Putting a Price Tag on Health Care Proposal

The Senate Finance Committee is expected to pass its version of health care reform legislation today. But a new report — titled Potential Impact of Health Reform on the Cost of Private Health Insurance Coverage — warns about the likely impacts on individuals, families and businesses.

The PricewaterhouseCoopers study looks at four key provisions:

  • Insurance market reforms coupled with a weak coverage requirement
  • A new tax on high-cost health care plans
  • Cost-shiftng as a result of cuts to Medicare
  • New taxes on health care sectors

Health care costs are going to go up absent any reforms. With this combination of provisions, the increases are projected to be significantly higher. How high? According to the study, the cost of private health insurance coverage will increase:

  • 26 percent between 2009 and 2013 under the current system and by 40 percent
    during this same period if these four provisions are implemented
  • 50 percent between 2009 and 2016 under the current system and by 73 percent
    during this same period if these four provisions are implemented
  • 79 percent between 2009 and 2019 under the current system and by 111 percent

The authors wrote: "Market reform enacted in the absence of universal coverage will increase costs dramatically for many who are currently insured by creating a powerful incentive for people to wait until they are sick to purchase coverage."

Additional analysis and numbers are expected from the Congressional Budget Office after committee approval and before floor debate. This report certainly gives all involved something to consider.

Overhauling Medical Malpractice Laws the Right Thing to Do

Malpractice changes have been ignored, for the most part, in the health care reform discussion – now there are numbers to back why this needs to be a part of the solution.

The Congressional Budget Office (CBO) recently released data estimating government spending on programs such as Medicare, Medicaid and the Children’s Health Insurance Program would decrease by $41 billion over a 10-year period with proper reforms. The reason:  Physicians would no longer overuse tests as a way to protect themselves from lawsuits.

Changes in the malpractice system would also cut national health care spending by 0.5% a year ($11 billion in 2009). No, that doesn’t solve all the problems, but trying to fix the lawsuit-happy world we are living in is a step in the right direction.

CongressDaily reports the CBO’s analysis is based on a few reform factors such as capping noneconomic damages at $250,000 and punitive damages at $500,000. It also calculated the numbers based on a one-year statute of limitation for adults and three years for children from the time the injury is discovered.

A few senators rightly shared their support for reform (and dismay for dawdling Democrats), CongressDaily shares:

"This is an important step in the right direction, and these numbers show that this problem deserves more than lip service from policymakers," said Sen. Orrin Hatch, R-Utah. "Unfortunately, up to now, that has been all the president and his Democratic allies in Congress have been willing to provide on these issues." Hatch had requested the updated analysis from CBO.

Senate Finance ranking member Charles Grassley and National Republican Senatorial Committee Chairman John Cornyn of Texas also expressed disappointment that Democrats have not cracked down on medical liability issues. Cornyn urged senators to "take account of the CBO’s objective numbers and the experience of Texas and other states where healthcare access and affordability have been improved by setting reasonable limits on lawsuits against doctors."

Democrats are reluctant to cap payouts from medical liability lawsuits. But President Obama recently directed HHS Secretary Sebelius to look at ways to make changes to the system that will bring down spending.

CBO’s analysis makes a clear argument that malpractice reform should be part of health care reform discussions. Still, supporters have their work cut out for them based on this outlandish comment:

The findings "reiterate what we’ve always known: that medical malpractice claims have almost no effect on overall healthcare spending," said American Association of Justice President Anthony Tarricone. "The vast majority of empirical evidence suggests that there are only minuscule savings to be found in reforming our nation’s civil justice system."

Here’s What’s Next on Health Care Reform

Congressional floor debate on health care could begin as early as October 13. That’s the goal of Senate Majority Leader Harry Reid.

First, the Senate Finance Committee is expected to vote this week (work resumes on Tuesday) on its version. The only real suspense is whether Republican Olympia Snowe (Maine) will cross over and vote for the measure. At the same time, Reid and other Senate leaders are trying to combine that proposal with elements of the one approved earlier by the House HELP (Health, Education, Labor and Pensions) committee.

Despite that HELP proposal, the House is still battling over Medicare reimbursement rates, trying to trim $200 billion from the cost of the bill and the final shape of the public option.

This is becoming the defining issue of the year. Immigration was pushed back early, there doesn’t appear to be the support for EFCA and most are now conceding that cap and trade will have to wait until when, and if, the health care debate is settled.

The drama, particularly when the issue hits the floor, will continue; the results are unknown.

Health Care Talk in Washington and Closer to Home

(Guest blogger Daniel F. Evans is president and CEO of Clarian Health. He shared insights on incentives last week and will soon be offering an additional posting.)

I’d like to use this blog entry to comment on two events related to health care reform that took place Wednesday, though they differed dramatically in scale and attention received.  First, President Obama spoke to a joint session of Congress and the American people about health care.  As is usually the case, the president’s oratory was powerful and compelling.  He presented a strong case for reform. 

But his speech was disappointingly short on specifics on the question that I believe matters most – namely, how we change the incentives in our health care delivery system to support higher quality, more efficient and coordinated patient care delivered by trained medical professionals. The speech provided a lot of detail regarding how to expand insurance coverage to those who don’t have it and to protect those who currently have insurance from losing it when they need it most.  But it was very vague about how to pay for these reforms, and it was largely silent on changing the model of how health care is provided.  Nor did it contain any reference to the responsibility we all must take on for our own health and health care choices. In that sense, I believe it was a lost opportunity to advance a critical element of real and lasting health care reform.

Earlier in the day, the Indiana Health Industry Forum sponsored a thoughtful and expansive discussion of health care reform here in Indianapolis. Participants had the chance to hear from a number of experts on key elements of the various reform proposals under consideration in Washington. The panelists were informative and interesting, and reminded us of just how complex and challenging reform is going to be. 

Can we have lower costs but still support medical innovation? Do we have enough health care workers to provide care for the patients who will enter the health care system as insurance coverage is expanded? Can a system really designed to treat episodes of acute care adjust to provide a continuum of care for the chronically ill? 

All are fascinating and important questions without easy answers. Panelists also reminded us that reform will be an ongoing issue and will not be “finished” even if major legislation passes this year. To give just one example, the Medicare program has unfunded liabilities of more than $30 trillion. This is obviously not sustainable, so additional changes to the program will be necessary over time to keep it from swallowing our entire economy. Health care “reform” will be with us for many years to come, as our society continues to grapple with the challenge of paying for the care we want and need.

Braly: Tackle Both Health Care Coverage and Costs

Angela Braly, CEO of the largest health insurance provider in the country in Indianapolis-based WellPoint, wanted to make two things clear during her Economic Club of Indiana speech today. At some point, the debate that is taking place in Washington and around the country has shifted from health care reform to health insurance reform — and it needs to shift back. Braly, in her remarks before a sellout crowd, said:

  • Inefficiencies in health care are driving up costs at an unsustainable rate
  • Current incentives are wrong in the traditional Medicare system with payment for quantity instead of quality — and she fears the same cost shifting that takes place now would occur in a public option plan
  • "We won’t solve the problem by only focusing on the insurance side of the equation."

Braly notes that Massachusetts has made progress in reducing the number of uninsured in its state, but that system costs have increased from $630 million in 2007 to an estimated $1.3 billion this year. The lesson for the federal level, she adds, is that coverage and costs must be tackled together.

An important topic that has been lost in the shuffle, Braly says, is malpractice reform. The fears of legal action "prevent more disclosure and communication about what might have went wrong. There are tests that are probably unnecessary and diagnostic tools used excessively because of the fears of medical malpractice." The arguments, however, have "fallen on deaf ears" on Capitol Hill.

The WellPoint leader opened her remarks by stating she is an advocate for reform, that all people should have insurance coverage and that insurers should offer coverage to all, including those with pre-existing conditions. But to make all of that possible, that shift in focus must take place. In answering questions, she defended her company’s 4.1% profit margin, said that WellPoint and the industry were prepared to continue to innovate and closed with her thoughts on one action item if she were leading the way in Congress.

"Focus on what is driving costs and how we can affect that. There are great discussions happening, but it doesn’t always make it to the bill." Earlier, she had ended her prepared remarks by saying about reform: "It won’t be easy, and it should not be quick."

Braly’s speech is available here and on the Economic Club of Indiana site. John Stossel of ABC News’ "20/20" is up next on October 6.

Cato Scholars: Stimulus Could Lead to Scams to Make Madoff Blush

Here’s an uplifting gem from the folks at the Cato Institute. They assert President Obama’s stimulus package (and health care plan) could end up leading to major scams to seize money from the federal government — scams in which we’d all be investing. They speculate:

Government fraud has been in the news lately because analysts are expecting major abuses of the Obama administration’s $787 billion stimulus plan. One Deloitte expert argued that "swindlers, con men, and thieves could siphon off as much as $50 billion" of stimulus funds, which are vulnerable because policymakers are under pressure to shovel it out the door quickly.

Even more troubling is the potential for fraud and abuse created by President Obama’s other big spending proposals — particularly his giant health-care plan. Obama wants to inject hundreds of billions more tax dollars into federal health care instead of fundamentally reforming Medicare and Medicaid — broken programs that are already subject to Madoff-sized larceny. That is incredibly unfair to those of us paying the bills.

Take Medicare. The Government Accountability Office reports that the program makes about $17 billion in improper payments each year. And that doesn’t include problems in the new $60-billion-per-year prescription-drug plan, which is a juicy target for criminals. Harvard University’s Malcolm Sparrow, a specialist in health-care fraud, recently testified to Congress that official estimates are "lacking in rigor," are "comfortingly low and quite misleading," and exclude many kinds of fraud and abuse. He thinks that as much as 20 percent of the federal health-care budget is consumed by fraud, which would be $85 billion a year for Medicare.

Medicare makes a staggering 1.2 billion electronic payments each year, making it highly vulnerable to cheating by health-care providers and organized-crime rings. Criminals need only fill out the government forms carefully and the "claims will be paid in full and on time, without a hiccup, by a computer, and with no human involvement at all," according to Sparrow. A perfect example is the recent case of a high-school dropout in Miami who was able to single-handedly bilk Medicare out of $105 million from her laptop by submitting 140,000 separate claims for equipment and services.

So what do you think? Do you expect this to happen or do we all need to stop worrying so much?

The High Costs of (this kind of) Health Care Reform

The Small Business & Entrepreneurship Council recently pitted rhetoric against facts when it comes to big government health care reform. Sadly, it seems it’s the taxpayers and businesses who are losing in that fight. Read on:

Let’s consider the cost issue. Government programs like Medicaid and Medicare, for example, have run far ahead of what the original cost projections were. That’s not surprising. When the taxpayer is the funder, no one involved in the actual transaction – consumer, provider, politician, and bureaucrat – has any reason to care about prices or utilization. If cost concerns do come up – when politicians initially set up the program, or down the road when facing huge shortfalls and/or an inevitable taxpayer backlash – the usual action is a combination of price controls and rationing of care.

So, the results of more government in health care are both increased costs and diminished quality of care.

That’s all in the mix in the current debate over health care reform. But let’s just take a look at what politicians are talking about initially to fund more government care.

President Obama floats the figure of $630 billion over 10 years. But the Obama budget makes clear that the "$630 billion is not sufficient to fully fund comprehensive reform." In fact, estimates for the coming decade for the President’s plan range up to more than three times higher.

What possible tax increases are in the mix?

First, the President plans on limiting tax deductions for higher income earners, many who happen to be investors and entrepreneurs. President Obama also proposes a variety of other costs largely focused on business, including jacked up tax enforcement, repealing the LIFO accounting method, and higher death taxes.

On May 20, the Senate Finance Committee came up with a long list of possible tax hikes to pay for health care "reform." One would limit the tax deduction for employer-provided health care plans. That, of course, would increase costs for employers and/or workers.

Obama’s Budget Passes, Indiana Chamber Opposes

The U.S. House passed the budget on a party-line vote Thursday night, 233-196; later the Senate passed a modified version 55-43 with two Democrats joining all 41 Republicans in opposition. Indiana Sen. Evan Bayh (D-Shirkieville) was one of the two.

This budget calls for approximately $4 trillion in expenditures in a single year, or nearly 29% of our country’s gross domestic product (GDP). According to Congressional Budget Office estimates, the Obama Administration’s budget blueprint, if followed, would double the national debt in five years and nearly triple it by 2019 – a point at which America’s federal debt would equal 82% of GDP.

The Indiana Chamber adamantly opposes such irresponsible spending, as well as many of the specific programs and tax increases included in the president’s proposal and urged the entire Indiana congressional delegation to reject the president’s proposal and adopt a more fiscally restrained, responsible alternative.

In addition to unsustainable spending and unacceptable levels of public indebtedness, President Obama’s budget would radically alter the federal government’s relationship to its citizens through expansive new proposals regarding taxation, energy, environmental regulation and health care. Hoosiers are looking for a common-sense solution to restore the economy, not an expansive overhaul of federal government programs. Increasing taxes as a means to finance new federal spending on health care reform, Medicare and energy policy resulting in the country’s largest government expansion in decades is the wrong answer at the wrong time. The country simply cannot afford a budget this out-sized, nor can we expect small businesses to invest in the economy or employ workers while their livelihoods are threatened by tax hikes and federal intervention across numerous markets and industries.

The Indiana Chamber is alarmed at the sheer size of the president’s proposal and what it portends for the future of free enterprise, job creation and economic growth in our country.

HOW THEY VOTED:  Within Indiana’s Congressional delegation, Democrat Joe Donnelly and Republicans Dan Burton, Steve Buyer, Mike Pence and Mark Souder voted against the budget plan. Democrats Andre Carson, Brad Ellsworth, Baron Hill and Pete Visclosky voted in favor. In the Senate, both Republican Richard Lugar and Democrat Evan Bayh voted against.

Health Care Reform Train Ready to Roll

A group of key stakeholders that has been meeting for months is apparently ready today to release its broad-based tenets for fixing what ails the nation’s health care system. The Healthcare Reform Dialogue, a self-given title, is expected to call for:

  • More individual responsibility
  • Tax credits to help individuals afford health coverage
  • Expanding Medicaid eligibility
  • Improving the Medicare payment system with a focus on prevention and care coordination
  • Increasing funding to train more primary care physicians (with loan repayment programs part of the deal)

Unanswered are the thorny questions of creating a public health care plan that would compete with private insurance companies or potential mandates on employers to provide health insurance. I think this simply foreshadows what a tough fight lies ahead.

Participants in the group represent insurers, physicians, hospitals, business, family organizations and unions. Many of the same people are talking with staffers for Sen. Edward Kennedy, chair of the Health, Education, Labor and Pensions committee. It’s that panel that will tackle the more difficult topics.

Key questions: Do we really want a government-run health system? How will the employer-based system, put in place at the end of World War II but not viable in many ways today, be adapted? And where is the money going to come from?

The Chamber’s next BizVoice magazine (debuting in early May) will have several interesting health care stories, including a roundtable with Indiana perspectives on reform and how everyone is going to have to "give a little" to make it a reality. 

Cato: Beware of Government Employee Burden on Taxpayers

A blog post by the Cato Institute raises an interesting question: What happens when taxpayers can’t afford to pay the salaries and benefits of the expanding government workforce? The obvious answer is, "Taxpayers can always afford it." We’ll just likely end up debating the meaning of the word "afford" as much as President Clinton debated the meaning of the word "is." At any rate, the post from Tad DeHaven (former deputy director of the Indiana OMB, btw) is worthwhile:

Dennis Cauchon of USA Today and Stephane Fitch of Forbes recently penned articles on the excessive nature of state and local government employee benefits and the threat taxpayers face as a result.

First, Cauchon reports that “State and local governments have set aside virtually no money to pay $1 trillion or more in medical benefits for retired civil servants…With bills coming due as Baby Boomers start to retire, states, cities, school districts and other governments may be forced to raise taxes, cut benefits or both — a task made especially difficult in an economic downturn.”

I would add that the task of cutting benefits for government employees is especially difficult because state and local politicians are generally beholden to the government employee unions. Even those policymakers not predisposed to carry water for the unions are hesitant to ruffle the feathers of a sizable voting block, not to mention a vocal one that still has a lot of regular citizens conned into believing government employees are underpaid, selfless, public “servants.”  Trust me, I’ve witnessed this game first hand.

Cauchon also spotlights the big picture problem: “These medical costs are part of a larger burden taxpayers face in providing health care for an aging population. The federal government has a $1.2 trillion unfunded obligation to pay medical costs for retired federal workers and military personnel. Medicare and Social Security push the nation’s unfunded promises above $50 trillion.”  He also notes that the same private sector employees who pay for these benefits via taxes are not so lucky: “Unlike private companies, most governments subsidize health insurance for retired employees.”