The poor CMA apparently can’t get it right. It finally gets a quasi-universal insurance bill passed in California that should reduce the number of uninsured showing up at the doctor’s office and yet a bunch of its members (like the LA and San Diego Medical Societies) have noticed that they might have to buy insurance for their employees when the bill becomes law.  So of course the squawking has begun. 

But the math skills of the southern Cal docs may be lacking. Lets say that 25% of their patients are uninsured (which is about the ratio down there). Presumably if that number fell dramamtically, many of the uninsured they are treating will now be insured, and so will be paying so revenues will go up–presumably by up to 25%.  Costs may rise as the office staff need insurance, but insurance does not cost more than 10-12% of payroll. So they should come out ahead. 

And of course if they bothered to read the fine print they might notice that SB2 doesn’t apply to employers with less than 50 employees, and not many solo or small group practices have that many.

In New York last week I had a great visit with my old colleagues at Harris. Humphrey Taylor had some new data showing that flu vaccinations don’t seem to work. Meanwhile Bob Leitman broadly agreed with me that we can’t expect anything much out of the next Congress no matter who wins the Presidency as, there may be as many as 5 Senate seats in the south that go over to the Republicans, and so the Congress itself will be to the right of this one. However, by 2008 things may be different. By then the TROOP and the donut hole will be familiar to the NASCAR dads (the southern males who vote Republican but economically should be Democrats).  Also, by then the first tranche of the baby-boomers will be retired (if they can afford it) and two years away from Medicare.  And they will be finding the individual insurance market increasingly difficult to deal with.  Meanwhile Medicare will be entering its most costly phase–the run up to 2020 when the peak of the baby boom hits 65. At that point wider appetite for reform financially from the fiscal hawks and from the baby busters who’ll be paying for this may meet the interests of the soon to be Medicare recipients who don’t like the benefits the way they are.  Some where in there is the subject of the real debate and therefore the seeds of a real compromise for a workable solution.  Maybe.

Apparently there’s a health care crisis going on. 43 odd million uninsured, (that’s at any one time–25 million basically permanently 80 million for some substantial time in any 4 year period), costs going through the roof (premiums up 8% over inflation in 2002 and more last year), and Medicaid coming under the knife. Oh, and seniors hate the NAIM (new and improved Medicare). The NY Times reports that the Democrats all have their health care plans and are taking them seriously. However, there are two minor differences between 2004-6 and 1991-4:

a) With the exception of the three outsiders’ single payer plan, none of the "main" Demo candidates proposals gets to universal coverage.  Don’t forget these are proposals.  And as you know any Presidential proposal will get watered down over the course of the negotiations in the Congress–especially in a Republican Congress.  So if, to pick on one suspect, Dr. Dean’s proposal will take us from 86% insured to 92% insured, the actual result may be to go from 86% insured to 91% insured–and that he’d regard as a victory.  It’s impact on the hard core uninsured and the providers who have to deal with them would be close to unnoticeable.

b) It’s not 1991.  We haven’t just won the cold war and can now concentrate on the peace time economy.  We’re involved in a never-ending "war" that whatever your view on it will be the main event in elections form now to 2006 and beyond.  Health care will be a poor second till the mass of NASCAR dads (the ones in the South who economically should be Democrats but culturally are conservatives and decide Presidential elections) get closer to retirement age and notice that they might need Medicare and Social Security.

In the meantime Bush is pushing his $89Bn tax break for the uninsured to buy their own insurance really hard.  I think he’s mentioned it twice in three years!

So please welcome yet another anonymous contributor, this one we’ll call Jones the Policy Wonk.  The Wonk took exception to my recent post which suggested that "big" health care reform would be absent in the next administration whether it was Bush, Clark or Dean at the top. (Don Johson at Businessword indirectly chides me for leaving out Gephardt’s plan, but besides my admiration for Kucinch taking a bold non-conforming stand, I am a realist and Dick Gephardt ain’t got a shot either! The Geek seems to me to be in the Paul Krugman camp who think that the current Administration wants to "starve the beast" (scroll down to #3 here to learn more)–that is, run deficits so there’s no money for moderate income people’s programs like SS and Medicare so those people will turn against the government. Anyway, the Wonk gets her name because she understands Medicaid very well, not because she said I was wrong about no big health care reforms coming. Here’s what she suspects is coming from Bushco in the next couple of years:

First, I think Bush will unveil some kind of tax credit for individuals, and while it will be deeply flawed policy, it will make for excellent political soundbites.  He’ll run on that and "I fixed Medicare!"

I see the following happening:  An agenda of caring for the uninsured, which encompasses:
#1 Med malpractice reforms–it’s ideologically desirable and the right kind of "malpractice reform" would undercut a huge source of funding for Democrats (trial lawyers).  It’s going to be a senate battle, and depending on how well Edwards does in the election, med mal could move WAY up in the agenda),
#2 some kind of tax credits scheme (probably similar to the TAA bill), and
#3 Medicaid Reform (largely an intragovernmental fight, and I think the White House will lose).

My guess that they’ll go to Medicaid is just a guess, but it makes sense–
Hint #1:  Dennis Smith, head of Medicaid, rather than Leslie Norwalk, currently the acting #2 person at CMS, was tapped to "temporarily" to take over Scully’s position.  I’m reading tea leaves at the Kremlin here, but it suggests to me they’re looking for someone conversant in Medicaid policy, and with the credibility and connections of a former state Medicaid director (Virginia) to push through reform.   

Hint #2–Bill Frist has said his #1 priority will be helping the uninsured. This doesn’t only suggest tax credits for low-income people.  Interestingly, when George Bush made his initial push for Medicaid reform in August, 2001 he linked it to decreasing the number of uninsured. 

Rationale for Action: Because of the Federal match, the Federal government has almost no control over the annual budget line for Medicaid, and states love to spend through Medicaid.   Richt now, Medicaid growth is really being driven by medical inflation, esp in the care of long-term disabled and elderly dual-eligibles.  So, the question isn’t "why is Medicaid spending increasing"–all healthcare spending is increasing.  The question is: "why don’t states slash their Mcaid budgets?" 

States are decreasing Medicaid spending (or, more often, decreasing the rate of growth in spending), but less than one would expect.  This is because aside from all the traditional political pressures against cuts (industries dependent on Medicaid  like pharma, hospitals, nursing homes, etc//political fallout of cutting benefits for poor people), every dollar of state spending through Medicaid is matched federally on a 1:1 or greater level (depending on how poor a
state is).  So, a Medicaid budget of $100 million  represents (at maximum) $50 million in state spending, and $50 million in free federal dollars.  In most states, every dollar spent on Medicaid brings in way more than a dollar in federal matching funds.

As a result, states have done things like classify state funded programs as part of Medicaid (eg: NY put its entire developmental disability system in Medicaid), to get the federal match on state spending they were going do even without the match.  Additionally, some states have engaged in fantastic accounting gimmicks with Medicaid to effectively draw down "match" federal dollars that could be used for any purpose.    

So, the problem from a Bush Administration standpoint is that federal Medicaid spending can be infinitely expanded (states just get a waiver), and there’s not a lot of accountability for where the money goes (in theory, there’s accountability, but in practice not really.  Lots of states, you know.)  So, as you go farther and farther out, it’s gets harder and harder to predict Medicaid spending because you have the typical uncertainties of medical spending growth, but also the uncertainty of "Will California one day declare universal healthcare through Medicaid?" 

In addition, there is some argument that federal regulations are too onerous.  IMHO, this is a red herring–most of the regulations really prohibit states from slashing benefits to the truly poor, and from providing benefits in a discriminatory manner.  Furthermore, you can always get around them with a good reason and a waiver.  Additionally, if the feds think the federal regulations are too burdensome, they can just not enforce them.  Grant waivers to everyone, for everything.  Problem solved.   

So, the Bush suggestion is that states should take a block grant instead of a match, in exchange for increased flexibility.  It’s supposed to look like "managed care" for states–they get a block grant and all the flexibility they want to design their programs however they want.  However, the danger is that this will look a lot like "managed care" ended up–capitation with ruthless enforcement of spending caps, and not so much delivery on creating a better, more integrated system.  There’s already sufficient pressure for efficiency–states DO have to foot about 40% of the bill, and with the shortfalls they’re suffering, it’s significant.  So, the "taking on of risk in exchange for freedom" analogy that the Bush Administration is pushing is fundamentally flawed–they already have enough risk to motivate them to maximize efficiency, and they have enough freedom to get the job done. 

However, it is strongly analogous to employers moving from a "defined benefit" system (we provide insurance to our employees) to a "defined contribution" system (shoot, we don’t know HOW much this damn insurance is gonna cost next year; let’s give all employees $900 annually to buy into a plan)

So there you have it. According to the Wonk, the next Bush administration will dump more people and less money into Medicaid, declare more or less universal coverage victory and go home.  My sense is that this won’t get off the ground politically because it runs into the roadblock of the southern strategy.  Most of those states relying on Medicare match for more than 50% of Medicaid spending, and the ones that get the most pork anyway, are the central and southern "Red" states. It seems unlikely to me that an Administration with almost no interest or appetite for significant policy reform domestically (i.e. outside Baghdad) and showing very little interest in fiscal restraint, will start down this path by upsetting its core supporters. But if I’m wrong the Wonk‘s theory does have a suitably neo-con ring to it!

The first decent poll I’ve seen on the Medicare bill is out from Harris, and the seniors hate it. No one under 40 has a clue about the bill (really!) but those over 65:
–are disappointed it passed by 51% to 16%
–disapprove of the discount drug card provision 45% to 44%
–disapprove of allowing private plans to compete with Medicare 54% to 30%
–disapprove of the ban on Canadian imports by a modest 85% to 12%

They only just approve of the drug benefit itself by 48% to 44%! These are horrible numbers by any interpretation and perhaps may have an impact in the wider scheme of things.

The Republicans (62-3%) get the blame over the Democrats (57%).  So my memo to the Democrat strategists (if they can find one) is to blame the Republicans for banning cheap drugs from Canada and selling Medicare to those evil HMOs, and perhaps they should suggest that Bushco has the same thing planned for social security.  The Donkey faithful must see Florida and Pennsylvania veering into the D column any time now……

Following my post last week on the individual and small group insurance market, the Anonymous Academic declared some of his political colors by saying this:

I haven’t followed the situation in California, but I am familiar with the situation in Washington State in the late 1990s, when the individual market there was a mess. The main culprit was a package of "progressive" reforms designed to enable chronically ill people to buy coverage, but which ended up making the individual market completely dysfunctional (for example, basically eliminating the market for generous individual coverage). After the reforms, most of the insurers (and many beneficiaries) fled the individual market, and those few insurers that remained offered truly crappy plans.

Unbelievably, the state’s insurance commissioner, Deborah Senn, and many left-wingers denied that there was a problem–or if they acknowledged the problem they denied that the legislative reforms were in any way responsible. One prominent liberal said that "sometimes things have to get worse before they get better," by which I believe she meant the market for individual coverage had to be destroyed to engender support for a single-payer approach.  Prior to the reforms, the individual market in Washington functioned reasonably well, although admittedly the situation was not very good for someone who got hurt or sick while uninsured. I don’t see how this problem can be avoided in a voluntary insurance market. If (a) people can choose whether to buy insurance and (b) there are few or no adverse consequences for getting sick while uninsured, then (c) few people will bother to buy insurance until they get sick.

A little later in our conversation, while giving the proviso that his comments are directly limited to the insurance reforms in Washington State in the late 1990s (guaranteed issue, community rating, 3-month waiting period for coverage of pre-existing conditions), he adds:

There were few serious consequences to being uninsured. If you got sick, you could get coverage in just 3 months with no underwriting.  I do think there are some problems with the individual market, but I definitely do not think that guaranteed issue, community rating, etc, are the right way to solve those problems.

Now I’m going to have to agree and disagree with the Academic. He is right. Individual health insurance CAN NOT work as a market if the insurer has any idea who they’re insuring OR if the individual has the choice to buy or not buy insurance. Both of them lead to one extreme–sick people being unable to get insurance–or the other–the adverse selection that kills companies that are compelled to offer insurance to the sick, as under those Washington State reforms. Insurers make money by getting rid of the expensive people. One of my buddies in the consulting business has been looking at individual enrollee profitability, and his analysis for his health  plan customer helped that plan increase profitability by identifying and enrolling the psychogrpahic profiles of a consumer who is less likely to be a big user of health services. Conversely if the plans have any clue in advance who those expensive people might be it’s their raison d’etre to make sure they don’t write them insurance. And funnily enough, crude though they may be, insurers have some tools to help them do that (hence my 300% quote increase when they found out I’d had knee surgery 2 years ago).  It’s the same concept as an insurer who covers fire damage knowing which 15% of houses are already on fire and therefore not covering them.  If an insurer gets it mostly right they do OK; if they get it wrong, they get hosed (pardon the pun).

And, by the way, as both the Academic and on a larger stage Mark Pauly gloss over, there are damn serious consequences for getting sick while uninsured. For example, there’s the raft of stories in the WSJ about denying care to the uninsured at UT Galveston. Another recent story well covered in the medblogs was the hospital in Indiana that carted deadbeat payers off to debtor’s prison.  And anecdotally (but I know her well), there’s my friend who has had no steady job in 30 months, is off COBRA, has a chronic blood-clotting illness (DVT) that flares up occasionally and was quoted (legally) $1200 a month she didn’t have for coverage with a $2,000 deductible (with no coverage of her pre-existing condition for the first 6 months) by California Blue Shield.  Her barely existing middle-class life will be torpedoed the next time she’s carted off to hospital when her condition breaks out, and she’ll probably have to declare bankruptcy to avoid paying the $20,000 bill she’ll likely receive.

I guess that if Pauly and other "free market" economists really believe that an insurance market is "good enough" if it works for the 80% of people who don’t actually need care, then the individual insurance market is fine.  If, on the other hand, you think that sick people should be able to get health care and have their costs spread over a larger group of healthy people (which I believe is the original concept of insurance) then everyone has to:

a) be anonymously community-rated in a big pool and
b) be forced to be in the pool (i.e. have to buy insurance)

But then again, that means that if you take it to its logical extension we should all be in one pool (or have large pools which make genuinely risk-adjusted transfer payments between each other), and then that means that the government is the logical organization to run that process. That then means the premiums we pay are called taxes, and we don’t like that.  So we pay much higher taxes called "premiums" for worse coverage and services (and pay way more out of pocket) and keep a bunch of useless anachronisms called brokers and small insurers in business all for the pleasure of avoiding "socialized medicine"–even though in Japan, Germany, Holland, Germany, etc, etc, they’ve worked out how to do this without nationalizing care delivery.

But instead we conduct minor and meaningless reforms like HIPAA at the edges of the individual insurance market, and try to get coverage to specific underinsured groups such as kids via tack-on programs like SCHIP which, as Cal Healthline and USA Today report, are incredibly vulnerable to the ongoing fiscal crisis at the state level. There is no way to put lipstick on this pig. But there’s no political interest in fixing it.

My personal solution for this whole mess is for Mark Pauly and all members of Congress to be forced to buy their health insurance on the individual market (even the over-65 year olds!).  Then you’d see a Clinton-style pooling plan implemented in about 3 weeks flat.

Wierd historical footnote: It was of course the smaller insurers who along with the AMA destroyed the Clinton plan with theHarry and Louise ads–the big guys fancied their changes in the pool structure. Ironically enough, a decade later the HIAA and the AAHP just merged!).

Every so often I run into someone, usually a doctor or someone else in healthcare who should know better, who just loses control when faced with a proposal they don’t like about health reform, and it’s usually got the words "single payer" and "Canada" involved in close proximity.  The always entertaining Chris RangelMD had such a moment last week, and unleashed a load of bile on Steffi Woolhandler following her interview with the NYTimes. Chris’ piece was filled with so many inaccuracies and crass misunderstandings about health care in the US (including in his native Texas), taxes in Europe, rationing, etc, etc, etc, that it required a response almost equally bilesome. As that type of thing is not the kind of cool analysis I try to provide at TCHB, I sneakily hid my response in Alwin’s entry about Chris’ piece at his code: theWebSocket blog I’m hoping that I’ll stir Chris into action over there too, and maybe get some other lefties like Ross at the Bloviator or single-payer advocate like Graham at Gross Anatomy to get stuck in too.  Then Sydney at Medpundit might get involved and the bar-room brawl really might get going into the silly season.  Graham incidentally found the the link to the article on rationing in Texas that I mention in my comment over at Alwin’s blog.

Meanwhile at THCB I’ll be trying to continue the highbrow discussion I’m having with DB’s Medical Rants about health care quality.  Of course if I mention the word malpractice that highbrow reserve could all fly out the window . . . . .

Finally and OT for this blog but as both Medpundit and RangelMD lead with it I’ll make an exception, ask yourself the following question: If you had access to at least $750,000 in cash, a false passport and a huge price on your head, wouldn’t you have shaved off the mustache, lost the beret, snuck over the border and been on the first plane to the south of France like this guy and this other guy did it?

I commented in response to a post in DB ‘s Medical Rants about a piece written by the libertarians at the Adam Smith Institute about private health care in the UK. (Don’t worry–they’re nice gentle British libertarians with no guns!). I too got an email requesting a look, so here goes. Their piece seems to be pretty accurate and I had the following comments that are already over at DB’s. So quoting myself:

There’s a little cheating going on here. Most of what the author is talking about is what’s called long term care in the US. That is funded by a mix of public (Medicaid) and private (mostly cash) sources here, but provided almost entirely by private sector facilities (including for-profit ones). That’s similar to the UK other than the money comes more from the state. In the UK, private provision of standard health services is used mostly as a safety valve so that middle and upper income people can get around the queue for NHS surgery. That’s been around forever, as allowing specialists to see private patients was part of the deal cut in 1945 by which they agreed to support the introduction of the NHS. NHS surgeons in specialties like orthopedics or gynecology can (quite legally) double or triple their incomes doing private work on the side.

But in the US context this is all misleading. Not even the most radical single-payer advocate believes that the government should provide all health care, they just think that it should pay for it. What this post ignores is that the every country apart from the US provides some kind of universal system of payment for care, usually delivered in a mixed public/private system. In virtually all of those countries you can "trade-up" with your own money to get better amenities or jump the queue in the public system.

As I wrote directly to Alex Singleton at the Adam Smith Institute, the cheating I’m referring to is at the American end–what they from their UK perspective think of as "private" is private sector provision of services that are often paid for by the government. The government here pays for over 50% of care in its role as insurer to seniors, the poor, the military, veterans and its employees.  So what they think is surprising in the UK is exactly what’s happening here in the US in most of the things that they write about in that post (such as government funding for a significant chunk of private long term care via Medicaid). 

Americans tend to be told by the more mendacious among us that universal health insurance (which of necessity requires some kind of government regulation of the insurance system) equals government-based provision of care.  This argument is made with frequent reference to "useless" American government agencies with low social status (like the California DMV) and rather less mention of the pretty effective ones with higher social status (like the US Marines or the NYFD). In fact the UK is pretty unusual even in Europe in having so much government provision of care facilities and services in the acute setting (I think only the Swedish have more), but government provision of care is by no means unknown in the US–once you add up the VA system, county hospitals, and the DOD there’s a big chunk of government provision going on here too. However, overall who owns care facilities or who provides care is mostly irrelevant.  What is important is the financing situation that determines what care is provided to whom.  In most of the UK’s NHS and in Canada there’s a group/community-based decision made on who gets what care in which area (e.g. we’ve got money to do 50 hip replacements this year and we’ll do the 50 neediest).  In the US that decision is almost totally dependent on the type and level of insurance that is attached to the individual patient, so in my hip example you may get 70 done but 30 of them may be medically "unnecessary" and 15 of the neediest may not get done as the patient couldn’t afford them.  (Ignore for the moment that there are other factors at work too such as race and education impacting access to care in every system). So my overall contention with the Adam Smith Institute’s piece is that they should be focusing on how private insurance markets work in health care rather than looking at who owns what beds.

What’s rather more interesting is that Smith himself back in 1776 thought a great deal about what constituted a competitive free market–although current American conservatives have totally forgotten what little they ever knew about that. The great Northwestern professor Edward FX Hughes gives a talk based on Smith’s principles of perfect competition and how they struggle to work in health care. American health care (not to mention defense, agriculture, energy and several other industries) is in fact predominantly full of the mercantilist behavior and government-protected and subsidized oligopolies that Smith was trying to undermine in his modest treatise called The Wealth of Nations.

Back in 1990 when I first got into this health care policy stuff a guy called Walter Maher was going around saying that we needed a government single payer system. Nothing too unusual in that other than Maher was head of public policy at Chrysler. He was saying it because Chrysler and the other autos, with their unionized and older work-force and pensioners, were locked into paying very high health care costs. When they did the math they noticed that a Canadian-style single payer system paid for out of general taxation would be cheaper for them. Of course during the 1992-4 debate on the subject, the rest of Corporate America took Chrysler out to the woodshed and little was heard from Maher after that.  And of course managed care was going to fix it all, and the market was going to work.  By then anyway the 90s boom was on and the Japanese competition was running into trouble and Detroit (aided by some little known tariffs on Japanese light trucks) was making a fortune out of minivans and SUVs (which are trucks not cars, really!), and saving a fortune by sending jobs to Mexico.

However, there’s to be a sequel to the movie, given that the autos are not seeing the boom days continue, but health care premiums are. Like all good sequels, we’re now going to see a rehash of the first movie. This time it’s Ford stepping up to the plate, and putting a senior executive in charge of solving their health care cost crisis. Listen to the complaint from Ford:

That was written last week, whereas in 1990 you would have read this:

I don’t know why Ford is bothering to have its own investigation.  Surely Chrysler can send over the draft of Maher’s old speeches. All they have to do is double the numbers and the job’s done.