Posts Tagged House Bill

Life’s a struggle then you die!!!

Posted by Mark Brenzel in For Consumers, Healthcare Reform on December 9th, 2009

The above saying usually contains a more colorful word than struggle, but the meaning is the same. In the context of health, this statement describes the human condition well. From birth to death, even the healthiest among us deal with the health consequences of aging and the demands of living that eventually results in death. The Senate Healthcare Reform Bill appears to be written based on the premise that this reality can be substantially changed (except for the ending of course) by government action.

The major goal of this bill continues to be to extend health insurance to all people living in the US. It is accepted without debate that not having health insurance is a severe health risk. The truth is actually much more complicated, but that is another discussion for another day. This bill goes far beyond simply increasing access to health insurance, however. The bill contains an almost endless list of studies, experiments, demonstration projects, and health improvement initiatives geared to making people healthier.

The following list describes some of these initiatives:
• Establishes the Center for Quality Improvement and Patient Safety to identify best practices and healthcare delivery process improvements
• Medical Homes will be funded to provide medication management services for specific patients that includes in-home services
• Funds a program to develop patient decision aids sensitive to cultural issues to help patients make the right healthcare choices for themselves
• Establishes an Office of Women’s Health to focus on how to improve healthcare for women
• Creates a National Prevention, Health Promotion, and Public Health Council to reduce incidence of preventable illness and disability (includes reduction of tobacco use, sedentary behavior, and poor nutrition)
• Funds more School-based clinics
• Provides for funds to study ways to improve oral health care
• Allows Medicare to pay for a physician visit to put together a personalized prevention plan
• Directs Secretary of HHS to determine which preventive services should be covered by Medicare without co-pays or deductibles
• Funds a tobacco cessation program for pregnant women covered by Medicaid
• Directs the Secretary to research incentives that could be implemented to change risky behaviors in the Medicaid population
• Requires manufacturers to make sure that new healthcare technology is accessible by the handicapped
• Provides funding to increase immunizations
• Requires chain restaurants to label their food with nutritional values
• Funds community centers to develop individualized wellness plans
• Requires employers to provide reasonable break times for nursing mothers
• Creates an initiative to combat childhood obesity
And many more…

Sadly, they left out my favorite health improvement idea. Studies have shown that people with pets tend to be happier and live longer. The authors of this bill should have funded a program of buying everyone a government approved pet. The good news is that this idea and any others that are left out can be added later. The bill calls for the establishment of many new Offices, Centers, and Commissions that can add new programs and initiatives as studies indicate their value.

Clearly, there was a heavy dose of academic input into this bill. Academics love to create studies and recommend courses of action that address the problems and implement the solutions identified by their studies. Obviously, the political sponsors of this healthcare bill have bought into the above academic ideas in a big way. The question is why they have done so now? The answer is embedded in the language that accompanies almost all of the health improvement initiatives. The ultimate goal is healthcare cost reduction. These collective initiatives are one of the cost reduction strategies the sponsors hope will not only pay for the cost of this entitlement, which will be much greater than projected, but also cover the ever growing government deficits caused by the Medicare and Medicaid programs. They are gambling big that healthcare costs can be driven down by preventive and wellness care. They are gambling with their political futures and perhaps the solvency of the US government.
Unfortunately, their gamble is going to fail because of the inherent immutable truth of the lead into this piece. Whatever other benefits these initiatives will generate, cost reduction will not be one of them. A simple thought experiment and real life example demonstrate this fact. Think about what would happen to the national cost of healthcare if an inexpensive cure for cancer was found tomorrow. The academic answer would be that healthcare costs would decline significantly. All the costs associated with diagnostic tests, surgery, chemotherapy, radiation therapy, and other related treatments would disappear overnight. The real answer, however, is that healthcare costs would decline in the short term and then begin to increase again until the increase swamped any savings generated by no longer providing cancer services. The reason is that anything that extends life almost certainly causes an increase in healthcare costs over time (as well as increasing the costs of non-healthcare programs like Social Security). Only the mix of healthcare services that are utilized would change assuming overall access to healthcare remains unchanged. Because cancer would no longer end people’s life prematurely, more will have to be spent on the increased incidence of other chronic diseases associated with aging such as congestive heart failure and dementia. Perhaps the best real world example of this conundrum involves cigarette smoking. It is very clear that the significant reduction in the number of people in the US who smoke cigarettes (from 37% in 1970 to 22% in 2003; a 40% reduction in the number of smokers over that time) has had no impact on the rate of inflation in the nation’s healthcare costs. Despite this reality, the federal government still publishes reports on how much cigarette smoking is costing the nation in terms of healthcare expenditures.

Hopefully, there are better strategies being considered than the ones discussed here to “bend the healthcare cost curve”. If not, the light at the end of the tunnel is a train.

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Intended consequence of the recently passed House Bill

Posted by Mark Brenzel in For Consumers, Healthcare Policy, Healthcare Reform on November 16th, 2009

Over the past month, the leadership in the House had to accept one significant change to their concept of healthcare reform; the public option will now have to act more like a private insurer at least in regards to how it will negotiate rates with providers. Instead of accessing the Medicare rates, the revised Bill calls for the government plan to pay the average of prevailing provider rates with private insurers (obviously the formerly confidential agreements between payers and providers will no longer be confidential at least as far as the government is concerned) .

At first glance, this would appear to be a significant and positive change for the future financial stability of hospitals. Under the old bill, the government plan would have had such an enormous advantage over private insurers in terms of what it paid providers in general and hospitals in particular that it was hard to see how the private insurers could survive. Their decline and eventual demise would have eventually reset provider rates across the country to Medicare rates, which do not cover the cost of operating hospitals by today’s standards.  Furthermore, the Health Choices Commissioner (HCC) was given power to restructure the payment methodology for providers that potentially could have caused even more havoc in the industry (the Bill still allows for experimentation with the Medicare payment methodology).

However, after reading the new House Bill that just got passed by the House, it appears there really is not much of a reprieve for providers if this Bill or something like it becomes law. The (HCC) was given even more powers to regulate the private insurance industry than the previous bill. These new powers in essence make all the private insurers de facto government run plans. The single most important new power is to approve annual premium increases. This gives the HCC the same power that the States have over their public utilities. There are several big differences however.  In my state, the Corporation Commission that has control over the public utilities rates is governed by an elected Board. They are not accountable to the State’s governor. The decisions of the Corporation Commission also do not significantly affect the State budget. As expensive as utilities can be, they do not make or break the State budget. By this bill, the HCC will be accountable only to the President and will have a powerful voice in how much the federal government pays for healthcare. The federal budget for this program will be significant and it will be very politically sensitive. 

The future HCC is going to face the inevitable squeeze of being between a rock and a hard place. As premiums continue to increase faster than inflation (as there are no cost reducing measures in this bill), the cost of the government provided affordability credits (subsidies to low income individuals and families to buy insurance) will rise as well. This will increase the pressure of the program on the government budget at a time when deficits are already projected to be high. One way to mitigate this budgetary pressure will be to fix the value of the affordability credits. If this is done however, the share of the premiums that lower income people will have to pay out of their own pocket will become unaffordable. This will be politically unacceptable. The other alternative will be to just tell the insurers that they cannot raise their rates as much as requested. This will be much more politically acceptable and reduce the pressure of the program on the government deficit.

By the time the above occurs, the insurers will also be restricted by the government’s target of maintaining at least an 85% medical loss ratio. As a result, they will not have the resources (or power) to implement tough new utilization standards that could help them reduce costs. They will not have any choice but to deny providers’ rate increase requests, the only cost they will be able to control (the government also dictates the benefit structure of each plan). Providers will not really have any alternative to accepting what the insurers offer because all the insurers will be forced to operate almost exactly alike. Providers could receive a double punch at this time. In recent years, providers have negotiated new rates with insurers to not only cover their increasing costs, but to also make up for the inadequate increases of Medicare and Medicaid. If the federal and state governments are limiting increases to providers through these programs at the same time, providers will feel enormous financial stress.

Eventually insurers and providers may again choose to experiment with capitation contracts (it is likely such a change would require government approval). Powerless insurers will want providers to take more risk for utilization and prices. Providers may prefer to take risk rather than accept pricing limits hoping that they can implement effective utilization and cost controls on their own. It seems that no matter what eventually occurs with healthcare reform, hospitals will have to become very innovative in lowering their costs.

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