Monday, March 29, 2010

Health Reform: Two Interesting Articles

There are a couple of interesting items in the Boston Globe this morning ( The first predicts a 40,000 primary care doctor shortage over the next decade. This would certainly slow the development of accountable care organizations and other forms of managed care. It may also mean that community health centers and public hospital outpatient departments (and ER's?) will be the primary service sites for new Medicaid enrollees created by health reform legislation. Whether the capacity exists to serve an influx of new enrollees remains to be seen, but the cost impact could be profound. My experience would suggest that persons with pre-existing and chronic conditions gravitate directly toward specialists, not to primary care doctors anyway. Many of the commercially uninsured who will now be able to obtain coverage will seek out specialists and hospital outpatient departments directly, even if sufficient primary care doctors were available.

The second item is an op-ed about the apparent intention of Massachusetts state government to control health care costs by capping insurance premiums and regulating hospital rates. The thrust of the piece is that from 1975 to 1991 the state tried to do this with little success. The piece also argues that capitated or global payments were equally ineffective. The authors' conclusion is that only a publicly administered single-payer system will control costs.

I see things a bit differently. While past efforts to control costs may have been unsatisfactory, it is clear that public sentiment and consumer demand have moved consistently away from managed care systems toward more and more freedom of choice. This drives cost in commercial markets more than anything else. If Medicare, which is the closest thing to a publicly administered single payer system we have, is any indication, the combination of freedom of choice and regulated payments is no panacea (see Medicare's comparative service utilization performance). But are the states and the federal government willing to exercise control over which doctors everyone(not just the Medicaid recipient)sees? I think not. As long as choice rules in private markets the only answers to controlling costs, short of good-faith public-private collaboration, are to stop government program cost shifting, curtail excessive hospital/physician consolidation, introduce more insurance products with significant levels of cost-sharing, make comparative cost and quality data transparent, and let consumers of health care vote with their feet.

Wednesday, March 24, 2010

Health Reform: Let the Reforming Begin

An unfortunate consequence of all the media focus on partisan health reform politics is that it masks the real work that needs to happen. The new law is a broad promise to cover the nation's uninsured without raising insurance premiums and without increasing the federal deficit. These are good goals, but hard to achieve.

To guarantee universal coverage the law requires everyone to buy or have qualifying health insurance, state governments to expand their Medicaid programs to cover more low-income people, health insurers to offer coverage to anyone who applies no matter how sick they are, and the federal government to offer subsidies to help the middle class afford insurance. So far so good, except perhaps that the penalty for not having health insurance is quite low. But if universal coverage were the law's only promise, its implementation would be a simpler matter.

Keeping the other two promises will be the real challenge because of the way universal coverage is structured and financed. For instance, when those who have been unable to obtain insurance because of pre-existing conditions join the pool of insured persons, premium costs for everyone will rise. The new law assumes that this will be offset by having more young and healthy persons insured, but the combination of a weak penalty for being uninsured and newly mandated premium discounts for older persons at the expense of others will price the young and healthy out of the market. Most of the new taxes that fund universal coverage are imposed on the health system itself, which is a new cost that will also raise prices. Private premiums will further rise through provider cost-shifting when the federal government ratchets down Medicare payments. Federal subsidy costs will rise along with private premiums. State costs for Medicaid will rise with expanded eligibility.

The only sure way to avoid the above scenario is to begin to do something about medical costs that typically rise at two to three times the rate of inflation. This is work that needs to happen. Otherwise, the currently insured, the states, and the federal treasury will foot the bill for universal coverage.

Sunday, March 21, 2010

Health Reform Without the Reforms

Congress and the President are intent on expanding coverage apparently at any cost. The recent CBO "scoring" of the bill is blissfully accepting of some spending projections and dismissive of others (see today's NYT op ed by former CBO director Holtz-Eakin). The current approach is to wrap a costly expansion in deficit-reduction rhetoric.

Health reform is a complex problem that requires trade-offs, fundamental changes in state/federal regulatory authority, a realistic financing plan, and health care delivery reforms. None of these are in the current bill because they are politically difficult and will take time to work out. This is unfortunate, not just because the bill will be costly at a time when the country can least afford it, but because the contraption itself won't work and will create new problems (like inter-governmental lawsuits and higher insurance costs for the young).

There is a measured way to implement real health reforms over time, but it will take discipline and patience. States need to plan for and accept gradual Medicaid expansions. Individuals must plan for and accept an enforceable coverage requirement. States must plan for and accept insurance market reforms. Health plans, hospitals, physicians, and ancillary providers must work together to moderate increases in medical costs. This all requires compromise, planning, balance of the parts, and time.

Wednesday, March 17, 2010

Health Reform: Federalism Rears its Head

A lead article in the New York Times today reminds us that the national health reform debate has taken place without sufficient consideration of the role of state legislatures and insurance regulators. Congress and the President have preferred to ignore the uncomfortable fact that the insurance practices they associate with insurance company abuses are in fact sanctioned by state officals with the legal authority to do so. A significant part of the opposition to national health reform is coming from state officials who view mandated Medicaid expansion, a mandated individual requirement to purchase insurance, and the superceding of state authority to regulate insurance practices as legal, if not constitutional, challenges. Another reason to slow this process down.

Sunday, March 14, 2010

Health Reform: A Return to Managed Care?

A New York Times op-ed today by Tyler Cowen argues that whether a health reform bill passes or not, whether health care is public or private, we face more managed care. The medical cost trend is unsustainable, and therefore the system will need to say no to more service requests, essentially rationing care. Managed care to Mr. Cowen means managing the over-use of services.

While this may be true for Medicare because it does little to address over-utilization, many commercial health plans actively manage the way services are used and do not view over-use as a key factor in the trend problem. Far more important is the insistence of purchasers and consumers on products that include every hospital and physician, the result of which has been a relentless increase in the price, not necessarily the use, of services.

Why? Consider: When limited hospital and physician networks were tolerated by buyers, a health plan could negotiate a reasonable price with even the largest, heavily branded hospital or physician group because it was understood that the plan might be able to live without them. Now the same hospitals and physician groups understand that the health plan cannot live without them or lose customers to a competitor. This realization alone is enough to unbalance negotiations, overly strengthen already strong brands, hasten provider market consolidation, and raise prices.

In addition to more managed care in our future we should expect efforts to control the unit price of services. These may take the form of a renewed willingness on the part of employers and individuals to live with limited provider networks, more aggressive enforcement of anti-trust laws, and/or government rate regulation

Friday, March 12, 2010

Health Reform: An economic engine?

I watched Charlie Rose interview Nancy Pelosi last night, and it was quite a sparring match. A few excerpts: When Rose asked why the legislative version of health reform does not do more to control costs, Speaker Pelosi responded "It's about a different system", and within a few seconds added "Everyone can keep their doctor". When Rose asked about the total cost of the bill, the Speaker responded "CBO just scores the impact on the federal budget.... The bill is about wellness, prevention, and innovation". When asked why passing health care now is so important, Speaker Pelosi said "The health care bill is a job creator and reducer of the federal deficit.... It is a pillar of economic growth." When asked whether or not health care should be deferred so that economic stimulus, climate change, and other legislation could be addressed, she replied "No. They are all connected. We must have leverage over the insurance industry. Health care is a jobs bill". Later: "The health reform bill is about history, progress, innovation, entrepreneurial discipline, families, and jobs."

I thought this exchange was interesting because, at least in the eyes of the Speaker, health reform is not really about health care but about controlling the costs of the health sector in order to spur economic growth. If so, the bill's new health care taxes and inability to stem the tide of rising medical costs will be big disappointments.

Tuesday, March 9, 2010

Is it a cultural thing?

Is our inability to provide Amercian citizens with basic, publicly available health care coverage cultural? Think about the differences between American health care and most other systems and what it might take for ours to be like theirs. Will American physicians (most of whom are for-profit) agree to work as government employees? Will American consumers be happy with a "basic" benefit package and agree to wait for elective (defined by government) procedures? Will those who are currently insured agree to pay more to cover the uninsured? Will Medicare and Medicaid agree to pay the same rates to providers as private insurers? Will the entire health care system operate within a global budget?

Perhaps these are the questions we should answer (about ourselves) first before engaging in ideological health reform warfare.

Monday, March 8, 2010


Now a freelance blogger, after10+ years at Harvard Pilgrim Health Care and 10 years (1989-1999) as Massachusetts Medicaid Director, I have one goal here, which is to continue a discussion on national health care reform that began in the pages of Let's Talk Health Care, the Harvard Pilgrim corporate blog. I hope my perspectives range a bit farther afield and that I can draw liberally on both a public-private health insurance background and twenty-year involvement in health reform efforts in Massachusetts. I have seen this movie from both sides of the aisle and am consistently amazed at how loudly the sectors talk past one another at the national level and how thoroughly the debate ignores the need to strike the appropriate balance between the sectors. Striking this balance is a complicated, time-consuming task filled with a lot of troublesome detail and trade-offs. It is helped by patience and good will, not the scoring of short-term political points or ideological arrogance. I would like to see us move forward, but do not think this will happen until a measured conversation takes place. I hope to contribute.