Government Run Health Care - Part II
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Health care reform is making a lot of news these days. President Obama is calling for “reform now,” Senators Edward Kennedy and Max Baucus are working on their own proposals, the U.S. House of Representatives is working on a number of plans, the so-called, “Blue Dog Democrats” in the House have come out against creating a “Medicare For All” program for the privately insured, and a variety of advocates and interests have suddenly landed opinion pieces, blog commentaries and talking head shots on the news and cable networks.
I hesitate to pick a spot in all of this, because it’s kind of like engaging in a debate about hypotheses of one sort or another, but I do think there are some points worth making anyway.
First of all, the problems we face as a nation with respect to health care costs and quality are not going to get better until Medicare gets serious about changing the way it does business. I’ve said this before, and I’ll say it again - if Medicare is just Medicare - as it is and as it has been - health care reform, with or without whatever reforms are currently being discussed - will not result in lower costs or higher quality. Read Atul Gawande’s article in this month’s New Yorker magazine or Maggie Mahar’s “steroids” post about Medicare on her blog at if you don’t want to hear it from me.
Second, we are woefully under-prepared as a nation to deal with the aging of the U.S. population - and there is precious little in the current debate about a “public plan” that will address this problem. I was on a panel discussing memory loss last week at my father’s 60th B-School reunion (which means virtually the entire audience was over the age of 80), and we talked quite a bit about whether or not the “system” is structured to deal with the simple demographics of an aging population. As a nation, we have very few gerontologists, fewer and fewer primary care providers with each passing month, and little focus or attention on interdisciplinary medical research or cross-functional care delivery models - both of which are critical to the success of managing an aging, medically complex population.
Here’s a fun fact put forth by one of the speakers - the life expectancy of someone who lived to the age of 65 in 1900 was 77. In 2000 - 100 years later - the life expectancy of someone who made it to 65 was 83 - not much difference. By 2050, the life expectancy of someone who lives to age 65 will be…102!!! And 2050 isn’t that far away. A 65 year old in 2050 is 24 years old today. Moreover, if the quality of the questions my panelists and I got peppered with by this crowd is any indication of where we’re going, this population will work deep into what was once considered to be ”old age,” and will maintain active lifestyles well into their 9th decades.
Third, these federal debates almost never talk about diet and exercise - but these two “preventive” measures, more so than almost any other - can dramatically affect health care costs and health status. Everyone is “for prevention” when we talk about health care delivery itself - but when it comes to doing something about the two most preventive measures of all - eating better and getting up off of the couch - we seem to take a pass. Why?
Fourth, the decision by a number of stakeholders (docs, hospitals, plans, pharma, labor, etc.) to come to the White House and commit to $2 trillion in cost reductions over the next ten years seems to have galvanized and energized the folks who support a publicly run financing system for health care. This is kind of curious to me. For years, people have urged “the industry” to step up and acknowledge the cost problem, and work collaboratively with the feds and one another to do something about it.
Finally, I remain a skeptic of the so-called public plan. As I’ve said before, I worry less about the impact of having the federal government writing the rules and competing directly with plans like Harvard Pilgrim for business, and more about the federal government’s ability to do this at all, much less do it well. Merely coordinating basic demographic information between Social Security, Medicare and Medicaid - three big federal programs that millions of Americans belong to - can be a chore for beneficiaries, their children, and their health plans. It’s not unusual for our members to spend six months or so trying to get this stuff corrected before they call us and ask us to step in on their behalf. Our member service representatives then spend a lot of time ensuring that the information between these three programs is consistent and updated - which it often isn’t.
The new COBRA law could be Exhibit B. As you may recall, this law was enacted as part of the American Recovery and Reinvestment Act, and it provides a subsidy for purchasing COBRA that runs as high as 65% of the cost of coverage for eligible individuals and their families. That’s the end of the simple part. The subsidy itself applies - and will apply - to newly unemployed workers who lose their jobs between September of 2008 and December of 2009, but it’s only good for nine months during that period of time.
More importantly, it’s really not administered as an individual benefit. Instead, the employer and the health plan are required to figure out who’s eligible and for how much over that period of time, to pay out the benefit/subsidy to the eligible individual, and to then claim credit for that payment on subsequent employer payments into Social Security. That’s right - the employer and the health plan figure out who’s eligible, for how long, and for how much. We then deduct the value of the subsidy from what would be someone’s full COBRA payment, we then get reimbursed by the feds through a reduction in our FICA contribution. If this sounds complicated to you, it should - because it is. We spent a lot of money (like hundreds of thousands of dollars) just putting in the technology to keep track of all the moving parts.
And by the way, the form the feds developed for beneficiaries to fill out to claim eligibility is, ah, about 11 pages long and has so many “if /thens,” “and/ors,” and “must/must nots” associated with it, I wondered when I first read it about how many people would be able to determine if they were eligible or not. I didn’t have to wait long to get the answer to that one. To date, we’ve sent out almost 4,000 letters, answered tons of questions and only enrolled a little over 100 people. Sheesshh.
And then there’s the math. When someone tells me that I should ignore the $35 trillion unfunded federal liability that’s currently undermining the future of Medicare and sign up for the installation of yet another government run health care plan, I just shudder. This is certainly theoretically possible, but I don’t believe it will happen this way. In the end, I don’t think the U.S. government can make the types of decisions that are required to make the math work. Take the General Motors deal. GM is bankrupt. It owes a lot more - A LOT MORE - than it’s worth. It has no capacity to pay its bills, and its competitive position is getting worse every day. In steps the U.S. government with $50 billion in taxpayer funds. GM will continue to lose money going forward, because its market share is shrinking, its costs are still out of line with industry averages, and new car and truck purchases are way way down, due to the economy. Put another way, the U.S. government is spending over $50 billion in taxpayer dollars to purchase the lion’s share of a company that’s worth less than $1 billion and has pretty dim prospects moving forward.
This stark reality - all by itself - gives me cause for pause when people tell me that the so-called “public health insurance plan” will be fiscally disciplined. It will negotiate with providers for a mutually agreeable fee, it will balance its books every year, it will have to cover its costs of doing business - just like the private plans do - and it won’t add to the federal deficit.
I’m sorry. I just don’t get it.
Charlie,
Much of what you say is undoubtedly correct, particularly on the execution side. The Senate HELP bill released yesterday (i.e., the Kennedy Plan) does actually propose initiatives to improve health and wellness, to the point of having the Secretary of the HHS and all other Cabinet Secretaries on a panel to recommend strategies to all of us. The scope of administrative oversight that the Kennedy Plan proposes, of course, makes the execution that much more difficult.
As for the providers, the math is simple. If you can make money at Medicare rates, or are willing to make your living that way, then everything will be fine. If not, then you might want to think about Plan B.
Charlie, I share your frustration. But let’s face it, asking folks to hold themselves accountable for their personal decisions is politically unpopular. Two words - Mortgage Industry. ‘Nuff Said. It’s much easier to lay blame elsewhere than to turn that high powered gaze of perception back on oneself.
You and I both know that the government (on a number of levels) has its challenges with running any public plan - let alone one that improves upon the individual healthcare consumers experience and ultimate end-user cost. Take one look at the recently released Athenahealth study (albeit it should be taken with a grain of salt) - MassHealth was nearly 2.5 times slower to pay claims, with over 4 times the denial rate of this state’s largest HMO - and we’re supposed to be the model. YIKES.
Charlie - You make a good point about the federal government being so politically driven that they invest $50 billion in GM to save 50,000 jobs and keep the unions in business. That really isn’t a good return on taxpayers money but they do it anyways because no politician is willing to step up and make the tough choices. That being said, how in the world does anyone expect a politician to “reform” Social Security and/or Medicare when MILLIONS of voters depend upon these programs? Many of our elderly rely solely on these two programs for their monthly cash and healthcare….. I think something like 85% of Social Security recipients depend entirely on that money to live. There was video a while back of a bunch of elderly attacking the car of a congressman who proposed reductions in Social Security. I just don’t see the politicians making the drastic cuts required to keep these programs going and the demographics just don’t add up in terms of enough young people paying in to carry the shortfalls (they really are just like Ponzi schemes). I really think that these programs will keep getting passed on to the next politicians until they go bankrupt and then the politicians can blame it all on their predecessors’ lack of action. As a younger person the sooner I can stop paying payroll taxes into these two programs that I will never see a dime from, the better.
Hi Charlie,
What’s your take on this scheme of taxing employees on their health care benefits at the federal level?!? Anybody out there except me worried that our mandatory drug coverages, other excessive mandates, and just the over all high cost of health care in Massachusetts is going to disproportionately wack MA working families every April 15? Where are all these billions of tax dollars going–to a new federal insurance bureaucracy?
Jon Hurst
Charlie:
I have a friend who works at a machine shop, who is an avid golfer. Business has been a little slow and the owner was asking around if anyone would take a lay-off.
After explaining to my friend that if he gets laid off, he can collect unemployment and only have to pay 35% of his health insurance (now pays 50%)–well you know the rest. One of his major reasons for work was benefits.
Now he golfs every day, collect unemployment, tends bar (cash) at night and cuts his monthly check of 35% of the monthly premium. What a country..
Bill Randell
Advantage Benefits
78 Pleasant Street Suite 300
Worcester, MA 01609
Bill@AdvantageBenefits.com
Jon - You raise a good question. I’ve thought for a while that high premium/high cost states would have a much more aggressive “tax cap” than lower cost states - if the federal government relied on a single standard for the tax cap (i.e., $10,000 per subscriber - or something like that). This approach would also put a much heavier hammer on high mandate states as well (in other words - they would have more “taxable” coverage than lower mandate states). Since no one knows how the tax cap would be implmeneted - based on plan design, regional cost differences, start high and move down, etc. - it’s very hard to draw conclusions about what it would mean.
But your general concern about high cost/high mandate states seems right to me - especially if the end game is to raise a lot of money to pay for health care reform by using a cap on the tax deductibility of health benefits.
The problem with “not getting it” has several aspects. The COBRA issue seeks to mimic the same routines as were present when the person was employed. The difficulties you experience carrying it out only shines more light on the inefficiencies of the private system. If there was central system these bureaucratic barriers would be gone. Further I did not see companies or their health insurance counterparts flocking to help their laid off employees pay their medical bills. It fell to government and the pressure from the health insurance industry diluted the solution and explains the extra paperwork. Further reforms of Medicare or any other part of health care falls to the private sector, medical schools, providers, hospitals, and the public to structure themselves more rationally to reduce waste. It is not government waste that is spoiling the system but greed and mismanagement of the private sector. Attempts by health plans to instill Hedis Standard preventive care has failed by any study used to measure it. It is also not the purpose, again, of health plans to promote this since we are trying to cover everyone not perform an underwriting exercise. There are several studies now showing preventive care, although necessary, increases cost, not lower it. Further if more citizens reach older age they are now in the costliest group of health care consumption, ironically paid for by the government, not private insurance. In addition Harvard Pilgrim like all major health plans is reaping a bonanza from Medicare Advantage plans by over-payments as much as 160% of Medicare in various areas of the country. They further have the chutzpah to organize a well-funded lobbying effort(through AHIP) called “Coalition to Preserve Medicare Advantage” and call this top down corporate enterprise a “grassroots” organization. Sorry Mr. Baker Karen Ignani is not a grassroots organizer. She represents big business interests. By the way if the President is successful in removing Medicare Advantage, saving the taxpayers 15 billion dollars, what will the bottom line of those insurers look like since they receive 3 times the amount of revenue from those plans skimming off anywhere from 11 to 30% from the top for administration?
What you don’t really get is that health insurance companies are anachronistic place holders. They had their time during WWII and its 20 year aftermath when they could give workers decent health care, but now the reverse is true. So we thank you for your past service and hope you for the sake of yourself, your family, and the nation start to see the light on our most pressing national need, a National Health Plan.
Dr. Green - Thanks for your post. I would offer these observations in response…
1) The COBRA solution was more about minimizing changes in the way the feds operate than anything else. If the end game was simplicity for the laid off worker, there were far better options than this one.
2) Medicare payment policy drives the rest of the system. Fixing health care requires changing Medicare. We would actually welcome changes in Medicare payment policy.
3) I understand Medicare’s obligations with respect to senior citizens. Ironically, Medicare needs more Gerontologists, but its payment policies for years have flattened reimbursement to primary care providers - including Gerontologists, thereby reducing the number of people who enter the field. I hope they change this policy as part of health care reform.
4) I’m no fan of the status quo - and have written several posts previously on my hopes for reform. But I remain skeptical about the fed’s ability to pay for another health insurance plan - when it hasn’t really been able to adequately fund the two it already has (Medicare and Medicaid).
5) In Massachusetts, the health plans spend about 11-12% of premiums on administration and margin. The other 89% goes to medical care.
I made a commitment to helping hospitals improve cash flow by automating the claim status follow up process. After many years of call center consulting work, I realized how inefficient the claim status process is, including excessive hold times when calling payors. Hospitals deserve and need claim payments in a timely manner. My company, Advance Response, has eliminated dialing and holding when providers or billing companies call the payor call center. We’ve also enabled efficient online lookup of claims, although many of us realize that phone calls are still and will remain a necessity. By working collaboratively with payors, I believe the mission of Advance Response will be fulfilled, which is to improve provider - payor relations. Look us up at http://www.advanceresponse.com or call me at 646-263-4214. Ken Poray
My continued uneasy feeling about healthcare reform comes from our overreliance on short term health insurance plans….generally uncapped, 1 year renewable.
These provide a disincentive for prevention (lifestyle changes), but incent quick medical hits. Some 70% of healthcare costs go to chronic patients, who we try to treat with short term horizons. This short term focus, including cost controls, always leads to higher long term costs.
Capitated long term plans, either public or private (my current flavor du jour is a UK type blended system — though clearly far from perfect) can incent prevention and improved chronic disease treatment.
A public plan offering long term coverage with appropriate incentives — ie capitation — would offer a real alternative to our current private plans. The issue, though is less public vs private but long term capitated vs short term open ended.
Major implications for our employer based — ie, highly inefficient - system also.
I’d like to hear that discussion on Capital Hill.
Mr. Baker,
The popular comment is to label the federal government as inefficient or corrupt and without the incentives to handle healthcare intelligently. My take is that the government steps in to ventures that capitalism and the ‘free market’ can’t or doesn’t want to handle.
Will there be fraud. Of course. Will there be inefficiencies, sure. But the fraud and inefficiencies of the private sector are, first of all, private and not open to as much scrutiny.
A national plan is the only first step to get the ball rolling and force the private sector to get the job done