Confessions of A Blue Dog Insurance Gunfighter

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A Short History of Medicine

2000 BC — “Here, eat this root.”

1000 BC — “That root is heathen, say this prayer.”

1850 AD — “That prayer is superstition, drink this potion.”

1940 AD — “That potion is snake oil, swallow this pill.”

1985 AD — “That pill is ineffective, take this antibiotic.”

2000 AD — “That antibiotic is artificial. Here, eat this root.”

— Author Unknown

As the bar room brawl escalates in Washington, I cannot help feeling like I am watching a B Western. Reform is a stagecoach whose driver has been shot and is slumping unconscious in his seat. The horses are racing uncontrollably, dragging the reins on the dusty ground. Inside the carriage, people are screaming, fighting and yelling for help. Suddenly, the hero appears — crawling from the window and almost falling twice as he strains to shimmy across the unstable hitching to grab the reins. Will he succeed? Will the occupants be saved or will the entire coach hurdle over the cliff to certain destruction?

I have seen the movie many times and it always excites me as the hero tries to rescue the runaway stagecoach. However, invariably he falls under the wheels, or is hit by friendly fire — perhaps from the gun of some passenger named Harry or Louise who honestly believed he was going to get them killed, or maybe he is winged by an arrow launched by myriad indigenous, hostile stakeholders who resent the intrusion of yet another idealistic pilgrim into a land too vast and tribal to ever be tamed.

Let’s face it, reforming health care is as complex as the diseases medicine seeks to cure. Both sides of the aisle have a legitimate axe to grind and they are whetting their Bowie knives on the whirling debate about how we fix a system that is in desperate need of change. However, when you politicize change, you force rank priorities not in terms of what might have the greatest financial and social impact but by changes that would be most palatable to your constituency — even when you know, deep down, that those who elected you are part of the problem. In the end, a politician seeks to burn the least amount of political capital necessary — with constituents or their own party depending on who you feel is more important to your ultimate reelection. You try to rally people around a common enemy. You forge treaties and then you break them. You marginalize those who ask the tough questions. Perfection is the enemy of progress, you say. Perhaps this is why someone once said, “Politicians are like diapers, they need to be changed regularly and for the same reason.”

The landscape for this drama is stark and filled with shades of gray. If the United States was a corporation, it would be broke and the treasuries that finance its debt would be low-grade junk bonds — I mean “bottom of the barrel, make a sub-prime security look like a AAA asset,” junk. The United States will post a public debt of $ 7.7 trillion in 2009 and incur another $ 1.7 trillion deficit from increased spending and reduced income from a contracting economy. The deficit is slated by the CBO to swell to $ 11.5 trillion in 2014 — without expanding health care. In 2017, Social Security outflows exceed income coming into FICA (translation: We are broke). In 2018, Medicare trust assets are exhausted (translation: We are broke). While the generation that preceded us has been labeled the “Greatest Generation,” we may very well be named the “Profligate Generation.” We do not seem to be able to make the tough decisions about balancing budgets, reigning in spending and attacking the root causes of many of the costs that are slowly eroding the foundation of our economic viability.

Just as the automotive and airline industries are being crushed under retiree and pension obligations, the federal government, states and municipalities are panicking under swelling deficits and the prospects of raising taxes to finance health and pension funding shortfalls at a time when a fragile economic recovery would advise otherwise. Most state’s budgets earmark at least 60 percent of their annual spend for just two items — education and health care including obligations to provide medical coverage for retirees. So, all agree health care is a problem, but to the average pilgrim walking down Main Street — there’s so much noise and rhetoric, its hard to know what’s causing the problem and how we fix it.

Here’s one 25-year vet’s take on the problem — Health care reform must happen. The question is how do we fix it, who pays, who sacrifices and how do you achieve this without killing innovation and quality? The most efficacious cures to taming this wild mare of medical trend are too politically volatile for many in Congress who desperately want to be reelected.

50 million Americans have no coverage and when an uninsured or under-insured person falls through the looking glass of our current health system, the patient ends up having to pay full retail for health care – often resulting in a financial crisis or worse, personal bankruptcy. The government’s obligations for financing health care are skyrocketing and contributing to the growing public debt. Individuals and small business cannot buy affordable insurance because insurers work hard to avoid risks that might actually pollute their loss ratios. Regulation does not make provisions for the millions that are impacted by insurer underwriting practices. Many believe that medicine cannot be for profit as the manner in which providers get reimbursed creates perverse incentives and alters the way medicine is delivered. At the heart of this debate is how big a role should government play in refereeing this brawl. And since it has such a huge stake in the fight, can the government be impartial or will Congress and the Obama administration end up being revealed as a hanging judge for the insurance industry? As one pundit remarked, “this is a battle for the soul of medicine.”

Here are some additional inconvenient facts that complicate the debate right now in health care:

• Neither society’s nor the government’s houses are in order — Medicare and Medicaid spend more than 25 percent of it’s annual $ 1 trillion cost on the last six months of life. In many instances, these services do not improve length or quality of the patient’s life. Uh oh, this is where we start talking about death panels, right? No, but we need to decide who makes the call on what services are provided to our loved ones in these circumstances. Since most individuals are likely to face end-of-life care issues while on Medicare, the government makes that call on what they will and will not cover already.

The Centers for Medicaid and Medicare Services (CMS) now clearly see that they are not getting value for their health care spend in this critical area of end-of-life care. However, just raising the issue is tantamount to committing political suicide. There is no doubt as costs increase the government will have to reduce Medicare benefits or become more stringent on how it will reimburse providers for services. Whether you choose to offer America a public option or not, this is an economic fact of life. Yet, no politician will admit to this downstream reality.

So, why not require everyone to have a durable power of attorney and end of life counseling given that today’s end of life care is a complex algorithm of quality, time, cost and consumption of a limited pool of dollars? It all sounds fine, right up until the point that it is you or your loved one, and then all bets are off. This is where under-60 demographic says, “Pull the plug, pull the plug” and the over-60 crowd responds, “Ask not for whom the next plug is pulled, it will be pulled for you.”

• For-profit insurance creates conflicts but so does big government — Medicare and Medicaid averaged a mere 5 percent of cost for administration and this is being trumpeted as a much lower cost compared to the 15 to 30 percent insurers charge for administration. This statistic disguises a simple truth — 5 percent gets you little oversight, no evidence-based medicine guidelines or strong controls around fraud and abuse. As a result, as much as an additional 10 percent of total public spending, or $100 billion, annually is attributable to rampant fraud, waste and abuse in public health programs. This total cost of 15 percent actually exceeds the average cost of administration for commercial insurers (around 12 to 14 percent according to consultant Deloitte) because they utilize much stronger controls to manage fraud and waste.

The big problem is what insurers do with their savings — they keep them as profit and do not return them to policyholders in the form of lower premiums. Each year’s premiums are a new base line for next year’s increases. However, these are for-profit companies and the last time most of us checked, profit motive drives free market capital formation, investment and innovation. Proposals that call for taxation of insurers may see insurers merely passing these costs on to policyholders.

• Medicare and Medicaid keep costs down by cost shifting to the private sector — Medicare and state-funded Medicaid save money primarily by under-reimbursing providers and hospitals with the exception of primary care doctors who are actually paid less by private payers. Doctors and health systems who are underpaid by Medicaid and Medicare, cost shift to private insurance plans which contributes to higher medical inflation in private plans than Medicare.

• Private insurance must be regulated and managed in the individual and small group markets — Private insurers make a large percentage of their profit on small group and individual insurance. This is where underwriting practices are most opaque and likely to lead to medical underwriting where individuals and small groups are denied coverage or charged astronomical premiums as for-profit ( and non profit ) companies naturally rely on risk analysis to achieve profitable books of business. Greater regulation of individual and small group pricing, minimum loss ratios and community rating to ensure guarantee issue for all applicants can solve a large percentage of the issues surrounding insurance affordability and access. Insurers may not like individual and small group reforms but they are expecting it. Fix this one piece and you fix a massive hole in the coverage safety net. You do not need a public option to keep insurers honest, you need effective regulation – something that does not exist today. .

• Co-op or co-opt? — Forming insurance purchasing co-operatives for individuals and small business to buy affordable healthcare sounds great. However, the devil is in the detail. For some politicians, co-ops must be established to compete with private insurance. For a minority of Congress, co-ops would take the form of non-profit purchasing consortia that individuals and small business can join to more transparently choose between private plans.  Both sides lack details over how co-ops would actually reduce costs — other than offering the modest savings inherent to a non profit. Unless these purchasing groups are adequately regulated, any start-up co-op will either be disadvantaged to commercial insurers or financed by tax payer dollars to slowly erode private care.  .

A start-up co-op cannot force hospitals and doctors to offer them better rates than private insurance unless they have the ability to use Medicare’s fee schedule as the basis for setting reimbursement. Traditional barriers to entry for new insurers can be high because hospitals and doctors grudgingly discount rates based on how many members the insurer represents. The more members you have, the steeper the discounts. If a cooperative has no members, it will not initially be able to offer premiums lower than private insurers and will either write only the worst risks that insurers do not want, or underwrite new clients, but at a large loss. It is unclear who would finance this large front end loss but the odds are, many taxpayers would not want to underwrite the losses of a public plan attempting to displace their private insurance..

However, if a co-op is allowed to only reimburse at Medicare levels, the co-op’s lower administrative costs, non-profit status and lower provider reimbursement schedule will offer a more competitive alternative to private insurance. The co-op would begin crowd out private insurers as doctors cost shift higher charges to private insurers – who must pay more than Medicare and must negotiate these reimbursements annually. Employers, seeing their private insurance costs rising at a higher rate than co-ops will drop employer based plans — sending all their employees into the cooperative which in effect, becomes a single choice, public option. When the doctors, specialists and hospitals are no longer reimbursed at rates above Medicare because there is now only a single payer, quality and access will decline while rationing and restructuring of health care will accelerate.

• Disease and apathy are bigger problems — The top 10 private insurers made $12 billion in profit in 2008 and all insurers posted earning amounting to close to $30B. This compares favorably to $1 trillion in health-care costs incurred over the last decade by obesity related illness, $100 billion of annual smoking related illnesses and $ 50 billion for the cost of defensive medicine. The  Senate Finance proposal is supporting a $6 billion tax on insurers. How can you tax 25% percent of insurer profits and not expect that these levies will be shifted to policyholders?

The real litmus test for anyone (government or private payers) who wants to remain a stakeholder in our health-care delivery system should be their ability to demonstrate how they are best positioned to incent health improvement, reduce the rate of disease and restructure the incentives that currently drive huge clinical and quality variability, waste and over-treatment.

The problem with government playing the role of referee is politics. Politicians do not have the will to tell America to put down the Krispy Kremes and get on the treadmill. In the President’s recent speech, he mentioned insurance reform more than 20 times. He never mentioned obesity, personal responsibility, the cost of smoking, the cost of absenteeism or the state of America’s public health. Of the 60 million Americans with obesity related risk, more than two-thirds are covered by commercial insurance. Meanwhile, employers have been tip-toeing around the issue of wellness for years with very few committing to plan designs that measure key biometric factors like cholesterol and weight and then actively work to create programs to mitigate these risks in their workforce. We must usher in a new era of health management, but many can’t or won’t because they’re afraid of offending their employees, or getting sued for violating the Americans with Disabilities Act for playing big brother.

• Reimbursement reforms are the biggest single factor absent from this debate. We need to level the playing field between all payers — standardizing reimbursement for services and then focus on using data to reward, recognize and convey to consumers those providers who deliver quality and efficient care. We must eliminate public to private cost shifting and increase reimbursement to primary care doctors to manage the well, at-risk and chronically ill and their conditions. If you want to reduce costs, someone will need to get paid less and that means dollars need to be rerouted from specialty care to primary care. We should focus on slowing the conveyor belt of people who at one point were healthy and through lifestyle choices became chronic, and ultimately, catastrophically, ill. This can only be accomplished by changing incentives that currently reward treatment of disease to rewarding better health outcomes and promoting prevention at home, in schools and in the workplace.

In a period of great social and societal turmoil that calls for tough decisions to ensure our economic and personal survival, we need to be honest with Americans and share the facts: we can restore Medicare and healthcare to viability only four ways: 1) managing access to services – some call this rationing  2) reducing reimbursement to providers, 3) reducing the administration costs of the delivery itself 4) attempting to control the rate of chronic disease in America so those coming on to Medicare do not consume a disproportionate amount of services as they become eligible for the coverage.  Any reform solution will set in motion changes that will utilize each of these four paths to cross the high peaks of our mounting costs.  The question is which path offer politicians the least resistance versus which path leads to our long-term ability to control costs.

Any legislative change must impact all the stakeholders in healthcare.  In the Old West, a wanted poster would depict culprits and their confederates guilty of crimes.  If our health crisis were pronounced a transgression against society, this Dirty Dozen could be charged with major or misdemeanor lawlessness:

Consumers – 60M Americans possess a body mass over 30 (the average US male’s waist is 38”). We have bad lifestyles that lead to overconsumption of health services, unrealistic expectations, poor consumerism and litigiousness when we don’t get our way or have a bad outcome.

Insurers – Insurers engage in opaque business practices that are not understood by policyholders or regulators.  How one makes money in healthcare does not seem to be as important as how much one makes.  This mindset creates massive image problems.  Insurers have failed to help solve for the uninsured and have engaged in excessive profit taking in certain geographic markets and in the individual, small group insurance, Medicaid and Medicare segments.  Insurer reimbursement practices have contributed to driving community hospitals and primary care into near extinction.

Employers – Have been inconsistent stewards of their medical spend, with Human Resources focusing on limiting disruption to employees rather than driving tough love with at risk employees.  Very few C Suite executives take the time to truly engage in health management and instead look at insurance as a commodity instead of a program worthy of risk management.

Brokers/Agents – these intermediaries function as a highly fractured distribution system of less sophisticated players. Insurers loathe broker consolidation and enjoy the multiplicity of distributors as no player has enough clout to change insurer business practices.

Government – The federal government and states serially cost shift to the private sector through reduced reimbursement to providers. Politicians pander to the public instead of educating.

Regulators – Many are politically motivated, including state insurance commissioners who often see these roles as a springboard to Congress, Attorney General or a gubernatorial run. Career regulators are under-resourced and often under-educated to the complex,  well resourced insurers they are regulating.  Given the paucity of resources, regulators focus on high visibility issues ( those that will draw headlines ) versus high impact, complicated reforms.  Most regulators are years behind in regulatory audits.

Unions –Most bargained groups are rabidly protective of rich benefits and pension plans which feature limited or no incentives for participants to be good consumers of healthcare dollars or engage in healthy lifestyles. The problem is not the benefits, which one could argue were negotiated in lieu of wage increases.  It is the unwillingness of the unions to force their members to be more responsible consumers

Malpractice Plaintiff’s Councils – Medical liability has driven massive overconsumption of services and puts self-prescribing patients in the driver’s seat. Attorneys generally oppose torte reforms such as punitive damage caps that would lower the cost of liability for doctors and reduce defensive medicine costs.  The sentinel effect of lawsuits has not proven to reduce the variability of care delivered by doctors.  Some would argue, it has made the problem worse.

Specialists – (Pathology, anesthesiology, oncology etc.)  We love, trust and self refer ourselves to specialists at an alarming rate.  In doing so, we do not understand the referral and provider payment practices that we bypass and set in motion.  A disproportionate amount of dollars goes to specialty care in Medicare, Medicaid and private insurance limiting money available to reward and incent primary care.  Medical graduates in family medicine are down 70% while up over 50% going into specialties that promise higher rates of reimbursement – at the very time that we need more primary care providers to work with us to improve our day to day health.  Our system has been set up to treat our chronic illness, not cure it.

Hospital systems – As hospitals consolidate, big systems exert massive leverage on insurers driving higher costs.  There is an arms race mind set between competing systems driving investment in specialty services. Big health systems overshadow community based hospitals that may have equally effective outcomes at a much lower cost.  With union and community pressure agitating against any hospital closure – even those that are deep in the red, we have an over-supply of services that get passed back to patients in the form of greater intensity of services during hospital stays and higher retail charges. Ken Raske, head of the NY Greater Hospital Association –makes $ 1.2M a year as the bellicose advocate for major hospitals.  Dennis Rivera is one of the more influential political figures in Washington as the head SEIU 1199 – the United Healthcare Workers.

Pharmaceutical Industry – The pharma industry has done a masterful job redefining the definition of chronic illness to include millions more Americans with conditions like restless leg syndrome, BPH and situational anger disorder.  The industry is still a muddy puddle in its rebating practices and its interactions with pharmaceutical benefit managers (PBM) who purchase drugs wholesale and resell the same drugs at varying retail prices to groups based on purchasing size.  Have not totally embraced the use of generics to supplant name brand drugs and have often acted to protect brand names at higher costs. US patients still pay retail for drugs and in doing so, finance 100% of drug R&D while pharma charges the rest of the world wholesale for the same drugs.

Food Industry – Protected by a powerful lobby an Congressional subsidies, the agricultural and food processing industries have been busy getting us hooked on high fructose, processed food, sugar and high caffeine content sodas.  In 2004 – candy, restaurant, food and beverage ads of $ 11.26B dwarfed health eating advertising expenditures of $ 9.55M.  Ineffective food labeling, financial dependency of our schools on royalties from vending machine sales, expanding portions in restaurants and fast food, aggressive lobbying to minimize explicit communications on food content and risks – all contribute to a an obesity epidemic that has only one state in the US (Colorado) having a prevalence of obesity less than 20%.

Marshal Mad Max To The Rescue? –  There have been five different Congressional health reform bills proposed to corral and tame healthcare’s rising expenses – three bills in the House of Representatives (referred to as the Tri-committee bills) and two bills in the Senate ( Senate Finance and Health, Labor, Pensions and Education [HELP] committee) .  The challenge for many insiders watching reform gain steam is that taxes and legislation proposed to impact costs do not evenly impact those who drive them.

The House will consolidate their bills and pass a single integrated bill with a simple majority of 218 votes.  Nancy Pelosi has all but guaranteed these votes.  The Senate is more complex – requiring 60 votes to close debate to even allow for a vote.  Without 60 votes, a filibuster can wreck legislation.  Recently deceased (D-MA) Senator Ted Kennedy was vote number 60.  This is why the Massachusetts legislature revoked a longstanding rule to wait five months after the death of a senator vacates an open position.  In Massachusetts, the replacement senator, Senator Paul Kirk, was sworn in on September 26th.   The Senate now believes it has the requisite 60 votes unless any Blue Dog democrats get cold feet.

Republicans have really failed to offer any substantive alternative health reform plan.  There are amendment suggestions but it appears that the various bills – all tendered by Democratic leadership will be the framework for reform.

The Senate Finance Committee under Max Baucus (D- MT) has tendered a bill that is the most closely aligned with President Obama’s vision for reform.  Actually, no Republican on the Senate health subcommittee approved Baucus’ bill.  At 2:15am on Friday October 2nd, 564 requests for amendment had been melded into 130 and resolved with a final Senate Finance version of the Baucus bill voted on this week.  Key firefights last week included a bi-partisan defeat of two proposals for a public option and a controversial reduction of the penalty for individuals who do not choose to comply with an individual mandate to buy insurance. This weakened provision means that some people are more likely to wait to buy guaranteed insurance until they have a medical event.  The new law would require insurers to take all applicants and could give rise, as it has in Massachusetts, to adverse selection as the healthy uninsured may only buy coverage when they have a medical event and choose to pay a nominal penalty. It is the equivalent to mandating the purchase of property insurance but only mildly penalizing people if they wait to buy coverage until after their house is on fire.

Additional unresolved land disputes include whether employers should be mandated to offer insurance, whether the bill’s cost is further inflated to boost subsidies for low income individuals facing individual mandate penalties and fees imposed on insurers, expensive insurance plans, pharma and medical device manufacturers – – all taxes presumed to be passed on to consumers either directly or indirectly leading to higher costs.  The price tag for the bill as it heads into session mark-up remains around $ 900B.

Unfortunately, Marshal Baucus has to once again wander up a hostile street and try to forge a single Senate bill with the left leaning 1000 page Senate HELP version that still includes a public option.  Some pundits theorize that many senators are holding their fire until they can see the whites of the Marshal’s eyes – – during backrooms committee mark-up sessions.  Marshal Max is tough but it’s hard to know who is friend or foe.

Should the Senate not field a majority, they can conjure up a special procedural rule created in 1974 known as Budget Reconciliation. Reconciliation was created to facilitate the advance of contentious legislation that might otherwise be defeated by filibuster. Originally designed for legislation thought too radioactive to survive normal partisan politics (e.g. deficit reduction initiatives), the process was modified in 1996 to apply to any legislation – even if it increases the deficit.  It requires a simple majority of 51 votes to pass.  Senator Robert Byrd, (D- WV), a long-time defender of process and order in the Senate, proposed a litmus test for how and what items can survive the trap door process.  The procedural litmus tests, known as the Byrd Rules, determine whether items proposed in reconciliation are “extraneous”.  Many of the provisions in the Baucus health bill would not be considered extraneous if they could be proven to reduce costs – even if these changes radically altered our delivery system increasing taxes and crowding out existing stakeholders.

The Baucus bill is a good start in addressing the need for insurance reform but fails to address many of the other stakeholder’s who are contributing to medical inflation today.  Baucus and Congress have clearly targeted insurers as a primary focal point for reform proposing a tax of $ 6.8B that would most likely be passed on to policyholders.  The bill imposes control over how much premium load insurers can charge for age, sex and status such as smoking.

The bill has included the creation of non-profit co-ops to compete with private insurance but it is unclear how they could compete without incurring massive losses that would be offset by taxpayer dollars as “ start-up costs”.  There is an establishment of state insurance exchanges (Small Business Health Options Programs aka SHOP)  where individuals and employers up to 50 or 100 employees can access regulated insurance programs designed to offer affordable private solutions.  Insurance commissioners will be instructed by Health and Human Services to set up catastrophic coverage risk pools to cover certain high cost individual claims, design a common set of benefit pan designs that may become open to interstate competition and oversee the creation of non profit co-ops.

The big debate is over the inclusion of a public option that would essentially offer a Medicare like program to all uninsured, under insured and employees of employers who may not want to be covered under employer sponsored insurance.  There is great debate whether an expanded government plan with lower administrative costs would create healthy competition for insurers or begin a massive retreat of employers from offering insurance.  Most employers would prefer shifting the burden of escalating health costs and the tricky moral hazard of trying to manage lifestyles to taxpayers and the government.

While primary care doctors might see a near term reimbursement improvement under reform, most physicians would see a slow and steady erosion of reimbursement as the Federal government inevitably cuts payments to try to balance a Medicare Trust that is already out of money.  Medicare physician cuts of 21% are proposed to begin of 2011. It is simply not realistic to offer expanded Medicare benefits like additional prescription drug coverage at a time when there is not enough money to finance the existing benefits.

The Baucus blll calls for a tax on America’s richest benefit plans (those averaging over $ 8,000 per person and $ 21,000 per family.  Many of these plans are union benefits in towns, municipalities and governments. An Amendment was approved to offer a higher allowable taxable cost for retirees and those working in “high risk” jobs.  (aren’t all our jobs high risk these days?).  Baucus does not offer the public option but does establish subsidized non-profit cooperatives that would compete with private insurers. Congress would also impose controls on how insurers could underwrite programs offered within the insurance exchanges to reduce the slope of premium differentials that insurers charge to “ cherry pick” younger and healthier risks.  Younger insureds will pay higher premiums while older Americans may pay less.

Unless Congress gets medical trend under control, we will all have benefits costs that exceed these caps by 2016.  The proposed benefits tax cap will rise with the CPI.  Our benefits costs will rise with medical inflation (averaging 4 times the rate of CPI).  The Congressional Budget Office (CBO) estimates significant revenues raised by the tax cap in future years suggesting that they do not believe that this legislation does not to bend medical trend to become more in line with CPI.

Do not misconstrue this barroom brawl as wasted energy.  A version of health reform will pass and most likely before Christmas.  In 1994, Clinton’s health legislation failed because he chose the craft the legislation behind closed doors and then sprang it on a wary and uninformed Congress.  He also did not have an ally in Senator Moynihan, Chairman of the Senate Finance Committee.  In 2009, President Obama challenged Congress to divine a blue print which he in turn, would help contour and help through the bitter process of a final mark-up.  He also has an ally in a very effective Senate Finance Chair in Marshal Max.

This high noon show down is not over and my guess is a few good guys and bad guys may still get killer or wounded before the shooting stops.  You’ll have to judge the ending for yourself and prepare for a sequel once the 2010 mid-term elections are upon us.

Judge Harry Reid is now in session –  As Senate Majority Leader, Reid must merge Marshal Max Baucus bill with the Senate HELP committee bill to bring a single piece of legislation to the divided townspeople of Senate, USA to ratify.  Meanwhile, just over the border the House of Representatives is busy crafting their single bill that will be merged with the final Senate bill.  All four bill are more liberal than Baucus and include the controversial “ public option”. My guess is President Obama will work hard to help protect the more bi-partisan Baucus bill which means more fighting could lay ahead if the Democratic Caucus will not back off their insistence on the inclusion of a public option in any final bill.  Some old timers believe the public option is really a stalking horse for the Democrats and it will be yielded but only after concessions that may threaten the President’s goal of a deficit neutral solution.

The race for rapid resolution is on.  If the governor’s seats in New Jersey and Virginia fall to Republicans, the swing will frighten blue dogs under the front porch and force the Senate into Reconciliation as 60 votes will not be found. Some Democratic leaders may already sense this and are working to get the wheels greased to jam reform through Reconciliation – while on the outside still appearing confident that 60 votes are possible

The question that inevitably keeps coming up is what is missing from the health reform legislation and are we bringing the right people to justice as Marshal Max drives his legislation through Congress.  The sad fact is this legislation does reform insurance markets but falls well short of reforming the healthcare system.  Since insurance is by and large, a system of financing care, we will see lower insurer profits, streamlined and lower cost of administration but we will not see the primary culprits responsible for rising costs receive much more than a wrist slap.  If Marshal Max deputized me, I would :

1) Push Consumers to take more responsibility and design any public or regulated plans to require biometric testing (annual paid physicals testing five risk factors – smoking, glucose, cholesterol, weight and body fat), offer wellness incentives to business and employees, incorporate chronic care management and expand federally qualified primary care health centers into high risk, underserved communities to stabilize high risk populations – Baucus plan response : weak to non existent

2) Global case rates for hospitals – Pay a single payment for an entire episode of care and transfer the risk to the institution to manage the outcome. Hospitals need to be more at risk for the total amount of care delivered.  Infections and readmissions due to errors, mistakes or secondary infections must be covered under the total rate paid – Baucus plan response: Medium.  Focus is on hospital fee cuts but Medicare is moving toward case rate reimbursement.  Private insurance will draft behind Medicare.

3) Medical Home – Any new coverage extended to the uninsured or those choosing a public option must be delivered via a primary care, gate keeper network that gets paid for improving its population’s overall health status.  No more self-referrals to specialists.  Everyone must use a primary care doctor as their medical home – Baucus plan response:  Medium.  Medicare and the private insurer community are already piloting models for potential expansion into covered populations.

4) Wellness – Legislate a Healthy Workplace Act and create tax incentives for all employers to offer screening, biometric testing and health coaching.  Ensure that the Americans With Disabilities Act is not used by plaintiff’s attorneys to penalize employers for creating pan designs that shift cost to less healthy, noncompliant employees and their dependents. Baucus plan response: Weak.  Some health incentives but separate legislation is working its way through Congress.  The issue is around giving employers more cover fire from liability if they actively engage in managing employee health and well-being.

5) Individual and small group reform – Reform insurer pricing practices and put a cap on all profits and administrative costs at no more than 82%-85% of premium for the under 100 employee market.  Mandate the release of claims experience from insurers to all employers over 100 with a clear understanding that it does not violate HIPPA regulations. ( This has already been done in Texas ) Mandate all individuals to purchase insurance and have the cost of non-compliance indexed to the cost of the cheapest plan offered through the state’s insurance exchange.  Offer tax credits for those up to 300% of the poverty level to ensure people have subsidies to purchase coverage.  Baucus plan response: weak.  Politicians have rolled over and reduced the penalty for those choosing not to sign up for mandatory insurance.  The cost not to join is far less than the cost of insurance creating the real possibility (we have seen this in Massachusetts) where healthy people will wait to get sick before joining insurance plans.  Insurers, by law, will need to take all comers.  Expect insurers to dramatically increase the cost of individual insurance or exit the market entirely if the individual mandate is not strengthened.

6) Public option only for uninsured – If you offer a public option, offer it for only those who currently have no coverage and place then in a plan that requires medical home, wellness and compliance testing to manage chronic conditions and health coaching.   Do not load the basic public option with rich benefits that will drive up utilization and medical trend. Baucus plan response: uncertain.  Some states like Connecticut are trying to embrace designs intended to reduce medical trend.  Others like Massachusetts are enriching public benefits and mandating higher reimbursement levels.  Massachusetts now covers 98% of all its citizens and has by far, the most expensive healthcare costs in the US.  If affordability is the goal of reform, Massachusetts gets an F.  Federal reforms seem to be racing down that same slippery slope.

7) Employer penalty for dropping coverage – Employers should be penalized at a level greater than the lowest cost public option to avoid the rapid erosion of employer sponsored care.  Our goal is to keep a balance between employer sponsored and government sponsored plans. Baucus plan response: weak.  Some in Congress want employers to drop coverage so we default into a single payer plan.  Estimates of those employers who would drop insurance if a public plan was offered vary dramatically from 5% of employers to over 70%.  If your employer drops coverage because they see a cheaper opportunity to shift your costs to a public option, the promise that “ you can keep your own coverage if you like it” would not hold true.  For 160M Americans, it is their employer who decides to offer coverage.

8) Reimbursement and malpractice reform – Harmonize Medicare and private insurance reimbursement schedules achieving one reimbursement methodology that rewards higher quality performance and widely distinguishes between those who achieve good outcomes and manage health of the population and those providers who do not.  Offer medical malpractice protection to those doctors who adhere to evidence based medicine making it difficult to sue for malpractice when clinical guidelines are followed.  Baucus plan response: Dead on arrival.

9) Consumption tax on junk food ( VAT for FAT ) Baucus plan response: Silent and unfortunate.  The food industry is getting away as an accessory to the crime of obesity in America.

10) Tax the richest benefit plans at the employee, not insurer level – any individuals receiving benefits that exceed the annual cap will lose their deductibility for benefits above the level of approved cost.  This precludes insurers from cost shifting and acknowledges that insurers having been already subjected to profit caps on their small group, individual, Medicaid and Medicare plans. Baucus plan response: weak and getting weaker as concession are made to unions to exempt them from the taxes that would hit rich collectively bargained plans first and hardest.

11) Means test for Medicare – If we want to keep our Medicare benefits, we will have to pay for them.  Until reforms actually reduce the number of practices that drive waste and fraud in the system, Medicare will continue to devour a large portion of public spending.  Baucus plan response: Silent. Means testing – the increasing of the pro rata taxation to retired Americans who receive higher retirement income – is inevitable.  It is inevitable in this administration that this is coming.

Any final bill will suffer withering attacks from both sides of the aisle.  There is a great sense of urgency in Congress to push reform through before the 2010 mid-term elections potentially restore party balance to the House and Senate and fiscal conservatives regain control of the spending that has increased our pubic debt to an estimated $ 9T in 2009.

The wild west of healthcare remains an untamed landscape where the strong survive and justice does not always prevail.  There are hangings, bank robberies, land grabs, gunslingers, crafty lawyers, rigged decks, carpetbaggers, untamed regions and innocent pilgrims lost forever in the wilderness of bureaucracy.  There are triumphs, tragedies, heroes and villains. However, there is a new sheriff and posse in town and a disgruntled mob is gathering by the courthouse.  They are building a gallows and ready to string up the culprits.  The insurance industry sits in the county jail hoping for a fair trial while other offending parties are out on bail or roaming free.

The problem is trying to identify the real culprit.  The solution is neither as dire as the dime store depictions of the hard right with their catastrophic warnings of death panels and wholesale rationing nor is it as simple as expanding care for all and finding the money to do it by keeping “insurers honest”.  Whoever drives this change must be challenged to offset needed access to the uninsured with legitimate, difficult dollar for dollar reductions in cost. We cannot allow any plan to pass through Congress that takes out a second mortgage on our children’s fiscal future.

The taming of healthcare is like the domestication of the real west – sacrifices need to be made by people who understand that the integrity of a generation is defined by how much better we leave the world for the generation that comes after it.  We want our children to have a chance to meet or exceed our standard of living.

At this rate, unless we all own the problem and quit defaulting into fear based sound bites or idealistic nonsense that cannot be supported with hard dollars, we could end up in a fiscal Little Big Horn. We must push our legislators to move thoughtfully to adopt reforms that impact all the various stakeholders or this may become a Greek tragedy where we suddenly realized we lynched the wrong guy, let many accomplices off with little or no consequence and corrupted the future we were purportedly trying to protect.

4 thoughts on “Confessions of A Blue Dog Insurance Gunfighter

  1. Ed Libonati September 9, 2009 / 8:25 am

    Delivered with clarity, eloquence and the insights of an industry sage. Thanks for the “low down”. By the way I ashamed to say that by your yardstick I fit the average American male. Ed


  2. Joan Sherman September 10, 2009 / 9:50 am

    Mike – Very well written, well researched and right on point! This is an extremely complicated issue and you do a great job of making it easier to understand all the “moving parts!” Living in DC, my passion is fueled even greater to be a part of the solution and I would welcome your thoughts about how I might “give back” to help repair this crucial initiative.

    P.S. BTW – I thought Obama did an amazing job clarifying HC Reform to Congress and the American people last evening (9/9/09). I am confident he can lead the important changes that need to be made, and made NOW!


    • Michael Turpin September 18, 2009 / 9:00 pm

      Hey Joan, thanks for the kind words. I think the biggest way people can help is to write to their Congressman, speak, read, write and agitate for the changes that one believes in. There is a responsibility on something as delicate, vast and interdependent as healthcare. People need to understand all the moving parts, deconstruct the “myths” and “facts” and be ready to pay the piper personally. There is still too much ” something for nothing” on the left and too much” we are all going to get rounded up by death squads” on the right. The fact is our system is suffering from a reimbursement issue, a public health obesity crisis, a for profit insurer regulatory failing, a government cost shifting ruse..etc. Obama is trying but all must remember – he is a great orator with a razor thin resume who must get Congress under control and drive meaningful reforms. If this is all a great feint to drive the entire system over the cliff to be replaced by a single payer, I will be very disappointed and advocate hard against those that would go to that extreme before trying to surgically fix the system. The problem is the ” fixes” may kill the ” doctor” – meaning any politician knows that the root causes are the third rail of politics. Touch them, you die !


  3. David Bamel December 7, 2014 / 4:04 pm

    Situational Anger Disorder. Really? Acronym: SAD. Yup.


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