life-time limits on payouts or refusing to cover children suffering from pre-existing conditions.   Excessive waiting periods before insurance kicks in also will be banned, and insurers will be required to provide coverage for non-dependent children up to age 26 on their parent’s polices.  (Parents will pay extra for the coverage, but adult children will get better deals than many would on their own.) Beginning in 2014, group health plans will no longer be able to exclude adults based on pre-existing conditions. Annual limits on how much an insurer will pay out will be restricted beginning six months after enactment, and prohibited starting in 2014.

Comment: Limits on how much insurers will pay out annually or over a lifetime can condemn individuals to death. If you have the bad luck to be diagnosed with a very expensive disease that might require years of pricey treatments (MS for example, or childhood cancers) your insurance can easily “max out”—even though treatment that might cure you (in the case of some childhood cancers where we have been making great progress)-- or at least give you many additional years of life.

• The “Cadillac Tax” on expensive health insurance plans has been pushed back five years and won’t go into effect until 2018. The thresholds also have been raised: the tax will apply only to individual plans that cost $10,200 or more (up from $8,500) or family plans that fetch $25,500 (up from $23,000). Dental and vision plans would not be included.  Under the new bill, there is no special deal for unions.

Comment:  In my view, this is a positive change. As I have argued in the past, the Cadillac tax could hit middle-income families.

• While the Cadillac tax is rolled back, the Medicare tax for wealthy individuals earning over $200,000 and married couples who earn over $250,000 rises.  Today, they pay a 1.45% payroll tax on wages. The Senate bill would raise that tax to 2.35%. The reconciliation bill expands the tax to include investment income (dividends, capital gains, etc.) as well as earned income. It still applies only to individuals who show income over $200,000 and couples who report income over $250,000.

Comment:  This tax makes up for the cut-back and push-back on the Cadillac tax. In contrast to the Cadillac tax , this tax is limited to those at the very top of the income ladder. Unlike the middle-class, those earning over $200,000  have  enjoyed significant tax breaks and income hikes in recent years. They are in a much better position to afford the increase. It’s worth noting that other countries tax investment income to help fund healthcare.

Complaints about Medicare Advantage Mount...While Congress Contemplates Slashing Fees Traditional Medicare Pays Docs

Recently I argued that eliminating the private insurance industry would not suddenly make health care affordable. But this is no reason to gratuitously overpay private insurers to provide health care to Medicare patients—while simultaneously planning to slash the fees that Medicare pays physicians.

Begin with the insurers. When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly.  Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.

Why the sweetener?  Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program.  Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare.  And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less.  This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.

Predictably, private insurers structured their plans to siphon off the healthiest seniors.  In New York City, for example, Oxford included free memberships to some pretty posh gyms as part of the package. They called it the “Silver Sneakers” program. Unfortunately, a year after seniors signed up they discovered that the number of gyms involved in the program had suddenly shrunk. The options that remained weren’t nearly as tony, and most were no longer located in upper-middle-class residential neighborhoods. Is this “bait-and-switch”? You decide.

Health Care Spending: The Basics

 

JUST HOW MUCH DO PRIVATE INSURERS ADD TO THE NATION'S HEALTH CARE BILL?

As a nation, we are spending well over $2 trillion a year on health care. This includes: all of the money that you and I pay out-of pocket to cover co-pays, deductibles and drugs; the dollars that you and I (and our employers) fork over for private insurance; the money Medicare, Medicaid and SCHIP lay out to reimburse doctors, hospitals and patients; the billions taxpayers chip in to fund veterans’ health programs, public hospitals, school programs, and health insurance for government employees as well as the money private charities contribute to health care.

What exactly are we paying for? How much of that money is used to pay the CEOs of drug companies salaries that read like telephone numbers? How much do hospitals eat up?  How much is spent on insurance company ads? How much is used to provide healthcare for the poor?

I’ve decided to do a series of posts spelling out exactly where the money goes. Today, I’m going to start with private insurance.

Many people believe that if we just eliminated the private insurance industry, healthcare would become much more affordable. There is a general sense that the “administrative costs” of private insurance are siphoning off a sizable share of our health care dollars.

There is some truth to that: because we  have  multiple insurers—not to mention so many solo practitioners, small hospitals, clinics, and individuals filing for reimbursement—the paperwork is enormous. If we had only one big insurance company that used just one set of forms we could simplify the paperwork greatly. People who want a “single payer” system, with the government paying all of the bills,  point out that the savings would be enormous.

And we could cut costs even more if, instead of having tens of thousands of health care providers filing for separate reimbursements, doctors, hospitals and clinics joined together into, say, eight our ten large organizations like Kaiser Permanente, each with its own back office.  The doctors would be on salary, so rather than filing for payment for each service they performed, they would receive a monthly check for taking care of their patients, just as they do at Kaiser Permanent or the Mayo Clinic (where doctors are on salary).

In other words, it is not only a fragmented multi-payer insurance industry that generates so much paperwork; on the other side of the transaction a fractured network of separate providers adds to a mind-boggling stack of paper. Unlike most other developed countries, we have turned healthcare into a  cottage industry. This gives us lots of choices: we can select from a Chinese menu of insurance plans and proviers. But it also means higher administrative costs. In this post I would like to focus first on just on how much our huge private insurance industry is costing us. (In a later post, we’ll look at the price we pay for a fee-for-service system of independent providers.)

The New York Times “Gets Cracking” on Rising Health Care Costs

On Sunday the New York Times published an editorial that set out to analyze “The High Cost of Health Care.” The result might best be described as “muddled.”

What is exasperating is that about 85 percent of the facts in the editorial are true. But a good 15 percent are simply wrong.  And the Times’ editors managed to weave truth and error together in such a way that it would take a knitting needle to separate the two. As Matthew Holt put it on The Health Care Blog: “the piece looks entirely as though it was written by a committee that couldn't agree with itself.”

As you read the editorial, you can almost see the editors sitting around a table, negotiating. “Okay,  we’ll let that sentence about the value we’re getting for our dollars stand—as long as well keep this sentence about  ‘skin in the game.’”  The result, a mix of propaganda and analysis, is far more dangerous than outright lies because the many true facts make the whole thing sound credible.   

Because I hate to see our paper of record disseminate disinformation, I am going to try to separate the wheat from the chaff. Begin with the truth: Near the top of the story, under a sub-head that reads “Varied and Deep-Rooted,”  the Times provides a nice summary of the main reasons why we lay out roughly twice as much as the average developed nation, without getting care that is twice as good:

“we pay hospitals and doctors more than most other countries do. We rely more on costly specialists, who overuse advanced technologies, like CT scans and M.R.I. machines, and who resort to costly surgical or medical procedures a lot more than doctors in other countries do. Perverse insurance incentives entice doctors and patients to use expensive medical services more than is warranted. And our fragmented array of insurers and providers eats up a lot of money in administrative costs, marketing expenses and profits that do not afflict government-run systems abroad.”

Spot on. If only this section of the editorial had not begun with a casual half-truth: “Contrary to popular beliefs, this is not a problem driven mainly by the aging of the baby boom generation, or the high cost of prescription drugs, or medical malpractice litigation that spawns defensive medicine.”

They first part of the sentence is correct: the aging of the boomers is not a major cause of health care inflation.  The last clause of the sentence is debatable, though probably true.
What’s troubling is the middle clause:  Why does the Times feel obliged to declare that the “high cost of prescription drugs” is not an important factor behind soaring medical bills?

Conditional Cash Transfers: An Interim Model for Health Care Reform?

This past September, New York City’s Mayor Bloomberg welcomed 5,000 families into the pilot program of Opportunity NYC-- the nation’s first conditional cash transfer (CCT) program. Based on a Mexican program called Oportunidades, CCT programs like Opportunity NYC (ONYC) provide financial incentives for poor households to “meet specific targets” in three areas: education, employment/training, and health.

I recently spoke with Héctor Salazar-Salame, Advisor to the Center for Economic Opportunity, which operates ONYC, about the health components of the program. I wanted to get an idea of the aims and strategy behind ONYC—and also to learn more about CCT as a potential model for thinking strategically about health care reform. 

According to the city’s press release, ONYC’s health incentives will be offered “to maintain adequate health coverage for all children and adults in participant households as well as age-appropriate medical and dental visits for each family member.” In terms of coverage, families can earn “$20 or $50 per adult per month for maintaining health insurance and $20 or $50 for maintaining health insurance for all the children in the family.”

The point is to encourage low-income families to enroll in health insurance plans. “Many families work for employers that offer insurance,” Salazar-Salame explains, but “many times the necessary employee contribution is quite high for low-income families. We’re providing an incentive for families to opt into their work-based, private health plan—and hoping that the incentives will help them offset the cost of the employee contribution.”

If parents are unemployed—or work for employers that don’t offer coverage—the family can still be eligible for health incentive rewards that keep them enrolled in Medicaid. “We know that to recertify for Medicaid can be a challenging yearly process that takes a lot of time,” says Salazar-Salame. (It’s worth keeping in mind that roughly 30 percent of parents who don’t manage to enroll or re-enroll their children in Medicaid have less than a high school education).  “We’re hoping the incentive will help them maintain the insurance that they’re eligible for,” Salazar-Salame explains.

Maintaining insurance is harder than it sounds. In October, Maggie wrote about  just how difficult it can be to stay enrolled in Medicaid and SCHIP, pointing to a Health Affairs article titled "Why Millions of Children Eligible for Medicaid and S-Chip Are Uninsured."

Health Beat Hosts Health Wonk Review

Today, Health Beat is hosting Health Wonk Review, a biweekly compendium of the best of the health policy blogs. More than two dozen health policy, infrastructure, insurance, technology, and managed care bloggers participate by contributing their best recent blog postings to a roving digest, with each issue hosted at a different participant's blog.

Thanks to all of you for your submissions. I couldn’t do justice to all of them, but here’s a sampling of some of the best posts about health care on the blogosphere:

At Health Care Policy and Marketplace Review Robert Laszewski takes on Mitt Romney’s assertion that there are “pots of money” in the states –enough to allow states to follow Massachusetts’ initiative and fund health care reform without raising taxes. Laszewski demolishes the argument, pointing out that even Massachusetts doesn’t have enough money to follow Massachusetts’s initiative. That’s why the state has had to exempt some citizens from the mandate that everyone buy insurance.

On Health Access California, Anthony Wright offers the clearest explanation I’ve seen of Governor Schwarzenegger’s plan for reforming care in California, and its merits and limitations when compared to both HRC’s proposal and the Romney plan in Massachusetts.

On Physician Executive, Zagreus Ammon’s ambitious post “Defining Universal Health Care” begins by addressing the theory that each of us is responsible  for our own health—i.e. “that people do well because they make good choices and people do poorly because of poor choices.”

Here Ammon is responding to Peter Huber of Manhattan Institute fame and his editorial in IBD (Investors’ Business Daily) arguing that universal healthcare is an idle dream because eventually, the “pocket-book healthy” (read: wealthy) will get tired of paying for the “health-careless people” who don’t “live informed, disciplined lives”(read: less well-educated and poorer.) The righteous would rather see that money funneled into products that would provide them with “better hair, skin and sex,” Stern suggests.  For a more generous synopsis of Huber’s argument, see H.G. Stern’s rave review on Insureblog. 

The Truth about the Politics of National Health Reform

For the past year, progressives have begun to talk about health care reform as if it is inevitable. Listen to the Democratic Party’s presidential candidates, and it seems just a question of what form the health care revolution will take, how quickly it will happen, and how we’ll finance it. After all, the polls show that the majority of taxpayers, employers and even most doctors want to see a major change.  Moreover, health care research shows that if we cut the waste in our system, we could fund universal coverage. What, then, is stopping us?

As regular readers know, I recently attended a Massachusetts Medical Society Leadership Forum where what I heard about the Massachusetts plan made my heart sink. While everyone in Massachusetts wants health care reform, no one wants to pay for it. Those who are receiving state subsidies to buy insurance are enthusiastic. But uninsured citizens earning more than 300% of the poverty level are expected to purchase their own insurance. The state hoped that 228,000 of its uninsured citizens would sign up; as of last month, just 15,000 had enrolled. Many have decided that they would rather pay the penalty than buy health insurance.

At the forum, Robert Blendon, professor of health policy and political analysis at Harvard’s Kennedy School of Government, talked about what Massachusetts’ experience might mean for the national health care debate: “Massachusetts is the canary in the coal mine,” Blendon, who is also a professor at Harvard’s School of Public Health, declared bluntly. “If it’s not breathing in 2009, people won’t go in that mine.”  If the Massachusetts plan unravels, he suggested, Washington’s politicians will say “If they can’t do it in a liberal state like Massachusetts, how can we do it here?” 

I’m not writing Massachusetts off. The state’s leaders are behind the plan and they may be able to persuade the Commonwealth’s citizens to come on board. But it won’t be easy. 

In the meantime, this week I decided to ask Blendon some follow-up questions: Just what would it take, politically, to achieve national health care reform sometime in the next two to four years?  How many seats would reformers have to capture in Congress?  Is this likely?   Some observers say that if a reform-minded president hopes to succeed, he or she will have to ram a plan through Congress sometime in 2009. But health care is complicated; wouldn’t it make more sense for a new administration to take its time and explain what it is doing to the public, while trying to create a sustainable, affordable, high quality health care system?

Finally, what are the biggest barriers to reform?  If major change proves impossible, what more modest back-up plans should a new president have in mind? What other health care legislation could he or she hope to pass?

Online Doctors, Privacy, and the Almighty Dollar

Last month a slew of media outlets caught wind of Jay Parkinson, a 31 year old Brooklyn-based M.D. who provides care for his patients through the Internet. Here’s how it works: you get an initial in-person consultation at your home or office. After that, you can ask Parkinson questions online through instant message or video chat; e-mail him digital images of minor wounds, rashes, etc., that he can then diagnose; have him help contact, call ahead, and inform specialists when you need their help; and generally fulfill most basic medical consultation functions online.

Parkinson’s work raises a lot of questions, but first among them may be this: how come my doctor isn’t utilizing virtual communication to its fullest potential?

Part of doctors’ technophobia stems from their lack of incentives to engage with the virtual world: they’re not reimbursed for virtual consultations that may be deemed “self-management support activities,” or good old fashioned advice about do-it-yourself care. As little as eight percent of patients communicate with their doctors via e-mail—a shame, considering in the latest issue of JAMA, Tom Delbanco from Harvard Medical School estimated that 50 percent of visits to the physician are unnecessary and could probably be dealt with online.

But there are other reasons why doctors are reluctant to take their practice online. For most doctors, communicating sensitive patient information without special, government-approved secure platforms is illegal under the Health Insurance Portability and Accountability Act (HIPAA). HIPAA, originally passed in 1996, was revised in 2002 by the Bush Administration to incorporate a privacy rule that came into effect in 2003. The privacy rule regulates the use and disclosure of private health information (PHI), which is information about “health status, provision of health care, or payment for health care that can be linked to an individual.” It’s this privacy rule that makes so many doctors computer-shy.

HILLARY CLINTON'S NEW PLAN

   I have written two posts analyzing Hillary Clinton's healthcare plan. You will find them on www.tpmcafe.com (where I am a contributor). You can comment there.

   

    

Do We Really Have to Cut Back On How Much We Spend on Health Care?

After all, we’re the wealthiest nation in the world. And what is more important than the health of our citizens?

Nevertheless, even in the U.S. resources are finite. And in 2007, Congressional Budget Office director Petter Orzag warns, "The central fiscal challenge facing the nation involves rising health care costs." In a recent letter to the House Subcommittee on Health chairman Pete Stark, Orzag frames the problem in a way that no one can ignore by comparing how much faster healthcare spending is growing than income per capita. "The rate at which health care costs grow relative to income is the most important determinant of the nation's long-term fiscal balance," he explains. "It exerts a significantly larger influence on the budget over the long term than other commonly cited factors such as the aging of the population.”

Let’s cut to the bottom line: If health care inflation continues to outstrip income growth over the next forty years at the same rate that it has over the past 40 years, spending on Medicare and Medicaid alone will rise to 20 percent of GDP in 2050. (To give you a sense of how big a slice of the pie that is: today, the entire federal budget equals roughly 20 percent of GDP).