What your health bills will be under Medicare

Here is a page from the Medicare.gov Website that tells you what the various programs pay for, and how much they cost in premiums.  I liked it because it is succinct and easy to understand.

SCOTUS OPINION on Obamacare- Read it here!

Here is the C-span link to the Supreme Court opinion on the ACA.
Who would have thought that logic (i.e., a mandate that is enforced as a tax is a tax! and Medicaid is a voluntary program, that States can opt out of in pieces) would prevail?

Is this another switch in time that saved nine?  Or the opposite?  Only time will tell.  My relief tells me exactly where my own opinions lie.

What's the best outcome of SCOTUS on Obamacare?

Here we are, on the possible eve of the supreme court's decision on the constitutionality of the Affordable Care Act (ACA).  I've been grappling with what I want to see as the outcome, from the standpoint of what's good for the health care system, what's good for Obama's reelection, for the Democrats in Congress, and finally, for the crowd of  people who deeply believe that a single-payer health care system (a la Medicare) is best for the entire country.  To clarify, when I think about what's good for the health care system, I have in mind the ultimate effects on cost, quality and equality of access...those three competing objectives of public policies governing the delivery of health care.
What's good for Obama's re-election?  I believe the best thing for Obama politically speaking  is to have the whole bill nullified (except for the Medicare provisions, which nobody is talking about anyway).  That would wipe out the state-level exchanges, the insurance mandate (of course), and all the Medicaid provisions that expand access to Medicaid to all individuals and families with incomes less than 133% of the Federal poverty line (about $14K for individuals;  and $31K for a family of four).  I can't imagine how striking down the insurance mandate could leave in tact the ban on insurers discriminating on the basis of pre-existing conditions, or even the requirement to cover the under-26 crowd (even though some major insurers say they will keep that one.)
I think it would be good for voters to go back to square zero on health care.  It would take the fire out of the conservatives' righteously(?) indignant bellies over the mandate, while leaving the rest of the country to mull the alternatives.
What's good for the Democrats in Congress?  Re-election wise, see above.  Ideologically wise?  What ideology?  Dollars (theirs)  is what matters to them.
What's good for the Single-payer ideologues?  This is a no-brainer.  The mandate goes, the Medicaid provisions stay.  Most Americans do not realize that the Medicaid provisions, in addition to expanding eligibility, require Medicaid to pay for physician services at Medicare rates..  We hear a lot about how Medicare fees are low compared with private rates, but Medicaid fees are 30% lower than that!  And, to top it all off, the Federal government will pick up the entire tab for the health care costs of the new eligibles.  (Yes, yes, that's for 2 years, after which the Federal % drops to 90% and the Medicaid fee schedule rule drops, but who believes that the doctors won't have the clout to extend the fee schedule, just as they have managed to keep fees from plunging under Medicare's law by one-year extensions?)
Bottom line:  an extension of the Medicare-like single-payer system to a greater part of the population, and a gradual acclimation of the public to the idea that universal coverage can only come from a single-payer system.
What's good for the Health Care System?   At this point, I am rooting for a complete nullification, though  I am aware it's a long-shot.  That's because I don't believe in a single-payer system. So, what I mean is that if the mandate is going to be shot down, then I hope they shoot down Medicaid, too. That way, in having to start from scratch, perhaps Congress will put all the people into exchanges, which will treat the lower-income folks with the same respect they treat others. And, instead of  "exchanges," it should be "exchange."   I believe in a regulated market place (much like the Federal Employees Health care system) that offers competing plans meeting minimum coverage requirements.  The exchanges sounded like a good idea, but they are implemented at the state level, which doesn't allow much ability to pool risks, especially in smaller states.  (The state-level exchanges came from the Senate and its nefarious (Demorcatic) leadership, while the (Democratic) House bill had a national exchange system that would have guaranteed a large pool of enrollees.)
At this point, it would be worthwhile to go back to ground zero and let the nefarious Republican leadership deal with the consequences of its political intransigence and the public with another failure of our country to make access to health insurance (and therefore decent access to health care) a right.
What do you think?

Medicare Premiums for 2011

Our CBO-Alumni den mother Kathy R sent the attached table around as a first look at what to expect for Medicare premiums in 2011. She took it from a report published September 23 by the National Health Policy Forum. I'm reproducing the table from that report here.

If you're in the "holdharmless" group, it's because you're not new to Medicare in 2011, and your income (modified AGI in 2009) is no more than $85,000. Otherwise, you're in another column. Note the income break points in the table. It makes sense to micro-manage your income if your AGI falls close to a breakpoint.
For example, make $85,001 (if you made only $85,000 in the previous year) and that extra dollar will net you about $58 per month, or about $700 per year, in extra Medicare Part B premium compared with the hold-harmless premium. That's a marginal tax rate of 78,000% on the last dollar (at least I think it is...it's hard for me to calculate high percentages.)

Schedule for changes in the Medicare Part D benefit

If you want to know how your (or your loved-one's) Medicare Part D benefit will change over the next 10 years as a result of the health reform legislation, see this excellent and short summary from KFF: Key Changes to the Medicare Part D Coverage Gap. What the summary sheet doesn't tell you is what the changes mean for Part D premiums and government spending ... (up up up, of course). Still, if the benefit is out there for everyone else, we'd be stupid not to take our share, right?

Health Care Reform Timetable

Here's a good summary, from the Kaiser Family Foundation, of what will happen when, as health care reform ramps up over the next few years. See Health Care Reform Timetable.

Hypocritical congress manipulates CBO esimtates.

An old theory states that regulated industries ultimately "capture" the relgulators and are able to mold the rules to their own advantage. Too bad the theory always seems to work in practice. Now we're seeing it in the manipulation of the CBO scoring process by the "regulated" Congress. Keith Hennessey posted an example of how the House has crafted a Medicaid provision in the reconciliation bill that requires states to pay doctors the same as Medicare pays them, and HAVE THE FEDERAL GOVERNMENT PICK UP THE TAB, without being charged with a $52 billion ten-year cost that CBO estimated for that provision in the original House Bill. The reconciliation bill limits the years in which those increased fees would apply to only two --- 2013 and 2014 -- which brings the cost down to only $8 billion over ten years.

Of course, everyone knows that once those increases go into effect, Congress will never let the fees go back to the old rules. Look what's happened to the physician fee reductions passed in 1997 for Medicare. Each year Congress passes an over-ride, and the reductions are "delayed" for another year. That's what will happen here. So, the health reform bill will effectively federalize Medicaid and add it to the Medicare fee-for-service system (the system that "works so well"). State leaders will love it. Less payout for Medicaid. Doctors will like it, and more of them will participate in Medicaid, which is good for poor people, and by extension the rest of us. Let's face it, though...our deficit hole will just grow and grow and grow.

CBO has no choice but to score the bill this way. It has to assume the law will operate as it says in the bill it's scoring at the time, not as it will play out in reality. This manipulation of legislative language by Congress has improved over time, so at this point the "CBO score" is largely a political football, with the majority using it to hide major new cost-raising changes.

This is just one of dozens of little "surprises" lurking in the bill -- which I admit I still have not read in full and probably never will. What I'm learning is from newspapers and internet. Keith Hennessey's blog is a jewel . I may not agree with him on priorities, but he's an excellent analyst of policy and politics. And he's not lazy. He actually read the reconcilation bill.

"But, Medicare works so well for me..."

That quote comes from one of my most devoted readers, whose name will go unmentioned. In my never-ending effort to convince him/her that it only works well until it doesn't work, for example, when one cannot find an endocrinologist who will accept a new Medicare patient, I am attaching an interesting article about a new trend among cardiologists -- charging an annual access fee to Medicare patients. This appears to be legal if carefully crafted, and I for one applaud it, provided that I will be able to afford it when my own internist decides it's time to do that same. My doc is worth it, because he does old-style actual communicating-type medicine, and I'd gladly pay extra for those phone calls and email access, etc. But, please, not too much extra $$, buddy, okay? Here's the article from the KFF Website, "As Medicare Pay Shrinks, Some Doctors..."

A good link to comparison of House & Senate Health Reform bills

Here's a good Q&A analysis of differences between the House and Senate bills as passed. Easy To read, from Kaiser Family Foundation.

Why the House Health Care Reform bill is fatally flawed

Confession: I still haven't read beyond the first 225 pages of the House bill. I got that far because I wanted to understand the structure of the Health Insurance Exchange (HIE), especially how the public option (PO) would work. In a previous post, I concluded it was good enough, but worrisome in the long run .
But, today Martin Feldstein, a noted Harvard economist (not my favorite, but way smarter than I) has an op-ed piece in the Washington Post (Obamacare's Nasty Surprise) that lays out clearly why the House bill will not work as presently structured.
The basic flaw is that the law requires health plans to enroll all comers, regardless of health risk, but it doesn't provide carrots/sticks to individuals or businesses that are strong enough to induce the young and healthy to enroll. So, premiums will go up, kicking off a cycle of adverse selection into the HIE by the sick or high risk and opt out by the healthy.
There are ways to fix this problem, but apparently they are not in the bill, or surely Feldstein would have mentioned them.
One solution would be to charge anyone who does not sign up (or have qualified coverage) within the first year of the program a "premium penalty" for the rest of their lives. That's what happens with Medicare Part B, and why even the healthiest 65 year old is willing to pay right away. For every year of delay after you reach 65, Medicare adds 10% to the Part B premium for the rest of your life.
Another solution would be to increase income tax penalties.
A third solution would be to increase subsidies.
I like first idea, though, because instead of being seen as a "tax," the penalty would be seen as just retribution for a young person trying to game the system by delaying enrollment until he/she encounters the inevitable need for health care.
BUT... so far as I know, this solution isn't in current health reform proposals. Why not? That's where Feldstein sees the invisible hand of the single-payer lobby. As the cost of insurance goes up and up, and as fewer and fewer people are insured, a single-payer system will be the only alternative.
Design a HIE market to fail and you'll end up with a single-payer system. So many of my dear friends, family members, and readers want this outcome that I am in despair. Why do we think that a government monopoly is any better than a phone company monopoly in the way it will treat us? Supporting a move toward public monopoly of payment for health care is to say we want health care to be run the way that public education is currently run. Good teachers underpaid; average income children underserved; rich children opting out.
That's the best I can do by way of diatribe right now.
Have a great day.

How health reform will gradually evolve to single payer system

Leaving aside the pros and cons of a single-payer system (SPS), I'm beginning to believe that a SPS would be an inevitable consequence of any health reform proposal that contained a public option (PO), even one as benign as the current version of the House bill. (See my previous post on good points of that bill.)
I'm basing the scenario on my long-time experience as an enrollee in a prototype health insurance exchange (HIE), namely the Federal Employees' Health Benefits Program (FEHB). FEHB has about 8 million enrollees, including current federal employees, their families, and retirees.
First off, I need to explain that the FEHB program is a regulated marketplace with open season at the end of every year, during which enrollees can choose among roughly 10 plans, depending on their place residence. Government subsidizes about 75% of the arverage plan's premiums (as do many employers.) Less subsidy goes to enrollees in richer plans. None of the plans are POs. All are private, but some are not-for-profit.
Here's what has happened to me over the 30 years of enrollment. When I was young and feeling good, I enrolled in a plan with relatively low premiums (never the lowest, cause I'm risk averse). As I got older and more needy, I opted for a richer plan, paying more in premiums but using health care more. Apparently, so did lots of other aging enrollees, because the costs of that plan began to skyrocket. And, that plan began to add draconian control features to the management of its benefit. And more and more doctors opted out of that plan's network. Finally, the costs got so high and my mistrust of the plan grew so much(especially in the past year) that I chose a low cost plan and paid more for visits and drugs than before. Overall, I might have paid more for health care (counting premiums and out-of-pocket) but at open season last December I was willing to take the gamble. This year, though, I'm torn, because the lower cost plan leaves me exposed to higher drug costs and less generous coverage of some services and devices that I might need in the coming year, given my decrepit state. So, right now I'm weighing a choice between two plans whose premiums vary by a ratio of more than 2 to 1. My choice is based on what I know now about my current state of health, which none of the plans can take into account in deciding to enroll me. That's the beauty of "open season" and "guaranteed issue."
Now fast-forward to a grand health insurance exchange, as envisioned in the House bill. That plan would also have a regulated market place with private insurers offering benefits that can differ within a defined range specified in the legislation. When I say "benefits", I mean things like the deductible, coinsurance or copayments, catastrophic limits on out-of-pocket expenses, networks of physicians, hospitals and other providers, care mangement techniques like prior authorization for expensive procedures, etc. An example of a limit on benefit variation is the requirement in the current House bill that every plan cover well child care visits with no copayment or coinsurance. (i.e., free well child care--costs would be covered through the premium assessed on all enrollees.)
Without a PO, the marketplace would behave similar to the FEHB program. People would check out premiums, networks, deductibles, etc., and would choose the best plan for them. Over time, there would be sorting of enrollees, and the costs of different plans might diverge. If the House bill became law, the young&healthy would enroll in the cheapest plan possible, while the old&sick would enroll in richer plans. This process would be mitigated to some extent because in the new marketplace, plans could vary premiums by age by a ratio of 2:1. (That's not true with FEHB, where we all pay the same premium.) So, in the House bill, the young&healthy would pay less for richer coverage and at least some might be induced to buy richer coverage.
Now, enter the Public Option (PO). Under the House bill, the amount that PO pays doctors and hospitals can never be greater than the average payment rates under private plans in the marketplace. Most likely the PO administrator will "negotiate" with doctors as follows: "We're paying Medicare rates. If you want to participate, fine. If not, hasta la vista." Lots of doctors might opt out of the public option, because right now Medicare rates are about 30% below private insurance rates. Hospitals may be stuck with the Medicare rates, though, because it could be very difficult for the major or only hospital in a community to thumb its nose at a public insurer. (I just don't know what hospitals will do.)
In any case, the PO premium is likely to be lower on average than those of private plans. Who will choose the more limited PO, with its more limited, perhaps less "elite" physician network? The young&healthy, of course. That will make it easier for the PO to pay for itself with lower premiums overall. Lots of young&healthies choosing the PO would mean that their premiums would be low, and the oldster's premiums would also be held down (by the 2:1 rule). Meanwhile, the private plans will attract us old&sicksters, and their premiums will be driven up. Eventually, some of the old&sicksters will give up on the "elite" docs and will enroll in the PO. This yin and yang will continue over time until, gradually, the PO (which still has the cost advantage due to payment of hospitals on Medicare rates) has become the behemoth. With lower and lower market share, private insurers will fail, merge, exit the market, etc., and real competition will be gone.
If you've read this far, I must tell you that I'm not completely sure of my prognostication. Competition is dynamic, innovation is inherent in markets such as this. I could be all wrong. That's why I'm not wringing my hands at the public option currently in the House bill. The uncertainty is great enough for me to say, okay, let's pass a law that makes health insurance affordable and get on with it. But, I'm mindful that the great long-term danger is the decline of the health care system into a single-payer system. Perhaps in the future I'll post something on why I'm so worried about single-payer system.

My first take on House Health Reform Bill

Ok, okay, so I've gotten through only the first 225 pages of the bill. (Read the 1,990-pages of the House "Affordable Care for America Act" yourself, if you think I should be faster!) I like this bill better than the Senate Finance concoction, but some things are worrisome.

The Good:

1. HIE Membership: All firms would eventually be allowed to enroll their employees through the health insurance exchange (HIE), thus encouraging over time a big pool of enrollees in this new system of competitive health care plans.
2. HIE Administration The HIE would be national in scope (though States may opt out), so the pool of enrollees would be large (very good) and the administrative expertise to set up and regulate the exchange would be centralized. (That's efficient.)
3. Premium Cost Structure within HIE: The range of premiums would be limited to a ratio of 2 to 1, so older people (the 50=64 crowd) wouldn't have to pay exhorbitant premiums.
4. The Public Option - participation: The public option (PO) will not require physicians to participate as a condition for them to participate in Medicare. That is, physician participation in the PO is largely unlinked from participation in Medicare. (This is very important in keeping the whole system from slipping into a single-payer Medicare program for all.
5. PO Payment rates to physicians: Physician payment rates under the PO would be negotiated but couldn't be more than the average rates paid by the private plans in the exchange. (Also can't be less Medicare rates.) So, if the PO administrator wanted to use the Medicare rates as the basis for participation, that would discourage doctors from participating, and the PO would become a bare bones plan in the sense that the availability of doctors to PO enrollees would be somewhat limited. (This would probably vary by area of the country.) You get what you pay for. Maybe quality for those people who choose the PO won't suffer. Who knows? What's quality in health care anyway? (If you think you know, you're wrong..Nobody knows, least of all myself.)
6. Participation of "Other Providers" in PO: The PO administrator would "negotiate" a rate at least as high as Medicare's DRG rates, and perhaps higher. The only practical "negotiation" on the part of the PO is to specify a multiple (say, 1.05) of the Medicare DRG rate. That higher-than-Medicare rate would mollify hospitals and other non-physician providers in the short run, and they would probably choose to participate, given the high fixed costs of hospital operation (volume is the name of the game for hospitals.) Now, this is good news, bad news, in my view, because other insurers may not have the market clout to demand that hospitals pay on a DRG basis, even one that's higher than the Medicare DRG rate. But, maybe insurers SHOULD play hardball with hospitals, and it is possible that this would encourage hospitals to take the lead in developing integrated systems of care (with doctors) that provide their own insurance offerings to people in their regions. That way, hospitals and physicians could share in cost-savings from delivering care more effectively and efficiently. In any case, hospitals' and other providers' ability to refuse to participate in the public option is an important safeguard for competition.

Worrisome things (other than cost, which I think we should pay for through a dedicated gasoline tax that brings prices at the pump to $4.00,..but that's another story and is so far beyond the fringe that I won't continue with it) will come in my next post, if I can ever slog through more pages of this bill.

Medicare, Medicaid, and Mayo Clinic

Today's Washington Post has an article about Mayo Clinic's decisions to opt out of Medicare for primary care in its Scottsdale Arizona campus and to refuse to accept Medicaid patients from certain mid-western states. Here's a link to an Oct. 9 news article in the Arizona Republic covering the Medicare decision .
Doctors all over the country refuse to accept Medicaid because of states' tendencies to pay even less for physician services than does Medicare. So, Mayo's opting out of some states is no big thing, in my view. The miracle is that they do participate in the Medicaid programs of MN, WI, ND and SD.
But, the decision of Mayo Scottsdale to refuse Medicare for primary care needs more consideration. Sounds heartless on its face, but my reading is different.
Here's what Mayo-Scottsdale is probably doing to stay within the confines of the law. It must be designating certain of its doctors (those manning one of its family practice facilities) as "opt-out" physicians. That Medicare jargon means that those doctors will not accept Medicare payment for any of their patients, and Mayo will not submit a bill on behalf of the patient for any of the services rendered by those doctors to Medicare patients. The patient is on the hook for the entire charge, and Medicare won't pay a penny for the services provided by an opt-out physician. Hear me? The patient cannot get a penny from Medicare when treated by an opt-out physician. Mayo is charging the Medicare patient who wishes to have a Mayo primary care physician an annual access fee of $250, plus fees for visits that are higher than the Medicare fee schedule allows.
Once the patient needs to see a specialist of any kind (say a radiologist, an endocrinologist, yada yada), or needs lab work, or special procedures, however, Mayo will bill Medicare on behalf of the patient. And, in that case, by law, Mayo must get no more than about 115% of the fee allowed by Medicare. So, the patient is completely on the hook at Mayo only for the services of the primary care internist.
Now, the unpleasant reality is that most Medicare patients who would pay, say, $1000 each year in excess fees are unlikely to be poor. So, the criticism of Mayo as catering to the elite in its primary care is somewhat valid. (Why do you think they located a new campus in Scottsdale in the first place?) But, --and here I am an expert as a sometime member of the Mayo (Rochester) staff and an occasional patient -- what the patient gets for that extra money is the kind of attention that most of us see only in Norman Rockwell paintings. First off, the Mayo community medicine doctor lets you talk and talk. You NEVER feel rushed. This is really true! He or she takes a thorough history. The visit almost always takes over a half-hour. (Time your next routine visit to your internist to compare.) You feel as if the doctor hears you. It's wonderful. Need a referral to a specialist? You get it, and you get it fast. Need lab work? It's done there, and the results come back quick. You're not left waiting for a month as you schedule that consult across town.
Does this make Mayo infallible? I haven't found it so. Those doctors have missed things in my case. Still, I never feel angry because I chalk it up to the inevitable imperfection of doctors in the face of mind-numbing variability and complexity of human disease. I've never chalked it up to the doctor not caring. Out here in the real world, though, I often do chalk it up to that.
Now, it's no secret that Medicare underpays for primary care services relative to specialist care. See Kaiser Family Foundation's background piece on the shortage of primary care docs. So, rather than start rushing patients through the system to meet its costs, Mayo has taken a stand against Medicare's crazy fee-for-service system. Lower income Medicare patients, or those who take umbrage, will have to see other docs for their primary care; they can still be referred by those doctors for specialty care at Mayo.
This is a signal to the Medicare fee-for-service system. You just don't work!

The Senate Finance Committee's Health Reform Plan

This is the "Baucus Committee", which is generally more conservative than the Senate HELP Committee (Kennedy, Dodd & Harkin). The SFC's bill hasn't been drafted fully, but last week Sen. Baucus released an 18-page summary of its provisions so far. I relented from my new "kill-no-trees...create-no-paper-waste" policy and actually printed a copy and then actually read the thing.
Here are some things to worry about in this bill (and why):

• Insurance market reforms - (p2-3) - Although plans would have to refrain from discriminating against pre-existing conditions & must eliminate lifetime limits on coverage, they could vary premiums by age group, up to a ratio of 5-to-1! That's pretty substantial for the 50+ crowd who are likely to need the most care. It's basically saying that each age-group of uninsured will subsidize itself. No transfer from the young to the old. It would not provide real relief on premiums for the older laid-off crowd that can't change careers fast. Oh, and by the way, plans could offer a super-cheap policy for the "young invincibles" who wanted only catastrophic coverage, thereby siphoning off the lowest risk segment of the population from the general market. End result? VERY HIGH PREMIUMS for older uninsured people. Makes the idea of "affordability" laughable for anyone who isn't young and healthy or near-poor (see below).


• Benefit options- (p3) - Oops! First I got this wrong. I thought that the summary was saying that Plans could keep 35% of premium collections for their own expenses & profits. What they really meant was that each plan's benefit would have to limit patients' out-of-pocket expenses to 35% of total costs (on average across enrollees). That's much better. So, I'm not worried about the plan options they're talking about.


• Health Insurance Exchanges - these would be set up and run by the states, instead of a Federal bureaucracy. Excuse me, but I'm from New Jersey. (Enough said?) In all my years working in Washington near or in the Federal workforce I've never seen the incompetence, waste and corruption that I've followed in my home state. (Well, maybe in my first years as an intern in a dying federal agency.) It's a bad idea in this case not to have the regional markets organized by a central commission. There, instead of 50 state bureaucracies reviewing insurance offerings for their fine print, you'd have just one. Regions would be distinct, but the expertise to regulate the markets would be centralized (like Medicare).


• Medicaid - (p. 7-9) This section is unclear, but it appears that people between 100% and 133% of poverty will be able to choose between Medicaid and the Health Insurance Exchange. That's good. And, instead of completely federalizing the funding for that newly eligible group (as in the House bills), States would have to share in the cost. At least I BELIEVE that's what the section says. Read it for yourself. Making States share in the cost of providing care for Medicaid is a good thing, since they actually administer the programs. Of course, Governors hate this because they don't have enough money right now, and how would they come up with new money? The 55/45 split between Washington and States called for in the proposal could be altered so that federal taxpayers pay more, but States should have some skin in the game if Medicaid is going to be covering these people. And giving working people the option to join the exchanges (with subsidies) is a good thing. Who wants to be in Medicaid? Nobody that I know, rich or poor, unless there is no other option.


• Subsidies to Low income individuals (p 3-4) - Up to 400% of the poverty line, you'd get a refundable tax credit (i.e., whether or not you owe taxes). According to the Institute of Medicine, that's about 80% of the population of uninsured people. For example, at 400% of poverty, your premium payment would be capped at 13% of your income. For a family of 4, with a household income of $88K, (400% of poverty) that would mean a cap of $11K. Gov't would give tax credit for the rest. At least I think that's how it would work. Read it for yourself and let me know if I've got it wrong. jwagner@bethesda20817.net. Does that sound affordable?


• Revenue Provisions (p. 17) - I love the new tax on employers with high-cost health plans. The tax would ultimately be 35% of the plan expenses beyond the threshold. The tax would give employers incentive to reduce their health benefit costs. And I don't like the idea of subsidizing (with my tax dollars) the high-cost plans of the richer companies. On the other hand, the bill would completely eliminate the subsidy that employers get when they give Medicare-eligible retirees drug benefits. That's currently a 26% subsidy for every dollar of benefit. It's what has kept employers from dropping health coverage for Medicare-eligible retirees. Lots of employers might drop coverage for retirees. Is that bad? Medicare drug benefit is still available for all. So, I'm not sure whether it's bad or good. More thinking to come.

"Public Option" out! "Choice and Competiton" in!

I hoped it would happen. The Obama Administration has seen the light and is ready to give up on a Medicare-linked public option (the only kind that could give the public plan an unfair advantage in a reformed marketplace). Now, the buzz-words from HHS Secretary Sebelius and Gibbs (WH Press Officer) are "Choice and Competition". I love it!

The problem with the insurance market has NOT been the evil insurance companies. The problem has been a failure of market regulation to guard against the four sources of market failure in health care insurance:

1. adverse selection bias into health plans -- If health insurance coverage is voluntary, and insurers can't deny coverage, only the old, or sick, or vulnerable will apply.
2. Cream skimming by health plans -- When insurers CAN deny coverage, or charge different rates to different people, only the healthy will be able to get insurance;
3. Incentives for over-use by the insured -- (this is called "moral hazard" by economists, a term that I consider to be incredibly stupid because it doesn't help me understand the problem. It's just an economist's way to keep normal people from thinking they know anything.) It's simple: if you don't pay the doctor anything (or very little) for a visit, or a test, or a procedure, etc., you'll have no incentive to restrict utilization or keep the doctor honest when he/she bills the insurer.
4. The provider is your "agent" in making health care decisions. Well, we pay him/her for that, don't we? Yes, but in this fee-for-service world he/she has an incentive to do more, or at the very least not to conserve resources. So, for example, the doctor may not get any money from ordering an MRI to rule-out something very unlikely but horrible, but he has no incentive NOT to order it, and it will justify a return visit (for which he'll be paid).

If problems 1 and 2 are fixed through regulation -- health insurance must be mandatory for all & health plans cannot discriminate either in coverage or premiums -- and if plans must compete for your business, then most of these problems will dissipate over time. It's the only way to get control over health care costs without leading to a single-payer system. (And I'm against a single-payer system, because Medicare and Medicaid are NO role models for efficiency and effectiveness in health care.)

More on the Pros and Cons of the Public Option

Richard Thaler (a well-known economist, born in NJ, too!) has a good piece in today's NY Times on the Public Option controversy surrounding health reform: "A Public Option isn't a Curse or a Cure." He says what I said (but I'm not such a well-known economist). He even refers to Victor Fuchs as the "Dean of Health Economists"... did he read my blog post of June 1? (ha ha...don't think so, but I like to brag anyway).
Thaler points out that, given a level playing field, government run enterprises NEVER out-compete private enterprises. Only if the public plan can exact concessions from providers (through legislative means) that private plans can't, will it be successful. Thaler emphasizes the capacity of the private sector to innovate. That's JUST what I said in my final opinion against a public plan, in my July 22 post. I see the potential for hospitals and doctors to integrate into stronger networks that encourage innovation under a system of competing regulated private insurance. That's our best hope of being able to evolve a system that balances quality, costs and access to care.
One point missing from the Thaler article is that to be on a "level playing field" with competing private plans, the amount that the public plan pays to physicians must NOT be tied to the Medicare Part B fee schedule, as is currently in the bill passed by the House last month. That bill requires that physicians be paid the Medicare fee schedule +6% (in hopes that will appease the AMA). But that amount is sure to be held below the amounts that private plans can negotiate. Sounds good on its face, but it strengthens fee-for-service medicine at a time when that mode of operation has been shown to lead to overuse of visits, procedures and tests. It will slow down innovation, and it will drive out private insurers because doctors will have a choice whether they must accept the private insurance fees. If the public plan can piggy back on the Medicare rules for physican fees and participation, it will have a big cost advantage.

Social Security and Medicare: Where to find the law itself.

For my class of '62 (hs) and '66 (college) cohort, and all those older and slightly younger : Here is a link to the Social Security and Medicare Laws. I like it because, though it's almost unreadable, you can search within the page to find what you want... for example, payment for home health services.. search "home health".. Then, references to other sections of the law are highlighted with clickable buttons. Yes, I agree that you'd have to have no life at all to want to research the law on a specific issue that you might have with Medicare, but you never know when that will be true! And think of how popular we'll be in the nursing home with our laptops to help our fellow inmates (or their children) figure out how to get reimbursed!

The "Public Plan" and Health Reform - What's wrong with it?

Health reform legislation is now focusing on building a regulated marketplace (or exchange) for plans to offer insurance to individuals. The regulations would require health insurers to offer a standard set of benefits at a single (or at most age-specific) premium and to take all comers, even those of us who actually will need medical care in the near future. The idea would be that you can choose among, say, 10 plans all offering a mandated set of benefits, but perhaps varying on co-pays, deductibles, and choice of providers.
A marketplace of competitive -- but regulated -- health plans offers the best hope of reaching a reasonable balance between costs, access and quality of medical care, because consumers (that's us) would be able to exercise the strongest vote possible against a plan that skimps -- select another! Same with a plan that costs too much. Over time, plans would come to look more and more alike. But, most important to my mind is that a competitive program would hasten the integration of medical care delivery into systems of care. That's where hospitals, physicians and other providers get together to offer a health plan in which they share the savings that come from making care more rational and cost-effective. (And, in every open season, they'd have to give some of those savings back in reduced premiums in order to stay competitive.) Integrated health delivery systems can be larger than one city or county. They can involve arrangements with nationally recognized high-quality cancer centers, for example, to offer state-of-the-art care. You might be willing to pay a bit more if your plan included access to the best specialty centers for certain types of care. Most important, integrated health systems would have to compete against rivals on both quality and cost.
The current fee-for-service system is a drag on system integration, because doctors are paid piecemeal and do not benefit from talking with one another or investing in more efficient use of hospitals and technology. It's a dinosaur payment system.
How does the public option come into all of this? The public option is essentially a Medicare add-on. It will piggy back onto the Medicare fee schedule and fee-for-service piecemeal payment system. So long as it pays physicians enough to keep enough of them accepting public option patients, it will be a drag on the needed evolution to systems of care. It will perpetuate the disjointed, disconnected, dysfunctional, and dissed (by me) current system.
That's my main problem with a public plan. Even one that pays doctors generously (and therefore gets buy-in from the altruistic American Medical Association) is likely to gum up the works for real reform of the health care delivery system for a long time to come.

Become a Medicare Expert in 2 Minutes!

A little-known federal government Commission, MEDPAC, is a fount of information and advice about how to fix Medicare. (A lot of its advice I do not agree with!) It's staff is small (about 30 people) but its knowledge of Medicare is deep. The reason it's not known by most of us is that it works for the Congress, not as an educator of the general public. But, last week they put out a great Data Book: Health Care Spending and the Medicare Program, that summarizes very nicely exactly where our Medicare dollars go and why everyone in Washington with at least a smidgen of patriotism (versus self-interest) is semi-hysterical over the "Medicare problem." All you have to look at is the first 15 charts (in chapter 1 of the report) to understand why Medicare fee-for-service -- fee schedule -- medicine has NOT protected us from breaking the bank! The other 200 pages would be interesting for obsessive compulsives, but as imminent or new Medicare beneficiaries, my fellow classmates and I should at least know the basics. And, if we're still going to cocktail parties, we can spout a data point or two and be considered an expert!

Health Reform Kennedy Style

While I'm still pondering all the ramifications of having a public (Medicare-like) plan offered along side competing private plans under a Health Reform PROGRAM, I must share with you my reading of the first 200 pages (Title 1) of the latest version of the Senate HELP Committee's draft legislation. (I read so you don't have to!) (If that doc doesn't open, it means it's already been updated, so go to the Senate HELP Committee's home page to find the latest.)
One item I find particularly delightful is the provision to extend Medicaid eligibility to all individuals in households with incomes below 150% of poverty-- that's about $35K a year for a family of 4, covering about 18% of all households in the USA, according to Wikipedia.
On its face, that's not so terrible, since State Medicaid agencies are very very careful about how they spend money for Medicaid recipients. (States must pay for about 43% (on average) of total Medicaid spending. The Feds pick up the rest.) Indeed, some might say they're downright stingy! Here's the little detail: the legislation provides for the States to continue to administer the Medicaid program for those new enrollees, but this time the FEDERAL GOV'T will foot 100% of the bill. So, say you're the Governor of your state. What would you tell your Medicaid Director to do? Give 'em the BEST! Pay those doctors more! Stick it to the other 49! Of course, the other 49 will stick it too, so The COSTS, THE COSTS! They'll be out of control, and I'll probably want to qualify for Medicaid!
These are the kinds of little goodies that make me almost despair of ever getting affordable health reform. (Ironically, "Affodable Health Care" is the name of the HELP bill.) Bottom line: THANK GOD FOR CBO! I'm sure they'll cost it.