The Silver Lining

By BRIAN KLEPPER and DAVID C. KIBBE

Massachusett’s voters’ stunning rejection of Democrat Martha Coakley, in favor of a not-very-impressive Scott Brown, should be exactly the splash of cold water that the Democratic party – and Congress as a whole – needed. The defeat can be understood in two ways: one large and one fairly small.

First, the large one. This will probably send reform back to the drawing board. Health care is too much in crisis and too pressing to be pushed completely off the table until certain issues – including both access AND cost – are addressed.

Second, this election marks the loss of a single critical Senate seat, but it is also very loud warning shot. The mandate received at the end of 2008 was a resounding call to throw out the Republicans who for more than a decade had ridden roughshod over American values. Yesterday, the Democrats, in one of their most secure strongholds, received the same message. Whatever people in DC think, rank-and-file Americans – not those on the right or left, but the swing voters in the middle who actually determine election results – are very unhappy with the gaming that’s been vividly displayed over the last year under the guise of health care reform.

The distaste expressed yesterday probably has little to do with the specific provisions of the bills, except for the largest generalities: that they expand coverage while avoiding a commitment to changes that could significantly reduce cost. But along the way, voters have witnessed — with an immediacy and transparency that has only been available as a result of the Web — lawmaking in its worst tradition. There was the White House’s deal making with powerful corporate interests like the drug manufacturers even before the proceedings began. And the tremendous lobbying contributions by health care and non-health care special interests in exchange for access to the policy-shaping process. Or the outright bribery of specific Senators and Representatives in exchange for votes. Last week’s White House deal with the unions that exempted them from the tax on “Cadillac” health plans until 2018 must have seemed like a perfectly OK arrangement to the people in the center of all this activity, but to normal people who read the paper, it was emblematic of the current modus operandi: If you have power and support the party in power’s muddled agenda, you get a special deal.

The most tempting mistake now for the Democrats would be to dig in. President Obama’s most appealing characteristic — the one that got him elected — was his embrace, his embodiment even, of approaches that would revise the traditional kinds of politics we’ve seen for the last year throughout the health care reform process. Of late, the most telling complaint about this Presidency so far has been disappointment that, once in office, he seemed to cave in so easily.

Undoubtedly, many Republicans are now rejoicing over the Democrats’ loss and the possible defeat of any health care reform legislation. That’s unfortunate. The health care crisis is real and remains unaddressed. The pressures it creates, particularly for powerful interests like business, will force Congress to return to it and develop meaningful solutions. Hopefully (though probably unlikely), Congress and particularly the Democrats, will be chastened and wiser. There’s a big opportunity here to make lemonade.

There is a new, bipartisan movement in Congress, highlighted on NPR two weeks ago, that would revisit the rules around the relationships between special interests and lawmakers. This is an issue that trumps and is more important than all others, because if every policy is ultimately shaped by those with enough money to buy Congress’ favor, then our democracy will be unable to hold.

The silver lining in yesterday’s election was that it was a mild, if critical, reminder that, whatever DC thinks, America’s center is just as displeased with the current governance as it was with its predecessors. Faced with a much larger rejection in the 1994 elections, President Clinton went on TV, took full responsibility, and then spent his time rebuilding. The good news is that today is a new day, and that, if they’re interested in what’s good for America over the long term rather than simply themselves over the short term, Congress has the ability to start again in ways that could please the American people and actually work to our collective advantage.

American Health Care Reform: Observations from Health Care Analysts

Brian Klepper

Here we are, with the first edition of Health Wonk Review (HWR) in a new decade. It is a pregnant moment, as reconciliation begins between the House and Senate health care reform bills, when the best health wonks are weighing in on how we arrived here and what it will probably mean to have a few key successes and some very significant failures at a time when most everyone in the country who doesn’t have power yearns for real solutions. Joe Paduda summed it up very nicely on Managed Care Matters, “…after all this, we’re going to end up with a bill that won’t work – it will not appreciably reduce health care costs today, tomorrow, ever.” Alas, the result is much more a reflection of what America has become than what health care is about.

And so, I have exercised my editor’s prerogative, and veered away from HWR’s standard format to focus this edition on the best, recent health writing I’m aware of, rather than just summarize the writings of submitters. Please indulge me as I have passed over some strong pieces in favor of a smaller, more selective number of consistently very thoughtful, insightful and meaty writers.

I’m hoping this selection will satisfy readers interested in deeply provocative discussions of the most pressing issues at hand, particularly around reform. There’s a lot to chew on here, and I’d urge each of you to curl up on a cold afternoon and read through every one of these columns.

A Face Full of All That Other Mud

Let’s begin with J. D. Kleinke’s thoughtful meditation on yesterday’s Health Care Blog, Is It 2013 (or 2014) Yet?, on the horrific compromises made in the name, not of problem solving, but of ideology. Referring to the watered down Senate bill, he notes that it

“has been so stripped of government management options and control that it is best characterized as the exact opposite of a government takeover. Rather, the bill now on trajectory to become The Plan is – paradoxically – a privatization of the public health problem of the uninsured, a corporatization rather than nationalization of health care’s rotting safety net.”

 

And this: “…people…have been using the health care reform stage to act out their bigger grievances, philosophical angst, and political frustrations…Something as literally critical to all of our lives as our health care system – regardless of which way an eventual bill goes (including the remote but real possibility of it just going away) – deserves better than a face full of all that other mud.”

 

Reform Based On The Principles of Competition

On The Health Affairs Blog (12/22/09), Alain Enthoven rebuts Atul Gawande’s New Yorker articleth that compares the health care bills’ pilot programs to those of the Agricultural Extension service that “sparked the agricultural revolution that so benefited the US economy in the first half of the 20 century. “

Both Enthoven and Gawande are icons, and justifiably so for their insights into how health care does and should work. Gawande’s June, 2009 piece, The Cost Conundrum, on health care profiteering in McAllen, Tx, was a sensation in DC, and became required reading for White House staffers looking forward to reforms that could impact the kinds of circumstances Gawande recounted so eloquently.

But in this piece, many of us thought his thesis was a stretch, and Dr. Enthoven lays out the case. One of his conclusions: that we need a commitment to structural reforms, rather than just more experimentation.

“If America wants 1,000 pilot projects to blossom and grow into significant improvements in health care delivery, it must reform its system based on the principles of competition and wide, responsible, informed, individual consumer choice of health plans. Experience shows that people will join if they get to keep the savings.”

The Nearly Trillion-Dollar Lake Mead of Money

In There Be Dragons, The Fiscal Risk of Premium Subsidies in Health Reform (12/14/09), Jeff Goldsmith, with unfailing attention to detail, takes us through a variety of health care principles to explain why 1) the Congressional Budget Office’s (CBO) attempts to model the impacts of subsidies on the private health coverage market are, at best, shots in the dark, and 2) its probably not wise to bet on our political system’s ability to say “no.”

He concludes, “All in all, the fiscal risks from an open-ended new entitlement to premium subsidies are likely to be significantly larger than CBO estimates. Instead of neat economic models with ten variables, we need something closer to chaos theory to explain how the nearly trillion-dollar Lake Mead of money will behave when we completely re-engineer its flow pattern…Behavioral economists would add that anxious health insurance and provider executives would behave differently, perhaps, than entirely rational actors, and act aggressively to preserve their franchises and operating margins. I wouldn’t bet the farm on moderation of present cost and rate trends. All the big risks are on the upside.”

 

The Medical Cost Tidal Wave

In a simple but straightforward column (12/22/09) on the health plan’s blog, Bruce Bullen, the Interim CEO at Harvard Pilgrim, explains how the structural provisions of the Senate’s final health reform bill will worsen current health care cost trends, which have been more than 4 times general inflation over the last decade.

“… expansion of eligibility and other reforms are largely delayed to 2014, but changes having the effect of increasing health insurance premiums will take effect prior to 2014. Before seeing any material benefits of reform, some will see their Medicare payroll tax rate increase, many fully insured subscribers will, beginning in 2011, see the effects of the health insurance premium tax, and everyone in the commercial market will see the cost-shifting effects of Medicare payment reductions and the tax on drug and medical device manufacturers. Medicare Advantage plan enrollees will also see sharp increases in premiums. Since there is no significant cost containment in the bill, these increases will occur on top of normal medical trend. And because the universal requirement to purchase coverage is weak, adverse selection will further increase costs starting in 2014.”

He concludes, “We can focus on insurance reform all we want, but the medical cost tidal wave continues.”

The Unintended Consequences of Hopelessly Complex and Poorly Thought-Out Laws and Regulations

At the Disease Management Care Blog (12/27/09), Jaan Siderov explicates the seemingly straightforward provision of the Senate bill that would require commercial insurers to “rebate” any excess profitability, if they have a medical loss ratio lower than 80%-85%. The rub lies in the definitions of medical costs and administrative costs, and what is contained in each. Under the Senate’s Management Amendment, the National Association of Insurance Commissioners (NAIC) would be charged with defining each term. But so far,

“the NAIC has not done well [clarifying] if the costs of wellness, prevention, care management, or patient-centered medical home support programs are costs that are assigned to the medical costs that make up the medical loss ratio or if they are administrative costs.”

 

It remains to be seen whether a compromise plan will correct this kind of confusion.

The Evidence In a typically pithy and to-the-point read (12/31/09), Roy Poses crystallizes what many of us have thought about the national squashing of the US Preventive Services Task Force guidelines for breast cancer screening. Here’s a quote:

“…after 30 years and 8 trials, we still have no convincing evidence that mammographic screening for 40-49 year old women saves lives (which is different from reducing deaths due to breast cancer), or reduces morbidity, improves function, or improves quality of life in the screened population. In the absence of such evidence, how can anyone fault the USPSTF for recommending (not that women not be screened), but that decisions to screen individual people should be based on considered discussion between them and their physicians?”

Dr. Poses calls for better clinical and comparative effectiveness research, another area given short shrift in the current reform proposals.

Who’s Kidding Who

In a policy environment in which half-truths and whoppers are the coin of the realm, nobody pours on the cold water of reality better than Bob Laszewski at Health Policy and Marketplace Review A former Liberty Mutual health insurance executive, Bob’s deep health finance experience has been refined by his long standing in the DC community as a health policy advisor. Throughout the reform process, Bob has written often, and his insights are always to the point. Take, for example, this simple observation from a 12/19/09 post, Coal in Your Christmas Stocking?

“…the Democrats [will] face four health insurance renewal cycles and two elections between 2010 and 2014 when the benefits of the health care bill would finally become effective. That’s four years of new taxes and continuing big health insurance rate increases before voters see any big benefits from what looks like will be a very unpopular bill.”

As I understand it, Bob’s blog is the most widely-read source for DC health wonk types. There’s a good reason for that.

Later

In Health Reform – When Will The Next Shoe Drop (12/22/09) at Managed Care Matters, Joe Paduda lays out an enticing scenario for straightforward, important changes that can’t happen when 60 votes are required, but are eminently doable if the goal is 51. He writes:

“I’d look for a requirement that the Feds negotiate drug prices for Medicare and lower payments for Medicare Advantage plans to start…And it won’t stop there. There is a large and growing concern about the cost of entitlement programs and Part D is particularly problematic. By attacking drug costs and thereby reducing Medicare’s future liability, liberal Democrats will make it very tough for their opponents to use the ‘big spender’ attack angle in November.”

Two On What To Expect

Jane Sarasohn-Kahn, one of our most gifted, industrious and grounded health care prognosticators, has a broad-reaching summary of the certain trends – employee cost-sharing, employer ‘nudging’ of employees toward wellness, health information technology becoming more mainstream among physicians, participatory medicine/online health tools – that will remain in play in “What to Expect When You’re Expecting…Health Reform on Health Populi. She says,

“With the US still in recession, the issue of managing costs will be Job #1 in health care for institutional and business stakeholders, from health plans and employers to pharma and medical device companies.”

Matthew Holt, a Founder of Health Wonk Review as well as The Health Care Blog, and one of the most incisive, if irreverent, health care commentators writing today, suggests five major trends. He wonders how the changes brought about in policy will take shape in the market, and how changes in the political winds will affect the ability to continue reforms. He thinks that HHS’ Office of the National Coordinator for Health IT’s transformation initiatives will have a profound impact on everyone in health care – “’It’s clear that we are not going to simply see mass adoption of the mainstream EMR vendors’ products.” – and that patients are beginning to expect more access to information, especially their own. And that quality of care, especially at the end of life, is finally becoming a concrete, mainstream issue.

The Verdict

Each of these voices describes different facets of a complex process. These are some of the most experienced and prominent health care authorities working today, and they don’t hesitate to conceal their disappointment at what is passing for reform.

It is not enough to dismiss this Congressional health care reform process as just another example of sausage-making. As David Kibbe, Alain Enthoven, Bob Laszewski and I discussed here, America’s health care industry has placed the national economic security in deep peril. An important goal, a commitment to structural changes that can significantly reduce the one-third or more of health care cost that is waste, now appears to have been squandered by a system that welcomes influence over policy in exchange for special interest financial contributions.

It is unlikely that meaningful health care change will be forthcoming after this process. The forces of special interest influences are vigilant.

Nor will the problems that were on the table now disappear just because they’ve been ignored. They’ll fester and worsen until business rises up in revolt to force the issue, or necessity overwhelms the capacity of lobbying to drive public policy. Unfortunately, the process of getting to that inevitable terrible moment won’t be pretty or pleasant.

Brian Klepper is a health care analyst and commentator based in Atlantic Beach, FL.

Will Business Force Reform Back to the Drawing Board

BRIAN KLEPPER and DAVID C. KIBBE

Until now, non-health care business has been noticeably absent from the health care reform proceedings , and quiet about the bills’ impacts on their management of employee benefits, on cost, and on the larger issues of global competitiveness. Where have the voices been of the powerful business leaders who will pick up much of the tab?

They’ve finally surfaced, and now we’ll see whether they have the will to bring reform back on track. They certainly have the strength. The question is whether this salvo by the business mainstream could force Democrats to reconsider and revise the content and structure of their proposals.

On October 29th, a powerful collaborative of major employer organizations sent a letter to Speaker Pelosi and Republican Leader Boehner asserting that the House legislation “falls short of the bipartisan goal of controlling costs and jeopardizes employer-sponsored coverage which now serves more than 160 million Americans.” The same group sent a similar letter to Senate President Reid earlier that week.

It is important to note that the collaborative – the group includes the American Benefits Council, the Corporate Health Care Coalition, the ERISA Industry Committee, the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Association of Wholesaler-Distributors, the National Coalition on Benefits, the National Retail Federation, the Retail Industry Leaders Association, the Business Roundtable and the National Business Group on Health – represents the mainstream of American business. In general, these associations’ member firms have sponsored employee health coverage for decades, and understand the linkages between health, productivity, cost and competitiveness. Their very real stake in the outcome, their long term sponsorship and their sheer collective clout enable them to enter and change the terms of the discussion.

Then, Tuesday, Employee Benefit News published a list of 10 specific items prepared by National Business Group on Health President Helen Darling, a longstanding progressive voice in health benefits, that “should concern plan sponsors that provide health care benefits to their workers.” The bill, she said:

  1. Lacks meaningful ways to control health care costs;
  2. Takes us down the road to even worse deficits and crushing national debt by not getting more savings from the health system and making the coverage more affordable;
  3. Does not support strong evidence-based medicine or a way to make certain that we don’t pay for treatments that are not effective;
  4. Does not establish a strong independent Commission that could help Congress make the politically hard, but obvious, good decisions to eliminate wasteful and harmful treatments and spending;
  5. Does nothing to correct medical liability problems and related costly defensive medical practices;
  6. Doesn’t expand employers’ ability to help employees to actively engage in wellness activities or achieve health goals;
  7. Undermines ERISA and opens ERISA plans to unacceptable burdens;
  8. Raises serious questions about the public plan and how it would operate;
  9. Could require an employer who provides comprehensive benefits to still be subject to an 8% payroll tax if employees decline employer coverage because it costs more 12% of the employee’s income; and
  10. Contains an outrageous requirement that would require employers still offering retiree medical coverage to continue it indefinitely, thereby hurting employers who have maintained retiree benefits in good faith.

Non-health care businesses comprise about six-sevenths of the economy – meaning they have six times the heft and influence of the health care industry – and financially sponsor coverage for more than half of Americans. Year after year, employers have borne the lion’s share of onerous health care cost increases, 4 times general inflation over the last decade. Endless reports have described how health care, business’ largest and most unpredictable benefit cost, has sapped America’s global competitiveness and placed its employers at a severe disadvantage. An equal torrent of words has been spent on health care’s excessive waste, at least 30% of our $2.6 trillion expenditure, or north of $800 billion annually. Even so, most business leaders are loathe to simply give up the health system they currently sponsor, its flaws notwithstanding, unless they can be confident the alternative can result in lower cost, improved quality, and an equally or more productive workforce.

Keep in mind that, at this point, health care reform has been a series of power plays between Congress and the health care industry (meaning the professionals, firms and associations representing health care’s four major sectors: the supply chain, HIT, care delivery and insurance/finance).

Until now, the health care industry – those who seek dollars – has dominated, lobbying Congress and contributing enormous sums to election campaign coffers to make sure that the legislation doesn’t impede health care profiteering and sends new funds their way. Meanwhile it has held its breath, apparently hoping that other interests with clout won’t notice. As the bills come down to the wire, the air waves have NOT burned with cautionary and righteously indignant health care industry messages opposing them. That’s because organizations in the health industry are reasonably certain they’ve won. They have been sitting tight until the deals are done.

And with good reason. As they stand now, the reform bills are very generous to the health care industry, facilitating, through mandate and/or subsidy, millions of new customers but, as we’ve recently pointed out, doing pathetically little to rectify the health care crisis’ structural drivers. For example, the health plan sector can raise rates without restraint, and a significant chunk of Medicare dollars will be transferred to private sector control. The biotech industry gets a 12 year moratorium on generic competition. With only token progress away from fee-for-service reimbursement and toward primary care re-empowerment, the system will continue to make specialist excesses lucrative. The American Medical Association (AMA) and Medical Group Management Association (MGMA) couldn’t be more enthusiastic, though both are now campaigning for H.R. 3961, which would eliminate the 21.2% drop in Medicare physician reimbursements scheduled to go into effect January 1, 2010. There are many more examples.

Commercial purchasers have waited to see how all this would play out. But now they’re stirring, and not a moment too soon. Non-health care business leaders finally appear to be mobilizing against the weak cost control provisions of the current proposals.

What is needed now is an orchestrated, mobilized, highly visible campaign effort that features the faces and voices of well-known American CEOs, and that leverages the full force of business’ leadership across industries, not just for their own interests, but for those of all Americans. The places to start are in the structural areas we and others have recently discussed: primary care, fee-for-service reimbursement and cost/quality performance transparency. Properly implemented, reforms in these approaches throughout health care could have profoundly positive impacts on both cost and quality, empowering the market to make health care far more affordable for businesses and working families.

It is possible that the entire health care reform process just changed tone and direction. If it did not, then we’re no worse off than before. But if it did, then the ramifications for how American policy works – not just for health care but for all our issues – could have just entered a new and profoundly important paradigm.

Brian Klepper and David C. Kibbe write together on health care market dynamics, health IT, innovation and policy.

Saving Health Care, Saving America

By

So far, Congress’ response to the health care crisis has been alarmingly disappointing in three ways. First, by willingly accepting enormous sums from health care special interests, our representatives have obligated themselves to their benefactors’ interests rather than to those of the American people. More than 3,330 health care lobbyists – six for every member of Congress – contributed more than one-quarter of a billion dollars in the first and second quarters of 2009. A nearly equal amount has been contributed on this issue from non-health care organizations. This exchange of money prompted a Public Citizen lobbyist to comment, “A person can reach no other conclusion than this is a quid pro quo [this for that] activity.”

Second, by carefully avoiding reforms of the practices that drive health care’s enormous cost growth, Congress pretends to make meaningful change where little is contemplated. For example, current proposals would not rebuild our failing primary care capabilities, which other developed nations depend upon to maintain healthy people at half the cost of our specialist-dominated approach. They fail to advance the easy availability and understandability of information about care quality and costs, so purchasers still cannot identify which professionals and organizations are high or low performers, essential to allowing health care to finally work as a market. They do little to simplify the onerous burden associated with the administration of billing and collections. The proposals continue to favor fee-for-service reimbursement, which rewards the delivery of more products and services, independent of their appropriateness, rather than rewarding results. Policy makers overlook the importance of bipartisan proposals like the Wyden-Bennett Healthy Americans Act that uses the tax system to incentivize consumers to make wiser insurance purchases. And they all but ignore our unpredictable medical malpractice system, which nearly all doctors and hospital executives tell us unjustly encourages them to practice defensively.

Most distressing, the processes affecting health care reflect all policy-making. By allowing special interests to shape critically important policies, Congress no longer is able to address any of our most important national problems in the common interest – e.g., energy, the environment, education, poverty, productivity.

Over the last four years, a growing percentage of individual and corporate purchasers has become unable to afford coverage, and enrollment in commercial health plans has eroded substantially. Fewer enrollees mean fewer premium dollars available to buy health care products and services.

With diminished revenues, the industry is unilaterally advocating for universal coverage. This would provide robust new revenues. But they are opposing changes to the medical profiteering practices that result in excessive costs, and which often are the foundation of their current business models. And these two elements form the troublesome core of the current proposals.

Each proposal so far contemplates additional cost. But we shouldn’t have to spend more to fix health care. Within the industry’s professional community, most experts agree that as much as one-third of all health care spending is wasted, meaning that a portion of at least $800 billion a year could be recovered. There is no mystery about where the most blatant waste is throughout the system, or how to restructure health care business practices to significantly reduce that waste.

Make no mistake. A failure to immediately address the deep drivers of the crisis will force the nation to pay a high price and then revisit the same issues in the near future. It is critical to restructure health care now, without delay, but in ways that serve the interests of the nation, not a particular industry.

Congress ultimately must be accountable to the American people. The American people must prevail on Congress to revise the current proposals, build on the lessons gleaned throughout the industry over the last 25 years, and directly address the structural flaws in our current system. True, most health industry groups will resist these efforts over the short term, but the result would be a more stable and sustainable health system, health care economy and national economy, outcomes that would benefit America’s people, its businesses and even its health care sector.

Finally, the American people should demand that Congress revisit and revise the conflicted lobbying practices that have so corroded policymaking on virtually every important issue. Doing so would revitalize the American people’s confidence in Congress, and would re-empower it to create thoughtful, innovative solutions to our national problems.

Brian Klepper is a health care analyst and industry advisor. David C. Kibbe is a family physician and a technology consultant to the industry. Robert Laszewski is a former senior health insurance executive and a health policy analyst. Alain Enthoven is Professor of Management (Emeritus) at the Stanford University Graduate School of Business.

Will Republicans Be Spoilers or Problems Solvers in Health Care Reform?

Will Republicans Be Spoilers Or Problem Solvers on Health Care Reform?

BRIAN KLEPPER and DAVID C. KIBBE

In theory Congress’ return from recess next week could offer a new beginning to the health care reform process, giving everyone a chance to take a deep breath and recalibrate the components of change.

Nine months into the wrangling around a new Administration, the talk-show right has seemingly hijacked the discussion on health care, Democrats’ signature issue, with the standard tools that demagogues have always used: leveraging popular prejudices with oversimplification, hyperbole, and distortion. The die-hard GOP faithful’s leaders – Gingrich, Palin and others (see this off-the-deep-end speech by Rep. Mike Rogers (R-Mich)) – are of course playing spoilers, independent of the cost. They hope to goad centrist voters into abandoning the Democrats so they can retake power. Witness South Carolina Republican Jim DeMint’s comment, “If we’re able to defeat Obama on this, it will be his Waterloo. It will break him.”

The problem with this approach is that we’re still early on in our national discussion about change and about health care. An increasing number of Americans may be frustrated with Democrats, but after 10 years of Republican rule, few Americans see them as a party of fresh ideas or having an interest in helping anyone but the wealthy and powerful. Americans may have short memories, but they likely still recall that Republicans were just thrown out for a multitude of significant sins. So if everyone you know sends around Obama-as-Hitler arguments, heckling and hoping the Dems will quickly self-destruct may seem like a reasonable strategy. It is doubtful, however, that the other 75 percent of us buy into that thinking.

Of course, the Democrats’ health care reform offerings haven’t particularly helped. As we recently pointed out, now that they’re in power the Democrats have taken enormous contributions from the industry, and their health care proposals show it, dramatically expanding entitlements but conspicuously doing little to drive out waste and cost.

This has alarmed some influential groups that otherwise might be supportive. For example, the non-partisan Committee for Economic Development, a business collaboration focused on social issues, issued this July 20th press release excoriating the bills:

“The House of Representatives and the Senate HELP Committee proposals are unacceptable. They would expand coverage without controlling costs, leaving future generations with a system even worse than what we have today. We cannot afford the government and the health-care system we have now, much less this bloated alternative. Lawmakers have bowed to political pressure at the expense of sensible policy. The business and policy community cannot stand behind these bills,” said W. Bowman Cutter, Managing Director, Warburg Pincus.

And the Mayo Clinic, often cited by President Obama as a national model for higher quality, more efficient care, issued this strongly-worded response to the House Tri-Committee Bill:

Although there are some positive provisions in the current House Tri-Committee bill – including insurance for all and payment reform demonstration projects – the proposed legislation misses the opportunity to help create higher-quality, more affordable health care for patients. In fact, it will do the opposite.

In general, the proposals under discussion are not patient focused or results oriented. Lawmakers have failed to use a fundamental lever – a change in Medicare payment policy – to help drive necessary improvements in American health care. Unless legislators create payment systems that pay for good patient results at reasonable costs, the promise of transformation in American health care will wither. The real losers will be the citizens of the United States.

Over the weekend, Senator Mike Enzi (R-Wyoming), a staunch conservative and a member of the Senate’s “Gang of Six” working on a health care bill, joined this chorus. He claimed that the Democrats’ proposals “will actually make our nation’s finances sicker without saving you money,” would “raid Medicare” and intrude “in the relationship between a doctor and a patient.”

It is important to distinguish this criticism from most of what we’ve previously heard from the right. Unlike many of his colleagues, and certainly contrary to conservative talking heads, Sen. Enzi’s comments here are not so political as factual. They reflect the legitimate concerns of reasoning, mainstream conservatives who worry about simply throwing more money at health care without fixing anything.

Which constitutes the real health care reform opportunity for Republicans. The time could be right for centrist Republicans to pragmatically wrap their heads around this issue. After all, the approaches that are known to drive down costs and improve quality can easily be embraced by true conservatives who clamor for market-based solutions. Now, out of power and longing to demonstrate that they can produce substantive answers to our problems, the challenge will be to turn against their traditional industry benefactors and act on behalf of the American people.

On August 24th, Bob Laszewski posted an important column, There Will Not Be Health Care Reform in 2009 Without Republican Leadership, that listed four major areas of health care change that should come easily to centrist Republicans.

  • Bulletproof Health Care Security. This is the idea that everyone would have significantly improved access to care, that the employer-sponsored system would remain available for those who like it, and that Congress would be required to use the same system that they pass for the rest of us.
  • Medical Malpractice Reform. The Republicans have the Democrats where they want them on this one. There is no good reason why our current Med Mal system, as capricious and ineffectual as it has been, has not been revised with expert systems, except that the trial lawyers, in exchange for hefty financial support, have received protection from the Democrats. It’s time to fix this problem that pervades our health care provider community.
  • Paying for It. This is acknowledging that subsidies will be required for those who can’t afford health care at its current cost level, and that there are ways to structure the new cost that are more sensible. As Bob points out, the nearly forgotten Wyden-Bennett bill would be cost neutral in its second year.
  • Tough Cost Containment. As we said above, this has been the Congressional Democrats’ proposals’ most glaring and conflicted flaw. It is an area that, with a focus on primary care, paying for results instead of piecework, and cost/quality transparency, could dramatically drive down cost while improving quality, rightsizing our health system and going a long way toward ameliorating the most pernicious drag on our larger economy. Bob tackles cost control most effectively in his Health Care Affordability Model, a plan that would use tax incentives to encourage the industry to focus on driving out waste.

Collaborating with Democrats or, failing that, taking the lead to demand well-understood cost control mechanisms, would send a clear message that some Republicans are actually interested in problem-solving, not simply nay-saying.

It is possible that the health care reform issue has hardly begun, that the conventional back-room deals and horse-trading needed to be sorted through before the real work could begin. It is a profound truth that, town hall protests and nonsensical boasts about American health care notwithstanding, the middle class is terrified that their access to health care is slipping away. Both Democrats and Republicans have a large stake in visibly resolving this crisis. And, as Rahm Emanuel said, a crisis is a terrible thing to waste.

The shame and danger of the health care reform proposals so far is that they would likely do little to actually address the crisis. The question now is whether lawmakers in either or both parties can put aside their partisanship, their petty grievances, and their special interest conflicts to do the people’s work. Pursuing the structural solutions described here would get America’s health care system headed in a new, far more positive direction.

The American people are desperate for meaningful health care change, and are watching this process very closely. Whoever takes the high road and achieves real reforms will win. The opposite is also true.

Brian Klepper, PhD and David Kibbe MD MBA write together and consult on health care market dynamics, reform issues, and health IT. Their collected writings can be seen here.

Health Care Reform’s Deeper Problems



UscapitolindaylightCongress’ health care reform debate has highlighted how American governance is broken and the difficulty of addressing our national problems.

Take, for example, whether health care is in crisis at all. Conservative commentators argue that America’s health system is fine, that our excellent care simply costs more than other countries’ poorer quality, and that most uninsureds can afford coverage. They ask why we should revamp a great system for the two or three percent of Americans who get less.

This misrepresents reality, though. Care and outcomes are often superior in other developed nations. In America, the ranks of the uninsured and under-insured have skyrocketed, from insurance costs that have grown four times general inflation for a decade. Health coverage is employers’ most unpredictable major cost, a threat to their businesses’ competitiveness, and they have increasingly offloaded costs onto employees. So while the marginalized uninsured are an important problem, declining coverage for the mainstream is the greater worry. Most know that, even with insurance, any major health problem can spell financial ruin.

As businesses and individuals have been priced out of health coverage over the last four years, commercial health plan enrollment has plummeted by as much as 20 percent, or about 36 million people. The Kaiser Family Foundation reports that 40 percent who lose group health coverage probably become uninsured.

Fewer people buying coverage means less money to pay for health care products and services, so the industry is experiencing an unprecedented financial decline. With reforms looming, it has fiercely advocated for universal coverage, which would provide stable funding for a larger patient population. Meanwhile, the industry has opposed changing business mechanisms that encourage waste, even though experts agree that one-third or more of all health care cost is unnecessary or inappropriate. But this raises an important question. Why not spend less by recovering wasted dollars, and then improve access?

The industry has pressed its goals through lobbying, which lets special interests exchange campaign contributions for policy influence. The non-partisan Center for Responsive Politics reports that, between January and June, the industry gave Congress more than $260 million. One lobbyist commented, “A person can reach no other conclusion than this is a quid pro quo [this for that] activity.”

The funds have gone mostly to Democrats, the party in power now, and are producing their contributors’ desired results. The current proposals expand coverage, but do little to reduce cost, failing to heed any of health care’s management lessons from the last 25 years. For example, they won’t re-empower primary care, which other nations have found will maintain a healthy populace for half the cost of our specialist-dominated approach. They fail to make care quality and cost transparent, which would let health care finally work as a market, and help identify the best health care vendors. They continue to favor fee-for-service reimbursement, which rewards delivering more products and services rather than rewarding results. And they all but ignore our capricious medical malpractice system, which most doctors say encourages defensive practice.

These problems and their solutions are structural, and are well understood within the industry. If reform does not pursue these structural approaches, health care will continue to drag down the larger economy. Our current problems will remain and intensify, at enormous cost.

Out of this experience, the American people should become aware of a couple of harsh truths.

First, so long as Congress willingly exchanges money for influence, American policy will favor special interests rather than the public interest. We’ll be unable to meaningfully address our national problems: energy, the environment, education, and so on.

Second, so long as partisans distort the truth to discredit their opponents, rather than focusing on our very real problems, America’s future will continue to be compromised.

Which is to say that we have deeper problems than an inability to fix health care.

Brian Klepper, PhD is a health care analyst based in Atlantic Beach. David C. Kibbe MD MBA is a physician and Senior Advisor to the American Academy of Family Physicians.


Why Congress Should Consider Bob Laszewski’s Health Care Affordability Model

BY BRIAN KLEPPER

ALP_H_BK_0010Over the last few months, I have become increasingly disheartened over the prospects for meaningful health care reform.

First, the process is terribly conflicted, and it shows. In the first quarter of 2009, the Center for Responsive Politics reported that the health care industry contributed $128 million to Congress. Now that the tide has turned, this has gone mostly to Democrats who, as it turns out, are just as receptive as their Republican predecessors.

In turn, the Congressional health care reform proposals so far are mostly about coverage entitlements and access – fair enough – but despite cost containment rhetoric, they mostly ignore the ever rising cost burden that has brought health care to its knees. As longtime health care crusader Paul O’Neill pointed out in last weekend’s NY Times, the proposals pay relatively little attention to adjusting the health system’s structural flaws that encourage and tolerate tremendous waste and excess: fee-for-service reimbursement; a specialist-dominated medical paradigm; and a lack of enterprise-wide infrastructure that can facilitate transparency, transactional streamlining, and evidence-based decision-support. It appears we could be headed for Massachusetts-style health care reform, in which all the concessions will be made by the people paying the bills, and virtually none are borne by the health industry itself.

The health care waste that has been glossed-over in these proposals is monumental, the result of millions of premeditated decisions made by real people. Consider, for example, the MedPac report issued a couple weeks ago that found that physicians who own or lease imaging devices order images at twice the rate of physicians who do not have a financial stake in them. Or the fact that, even though the majority of claims are auto-adjudicated and we live in the age of electronic fund transfers, it takes health plans – which earn interest while they hold onto the funds – more than a month on average to pay a physician’s practice and nearly two months to pay a health system. Or that many health plan brokers represent that they are independent consultants to employers, but steer their clients to health plans with whom they have a financial relationship.

There are literally thousands of examples like this tucked inside every health care sector: the supply chain, the IT sector, the care delivery system and the finance system. No one knows for sure what these excesses actually cost, but estimates vary between 30 percent ($800 billion) and 60 percent ($1.5 trillion) of our annual total health care expenditures. These are breathtaking numbers. We fork over these immense sums every year for services that provide little or no value.

In the process, we have eroded our national economic stability. The President and his health team have repeatedly noted that health care cost represents the single largest threat to the nation’s long term financial viability. The savings that presumably would accrue from meaningful reform are key to the success of their larger economic plan.

The American people may not understand the technical issues, but they’re also aware that the system is not working in their interests. In a recent NY Times/CBS poll, 72 percent of respondents – nearly 3 in 4 – said they favored “the government’s offering everyone a government administered health insurance plan like Medicare that would compete with private health insurance plans.” While I doubt that the rank-and-file of respondants understands what a public option would really mean, the deeper message seems clear: the current system is dreadfully broken and we need a different approach.

But the Democratic proposals seem oblivious to how crucial the issue is to the President or the American people. And so their focus has been on two seemingly extraneous issues.

First is whether the proposals’ programmatic costs will come in at less than a trillion dollars over 10 years (rather than their long term impacts). Let’s leave aside the fact that a trillion dollars is less than 40 percent of our annual health care expenditure at the moment.

Internally, the Congressional Budget Office and then Congress scores each proposal – the most recent version of the Affordable Health Choices Act from the Senate Health, Education, Labor and Pensions Committee (HELP) came in at $611.4 billion over 10 years – even though the evaluations may not consider ancillary deals made to win the buy-in of powerful health care lobbies, or financing that offloads costs onto some part of the private sector.

Still, if 30-60 percent of all current health care cost is waste, it is not clear why we should spend another $60 billion a year to improve the system. Why can’t we recover and apply the wasted resources instead?

Second is whether the government offers a public option. This issue is worth a separate post, but suffice it to say that the cost growth of Medicare, a public option, has tracked closely with that of commercial health plans for 30 years. There is literally no evidence that the placing a program in the public domain – where it is highly susceptible to perverse influences like lobbying – is any guarantee of better performance.

In other words, one of the lessons of the last 50 years is that changing the financing model alone probably won’t fix health care. What’s needed – what is critical right now – are changes to the ways health care is supplied, tooled, delivered, managed and reimbursed, independent of any health plan’s sponsorship and legal structure.

So far, our current round of reform has conspicuously dodged those issues, presumably at the industry’s encouragement. The long term consequences of that avoidance, though, could prove disastrous.

*****

One of the problems with taking on health care reform is that it is so complicated, with endless facets and special cases, and with stakes that are extraordinarily high. After all, we’re tinkering with an economic sector that represents one dollar in seven and one job in eleven. There is a tendency to suggest that the health care marketplace IS the problem, and that we can solve problems through policy alone.

But the truth is that the marketplace has not been allowed to work in health care, or at least not in the classical sense. Government has financed about half of health care over the last several decades, distorting market functions. And the most powerful organizational forces in the market – physicians, hospitals, health plans, drug companies, device companies – have consistently lobbied against transparency of cost and quality information, the one ingredient that markets need to work effectively. The hope is that good policy both empowers market innovation and constrains its propensity for excess.

What is really needed in situations like these, though it rarely appears, is a fresh approach from an unimpeachably non-partisan and credible source. That approach must cut through complexity to get at the root of the problem, preferably with a relatively simple, easy-to-understand idea. I believe Bob Laszewski has provided us with this kind of solution.

There are many excellent writers and thinkers in health care, but I doubt many would object if I suggest that Bob Laszewski is at the very pinnacle of this group. His articles, written plainly and clearly, are a model of lucid, informed thought. A former health insurance executive, he has deep expertise in health care finance. A longtime DC health policy advisor, he has extensive connections with and is highly regarded within that community.

Bob has written a summary piece and a detailed piece about the Health Care Affordability Model. These posts should be as high on the required reading list for everyone involved in the national health policy reform discussion as Gawande’s Cost Conundrum article was for the White House staff.

The Affordability Model posits a simple idea: Let’s use tax incentives to align everyone’s interest around driving out waste. If health plans and their health system partners hit targets, they keep their advantage. If they don’t, they lose them. He then provides sufficient underlying detail to convince us that it is a workable plan for attacking one specific, important piece of the health care crisis: unrelenting cost growth. He states it like this:

The Health Care Affordability Model creates unavoidable incentives for health plans and their provider network partners to maintain their tax qualification:

  • The health plan would be placed at a substantial competitive disadvantage without it.
  • Doctors, hospitals, and other providers who were not in a tax qualified health care network would lose patients to networks that did control costs.
  • Employers and consumers would almost certainly purchase their health benefits only from qualified plans.

And, unlike most health care reform proposals, the Affordability Model would simultaneously reduce both public and private health care costs.

The Health Care Affordability Model is not a standalone health care reform proposal. It could be attached to virtually any health care reform plan now on the table.


There is nothing new about using tax incentives to shape individual and corporate behaviors. We have used them to encourage employers to purchase coverage for their employees, but we have not applied them to drive behavior within the health industry itself.
In my experience, most seasoned health care professionals have very good ideas about what will work and won’t work, and what remedies can be applied to fix the current crisis. There isn’t a lot of mystery about this. Empowered primary care, data aggregation and mining for transparency and decision support, some new genomic assays, new imaging procedures, face-to-face disease management, and many other approaches are known to work but have been under-utilized. As Bob notes, there simply hasn’t been the reason to pursue these approaches.
We know, for example, that, when they’re appropriate, minimally invasive surgeries are a grand slam. They dramatically reduce the pain associated with an invasive procedure. They have lower episodic costs. They’re associated with fewer complications and nosocomial infections. And they produce quicker back-to-work times for workers. But we often pay surgeons less to do them, so we have created a perverse incentive to use the older, less positive approach. Under the Affordability Model, there would be a clear incentive for health plans, clinicians and everyone that supports them to change to the better, higher value approach.
To me, the real beauty of the Affordability Model is that it offers minimalist steerage. It implements a (relatively) simple, straightforward incentive, and then allows the market to innovate to achieve the desired results. It is as hands-off as possible, is likely to keep the best parts of our system intact and creates the impetus to drive out services that offer little value. It empowers the health care marketplace.
Who will be against Bob’s proposal? Nearly everyone in the industry, because over time it will organically reduce revenues throughout the industry. But they ought to be for it, because it would stabilize health care, and at long last provide the sustainability that has been missing for so long.
Read Bob’s piece closely, and you’ll hear the passion he has infused into it. This is not simply a post, a suggestion. It is the distilled, highly focused advice of a top professional, offered to his country in a time of need. It is the summary wisdom of a life’s work.
Congress has not adequately turned to the very pressing cost problem that Bob’s model addresses. If it does not do so, the result will health care reform that is empty, meaningless and, ultimately, shameful.
My fervent hope, for all of us, is that they are listening with open minds, and that they have the courage to follow his advice.