Sunday, February 28, 2010

Pass the bill

I am a signer of a letter by 80 economists/health policy types urging the House to pass the Senate bill and to then pass any clean ups necessary via reconciliation. Here is NY times economix blog on this letter. There are some differences in what the folks signing this would do if they could do whatever they thought best....but we all agree passing this bill now is an important step in the right direction and far preferable to the status quo.

Thursday, February 25, 2010

Thoughts on the Summit

I watched most of the Summit but not all. There were a few moments where some clarity of discussion and differences came out, but plenty of folks just repeating their talking points carried most of the day. The people who came off the most knowledgeable on the policy issues were the President, Chris Dodd D-CT, Tom Coburn R-OK and Paul Ryan R-WI. Revised: watching some tape, Jim Cooper D-TN was also knowledgeble. Lets just say the Congressional leaders of both parties aren't so good at talking up health policy in public......

In purely policy terms, there is a deal to be had between the Senate bill and the Patients' Choice Act (co-sponsored by Coburn and Ryan, and Nunes of CA and Burr of NC). I have written a great deal about the PCA and called it the most comprehensive Republican plan. The rhetoric used by Republicans does not match the reality of the content of the Democratic bill. If only policy folks were working from these two frameworks, the compromise between Senate bill and PCA would be straightforward and it should get at least some Republican votes, but of course 218 members of the House and (presumably) 60 in the Senate plus 1 President have to agree. So, while the Senate bill with the President's tweaks and the PCA suggest a deal, the politics do not. The deal would go something like this.

Add the things they seemed roughly agree on today. More robust malpractice reform and some increased efforts at decreasing fraud and abuse.

Individual mandate. It is a fantasy to say you can have anything near universal coverage without a mandate of some sort. Some Republican staffer types have acknowledged this to me in private conversations, but note the politics of mandates are bad for Republicans. The PCA has auto enroll procedures like signing people up for cover when they get drivers' licenses and similar activities, so they are dancing all around some sort of mandate without calling it that. The President is right to insist on the individual mandate, and a great many Republicans have supported this for quite a long time until the last few months. In the end, if everyone is going to get care, the goal is to move as mean people into as big a risk pool as possible and it will take a mandate.

Insurance reforms. Banning pre-existing conditions is popular. The President needs to continue banging away that the individual mandate and these insurance reforms come together. This is the most important information job the President has in the next weeks. If you like the ending of pre-existing conditions, that comes with a personal responsibility to have health insurance because if not everyone else has to pay for your care.

The PCA has places where the text says things like 'develop mechanisms to prevent premiums from being too high and the like. They (Republicans in PCA) haven't written a lot of the necessary regulation details, but the Senate bill is solid here. They could obviously tweak the rules, but you have got to have rules to set up what insurance is so folks know what they are buying.

Level of cover. The tax credits provided by the PCA are not enough to buy comprehensive policies, and are really of the magnitude to provide catastrophic coverage only. This is where I think the President could move toward Republicans in saying the individual mandate could be for catastrophic coverage only. People could purchse more cover in exchanges, but if we could guarantee catatstropic coverage that would be a step ahead. This is the one place I think the Pres could move the most toward the Republicans if they were willing to negotiate.

Independent Medicare advisory commission. The most surprising thing of the day was Sen. Coburn banging away that 1 in 3 dollars in the system is non productive. This actually makes the case for expanding coverage via Medicare cuts.....but the PCA had a robust commission of this sort before anyone else did. The fact that such a commission is the Democratic bills is an example of a key Republican idea that has long been a part of the Senate bill. A commission of this sort is key if we will make changes to Medicare that will reduce some of the unproductive spending Sen. Coburn noted.

Financing. The PCA is actually far more radical than the Senate bill becuase it totally repeals the tax exclusion of employer paid insurance. It therefore ends the upside down subsidy (higher income get more) and equalizes the amount of subsidy (tax credit) that all Americans get to purchase private insurance. A compromise that would greatly increase the cost saving potential would be to limit the tax exclusion at a given level (say the mean). This could replace the excise tax on high cost insurance and would help orient focus on the role of patients and their use of care in driving health care cost inflation. This is probably too big a change to be realistic....I would prefer it but I think that the mix of policies to finance in the Senate bill as is is far better than the House (excise tax much preferable to income tax increase).

Medicaid. I thought the most convincing critique of the Senate bill by Republicans was talking about the 15 Million folks who would be covered via Medicaid expansions. I thought the President was also effective at making the case that Medicaid cover is preferable to not being insured and noting everyone in the room has good insurance....but I would like to see a discussion along these lines. Would the country be willing to pay more to expand coverage into private insurance? Would we be willing to pay more to move toward ending Medicaid as an acute care financing (mostly children and pregnant women). The PCA is not good on Medicaid generally for long term care/elderly as it is a block granting which is not a good idea at this point given these are the most vulnerable members of society.

So, in policy terms, there is a deal to be had. In political terms I don't think there is a deal to be had. If there is a movement toward some behind the scences compromise then great, lets see what happens, but the issues are not fine wine: ain't getting better with age.

If there is not some immediate movement toward a deal, the House should pass the Senate bill. It is good policy, and far better than the status quo. It won't take reconciliation by the way to do that, just one roll call vote. Then a reconciliation bill to enact some clean ups and tweaks that the President proposed.

Highlight from Session 1

I agree with Ezra Klein that the Cantor/Obama/Ryan interaction on insurance regulation was most important exchange.

Summit Thoughts

After 1 hr 45 min, my thoughts.
*opening statements exhausting
*First somewhat real exchange was Obama and coburn on waste, fraud and abuse
*First, very real exchange was Ryan and the young Democrat from House and President on federal v. state regulation of insurance, what level of regulation, and that there is a relationship between premium, level of benefit (actuarial value) and out of pocket. When Ryan admitted his plan (Patients' Choice Act) and Roadmap has minimum standards for coverage, was a big moment and young Dem agreed their bill has a higher level and the Pres said this was a legitimate difference. That is the beginning of talking Turkey....good.

*Most surprising thing from first 1 hr 45 minutes is Republicans saying one in three dollars non prodcutive in system. Dems agree. This hurts the argument Republicans have been making about 'not cutting anything from Medicare' but Coburn says inefficient even more in Medicare. I am not sure about one in three but agree much unproductive....this actually argues FOR using Medicare to finance as it in theory can be done in way that doesn't hurt patients if 1 in 3 not useful.

11:56-Noon: President makes key point. High deductible plan basically losing my house insurance. Dem plan has expansive benefit package, what he defines as 'real insurance' by which he means way to finance care if sick. Pres is arguing Dems prefer expansive package....and Repubs framing on catastrophic. This is true and not fully owned by Republicans....for example, Patients Choice Act only has enough tax credit for catastrophic coverage.

Pres says legitimate philosophical difference here, which I agree with. And it is useful that they have talked about increase in small group premiums under senate....Pres hits on head price is higher because coverage more expansive. Repubs say higher price due to regulation. YES.

This is a choice/difference that deserves to be highlighted. I am very surprised no Republican hasn't brought up individual mandate. Add that in and they are talking about some key questions. For me, it would be great move ahead to have catastrophic cover for many more.

12:10. I wonder if adding a catastrophic level of cover based on age (say under 30) would be useful? If both sides are talking about letting parents cover their kids up to age 25 or 26 tha t is a sign that the system doesn't work. It makes no sense that a 25 year old would be expected to get health insurance from the job of their parent. Maybe take Patients' choice act notion of autoenroll and put everyone under 30 into very high deductible plan. Let them buy more if they want.....add something on prenatal and that would work pretty well.

12:15. What if you passed the following federal regulation. individual mandate. No pre-existing and no recission. And insurance must cover everything that is not experimental. Then define insurance tradeoffs only in terms of premium and out of pocket deductible.

12:17. Dr. Boustany talking up reinsurance.....that won't help if the underlying risk pool is bad. Biggest problem conceptually with many of the repub ideas is that they segment risk....put folks into smaller and smaller pools. Answer is bigger pools if you are going to cover everyone.

12:24 Rep. Miller makes point of high risk pools are attempts to make segmented risk work whereby the answer is put into larger pool.

12:50: Obama and Cantor and Biden: fundamental point. Cantor notes in a perfect world everyone would have care. He says get rid of pre-existing but not a mandate. This is fantasy. Biden pipes up and points this out. That if you are for ending pre-existing then only way to bring this about is through regulation (this is true). Cantor had been saying large philosophical differences but Biden usefully points out that both are talking regulation, Dems may want more but it is degree if you are for ending pre-existing.

Key question: individual mandate or not? Cantor notes in perfect world all would be covered but we can't afford it. Key to get this straight and decide. What flows naturally from Cantor's point is that if we don't cover everyone, do we insist providers give free care?

Wednesday, February 24, 2010

Senate bill similar to Chafee bill in 1993

I have written quite a bit about how the Senate bill is reminiscent of the Chafee bill, which featured an individual mandate, and the most comprehensive Republican alternative to the Clinton Plan in 1993. Kaiser Health News with a summary table comparing Senate bill, Chafee bill, and Rep. Boehner's bill that was released in November, 2009. It would be very useful for the summit to focus on whether the Republican party really has changed on this (many have changed within the past year) and is now diametrically opposed to an individual mandate. A real discussion of the pros and cons of such a mandate would be useful for the nation.

Getting ready for the summit

I visited my third grader's school yesterday to see his class present projects on which they have been working. The kids did a great job. While there, I happened upon a dispute between two 9 year old boys. The upshot was: you started it; no, you did; no you get the picture.

Tomorrow the President and leaders in Congress from both parties will talk about health reform. I have written why I think the Senate bill is a step in the right direction, which as much as anything else, gets the ball rolling and makes continued dealing with health care inevitable over the next decade. I wrote on Sunday the outlines of what a deal could plausibly look like between essentially the Senate bill and Republicans. Such a deal would also be strongly preferable to the status quo. I'd gladly take either.

Maybe tomorrow will simply be you started it, no you did, etc. My hope is that somehow the summit could focus clearly on the individual mandate. There is no example of a health system with even near universal coverage without some sort of a mandate. If the Republican party has changed its mind on this (several key Senators, such as Grassley, supported an individual mandate in this Congress, but now oppose it on freedom grounds) that distinction really needs to come out and be made clear.

It will take a mandate of some sort to move toward covering everyone for at least catastrophic cover. If the individual mandate is rejected on freedom grounds, that would seem to logically lead toward rejecting the notion that providers have to give care to the uninsured, also on freedom grounds (freedom to enjoy the fruits of their labor). I don't want to go that way, and am happy to trade the freedom loss implied by an individual mandate to move toward universal coverage. But, we need to decide and move ahead. I think a direct discussion of the pros and cons of the individual mandate would be useful for the country.

The dispute at my son's school was resolved, but it took a grown up intervening. Here's hoping some grown ups show up tomorrow.

Tuesday, February 23, 2010

Next card, med mal?

So, no Republican jumped up and said here is what we want on malpractice. The President should play the card they would play if they were going to negotiate: malpractice reforms. Cohn at New Republic writes this today, and I agree. Reforming malpractice won't save that much money for the system, but will save some money. Most importantly, the malpractice system is totally messed up, so it is good policy to reform it. As I tell folks when I am out talking up reform, no matter what you think is wrong with the malpractice system, it is worse than you think. To whit:

*about 40% of malpractice suits are filed when there is no injury, much less malpractice.
*when true negligence in care is present, only 4% (yes, 4 out of 100) result in any sort of suit.
*when negligence is present, a suit is filed, there is a finding for the injured, only 55% of the money goes to the victim.
*because insurance is an integrated business, some of the spikes in premiums are linked to losses in other sectors, like property.

So, there is a problem with too many suits, too few suits and inefficient compensation when there is an appropriate suit.

My hunch is the group most protected by the current system is actually bad doctors. The cats v. dogs nature of the current adversarial system mean they skate through on the systemic animosity.

If med mal reform was a step away from adversarial system toward a patient safety one, that would be good policy. And good politics to boot. Mr. President, you should play an Ace on Thursday. Either it leads to a deal, or you have the maximum cover to argue for reconciliation clean up after with House passing Senate bill.

Here is what I have written on med mal last summer, with a back up post here with lots of stuff.

Monday, February 22, 2010

The Summit Negotiation

The President has released a list of policy provisions that would bridge the differences between the House and Senate bills, with the general outline of the Senate bill taking precdence (no income tax increase, state based exchanges, tax on high cost insurance) plus expanded income based subsidies to improve affordability. Dan Pfeiffer, an aide to the President, characterized this as the opening bid of a negotiation. Of course, it takes two parties to negotiate.

A fundamental truth about negotiation is that you cannot control how the other party negotiates. You are affected by their choices, and you can attempt to anticipate them, but you cannot control what the other party will do. And you cannot be sure how the negotiation will conclude before it takes place.

The House could simply pass the Senate bill and a budget reconciliation bill that enacted the types of policies contained in the President's document. If that reality were certain in the absence of a negotiated deal, then surely the Republicans would negotiate, because they could improve the legislation (from their standpoint) by cutting a deal with the President. On the other hand, the President would prefer the Senate bill plus the policy tweaks outlined by the President, to a negotiated deal. However, it is not certain that the Democrats in the House and Senate will muster the will to do this, and we could end up with no bill whatsoever. If it were certain that the Democrats could pass the Senate bill and a clean up reconciliation bill, then they would have already done it. Thus, the President would almost certainly take a pared down deal that would be preferable to nothing from his standpoint, because of the uncertainty of the House passing the Senate bill plus a reconciliation bill passing both houses of Congress.

So, is there any hope of a deal? If one doesn't come about, will this summit serve to give the democracts enough nerve to move ahead and finsish the job? Time will tell.

The route to a compromise has always been through malpractice reform, and I included it with some other ideas yesterday in the News and Observer. Here is what I wrote last summer on the subject. Republicans could get quite a lot on this issue if they would negotiate, and they know it. If they offer concrete proposals on this topic, a deal could be done. If there are no whiffs in this direction, the only question left is whether the Dems have the nerve for reconciliation.

The President's Proposal

is here. It is in the format of a series of changes proposed to the House and Senate bills. The claim is that the changes proposed will result in reduction of deficit over 10 years of $100 Billion, about $30 Billion less reduction than the Senate bill. Alot of these changes delay imposition of taxes, and there is also a reduction of the maximum amount a person could spend on premiums. Quick take highlights include:

*Maintains individual mandate, penalites weakened a bit from Senate bill
*keep income based premium subsidy....with very low income persons getting a bit less (3-4% of income max can pay for premiums just above 133% of poverty up from 1.5% in House bill), but max that can be spent at 400% of poverty is lowered to 9.5% of income (12% in House, 9.8% in Senate).
*Expand tax credits to businesses for insurance and makes available immediately, with penalty for for firms with 50+ employees, if their employees end up with federal income based subsidy
*Create a federal insurance rate approval board;
*Max cost sharing, meaning amout you pay out of pocket if sick is set right between the House and Senate bills; for example, at $55,000, Pres proposal is insurance must cover 73% of costs; House it was $85%, Senate it was 70%.
*ending of the Nebraska Medicaid deal;
*keeping the tax on high cost insurance, but delaying its imposition, raising the threshold for application to $27,500 ($10,200 individual), and implementing it at the same time for all policies (Union or otherwise) in 2017.
*Delay tax on high insurance providers contained in Senate bill until 2014
*Update: Appplies current Medicare payroll tax of 1.45%/1.45% on unearned income.....this is in lieu of House income tax increase (which is not included in Pres plan), and is a bit different from Senate increase in payroll tax for persons above $250,000
*Maintain the CLASS long term care provisions
*eliminates the Medicare part D donught hole....tracks more closely with House version than senate here.
*Expands funding for Community Health Centers, Senate bill had $7.5 B over 10 and Pres bill has $12 B over 10...responding to notion that who will care for low income folks newly insured.
*There are a series of items from Republican bills that the President has adopted, including amendments that failed in comittees. Many of these are related to fraud.

Running today....more later. Updated: This post has a useful table comparing President, House and Senate bills. And some thoughts on the President's tweaks of the (essentially) the Senate bill.

Sunday, February 21, 2010

Individual Mandate

I have a column in today's Raleigh, N.C. News and Observer that says the main thing Thursday's reform summit needs to focus on is the individual mandate. The actual policy details offered since the Summer by Democrats have been reminiscent of past Republican proposals. And a policy deal should be fairly straigtforward.

However, as the policy details moved toward the center during the most recent reform discussion as compared to past reform discussions, the rhetoric used by Republicans in opposition has moved toward the apocalyptic. The most fundamental argument in opposition seems to have settled on the individual mandate as a limt of freedom. Every piece of legislation limits freedom in order to achieve a goal that those who support it decide is worth it. Such a tradeoff (freedom v. policy goal) is inevitable and a legitimate discussion in a democracy.

Decisions have consequences.

There is no example of a nation with anything near universal coverage without some sort of mandate. We as a nation, of course, do not have to move in this direction. If we do not, we need to face up to the inconsistencies inherent is having legal and cultural expectations that providers still provide care to those who cannot pay, and shifting these costs throughout the system. The same sorts of freedom based arguments could be used to say why should providers have to provide the fruits of their labor to those who cannot pay?

If the Summit could focus on the issue of the individual mandate in a way that could help our nation decide whether we are willing to couple our desire for everyone to have coverage with a mix of policies necessary to move in that direction, that would be useful.

I believe the individual mandate is worth it, and have written about that here and here and in much of the content of this blog. I sincerely hope that the summit can help focus the nation's attention on the individual mandate in a way that can help us decide, accept the consequences, and move ahead.

Friday, February 19, 2010

President to offer bill

NY Times says the President will offer a reform bill that is designed for budget reconciliation. The Times says Congressional Dems haven't signed on, so this seems to be the President saying here is what I want. The description of big ideas is the basic Senate bill with the President's additions, which are not laid out. There will finally actually be an Obamacare! The summit will be him saying this is what I want, and I am willing to push for reconciliation if you guys won't negotiate. What do you guys want? By the President offering a bill it does give him more ability to negotiate with Republicans if they are inclined to do so....but of course if he cuts a deal with them, he has to corral the Democratic votes. If he gains blue dogs in the House, he may well be losing liberals, etc. There is quite a bit of ideological diversity within the House Dem caucus.

My guess is that the one big, new item the President adds is medical malpractice reform far beyond the demonstrations in the Senate bill. That seems to the only route to a deal with Republicans. If the bill doesn't include that, he has concluded the Republicans will not negotiate no matter what and he has decided to use the summit as a means of demonstrating this and in turn pushing the Congressional Dems toward reconciliation.

In poker terms, this is all in for the President. In another sense, there is a song that once said 'freedom's just another word for nothing left to lose.'

I am writing in the News and Observer on Sunday about the biggest idea that the summit needs to focus on: the individual mandate. Meaning the essence of opposition to reform bills has ebbed and flowed on different topics and aspects, but the most profound opposition seems to be against an individual mandate. The President will have to make the case.

Update: 5pm: Thoughts on reform today from Ezra Klein, Politicio on Reid and public option, J Cohn on same topic, Krugman saying Cali rate hikes show death spiral and what will happen en masse sans reform, Newsweek with predictions on the President's bill.

Thursday, February 18, 2010

Reform buzz picking up

The chatter about health reform is picking up a bit in advance of next weeks' summit. It has been wobbling, but it is also true that it is not dead. The President has pledged to release the text of a bill in advance of the summit. The two choices seem to be the resolution of House/Senate bills that passed late last year. Or the President releasing some proposed changes to the Senate bill, which has been the set point for reform discussions for awhile. There was apparently a deal between the House and Senate just before the election of Scott Brown put the brakes on the reform train. It is not clear how it may have shifted since then, but the tax on high cost insurance plans remains the most controversial issue among Democrats. It remains unclear exactly what will be released prior to the summit, but we should know soon.

Politico describing a sudden movement of Dem Senators calling for the inclusion of a public option via budget reconciliation. At first this seemed to be limited to Democrats running for relection and who were facing a potential left flank primary challenge (think the opposite of what John McCain is now doing), but it has gained a bit more steam. While I am not an expert on Senate rules of course, it is not clear to me that you could add a public option to the Senate bill after passed by the House, through reconciliation. However, it seems clear reconciliation could be used to legislate fixes to the Senate bill if passed by the House (like removing Nebraska Medicaid deal, altering tax on high cost insurance, and the like). Not clear if this increased reconciliation talk represents a momentum in that direction, or if it simply posturing heading into the summit next week.

And HHS released a report highlighting premium increases in individual purchase markets in different states....some of them quite large, again laying context for the summit. Anthem Blue Cross says it is essentially death spiral and not them gouging, and the rate increases are likley to take place eventually, in spite of the delay won this week after criticism by the White House. I wrote earlier that this type of increase foretells things to come sans reform.....The WSJ editorial board says the opposite, this is what will happen if 'Obamacare' becomes law. Now that we cleared that up, on to the summit....

Wednesday, February 17, 2010

Catastrophic v. first dollar

Megan McArdle with a thoughtful post saying her comments on limits of insurance were aimed at first-dollar cover for middle class folks. Meaning, she says she didn't mean moving from no insurance to being covered had no health impact....just that first dollar cover for upper middle class folks probably has limited health benefits because most middle class folks would spend on basic stuff anyway. I think I basically agree.

I would take in one second a system that provided everyone guaranteed catastrophic coverage and that had people buying extra cover with after tax dollars, with premium support for low income, realizing that you create perverse incentives around the 'line' defining low income.

We could do it in one year using Medicare as a vehicle. You could also get it quick using McArdle's approach of making all health expenditures above 15-20% of AGI refundable via the tax code, at least for middle income folks who pay income taxes. Here is Martin Feldstein's answer to catastrophic insurance coverage....abolish tax exclusion, tax credits to purchase catastrphic plans, buy more if you want, and federal government issuing a credit card to charge expenses directly to feds above the spending limit.

Tuesday, February 16, 2010

For individual mandate before they were against it

NPR story on the 'striking similarities' between the Republican alternatives to the Clinton plan and what has passed in the House and Senate this Congress....with a focus on the individual mandate. An idea initially suggested by Republicans and economist Mark Pauly to counter the concept of an employer mandate, and to try and maximize market principles in shopping for indivdiual health insurance. Here is the audio about 5 minutes long.

The story notes that Republicans such as Orrin Hatch being against an individual mandate as an assault on freedom while supporting one in the past is 'ironic.' I like understatement.

Myths about reform

Politico has it about right that both sides float myths about the reform debate. Bottom line is that there is a deal to be had that will move the country ahead.

Does being uninsured kill you?

A bit of a blog-o-war has been cooking regarding the evidence that being uninsured results in excess deaths. Megan McArdle who blogs for the Atlantic and Ezra Klein who blogs for the Washington Post were the principals in the debate with many chiming in. I am not going to link to all the back and forth or all the various folks who chimed in. I think the main thing that McArdle deserves to be criticized for is previously arguing that the Democractic health reform plans were bad because they would lead to rationing and a limiting of access to medical innovation. Then she says not having health insurance isn't so bad because health care is not so effective at extending life. Either of these two positions are questionable, I think. Holding both of them at the same time doesn't make so much sense.

In any event, two bloggers have weighed in with guest posts from researchers who have specialized in this area in very convincing, peer review fashion. J. Michael McWilliams from Harvard Medical School, and Stan Dorn who worked for Urban Institute and was principal for one of the key studies. Austin Frakt with a bit more.

The upshot is that it is hard to measure precisely, but being uninsured is not so good for your health, on average, and does lead to early death, though the exact number of hard to quantify. Mcardle cherry picked the one study that took her where she wanted to go (a study done by a reputable researcher, but one that did not account for the endogeneity of illness in the decision to seek insurance), but the totality of literature is in the opposite direction. No study is perfect, and observational/epidemiological studies of real people living their lives are hard to do well. You have to look at the totality of the evidence. The only other thing I would note is that all the folks weighing in on the controversy with their words have health insurance....

Monday, February 15, 2010

More on Feb. 25

The New Republic wondering about the Dem bill the Pres says will be released online prior to the summit. Ezra Klein writing up as well....many seemed to have originally missed the part about a new bill coming forth. The Republican leadership has been saying scrap past bills and start over, but that is not going to happen, nor should it. It seems as though the Pres is shoving the congressional Dems to say 'here is our compromise between House and Senate bills' and then saying to the Republicans, lets see not only your ideas, but your legislative language. In other words, shift from defense to offense. I submit the Republicans have no offense (but are impressive on defense). By that I mean that when they are in power, they don't take on comprehensive reform at all. They specialize in strident, ideologically driven defense, and in fairness the Dems haven't successfully countered in making the case to average folks that reform would help them.

So, we are stuck. The Dems seem to not have the nerve to finish the job. The Republicans can't seem to shift out of defeat the President mode.

Yesterday's Raleigh News and Observer had a bland AP story noting that the status quo given no reform proposal this year is quite bad. However, there is a key question for Republicans and the country buried in the story. Douglas Holtz-Eakin, who was John McCain's chief health policy advisor is a health policy guy and is quoted as saying this:

" one has the luxury of saying we aren't going to worry about this....(Republicans) are going to have to deliver something at some point. The question is whether they (Republicans) do something with this President leading, or wait for a Republican President."

Based on past history, I don't think there is any evidence that Republicans will take the politcal risk of driving the reform train, and I don't think we can wait. Stop for a second and see if you can imagine a candidate getting the Republican nomination for President in 2012 running on a platform of any type of health reform?

However, Republicans could jump in now and help the country, primarily by insisting on what I would say seems to be the closest thing to a shared notion among the Republicans who are interested in health reform: limit the tax exclusion of employer paid insurance. They may find an unlikley ally in the President on this. I think he has truly been won over by his health policy advisors who believe that limiting the tax exclusion is key if we are to slow the rate of health care cost inflation. The President took a lot of heat from a key Dem party constituency in Labor in insisting on the tax on high cost insurance. The deal exempting labor for a period of time was very damaging politically, but the Pres has had no option but to try and find something that can get 218 in the House and 60 in the Senate. If a few Republicans would jump in and say, we will vote for this if we limit the tax exclusion, etc. then we may actually be able to move ahead.

Here is what I suggested a week or so back about the route to a deal. The rhetoric aside, the plans before us are quite moderate, and should be able to be altered in a manner that could get some Republican votes if there is at least reasonable faith at work.

Friday, February 12, 2010

Invites for Feb. 25 Summit

have been released by the White House. It includes the chair and ranking members of the relevant committees and the leadership in the House and Senate. The Dems and Repubs each get to invite 4 members and 1 health policy staffer as well. Most interestingly, the President says he will release a bill prior to the summit....presumably this will be the Senate bill with fixes that have been discussed (taking out Nebraska Medicaid deal, etc.). I wonder if the President will also add some aspects and say the House and Senate have taken it this far, this is what I want. If I were advising him, I would suggest offering more med mal right up front.

He has asked Republicans to release a plan and place the text on line prior to the summit as he says he will do. This won't be so easy for the Republicans as they have only had to play defense up to this point. Of course they have ideas, some of them are reasonable, some preposterous. But, there are multiple bills--Patients' Choice Act, Ryan's Patients Choice Act on steroids that makes FDR's designs for change see reserved, Gregg's bill, Price's bill, etc. etc. and even more ideas that have not been placed into legislative language.

Even more important, they have a lot of folks who imagine themselves as the slayer of it will be interesting to see how they respond, and which 4 Republicans will be invited to participate. Which Republican(s) become the face of the health discussion will be very important. At the House meeting with the Pres two weeks ago, Rep. Ryan (R-WI) came across as reasonable, and Rep. Price (R-GA) as silly. So, it will make a difference. The Republicans could go with what Rep. Boehner put forth in November, which was scored by CBO as expanding coverage by 3 Million persons. Here is what I wrote about that in November. I doubt that is what they want as their 'here is what we would do' overture to the country, but I don't think any of the other bills have been scored completely by CBO. CBOs work on Ryan's roadmap is not a full score.

Here is what I wrote recently suggesting the House should pass the Senate bill. I think the default at this point is that they will not do so, though they always could. If both sides show with reasonable motives to the summit, there should be a a deal possible....the Senate bill is politically partisan but from a policy perspective is quite moderate and is more like the Republican alternative to the Clinton plan than anything else; the rhetoric used to describe the opposition to the bill has never reflected the the policy reality. Of course, it is not policy analysts who will be meeting on the 25th.....I hope they will work together and move ahead, but I don't feel optimistic.

The Millennials and Health Reform

Maggie Savage, a Duke grad (2009) who was a Benjamin N. Duke Scholar at Duke and who is now working with the Global Health Corps in Newark, NJ writes about her view on health reform, and the perspective of her generation. From my perch as a professor at Duke, the campus was electric with excitment, energy and optimism from the kids during the fall of 2008, and early last year. Seems a long time ago....

Thursday, February 11, 2010


Judd Gregg (R-NH),who is retiring from the Senate this year has put himself in the middle of reform negotiations. Here is an outline of his plan from last year, that is not in legislative language.

He is saying scrap the Senate bill and start over with his notion, but the Senate bill and his ideas are actually quite similar, conceptually. Basically, Gregg wants state-based insurance markets that are at the heart of the Senate bill, but instead of providing comprehensive cover, he wants to provide catastrophic guaranteed cover with people purchasing more if they wish. And he wants a major capping of the tax exclusion, which would add cost slowing pressure to the system.

You could just as easily say add the tax exclusion financing to the Senate bill and provide catastrophic cover instead of comprehensive. So, if he is serious, there would appear to be something to talk about. I guess the key is for Republicans to be able to say 'they killed the Senate bill' and for Democrats to say 'The Republicans didn't roll us.' So, why don't both say the requisite phrase and move ahead.

The biggest uncertainty I have about what Gregg says he wants is this phrase:
"Defines a cost structure (not a benefit structure) in order to allow for flexible benefit design."

I am not sure what that means?

Wednesday, February 10, 2010

Individual Insurance Market

News of Anthem Blue Cross raising premiums in their individual purchase market by nearly 40% for the coming year. Very few people nationally have such polices (about 14 Million), but the companies claim of why the rise when their medical expenses rose by just 9% last year is instructive. They say that in a bad economy, some decide they can't afford the insurance and go without. Those doing so are more likely to be young and well....and conversely, those keeping cover in bad times are more likely to be sick.

This is the beginnings of a death spiral, whereby higher premiums drive out better risks and the individual purchase market could eventually implode. The answer to death spiral is risk pooling. Many of the incremental policies that are suggested in response to saying the Democratic bills are too grand segment risk, and attempt to make smaller and smaller pools work. The simplest answer if you think everyone should have insurance of some sort is to force risk pooling into larger and larger groups. If forced risk pooling is not the answer, then at some point what you are really saying that everyone shouldn't have health insurance if they can't afford or don't choose to afford it (whichever language makes you happy).

If we aren't willing to come up with a way to cover everyone, then at some point the logical answer is to say the uninsured don't get care. We are now stuck in no mans land, turning in horror at the plight of the uninsured, and turning in horror from any plausible policy to move toward covering everyone.

WaPo Poll

Interesting poll numbers from Washington Post poll on health reform. Most interesting is the answer to this question "Do you think lawmakers in Washington should keep trying to pass a comprehensive health care reform plan, or should they give up on comprehensive health care reform?" All respondents: 63% say keep trying; 56% of Independents. Not surprisingly, 88% of Democrats say yes, but even 42% of Republicans say keep trying.

Tuesday, February 9, 2010

Lets Make a Deal

The Republican leadership has responded to the White House invitation for a health reform summit on Feb. 25 with a list of demands or they won't show.

The President should agree to no reconciliation IF they agree to let a final bill have a straight up or down vote in the Senate. You know, majority rules. So, no reconciliation if you won't filibuster. Easy.

He ESPECIALLY should agree to have the CMS actuary come and testify/present. Based on what the acutary has written of late, his presentation will go something like this.
1. The current health system is unsustainable.
2. If we do nothing, we will spend $33.3 Trillion on health care in the next 10 years.
3. If the Senate bill becomes law we will spend $33.6 Trillion on health care in the next 10 years, and 36 Million people (what actuary said) will be insured in 2019 who will otherwise be uninsured.
4. We really need to do something.
5. If you want to really slow cost escalation in health care you will need to do two things: (1) reform the tax exclusion of employer paid insurance; and (2) Begin to apply cost effectiveness research/some means of reducing expenditures in Medicare that are either non-productive or where the costs are greater than the benefits.
6. Now do something.

Then I would ask the Governors to come and ask them a simple question. "If you are opposed to an individual mandate, how do you think we can got more people covered?" Especially invite the Governors from the 5 states with the LEAST insurance regulation and ask them why they haven't lead the way in terms of the proportion of their population that is insured? And finally ask them whether they think we as a society should reconsider the legal requirements, as well as the cultural and moral intuitions that underlie the fact that people who are uninsured actually get care, and whose costs are then quietly socialized? If we are not going to come up with a financing mechanism for uncompensated care, why should providers have to provide care?

Monday, February 8, 2010

Health Care Meeting Feb. 25

President Obama has announced a meeting Feb. 25 with Democratic and Republican members of Congress to discuss health reform. It makes good sense to not start over, but to start with the bills that have passed the House and the Senate. And then discuss how to move from that toward some compromise. I suggested this outline of a deal last week. Ezra Klein has a list of compromises already in the Senate bill that Republicans tout as desiring.

Biggest political issue that also has policy merit is bringing in med mal. But, there also needs to be a shift away from adversarial dealing with malpractice toward patient safety approach. I wrote about this last year.

Biggest political issue that is mostly fake from a policy standpoint is the selling across state lines as a panacea. Of course, the Senate bill that passed on Christmas Eve allows states to form compacts and do this. This meeting on February 25 needs to walk through the steps of the general sell across state lines. Meaning I would give McConnell and Boehner the floor and tell them to tell us how it would work. First, you pass a law that reforms McCarran-Ferguson, then you....that sort of thing.

There are really two choices as I see it if you are after blanket across state lines: (1) set national insurance regulation of insurance. Big problem then will become fact that insurers don't have networks everywhere and that practice patterns render health care costs per capita so different across locales, so premiums won't work nationally. Or (2) make insurance like credit cards and allow insurance companies to all set up shop in a few states with low regs and then sell anywhere. People will get cheap insurance that will be fine if they don't get sick, but which will be filled with back end exclusions and there will develop a cottage industry of telling the stories (I thought I was covered and then I got Cancer...). The sell across state lines is a brilliant political slogan, but not much else as a mainline health policy.

Biggest policy issues that the country really does need to focus on and decide are:

1. Individual mandate or not? If no mandate of any type, there is no way to get to universal coverage. Even with it, you can't get there immediately. If we are going to decide we will not have a mandate of some sort (covering everyone via a catastrophic insurance of some sort is a type of mandate), I think we really have to then decide whether it makes sense to say that person's get care when they are uninsured. It makes little sense to say they do, which implies some sort of notion of right to health care, but then not put in a practical way to get the financing straight. We are in no man's land at this point.

2. Will we alter the tax exclusion of employer-paid insurance or not? There is good agreement across health policy types. This will take bipartisan support for sure. The President has been pretty bold on this, insisting on the tax on high cost insurance plans, which is the beginnings of a de facto capping against the wishes of Labor. It would be better to simply limit the exclusion, on the route to repeal. There are lots of Republicans for this, so simply adding this as a financing mechanism/reform to any bill should make them like it better if they are deciding based on policy.

3. Will we admit that there are limits to what can be done? Not rationing is everyone getting everything they want. We don't have that now. We need to put the rational into our rationing and begin to purchase health care with value in mind. Paul Ryan's Roadmap provides an interesting foil/approach that can help bookend the choices in a manner that is good for the country. He says voucher the Medicare program beginning 10 years hence, fixing the federal government's contribution and assuming the rest works out (with extra resources for low income persons). I would prefer a muddle through approach that would be based on expert assessment and practical interpretation of guidelines that also begins to have a policy punch. Eventually deciding some types of care don't make sense in certain circustances, and then say public money won't pay in some cases, or will pay less.

I would rather have an honest discussion and have my point of view not prevail than to continue our hysterical 'discussion' that we typically we have around rationing.

Friday, February 5, 2010

More on Ryan Roadmap

Howard Gleckman at Urban noting that people are overstating the Ryan Roadmap. CBO estimated that revenues (taxes) of the nation would equal 19% of revenue over the long term (see table 1, page 6; in 2040, 2060 and 2080 assumes taxes=19% of GDP). The CBO did not estimate Ryan's tax proposal, meaning model what effect it would have on revenues because Ryan's staff asked them to make the 19% assumption. The tax plan is for a $25,000 standard exemption and then two rates: 10% up to $100,000 and 25% over $100,000.

The CBO letter clearly states this. But, it is important to keep in mind that the CBO letter provides no information whatsoever on the revenue side of the equation.

However, Ryan's plan is still a useful estimate in the senst of saying, if revenues are at 19% of GDP, here is the type of cuts in benefits necessary to get to long term solvency.

We don't know if Ryan's plan could produce 19% of GDP worth of revenue....and Gleckman says almost certainly not based on past scores of similar plans. It is worth noting that all the balanced budgets the U.S. has had since World War II have occurred in years in which revenues were around 20% of GDP.

Guest post from Barak

No, not that one. Barak Richman, Professor of Law at Duke University and an expert in anti-trust law who focuses on health policy. I asked him to address the merits of proposed legislation to repeal the 'anti trust exemption' that health insurers currently enjoy under the Mccaran-Ferguson Act. His post was edited by Duke Law Student James Deweese. Here is a copy of the CBO report to which he refers.

There are different versions of this. The one referred to in the CBO report, and here is a new one from two Freshman House members (one who voted nay or the House bill, one who voted yea) saying theirs allows for some sharing of data, but I think the main point is that it is a Blue Dog and a progressive proposing it.

Barak and I are doing a Duke Alumni forum on "Health Care Reform: What Happened and What's Next?" along with Sandeep Kishore, who is doing the MD/PhD program at Cornell-Weill-Sloan Keetering in New York, and who is the greatest student I ever taught at Duke University, on New York City, Tuesday March 9, 2010. More on that later.

Thursday, February 4, 2010

Obama calls for reform talks with Republicans

The President called today for talks between himself, Republicans and Congressional Democrats seeking to develop a reform bill that wouldn't be filibustered in the Senate and presumably might actually get some Republican votes. He seems to suggest unifying the House and Senate bills and saying here is where the Dems are, what do you guys think? to the Republicans.

In many ways the Republicans have no incentivizes to vote for anything. However, it will be hard for Republicans to not neogtiate at some level, and a give and take could result. If the talks are 'public' which is what everyone has been calling for, the President will likely do well. And if nothing passes then, the voters will have to decide what happens.

For all the terse rhetoric used to describe the Democratic bills, they essentially parody the Republican alternative to the Clinton Plan in 1994 and the framework of a deal is fairly obvious.

Might I suggest the following road map for discussion.

1. Med mal. The President should simply propose the AMAs wildest dream. The cost savings are widely over-estimated, but this is a key step both politically, and to have a hope to transition to a more patient-saftey focused system. Here is what I wrote about malpractice and reform in August. Here is what the CBO says is will be saved by a national imposition of a basic slate of medmal reforms ($54 Billion over 10 years; this is on a base of $33.3 Trillion, keep in mind). I think med mal reform is a good policy if used to also focus on patient safety. But, let me make a straight political argument to my liberal/progressive friends.

Even if you think doctors are money grubers, and you think they overstate the case for how much savings will come from malpractice reform, you should be for this in order to call their bluff. We often hear in response to any reform discussion that the real way to slow costs is to get rid of junk lawsuits. If you play this card, you end that argument. This is both good policy (I think) and good politics in terms of getting a bill passed.

2. Dump the tax on high cost health insurance and instead cap the tax exclusion at the mean (about $13,500 for family policies; about $5,000 for individual). Among health policy types, this is about the most bipartisan policy that exists--most think this is necessary to help get control of cost inflation. There are some Democratic politicians for this (for example the Wyden-Bennett bill), and all the Republicans who are for this need to put up or shut up. Adding this financing to the mix would be a big change, that will bring much more cost inflation reducing pressure into the system. I have written alot about this over the last 6 months. One aspect of this change that is key I think, is reorienting the discussion of health care cost inflation to include the role of individual consumers--you and I--our use of care ultimately drives increases in health care costs.

3. Add a lower cost catastrophic insurance option for persons under age 30. One of the biggest concerns about the Democratic bills are related to affordability of insurance given that an individual mandate has been enforced. While I agree that you need clearly defined and regulated benefit packages to enable consumers to shop for care, allow an option for a much more catastrophic level of coverage (maybe $10,000 individual; $15,000 family) for persons under age 30. Even better, create an auto-enroll catastrophic policy for persons under 30.

Update: an older post showing proportion of persons with $10,000+ in medical expenditures in a year...18-39 is 6.2% of persons.

4. Do two things related to Medicare. First, increase the eligibility age to equalize it with the planned increases in Social Security age, increasing it by two months per year starting in 2014 until it is 67 in 2025. Second, keep an Independent Medicare Advisory Commission that has an ability to look closely at what Medicare pays for, how and when. And have and engage in an open discussion about rationing of care. Not rationing is everyone getting anything they want. We don't have that now. We need to begin asking the question are the benefits greater than the costs and develop practical ways to frame, address, answer and act upon these questions.

During this discussion, everyone needs to take a close look at Rep. Ryan's proposal for vouchering Medicare. We can reduce the cost of Medicare by fixing the federal government's cost, and assuming the rest works out as Rep. Ryan notes. Or we can begin to muddle through developing ways to reconsider what, when and how we pay for care. Or it could be a mixture of the two. But, it has got to be something.

5. Adopt the so-called Wyden Amendment, which would open up the exchanges to more persons. As written, the Senate bill only allows around 1 in 10 Americans to buy insurance via the exchanges (only the uninsured, those working or small employers, or those with offers of employer based cover that is above the affordability standard). The big idea behind the Senate idea, and the Patients' Choice Act (Republican Alernative) is to help individuals shop for their own health insurance. If we are going to try it, lets try it.

These are just some thoughts on a way forward.

Wednesday, February 3, 2010

Paul Ryan's Roadmap Proposal

So, if you have been thinking that the Democrats overreached and tried to 'take on too much with health reform' you should stop reading now and write off Paul Ryan's (R-WI) Roadmap for America's Future Act of 2010 [hereafter Roadmap]. This is a overarching vision for taxes, Social Security, private health insurance, Medicare and Medicaid, all rolled into one. This would be a big, big bang.

From my perspective as a 42 year old with 3 children, who thinks we must cover everyone while being fiscally sane, I think our country needs a fairly fundamental reconsideration of what people can expect to be provided by government in the way of retirement and health, and what they will be responsible for own their own. So, I am open to big bangs, but that is typically thought of as an ailment or virtue that only affects liberals. Rep. Ryan paints his vision, and shows that desire for big bang is bi-partisan, at least for this Republican.

On parts of Rep. Ryan's vision, I think it is about right (Social Security). On parts of it, this is not how I would do it and I am not convinced it will work(Medicare), and on others (private health insurance) I am not only in between, but see alot of similarity between the Senate bill and what he proposes, even when he professes to not see it. [Interesting interview by Ezra Klein with Rep. Ryan on all this from yesterday].

The big picture effect of the Roadmap becoming law as compared to the what CBO calls the Alternative Fiscal Scenario (which is a mix of current law and certain changes they assume would have to be made) would result in the following differences in revenues and spending on Social Security, Medicare, Medicaid (all shown as percent of GDP, extracted from Table 1 in the CBO document). Here is the CBO analysis of the Roadmap, which it should be noted doesn't appear to contain coverage estimates....meaning how many people insured in 2020, etc. Further, it isn't a score of the bill or estimate of its cost over the next 10 years, but a 75 projection of the approach. Projections this far ahead are subject to a great deal of uncertainty, but they do provide a sense of what the proposal would entail.

% Gross Domestic Product
2020 2040 2060 2080
Revenue-Ryan 18.6 19.0 19.0 19.0
Revenue-CBO 18.6 19.4 20.6 21.9

Soc Security-Ryan 5.4 6.3 6.0 5.1
Soc Security-CBO 5.3 5.9 5.8 6.1

Medicare-Ryan 3.7 5.1 3.8 3.5
Medicare-CBO 4.2 8.1 10.9 14.3

Medicaid-Ryan 1.6 1.3 1.1 1.0
Medicaid-CBO 2.1 3.0 3.4 3.7

Tax credit-Ryan 0.6 0.6 0.5 0.4
Tax credit-CBO* 0.0 0.0 0.0 0.0
*This is new spending, and the amounts above are net of the difference between the refundable tax credit and the loss of the tax exclusion of employer paid insurance. So, in 2020, the tax credit results in $600 Billion more for private health insurance via tax credits than the current tax exclusion would provide in subsidy.

Big picture. Spending on Social Security would actually go up slightly under the roadmap from 2020 to 2060, then drop by 2080, while spending on Medicare and Medicaid would drop substantially from 2020 to 2080. Net spending by the federal government to subsidize the purchase of private health insurance would go up slightly, but the distribution of this expenditure would be equalized across the population with everyone getting the same amount.

Immediate Changes. The tax exclusion of employer paid insurance would be repealed and individuals would get refundable tax credits to purchase health insurance beginning in 2011, with each adult getting $2,300, children $1,700 up to a family maximum of $5,700. The tax credit amount would be indexed at the average between the Consumer Price Index all item Urban (CPI-U) and the Consumer Price Index Medical (CPI-M). This means the value of the tax credit would grow less slowly than medical inflation has grown recently. CBO estimates that the annual increase in the value of the vouchers will be 2.7% under the roadmap, as compared to a projected 5% per capita growth in health care spending under the CBO's alternative scenario. That is a big difference. I will comment more fully on the health exchange issues below, but the bottom line is that the bill would fix the federal government's contribution to private insurance over time and determine how fast it grows. This is like a governor on a bus accelerator. A similar approach is taken for Medicare, with vouchers indexed in the same manner eventually replacing Medicare as we know it. It is basically defined contribution instead of defined benefit.

Social Security. Social Security would be unchanged for persons who are 55 or older in 2010. For those 54 and younger this year, several changes will take place. First, a new and increased minimum benefit will be established for low wage workers, roughly persons who worked at or near minimum wage for more than 20 years. Second, private accounts will be available whereby workers can allocate some of their pay roll taxes into private accounts. The mix of investments will be regulated in some way. As people with private accounts begin to retire, the federal government will guarantee a return of equal to inflation (Consumer price index all item-urban?-not clear to me what definition of inflation is for this provision; very important). So, if you get a better return, you get to keep it. If you lose money, the government will guarantee you at least inflation-level returns. Gains above inflation reduce the flows from government to retirees.

My bottom line: This is privatization with a net, and with an expanded minimum benefit for very low income workers. This sounds about right to me.

Private insurance. This part of the Roadmap is just the Patients' Choice Act with a bit more detail on the actuarial aspects of the plan (notably, how the value of the credit will inflate over time) but there are MANY unanswered questions about the exchanges and how they will work. For example, the Patients' Choice Act as submitted May 20, 2009 has the following sentence about exchanges. (Exchanges)...."shall develop mechanisms to protect enrollees from the imposition of excessive premiums, reduce adverse selection, and share risk." One of the reasons the Senate (and the House) bills were so long is that they provided inordinate and necessary detail about these sorts of things. This sentence and others like it will have to be fleshed out in order to fully evaluate this aspect of the Roadmap. And you can't do it in 10 pages, by the way.

Big questions I have:
*will states continue to regulate insurance?
*will the Roadmap specify benefit packages? If no, then what is their a strategy to help consumers shop/compare policies in a reasonable way?
*will private insurers still be able to offer policies outside of exchanges that employ underwriting?
*will pre-existing condition bans and other insurance market reforms apply only within exchanges? If yes, why won't the exchanges end up in death spiral?
*What about affordability? The mean annual insurance premium for a family in the U.S. is about $13,500, alot less than $5,700.
*Is there any sort of a soft mandate? Auto -enroll, etc....while I get politically individual mandates are not liked by Republicans, that sentence above about adverse selection is most easily fixed via an individual mandate with teeth. I don't see how you make it work without some sort of a mandate.

I favor ending the tax exclusion of employer paid insurance, so am willing to listen to anyone who wants to do that. However, alot more detail is needed to understand how this will work.

I understand the general idea here to be a cousin of the Senate plan. However, I think what Roadmap is really proposing is a catastrophic level of coverage to everyone, and a new cultural statement that people are going to be responsible for the rest with after tax dollars. That message does not come through in how the Roadmap is described. With the questions above addressed and with premium support for underneath cover for low income folks, this would begin to look alot like the Senate bill with only catastrophic cover being guaranteed, with people buying other cover if they wish with after tax dollars. The Senate bill says everyone will be covered with comprehensive benefits and a much lower level of out of pocket cost once insured. Those are more differences in degree than in approach. So, I see this as similar to the Senate bill if you answer the questions above with the regulations that I see as necessary to make this work.

My bottom line: More detail needed, but this is an approach with which a compromise should be possible with what is proposed in the Senate bill. The big difference is whether goal is guarantee comprehensive coverage to everyone, or to guarnatee catastrophic coverage to everyone. I can live with the latter if everyone is in. I don't see how you do it without a mandate of some sort...

Medicare. I understand Medicare to be the most practical example (along with Social Security) of our culture making the moral precept 'Honor Thy Father and Mother' a reality (and grandfather and grandmother). I am much more willing to try more individual based/market notions with younger persons than with the elderly. As I say that, I am thinking of my 85 year old grandmother, but of course she will not be affected by this proposal. And there is a 10 year 'warning' of changes coming to Medicare, on the backs of individual's being much more involved in purchasing their own insurance via the tax credit/exchange regime noted above for the decade prior to Medicare eligibility age (which also increases over time which makes good sense). But, I am skeptical of this part of the proposal.

The proposal is as follows: For those age 65 and older in 2020 (55 and older in 2010) you will not experience a difference in Medicare. It will be fee for service Medicare. Apparently Medicare Advantage will also continue, with I think reduced premium rates, but that which is often a hot topic is small potatoes here. For those turning 65 in 2021 (54 this year), you will not have the option of being in fee for service Medicare. Instead, you will get a voucher with which to purchase private health insurance. 65 year olds would get $5,900 (in 2010 dollars). The in 2010 dollars means that the voucher amount is set at $5,900 this year and then is inflate in by the average of the CPI-U and CPI-M, as with private insurance tax credits, but the vouchers would not be used until 2021. The amount of the voucher that one would recieve would vary based on their age and health. The average voucher amount in 2021 based on projected age/health breakdowns per CBO of 65 year olds then would be $11,000 (in 2010 dollars). The CBO notes that Rep. Ryan's staff provided extra info to allow these projections to be done, so they will follow up with more written detail soon, I assume.

The voucher would be means tested. Those in top 2% of income would get 30% of the voucher; those in next 6% (92%-97.9%ile of income) would get 50% of voucher amount. [I think the 90th percentile income is about $120,000 last year...but I need to check that.]. Everyone else would get 100% of the voucher amount.

The federal government would then provide funding for a Medical Savings Account (MSA) for low income elders (not clear how low income defined) Attachment B of the CBO report on Medicare (p. 27-28) is important here. It says "The amount of the Medicare voucher would equal average per capita Medicare expenditures in 2010 under current law." Is this average as simple arithmetic mean, or average as defined by 'average adjusted per capita cost' which varies by county and is used to set premium levels for current Medicare Advantage plans? If this voucher is a straight mean, then doctors practicing in the Miami area (which has very high Medicare expenditures per capita, nearly 3 times as high as some areas) will remember today as the Halcyon days in terms of how much Medicare pays them!

If it is average meaning based on average adjusted per capita cost, then of course it serves to lock in geographical variations that do not appear to be linked to quality. The unexplained geographical variation in Medicare spending is a big problem. I am just not clear which of these they are using.

In any event, moving to a voucher based system in which elderly persons get a defined contribution will result in Seniors having less generous benefit packages and paying more in extra premiums for similar benefits. It is unclear to me whether there is a ban on pre-existing conditions for elderly purchase? Perhaps in the exchange but not outside? The CBO report says on page 28 "To the extent that risk adjustment did not adequately reflect expected costs, however, less healthy people would either have to pay an additional premium for the same coverage or accept some limits on their coverage, and healthier individuals would be able to buy more extensive coverage or pocket the difference between their premium and their voucher."

Now obviously the status quo planned level of Medicare expenditures is fscal insanity, and the only way to reduce spending is for people to systematically get less care (price x quantity) than they would get under the scenario of no change. We are talking about rationing care, with not rationing meaning everyone gets whatever they want. We have rationing now, and I give Rep. Ryan credit for honestly noting this in his interview with Ezra Klein yesterday. He says, "Rationing happens today. The question is who will do it. The government. Or you and your doctors."

I think he overstates the difference in the choice of how to ration.

It is a question of how do we ration, or apply limited resources in the best way. I prefer an approach that is based on systematically asking the questions: (1) do the benefits of the care outweigh the costs? If no, we shouldn't pay for it via Medicare. and (2) Is the care worth it? Meaning, at some point, there is a marginal benefit that is not worth the extra cost.

The qeustions I suggest are hard questions to answer. They are laiden with value judements. It will be hard. Mistakes will be made. I would prefer a system that relied on an Independent Medicare Advisory Commission applying cost effectiveness research and having guidelines that mixed guidance of what is covered and how much is paid for care with patient choice and a bigger role for docs who were less incentivized to do more by default, in conjunction with their patients. Government has a role in interpreting the research evidence, and keeping incentives straight. But it is not a choice of gov't v. doctors deciding. There are many steps to what I write above, but I think we can work out the over spending and reduce the cost of Medicare in this way.

Rep. Ryan's approach fixes the cost to the federal government and then assumes that the market will work it out. It says we will fix an amount the government will pay for your health care in old age, but you are responsible for the rest. In the end, society will have to decide whether they would rather muddle through on changing what is covered, when and how it is paid for as I prefer, or whether we would rather fix the public costs and assume it will work out via the market. In fact, you have now created a payer (private insurance) with a clear incentive to provide less.

But, we need to get straight the market for what. Insurance? or Care? They aren't the same thing, but they are certainly related. Meaning markets work when consumers understand how much they want something and sellers know what they are willing to take to give something up. I actually don't think that people can do a very good job of shopping for health care. If I go to the doctor and am in pain and scared, how am I going to inquire about price? Thus, I would prefer more expert driven guidelines with docs helping patients decide after some of the incentives now in the system have been changed. I think people can do a better job of shopping for insurance, so long as you have some basic things set such as benefit packages so they know what they are buying.

It is true that you first start with only 65 year olds in 2021. In 2022 there are 65 and 66 year olds, and so on. So, you are easing into this as opposed to trying to do it with a broad cross section of the elderly at once. Still, I have the following BIG questions about this approach to transitioning Medicare to a voucher based private insurance system.

1. Why would any insurance company want to be involved in this market? Everyone dies. Before you die you are tpically sick, and costs rise tremendously before death. The older you are, the closer you are to death (you heard it here first). Again, why in the world would a private insurance company go into this business unless you could figure out how to cherry pick. But, if so, the non cherry pickers will blow up and exit. I know there is some premium at which this will work, but the voucher suggested is far below the amount of money planned to flow into the system to care for the elderly. That is the point of all this, I just don't see how private insurance companies are going to want to jump into this market.

All of the experience we have seen with Medicare Advantage/HMOs has been one in which the healthies sign up and the sickest stay in FFS Medicare. If insurance companies had to insure a certain proportion of the elderly, with some sort of rebalancing of risk to account for adverse selection that occurred, then maybe.

2. The above will be exacerbated if you keep a system with exchange based policies with no pre-existing conditions, but outside the exchanges they can underwrite. With elderly individuals, I would think you just sell outside the exchange and aggressively underwrite. Who ends up with the sick folks....remembering that eventually almost all of us are sick.

3. Is the average premium a straight national average, or a county based average like average adjusted per capita cost used to set Medicare advantage premiums?

My bottom line: the reduction in Medicare cost as percent of GDP that the CBO says the Roadmap would generate are tremendous. Medicare is expected to be 8.1% of GDP in 2040 under CBO alternative scenario, and 5.3% under the Roadmap. I appreciate the fact that there is extra resources for low income persons, but I don't see how practically this market will work without some form of forced risk pooling. I am skeptical and need to hear more. But, this is a serious proposal and I am willing to listen.

Medicaid. The Medicaid changes called for an analysis that CBO was unable to perform....meaning there are so many changes to a complicated subsystem--particularly the long term care parts-- that it is hard to predict exactly what will happen. The letter from CBO to Rep. Ryan says they agreed with his staff to simply alter the rate of Medicaid growth, with most persons in Medicaid being shifted into private insurance using the tax credit plus a Medicaid-paid subsidy (premium support) to purchase private insurance. This essentially does with the Medicaid program what the Senate bill envisions with persons just above Medicaid eligibility (133% poverty + in Senate bill).

I would be open to this goal of moving income-eligible persons into private insurance, from the standpoint of removing the stigma of Medicaid and removing a payer that is not beloved by doctors and hospitals (again, we will see what they think about the old days if this actually became law because every dollar saved is a dollar of somoene's income dropping). These would mostly be children and pregnant women. Others will say they are more vulnerable, etc. so the marketplace won't be so good for them, but I think it is worth the risk to try and mainstream them into the system, so to speak.

Persons who were disabled and/or receiving long term care services would remain a part of Medicaid, with the federal government block granting Medicaid payments to states. This is actually a big deal, as around 6 in 10 Medicaid beneficiaries are children or pregnant women, but they account for less than 30% of Medicaid spending. So, the real big money in Medicaid is for the disabled and long term care, and the Roadmap has the federal government fixing their costs for this portion of the costs, block granting and thereby shifting the rest of the responsibility to states. The most obvious group to be opposed to this will likely be bi-partisan upset from Governors. I am unclear whether the block granting is population based only, or whether it also accounts for the relative poverty level of the state, as does the basic Medicaid funding formula?

I think there is lots of evidence that long term care needs to be greatly reformed, and particularly Medicaid programs are notorious for insitutionalization bias, meaning they pay for the most expensive setting after spend down (nursing homes), but lag behind in less expensive and likely preferable community arrangements and settings (that are assumed to have more moral harzard or wood work effect). So, a change in how we fund long term care is needed. Would block granting force a change? Probably so. But, it bothers me to be making changes that affect the most vulnerable members of society in such a blunt manner.

As Rep. Ryan's roadmap could be viewed as a clear statement of what government will provide and what you will be responsible for, you could imagine the CLASS provisions in the Senate bill fitting into his framework. Here is what I wrote about CLASS in December. And this recent paper I have with colleagues in Health Affairs on the use of genetic markers to underwrite private Long Term Care Insurance lists reasons why people don't purchase private insurance, and discusses issues related generally to trying to increase rates of purchase. Adding a self-financing provision such as CLASS could stimulte the development of private LTC policies that would be more likely to be purchased, which could potentially reduce the future costs to Medicaid. Any riskiness of the CLASS provisions in terms of not being self financing pale in comparison to transitioning Social Security to private accounts with a federally guaranteed rate of return equal to inflation.

My bottom line: I could live with trying to shift Medicaid beneficiaries into private insurance, but have concerns about block granting Medicaid for the most vulnerable members of our society. Especially since the Roadmap is an approach that is trying to spur more individual role in addressing health insurance needs, the CLASS provisions in the Democratic bills would seem to be something Rep. Ryan would support.

In the end, the Roadmap clearly defines a vision for what the federal government will provide in terms of retirement and health care, and makes the individual responsible for the rest. We need such a clarifying societal agreement going forward. I like some aspects of this proposal (Social Security), think others have some good ideas but with *many* questions and details that need to be answered (private health insurance), and am worried that the proposed vision will not work well for other parts of the system (Medicare, Medicaid). However, this is a serious and wide ranging proposal that at least says how one guy would do it.

Update: What others are saying about Rep. Ryan's Roadmap. Here, here, here, here, here, and here. Even more and more

Tuesday, February 2, 2010

Bipartisan Budget/Deficit Commission

My good friend Frank Hill has a post describing failed past commissions of this failed meaning they produced recommendations that were not adopted by Congress. Last week a commission failed in the Senate 53-46 (53 voted in favor, but the Senate is operating under de facto supermajority because of threatened filibuster). 7 Republicans who co-sponsored the law developing a bipartisan commission to address entitlements and the deficit voted against their own bill once the President announced his support of it.

Frank says the failure of the commission in the Senate and the President saying he will create a similar commission via an executive order is a waste of time.

I understand Frank's point about past failures, but I think he is wrong. Such a commission could still be a useful, because it is a tool to try and make the ins match the outs. We have to do it.

In the end, if you are using the past as a predictor of the future in predicting how we will deal with our long term fiscal problem, we are doomed. There is no example of our nation doing anything as politically difficult as raising taxes and/or cutting future Medicare and Social Security benefits so that we can achieve fiscal sanity. So, something has got to be different this time, or we will fail. And a commission such as this one is one tool.

Revised, 2/3: Here is a list of the votes. The 7 Republican co-sponsors of the bill who voted against it were: Bennett of Utah, Brownback, Crapo, Ensign, Hutchinson, Inhofe, McCain. All the Democratic co-sponsors voted for it.

The ins and the outs

must balance over time, else we have a big problem. NY Times economix blog on historical ins and outs from 1930s on for the ins, and from 1960s on for the outs. Very cool graphs. Note graph 2, the outs, includes spending of borrowed money. But you can see trend over past half century away from defense spending as percentage of what we spend toward health care, especially. For the ins, you can see trend away from excise taxes to income taxes and then the rise of payroll taxes (SS and Medicare).

Gov't not solution

is a common refrain, but Austin Frakt guest-posting at the New Republic has a slightly different lesson learned from reform on this....that our gov't can't agree what to do one way or another for anything big or important. And New Republic with latest handicapping of health reform.....either dead and just pretending or rolling but doing so out of the spotlight. I'm just not sure.

Monday, February 1, 2010

Passing the laugh test

Rep. Paul Ryan (R-WI) has released his vision for how to balance the budget over the long term. I haven't looked closely at his plan, but it includes privatizing Social Security and Medicare and ending the tax exclusion of employer paid insurance. Ezra Klein has a detailed discussion and CBO has weighed in and said that in 2080 under no change the deficit will be 80% of GDP, and under this plan we would have a surplus.

I will read this carefully and comment more fully later, but let me say several things. First, good for him for saying what he would do, and for saying it 9 months before an election (of course the House is always running for re-election). Second, it certainly makes sense to say something like for those 55 and over, nothing will change....for those of us younger, we intuitively know that something MUST change. And it will take a big change. You have no hope politically if you don't exempt those right on the door step, though. If you are my age or younger, we will have to embrace that it will be harder for us than past generations, if for no other reasons than our parents didn't have more children. Third, I completely agree with his goal of ending the tax exclusion of employer paid insurance....there is really quite a bipartisan consensus developing that the current bottomless subsidy for those with it, with none for others needs to be a thing of the past. Fourth, I think that tax rates need to increase as well, to around 20% of GDP, the general level each time we have had a balanced budget since World War II. Meaning, I suspect my solution would include cuts but also tax increases designed to be around 20% of GDP (there were 17-18% since 2001 and 2003 tax cuts).

Again, more later after I have a chance to read the specifics and what CBO says.

Most analysts will say, 'no chance in Hell this passes!' I think I will simply say the status quo is fiscal insanity, and this sure aint the status quo....

It is a start

Austin Frakt clearly writing about the Senate bill as an imperfect start, but a start. I agree with his general notion, and as I wrote last week, one of the worst aspects of ending up with nothing is how hard it will be to get the political will to address health care again. And several folks have written and said that the Republican's do have proposals. They definitely do. My main point is that whenever they have had power in the past, they don't bring up these issues, but have developed proposals while playing defense. Maybe it would be different in the future, but I am not optimistic....