President’s Executive Order Shows Two Contrasting Visions of Health Care

As Washington remains consumed by impeachment fever, President Trump returned to the issue of health care. In an executive order released Thursday, and a speech at The Villages in Florida where he spoke on the topic, the president attempted to provide a vision that contrasts with the left’s push for single-payer socialized medicine.

This executive order focused largely on the current Medicare program, as opposed to the existing private insurance marketplace. By promoting new options and focusing on reducing costs, however, the president’s actions stand in opposition to the one-size-fits-all model of the proposed health care takeover.

The Administration Wants To Explore These Proposals

One fact worth repeating about Thursday’s action: As with prior executive orders, it will in and of itself not change policy. The more substantive changes will come in regulatory proposals issued by government agencies (most notably the Department of Health and Human Services) in response to the executive order. While only the regulations can flesh out all of the policy details, the language of the order provides some sense of the proposals the administration wants to explore.

Modernized Benefits: The executive order promotes “innovative … benefit structures” for Medicare Advantage, the program in which an estimated 24 million beneficiaries receive Medicare subsidies via a network of private insurers. It discusses “reduc[ing] barriers to obtaining Medicare Medical Savings Accounts,” a health savings account-like mechanism that gives beneficiaries incentives to serve as smart consumers of health care. To accomplish that last objective, the order references broader access to cost and quality data, “improving [seniors’] ability to make decisions about their health care that work best for them.”

Expanded Access: The order seeks to increase access to telehealth as one way to improve seniors’ ability to obtain care, particularly in rural areas. It also looks to combat state-imposed restrictions that can limit care options, and can lead to narrow physician and provider networks for Medicare Advantage plans.

More Providers: The order discusses eliminating regulatory burdens on doctors and other medical providers, a continuation of prior initiatives by the administration. It also references allowing non-physician providers, such as nurse practitioners and physician assistants, to practice to the full scope of their medical licenses and receive comparable pay for their work.

Entitlement Reform: Last, but certainly not least, the order proposes allowing seniors to opt out of the Medicare program. This proposal would not allow individuals to opt out of Medicare taxes, but it would undo current regulations that require seniors to opt into the Medicare program when they apply for Social Security.

As I had previously explained, this proposal stands as a common-sense solution to our entitlement shortfalls: After all, why should we force someone like Bill Gates or Warren Buffett to accept Medicare benefits if they are perfectly content to use other forms of health coverage?

Democrats’ Health Care Vision Is Medicare for None

Of course, many on the socialist left have made their vision plain for quite some time: They want the government to run the entire health-care system. Ironically enough, however, Sen. Bernie Sanders’ single-payer legislation would abolish the current Medicare program in the process:

(1) IN GENERAL.—Notwithstanding any other provision of law, subject to paragraphs (2) and (3)—

(A) no benefits shall be available under title XVIII of the Social Security Act for any item or service furnished beginning on or after the effective date of benefits under section 106(a)

As I first noted nearly two years ago, this language makes Sanders’ proposal not “Medicare for All,” but “Medicare for None.” It speaks to the radical nature of the socialist agenda that they cannot come clean with the American people about the implications of their legislation, such that even analysts at liberal think-tanks have accused them of using dishonest means to sell single-payer.

Just as important, “Medicare for None” would take away choices for seniors and hundreds of millions of other Americans. As of next year, an estimated 24 million seniors will enroll in Medicare Advantage plans to obtain their Medicare benefits. As I outline in my book, Medicare Advantage often provides better benefits to seniors, and at a lower cost to both beneficiaries and the federal government. Yet Sanders and his socialist allies want to abolish this popular coverage, to consolidate power and control in a government-run health system.

The actions the administration announced on Thursday represent the latest in a series of steps designed to offer an alternative to the command-and-control vision promoted by the left. The American people don’t deserve socialized medicine, but they don’t deserve the broken status quo either. Only true patient-centered reforms can create a health-care environment that works for seniors and the American people as a whole.

This post was originally published at The Federalist.

21st Century Health Care Options for the States

A version of this post is available on the Galen Institute website.

Across the country, state legislatures are considering whether or not to expand their existing Medicaid programs.  Last year’s Supreme Court ruling struck down the mandatory nature of Obamacare’s expansion of Medicaid to all families with incomes up to approximately $30,000 a year.  Chief Justice Roberts’ June 2012 opinion stated that the health law as originally written engaged in “economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion.”[1]  The Court’s opinion gave states a choice whether or not to expand their Medicaid programs to approximately 20 million new individuals,[2] a decision which states are weighing during their current legislative sessions.

The reasons why states should NOT participate in Obamacare’s Medicaid expansion are well-documented[3]: Medicaid patients have worse health outcomes than patients with other forms of insurance, and in many cases worse health outcomes than the uninsured;[4] Medicaid beneficiaries often face difficulty finding doctors who will treat them;[5] and by increasing federal spending funded by massive tax increases, a Medicaid expansion will destroy jobs rather than create them.[6]

Less well known, however, are the innovative programs states have utilized over the past several years to modernize and enhance their health sectors, expanding coverage and improving quality of care while lowering costs.  Rather than utilizing Obamacare’s top-down, government-centric approach of putting more people into a broken Medicaid program, these policy solutions seek to transform Medicaid using market incentives to create a health system that works for patients.

Recently the Centers for Medicare and Medicaid Services (CMS) issued a bulletin providing clear evidence that the Obama administration views Medicaid expansion as an all-or-nothing proposition.[7]  The Administration apparently hopes that pressure from hospitals and special interests will force state legislators to approve Obamacare’s massive Medicaid expansion.  However, as Chief Justice Roberts indicated in his opinion last June, states now have a real choice.  Based on the examples presented below, states should choose innovative, market-driven solutions, rather than Obamacare’s bureaucratic approach.

Rhode Island

States seeking to improve their health care system should closely examine Rhode Island’s successful global compact waiver for its Medicaid program.  The waiver, negotiated by then-Gov. Don Carcieri and approved by CMS in January 2009, attempts to reduce expenses by giving the state the flexibility to improve the quality of care.  The Rhode Island waiver focuses on promoting home-and-community-based services as a more affordable (and more desirable) alternative to nursing homes, on improving access to primary care through managed care enrollment, and on other similar methods to provide quality care at better cost.  In December 2011, the non-partisan Lewin Group released an analysis of the Rhode Island global compact waiver.[8]  The Lewin report provides demonstrable examples of the waiver’s policy success, saving money while simultaneously improving care:

  • Shifting nursing home services into the community saved $35.7 million during the three-year study period
  • More accurate rate setting in nursing homes saved an additional $15 million in Fiscal Year 2010 alone
  • Better care management for adults with disabilities and special needs children saved between $4.5 and $11.9 million, and
  • Enrollment in managed care significantly increased the access of adults with disabilities to physician services.

Lewin’s conclusion:

The GW [Global Waiver] initiatives and budget actions taken by Rhode Island had a positive impact on controlling Medicaid expenditures.  The actions taken to re-balance the [Long Term Care] system appear to have generated significant savings according to our estimates.   The mandatory enrollment of disabled members in care management program reduced expenditures for this population while at the same time generally resulting in improved access to physician services.  Continuing the GW initiatives already undertaken by the state and implementing the additional initiatives included in the [Global Waiver] will result in significant savings for the Rhode Island Medicaid program in future years.[9]

All this progress comes despite the Obama administration’s efforts, not because of them.  Pages 14-15 of the Lewin report note that maintenance of effort mandates imposed in Obamacare and the “stimulus” prevented Rhode Island from imposing modest premiums on some beneficiaries, even though the approved waiver was supposed to give the state that flexibility.[10]

Despite the ways in which the Obama administration’s bureaucratic requirements interfered with Rhode Island’s ability to implement its global waiver fully, the state achieved measurable progress in reducing costs while improving care – providing a clear example that other states can emulate.

Indiana

The Hoosier State’s Healthy Indiana Plan (HIP), created in 2008, applied the principles of personal responsibility, consumer-driven health plans, and Health Savings Accounts in its expansion of coverage to low-income populations.  Initiated as part of a Medicaid demonstration waiver, the program requires individuals to make contributions to a Personal Wellness and Responsibility (POWER) account.  No beneficiary pays more than 5% of their income, and the state supplements individual contributions so that all participants will have $1,100 in their accounts to pay for routine expenses.

Healthy Indiana promotes personal responsibility in several ways.  First, the required beneficiary contributions to the POWER account ensure that all participants have an incentive to take greater responsibility for their own health and health spending.  Second, the program promotes preventive care by providing an additional $500 to fund important preventive screenings.  Moreover, only those beneficiaries who participate in a series of annual screenings may roll over unused POWER account funds from year to year.  Third, Healthy Indiana assesses co-payments for non-urgent visits to the emergency room, attempting to reverse a trend of high ER usage by Medicaid beneficiaries prevalent nationwide.[11]

Overall, Healthy Indiana has achieved many of its policy goals.  Despite the modest incomes of beneficiaries enrolled in the program – all of whom must have incomes below 200% of the federal poverty level, or about $31,000 for a couple in 2013 – nearly four in five contributed to their POWER account.[12]  Nine in ten participants have at least one physician visit in their first year of enrollment, demonstrating that the HIP deductible does not hinder patients from obtaining needed care.[13]  And an analysis by the consulting firm Milliman found that parents in Healthy Indiana “seek preventive care more frequently than comparable commercial populations.”[14]

Healthy Indiana has not only proved successful – it’s been popular as well.  Only about one-quarter of participants ever enrolled in the program during its first two years left the program, “a retention rate much higher than the rate for adults in Indiana’s regular Medicaid managed care program.”[15]  Approximately 70% of beneficiaries considered the required POWER account contributions just the right amount, and 94% of members report being satisfied or highly satisfied with their coverage.[16]

A 2011 policy brief by Mathematica Policy Research commented on the program’s successes:

HIP has successfully expanded coverage for the uninsured, while giving enrolled members an important financial stake in the cost of their health care and incentives for value-based decision making.  Early implementation suggests that members value HIP benefits and that at least some low-income, uninsured adults are willing and able to contribute toward the cost of their care.[17]

Just as important, the program’s increase in preventive care, and decrease in emergency room usage, have achieved measurable savings. Milliman reports that HIP exceeded its targets for budget neutrality, spending nearly $1 billion less than its original spending cap in its first five years.[18]

In the past five years, the market-based incentives of the Healthy Indiana Plan have yielded two-fold success in improving the population while containing overall spending.  It remains to be seen whether CMS will approve an extension of HIP or will instead claim that Obamacare’s bureaucratic mandates preclude the program’s continuation.  The week the law passed, then-Gov. Mitch Daniels publicly worried that Obamacare would force him to plan for HIP’s termination.[19]  State legislators seeking to avoid Obamacare’s requirements and restrictions who are looking instead to market incentives as a way to control costs would be wise to examine the Healthy Indiana Plan approach.

Florida

Earlier this year, CMS granted approval to the state of Florida’s two waivers to alter its Medicaid program.  These waivers, which follow on the heels of a five-county pilot reform program begun in 2006, will roll out over the coming 18 months; both waivers should be fully implemented by October 2014.[20]

One of the two waivers would transform the Medicaid program for low-income beneficiaries. The waiver will allow all Medicaid recipients to enroll in managed care plans; each will have at least two, and as many as 10, Medicaid plans from which to choose.[21]  The waiver allows managed care plans – which are based in one of 11 regions – to create customized benefit packages that meet the unique needs of their local populations.  In applying for its waiver, Florida rightly noted that “each plan will face the competitive pressure of offering the most innovative package,” which will allow beneficiaries “to use their premium [dollars] to select benefit plans that best meet their needs.”[22]

Other features of the waiver likewise seek to reduce costs while improving the quality of beneficiary care.  Managed care plans will be required to “establish a program to encourage and reward healthy behaviors,” similar to the Healthy Indiana Plan incentives discussed above.[23]  Florida also is seeking waiver flexibility from CMS to encourage beneficiaries to enroll in health coverage through their employer when available and require modest cost-sharing for certain populations.[24]

Coupled with another waiver for the state’s long-term care program – one which seeks to place individuals in home and community-based services instead of nursing home facilities – the two waivers collectively will transform the Medicaid program in Florida.  The waivers’ focus on participant choice, competition among plans to enroll beneficiaries, and incentives to promote wellness and preventive care all hold the potential to provide a more personalized experience for Medicaid beneficiaries – and, just as important, a more effective and efficient one as well.

Even as Florida moves ahead on implementing its waivers, state legislators are offering state-based alternatives to Obamacare’s costly Medicaid expansion.  House Speaker Will Weatherford introduced legislation – the Florida Health Choices Plus bill – with Rep. Richard Corcoran, chairman of the House Health and Human Services Committee, to provide incentives for low-income individuals to obtain health insurance.[25]  Under the proposal, individuals with incomes below the federal poverty line would receive $2,000, deposited into a CARE (Contribution Amount for Reasonable Expenses) account.[26]  Beneficiaries would be required to deposit $25 per month, or $300 per year, into the account, and employers could contribute additional amounts as well.  The money could be used to purchase affordable health coverage in the Florida Health Choices insurance clearinghouse, or used directly for health expenses.

Because more than two in three uninsured Americans lack coverage for periods of less than a year, Florida Health Choices Plus would provide bridge funding to the majority of citizens who suffer only short spells without health insurance.[27]  It does so without providing incentives for individuals to drop private health insurance and enroll in a government program – a problem that has plagued past state coverage initiatives.[28]  The proposal includes a personal responsibility component, coupled with incentives for beneficiaries to serve as wise consumers of health care.  And it accomplishes these objectives without relying on Obamacare’s massive new gusher of federal spending.

Texas

Although it has not yet come to fruition, state thought leaders have begun to consider how additional flexibility from Washington could result in better care for patients and a more predictable and stable Medicaid budget for states.  The Texas Public Policy Foundation recently released a paper outlining its vision for a Medicaid block grant, and how Texas could use the flexibility under a block grant to revamp its existing Medicaid program.[29]  The paper describes how the amount of a block grant might be set, along with the terms and conditions establishing a new compact between the federal government and states – giving states more flexibility, but also requiring accountability for outcomes in the process.

Texas envisions a block grant as providing a way to revamp its Medicaid program for both low-income and elderly beneficiaries.  For lower-income applicants, the state could choose to subsidize private health insurance, with incentives linked to Health Savings Account (HSA) plans.  Beneficiaries would fund the difference between the amount of the state-provided subsidy and the cost of the insurance plan, “provid[ing] strong incentives to the enrolled population to purchase low premium, high value plans.  Beneficiaries selecting coverage that costs less than their premium support entitlement would be allowed to deposit the difference in an HSA.”[30]

With respect to long-term care for the elderly, the Texas paper envisions a series of reforms under a Medicaid block grant.  Incremental reforms – including partial benefits for those who seek to remain in community settings, a competitive bidding process for nursing home care, and greater restrictions on asset transfers, to ensure benefits are targeted toward truly needy individuals – would eventually lead to a fundamental transformation of the long-term care benefit into a defined contribution model.  Under this reform, “the state will provide a pre-determined level of financial support directly to those eligible by establishing and funding an account on each beneficiary’s behalf” to be used for eligible care expenses – maximizing beneficiary choice and flexibility and encouraging the use of community-based service over institutional nursing homes.

Unfortunately, a block grant requires approval from Congress – and neither the Democrat Senate nor President Obama currently appear inclined to grant states the degree of flexibility the Texas paper envisions.  But Rhode Island’s Global Waiver, approved in the final days of the George W. Bush administration, shows that the administration does have the authority to grant global waivers to other states seeking the same control over their Medicaid programs.

Nevertheless, the ideas offered in the paper present a vision where both flexibility and market incentives can provide better quality coverage to residents while providing budgetary stability to federal and state governments alike.

Learning from other states

Other examples of states taking action on their Medicaid programs:

North Carolina:  States first need to be armed with solid information about how the Medicaid program is working.  They need to know who is being helped or harmed and how much is being lost to waste and inefficiency in this ossified, rule-driven program.  In North Carolina, state auditor Beth Wood recently found that the state’s Medicaid program endured $1.4 billion in cost overruns each year, including $375 million in state dollars. As a result, North Carolina has decided not to expand its Medicaid program. Before considering any action, others states should commission objective, independent audits of their Medicaid programs to understand the program and the problems that need fixing.

New York also was able to gain more control over how Medicaid subsidy money is spent in exchange for a global cap on a substantial fraction of its Medicaid expenditures.

West Virginia offers alternative benefit packages that create incentives for beneficiaries to take responsibility for their own health and health care. Kentucky and Idaho are among other states with similar programs.  Patients receive additional benefits if they select a medical home, adhere to health improvement programs, keep and arrive on time for appointments, use the hospital emergency room for emergencies only, and comply with prescribed medications.

Utah fought for and received a waiver that allowed the states to scale back Medicaid’s excessively large benefit package to stretch the money to cover more citizens.

These are a few examples of the creative programs that states could develop if they weren’t forced to jump through Washington’s Mother-May-I Medicaid hoops to get approval to make even minor changes to their Medicaid programs.  

Lessons and Themes

While each state’s Medicaid program is unique, the examples discussed above each contain common themes that should guide policy-makers seeking to transform their state health systems – and avoid the pitfalls of Obamacare’s massive, bureaucratic expansion:

  • Customized Beneficiary Services:  Providing beneficiaries with a choice of coverage options can provide plans an incentive to tailor their benefit packages to best meet individuals’ needs.  Similar incentives promoting competition in the Medicare Part D prescription drug benefit helped keep that program’s cost more than 40% below original estimates.[31]
  • Coordinated and Preventive Care:  Several of the reform programs focus on providing individualized, coordinated services to beneficiaries – an improvement to the top-down, uncoordinated care model of old.  In many cases, preventive care interventions for Medicaid recipients suffering from chronic conditions can ultimately save money.
  • Personal Responsibility:  Cost-sharing can be an appropriate incentive, to encourage beneficiaries to take ownership of their health, and discourage costly practices, such as emergency room trips for routine care.  The fact that more than two-thirds of Healthy Indiana Plan participants consider their cost-sharing levels appropriate proves that even families of modest means are both willing and able to provide some financial contribution to their cost of care.
  • Home and Community-Based Services:  Several of the reform programs attempt to continue and accelerate the trend of providing long-term care in patients’ homes, rather than in more cumbersome and costly nursing home settings.
  • No New Federal Funds:  Most importantly, each of the reform projects discussed above neither seek nor require the massive new spending levels contemplated by an Obamacare expansion.  In many cases, the programs above were implemented successfully despite Washington’s interference, not because of it.

Conclusion

Functioning in their traditional role as laboratories of democracy, states have provided better solutions for policy-makers seeking to reform their Medicaid programs.  These solutions have expanded coverage, and improved the quality of care, even while reducing costs to taxpayers.  As the Obama administration denies states true flexibility when it comes to Obamacare’s costly Medicaid expansion, states have demonstrated that they can convert a modicum of leeway from Washington into maximum improvements for their citizens – and savings for taxpayers.

The analysis above shows that Chief Justice Roberts was right: states do have a choice when it comes to their Medicaid programs.  They can – and should – choose the options that will reform and revitalize their programs, rather than the massive and costly expansion of the Medicaid monolith included in Obamacare.

States must take the lead in insisting that Washington provide more flexibility over Medicaid spending so they can expand access to care without burdening taxpayers with significant new costs or burdening their citizens with a program that can be worse than being uninsured.

States can show that Medicaid can have a more efficient and effective service delivery system that enhances quality of care and outcomes.  Expanding Medicaid without a guarantee of flexibility would be a major missed opportunity for the states. If states join together, they have more leverage to demand true flexibility than if they try to gain leverage one by one.

 

NOTES

[1] NFIB v. Sebelius, June 28, 2012, http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf, p. 52.

[2] Prior to the Supreme Court ruling, the Congressional Budget Office estimated that Obamacare would expand coverage to 17 million individuals through Medicaid by 2022, while the Office of the Actuary at CMS estimated the Medicaid expansion would cover 25.9 million individuals by 2020.  See CBO, “Estimates for Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” July 24, 2012, http://cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf, Table 1, p. 19, and Office of the Actuary, Centers for Medicare and Medicaid Services, “2011 Actuarial Report on the Financial Outlook for Medicaid,” March 16, 2012, http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2011.pdf, p. 30.

[3] Grace-Marie Turner and Avik Roy, “Twelve Reasons States Should Not Expand Medicaid,” Galen Institute, March 15, 2013, http://www.galen.org/topics/tennessee-should-block-medicaid-expansion/.

[4] Scott Gottlieb, “Medicaid Is Worse than No Coverage at All,” The Wall Street Journal March 10, 2011, http://online.wsj.com/article/SB10001424052748704758904576188280858303612.html.

[5] See, for instance, Joanna Bisgaier and Karin Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” New England Journal of Medicine June 16, 2011, http://www.nejm.org/doi/full/10.1056/NEJMsa1013285.

[6] Chris Conover, “Will Medicaid Expansion Create Jobs?,” Forbes, February 25, 2013, http://www.forbes.com/sites/chrisconover/2013/02/25/will-medicaid-expansion-create-jobs/.

[7] CMS Bulletin, “Medicaid and the Affordable Care Act: Premium Assistance,” March 29, 2013, http://medicaid.gov/Federal-Policy-Guidance/Downloads/FAQ-03-29-13-Premium-Assistance.pdf.

[8] Lewin Group, “An Independent Evaluation of Rhode Island’s Global Waiver,” December 6, 2011, http://www.ohhs.ri.gov/documents/documents11/Lewin_report_12_6_11.pdf.

[9] Ibid., p. 40.

[10] Specifically, the report notes that the maintenance of effort requirements included in the “stimulus” (P.L. 111-5) and Obamacare (P.L. 111-148) “had a profound impact on the flexibility Rhode Island anticipated…The Special Terms and Conditions for the global waiver authorized Rhode Island to charge premiums of up to 5 percent…however, CMS prohibited Rhode Island from using this authority,” citing the maintenance of effort requirements.  Ibid., pp. 11-12.

[11] See, for instance, a 2010 Centers for Disease Control research brief finding Medicaid beneficiaries were nearly twice three times as likely as those with private insurance to visit the ER multiple times in one year.  Tamrya Caroll Garcia, Amy Bernstein, and Mary Ann Bush, “Emergency Department Visitors and Visits: Who Used the Emergency Room in 2007?” National Center for Health Statistics Data Brief No. 38, May 2010, http://www.cdc.gov/nchs/data/databriefs/db38.pdf.

[12] Timothy Lake, Vivian Byrd, and Seema Verma, “Healthy Indiana Plan: Lessons for Reform,” Mathematica Policy Research Issue Brief, January 2011, http://mathematica-mpr.com/publications/pdfs/health/healthyindianaplan_ib1.pdf.

[13] Indiana Family and Social Services Administration, Healthy Indiana Plan 1115 Waiver Extension Application, February 13, 2013, http://www.in.gov/fssa/hip/files/HIP_WaiverforPosting.pdf, p. 18.

[14] Cited in Ibid.

[15] “Healthy Indiana Plan: Lessons for Reform.”

[16] Healthy Indiana Plan 1115 Waiver Extension Application, pp. 19, 6.

[17] “Healthy Indiana Plan: Lessons for Reform.”

[18] Milliman letter to Indiana Family and Social Services Administration regarding budget neutrality of Medicaid Section 1115 waiver, January 30, 2013, http://www.in.gov/fssa/hip/files/041115_Budget_Neutrality_Waiver_Renewal.pdf.

[19] Mitch Daniels, “We Good Europeans,” The Wall Street Journal March 26, 2010, http://online.wsj.com/article/SB10001424052748704094104575144362968408640.html.

[20] Frequently Asked Questions on Statewide Medicaid Managed Care Program, Florida Agency for Health Care Administration, http://ahca.myflorida.com/medicaid/statewide_mc/pdf/FAQ_MC-SMMC_general.pdf.

[21] Ibid.

[22] Florida Agency for Health care Administration, Section 1115 waiver submission to the Centers for Medicare and Medicaid Services, http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/fl/fl-medicaid-reform-pa.pdf.

[23] Ibid., p. 16.

[24] A summary of the specific federal authorities Florida seeks to waive can be found on the state Agency for Health Care Administration website, http://ahca.myflorida.com/medicaid/statewide_mc/pdf/Summary_of_Federal_Authorities_01232013.pdf.

[25] “Florida Health Choices PLUS+: Creating a Stronger Marketplace for Better Health, More Choices, and Expanded Coverage,” Floriday House Majority Office, April 2013, http://myfloridahouse.gov/Handlers/LeagisDocumentRetriever.ashx?Leaf=housecontent/HouseMajorityOffice/Lists/Other%20Items/Attachments/6/Florida_Heath_Choices_Plus.pdf&Area=House.

[26] Available online at http://myfloridahouse.gov/Sections/Documents/loaddoc.aspx?PublicationType=Committees&CommitteeId=2738&Session=2013&DocumentType=Proposed%20Committee%20Bills%20%28PCBs%29&FileName=PCB%20SPPACA%2013-03.pdf.

[27] Congressional Budget Office, “How Many People Lack Health Insurance and for How Long?” May 2003, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/42xx/doc4210/05-12-uninsured.pdf, Table 4, p. 11.  For a further discussion of the cohorts comprising the uninsured, see Chris Jacobs, “Deconstructing the Uninsured,” Republican Study Committee Policy Brief, August 26, 2008, http://rsc.scalise.house.gov/uploadedfiles/pb_082608_uninsured%20analysis.pdf.

[28] See for instance Jonathan Gruber and Kosali Simon, “Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Insurance?” Journal of Health Economics, February 2008, http://economics.mit.edu/files/6422.  The study found that about three in five individuals enrolled in government health programs dropped their private coverage to do so.

[29] James Capretta, Michael Delly, Arlene Wohlgemuth, and John Davidson, “Save Texas Medicaid: A Proposal for Fundamental Reform,” Texas Public Policy Foundation, March 2013, http://www.texaspolicy.com/sites/default/files/documents/2013-03-RR05-MedicaidBlockGrants-Final.pdf.

[30] Ibid., p. 10.

[31] Robert Moffit, “Medicare Drugs: Why Congress Should Reject Government Price Fixing,” The Heritage Foundation Issue Brief 3880, March 18, 2013, http://www.heritage.org/research/reports/2013/03/medicare-drugs-why-congress-should-reject-government-price-fixing. ­­­

On Liberal Elites and “Dumb” Patients

Just before the Memorial Day recess, liberal blogger Ezra Klein published an interview with Sen. Coburn regarding health care.  Dr. Coburn’s responses can be found here, but in many respects Klein’s “questions” are themselves more interesting.  Two in particular speak volumes to the liberal mindset on health care:

EK:  Well, if you presuppose “properly regulated [markets],” then I doubt there are many examples.  But IPAB seems like an effort to deal with something you’re worried about: The inability of Congress to act to reform Medicare.  It’s an effort to more properly regulate the Medicare market….

EK:  The question is how do you define excess?  In the market version of this, it’s not clear that people know the care that’s best for them.  When you say how many primary care physicians we need, it may just be that Americans like a lot of specialty care.

There, in a nutshell, lies the liberal philosophy: That patients are unable to make their own choices, and that government – in this case, the IPAB bureaucracy created by Obamacare – should do so instead.  It’s worth examining each premise more closely.

The idea that patients cannot be intelligent consumers of health care permeates the left.  Former CMS Administrator Donald Berwick perpetuated the belief, as have writers like Paul Krugman and Klein himself.  At least at the most basic level, one can’t argue with the logic: It would be highly irregular – not to mention dangerous – for an accident victim riding in an ambulance to quibble about hospital choice.  But a significant part of the health spending problem in the United States focuses not on acute episodes like heart attacks or car crashes, but on chronic diseases like diabetes and emphysema, which comprise three-quarters of all health spending.  In these cases, patients certainly have the ability – and often the desire – to take better control of their health care, if only they were given the tools to do so.

The left argues in response that not every diabetic patient will want to spend time poring over “Consumer Reports”-esque ratings guides to find the most effective clinic or program that will work best for them.  But as Harvard’s Regina Herzlinger has written, markets don’t assume – and don’t need – every consumer to be fully informed in order to spark innovation; they only require a leading vanguard of educated “early adopters” to spark change and competition.

After all, how many automobile purchasers know the intricacies of their cars’ ignition systems, braking devices, etc.?  A car can be just as deadly an instrument as a surgeon’s scalpel – yet we don’t need a federally-created board like IPAB to “properly regulate” the automobile market.

News on Containing Costs Goes from Bad to Worse

The employer benefits firm Mercer released its annual survey of health plans today, and for those wishing to “bend the curve” on health costs, the results were not promising.  Mercer’s survey concluded that employers’ health costs will rise 4.1% this year, and even more (5.0%) next year; if firms do not take steps (e.g., raising co-payments, etc.) to control spending, costs would rise by a whopping 7.4% in 2013.  Recall that four years ago, candidate Obama promised repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  Not only has that premium reduction not happened – premiums have risen by $3,065 since Barack Obama was elected President – but cost increases continue to grow unabated.

In fact, today’s Mercer study suggests one way Obamacare will accelerate the growth of health costs – by limiting usage of consumer-driven health plans.  The survey notes that an “enrollment shift” to consumer-driven plans – which have more than tripled in popularity since 2007 – has “helped to hold down overall cost increase[s].”  Consumer-driven plans help to slow cost growth because average costs are nearly $2,200 lower per year than traditional health insurance costs.  Unfortunately, several provisions in Obamacare will move health coverage in the exact opposite direction, by restricting access to HSAs and consumer-driven plans – therefore raising, not lowering, health costs.  Three separate provisions in the statute, and regulations implementing the law, will reduce access to HSA plans:

  1. Obamacare’s essential health benefits package contains new restrictions on deductibles and cost-sharing, which will prevent at least some current HSA plans from being offered.
  2. Obamacare’s medical loss ratio regulations also impose new restrictions that studies show will hit HSA plans particularly hard, and could force individuals to change their current form of coverage.
  3. The Obamacare statute does not specify that cash contributions made to an HSA will be counted towards the new federal actuarial value standards.  And a February bulletin released by HHS in advance of upcoming rulemaking indicates that under the Administration’s approach, not all contributions into an HSA will count towards the new minimum federal standards – meaning some HSA policies will not be considered “government-approved.”

Both individually and collectively, these provisions in Obamacare will have the effect of limiting access to new and innovative consumer-directed health plans like Health Savings Accounts.  Not only will these onerous regulations prevent many Americans from keeping the plans they have and like – by limiting access to consumer-directed health plans, Obamacare will also raise, not lower, health costs for many Americans.

Medicare’s Corporate Welfare

On Friday, the Washington Post published a lengthy front-page expose regarding the billions of dollars Medicare spent on anti-anemia drugs that studies eventually determined had “wildly overstated” benefits and “potentially lethal side effects, such as cancer and strokes.”  The story reads like a case study of the influence of the healthcare-industrial complex in putting its own interests ahead of patients:

Unlike medications that a patient picks up at the store, drugs administered by a physician, as these were, can yield a profit for doctors if there is a “spread” — a difference between the price they pay for the drug and the price they charge patients.

In this case, drugmakers worked diligently to make sure that doctors had an incentive to give large doses — that the spread was large.  They offered discounts to practices that dispensed the drug in big volumes.  They overfilled vials, adding as much as 25 percent extra, allowing doctors to further widen profit margins.  Most critical, however, was the company’s lobbying pressure, under which Congress and Medicare bureaucrats forged a system in which doctors and hospitals would be reimbursed more for the drug than they were paying for it.

The markup that doctors, clinics and hospitals received on the drugs given to Medicare patients reached as high as 30 percent, according to the Medicare Payment Advisory Commission, a group that advises Congress.

In other words, high-priced lobbyists, drugmakers, and physicians gamed the political system in order to perpetuate their gravy train of fat profits at taxpayers’ expense.  The story continues:

The industry’s success at beating back attacks by the Medicare bureaucrats to rein in costs would be repeated again and again.  It wasn’t just the drugmakers who were advocating for the drugs, either.  On Capitol Hill, the nation’s dialysis clinics, which were receiving as much as 25 percent of their revenue from using the drugs, were sometimes a key ally of the drugmakers.

One of the nation’s largest dialysis chains, in fact, in 2004 offered bonuses to its chief medical officer if he blocked efforts to reform the payment system.  According to a financial filing, Charles J. McAllister, chief medical officer of DaVita, the dialysis company, was to receive a $200,000 bonus if the rules for the drugs’ use being considered by regulators were dropped or delayed.  He was to receive an additional $100,000 if the then-new legislation, known as the Medicare Modernization Act, didn’t cut into the company’s revenue.  The Medicare proposal was “deeply flawed,” DaVita spokesman Skip Thurman said in a recent statement, because it limited dosing levels “without regard to the patient.”

At times, the companies would even enlist the patients to lobby on their behalf.  For example, in what may have been the drugmakers’ largest lobbying push, the companies sought to undo a Medicare proposal in May 2007 to restrict the use of the drugs in cancer patients.  The company spent millions trying to turn back this effort, including developing a Web site, Protectcancerpatients.org, that solicited testimonials from patients and instructed them on how to contact officials.  Johnson & Johnson set up a similar one called Voiceforcancerpatients.com.

Amgen lobbying expenditures and political efforts jumped that year.  The company ranked as the largest contributor to the campaign of House Speaker Nancy Pelosi (D-Calif.), which got $42,050.

Eventually, research proving the anti-anemia drugs produced serious side effects was enough to force regulators to limit the use of the drugs; Congress eventually stepped in to modify Medicare payment rules in a way that eliminated hefty price markups.

But the real scandal here involves far more than anti-anemia drugs.  It’s about the system that allowed this fiasco to happen for years – a system which Obamacare did very little to change.  Friday’s story was entirely predictable – Harvard’s Regina Herzlinger predicted it in a work five years ago, in fact.  And Herzlinger and others have identified the real culprit: Third party payment empowers bureaucrats, not patients.  In Medicare’s case, it gives federal officials at CMS, Members of Congress – and the high-priced lobbyists that try to influence both – a disproportionate impact on the health care decisions of millions of seniors.

Obamacare does nothing to change this government-centric culture; all it does is set up yet another board of bureaucrats to oversee the same centralized health system.  In the wake of Friday’s news story, liberals argued that the law’s new board of bureaucrats will succeed in wringing these kinds of abuses out of Medicare.  It’s a predictable response from the Left – government created the problem, so more government will “fix” it.  But any system fundamentally controlled by government is almost by definition subject to the political and lobbying pressures that created the scandal profiled by the Post.  The real solution is to empower patients, not bureaucrats.

President Obama continues to make clear that he wants no part of a solution that empowers patients.  So the story in Friday’s Post is likely to be repeated yet again, with another scandal costing taxpayers money, and harming more patients.  It’s not a question of if, but when.  And this broken-down, government-centric health care system is not change, and it’s not something the American people should believe in.

Obamacare Raising Premiums in Myriad Ways

This morning, the New York Times reported on a plan by NYU Medical Center to merge with Continuum Health Partners, which runs Beth Israel and several other hospitals in Manhattan.  Perhaps unsurprisingly, the article makes clear that Obamacare is the cause of the merger, and higher premiums are likely to be the effect:

It would create one of the largest health care systems in the city, one that would have immense market power under the new federal health care system, and put pressure on independent medical practices, insurance companies and even rival medical schools, which may have to find other places to train their students….By strengthening its competitive advantage, a merged hospital system could limit options for patients and charge more for services, advocates fear.  It would also have more power to negotiate higher rates with insurance companies, which might be passed on to consumers in the form of higher premiums.

As we’ve previously noted, the law has prompted numerous hospitals and medical providers to combine, in the hopes that consolidation will allow them to charge insurance companies more for medical services.  By both encouraging provider consolidation and discouraging consumer-oriented incentives, Obamacare creates the perfect ingredients for insurance premiums to rise still higher.  And not even the New York Times can deny that fact.

How 13.5 Million People Could Lose Their Current Coverage

America’s Health Insurance Plans is out this morning with its annual survey of Health Savings Account (HSA) eligible insurance plans.  The survey finds that as of this January, 13.5 million Americans are enrolled in insurance plans compatible with HSAs – an increase of more than 18% compared to January 2011.  What’s more, enrollment remains evenly distributed along age and gender lines, disproving the notion that HSA insurance policies favor the young and healthy.  And the survey also demonstrates that most HSA plan holders have access to tools, including price and quality data, that can make them better consumers of health care.

Unfortunately, Obamacare could quickly change all these positive developments.  Several provisions in the law, and accompanying regulations, will move health coverage in the exact opposite direction, by restricting access to HSAs and consumer-driven plans:

  1. Obamacare’s essential health benefits package contains new restrictions on deductibles and cost-sharing, which will prevent at least some current HSA plans from being offered.
  2. Obamacare’s medical loss ratio regulations also impose new restrictions that studies show will hit HSA plans particularly hard, and could force individuals to change their current form of coverage.
  3. The Obamacare statute does not specify that cash contributions made to an HSA will be counted towards the new federal actuarial value standards.  And a February bulletin released by HHS in advance of upcoming rulemaking indicates that under the Administration’s approach, not all contributions into an HSA will count towards the new minimum federal standards – meaning some HSA policies will not be considered “government-approved.”
  4. The law also includes several new tax increases related specifically to HSAs and to consumer-directed health plans in general, several of which have already sparked controversy – and all of which violate the President’s “firm pledge” not to raise taxes on middle-class families.

Both individually and collectively, these provisions in Obamacare will have the effect of limiting access to new and innovative consumer-directed health plans like Health Savings Accounts.  Even as today’s study confirms that HSAs are gaining more followers, Obamacare’s looming threat means millions of Americans could lose access to these innovative and popular plans.

Another Way Obamacare Will Raise Costs

Yesterday a health care institute released its first analysis of a newly created database featuring claims information provided by several private insurers.  The report found that from 2009 to 2010, health costs rose by 3.3 percent, even though actual utilization declined for many health care services.  The reason for this seeming anomaly?  Price levels charged by medical providers rose – meaning individuals paid more to receive the same, or in some cases less, medical services.

This development is particularly troubling, given that Obamacare has raised concerns that consolidation among medical providers will encourage powerful hospitals and physician groups to charge patients and insurers more – thus raising costs rather than lowering them through better coordination of care.  A New York Times article from late 2010 noted that “consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve,” as a “growing frenzy of mergers involving hospitals, clinics, and doctor groups” could prompt providers to raise their prices after establishing a dominant market position.

Other studies have confirmed these anecdotal results.  One analysis released last November found that “the integration of hospitals and physicians into the accountable care organizations encouraged by [Obamacare] is expected to accelerate provider consolidation in local markets.”  And the result of that consolidation?  “Hospitals in concentrated markets charge significantly higher prices to private payers than do their peers in more competitive markets.  Furthermore, these prices are significantly above their direct costs of providing care.”  For instance, prices for angioplasty procedures were nearly 50% higher in consolidated (i.e., non-competitive) markets than in competitive markets.

Of course, some conservatives argue that a move away from third-party payment, and moves to make patients more aware of and sensitive to the price of health care services, would mitigate against potential adverse effects coming from provider consolidation.  But Obamacare reduces these consumer-oriented incentives – it further entrenches the third-party payment system, and the law’s individual mandate, coupled with the restrictions placed on government-defined insurance, will discourage rather than encourage individuals to take control of their own health care.  It’s one more reason why reports like the analysis issued yesterday – showing patients are paying more but getting less – could become par for the course in a health care system governed by Obamacare.

Another Way Obamacare Will RAISE Health Care Costs

This month’s issue of Health Affairs, released on Monday, contains an interesting new study on consumer-directed health plans – both Health Reimbursement Arrangements and Health Savings Accounts (HSAs) – written by researchers from the RAND Corporation.  The study (subscription required) found that expanding the use of consumer-directed health plans from their current share of 13% of the employer-sponsored marketplace to 50% market penetration would reduce health costs by $57 billion per year.  The study also found that if HSAs had a 50% share of the employer marketplace, costs would drop by an even larger amount – $73.6 billion per year, or 9.1% of employee health care spending – because employees save more in HSA plans than in Health Reimbursement Arrangements.  By any standard, both sums discussed in the study are significant amounts of potential savings for American workers.

Unfortunately, several provisions in Obamacare will move health coverage in the exact opposite direction, by restricting access to HSAs and consumer-driven plans – therefore raising, not lowering, health costs.  Three separate provisions in the statute, and regulations implementing the law, will reduce access to HSA plans:

  1. Obamacare’s essential health benefits package contains new restrictions on deductibles and cost-sharing, which will prevent at least some current HSA plans from being offered.
  2. Obamacare’s medical loss ratio regulations also impose new restrictions that studies show will hit HSA plans particularly hard, and could force individuals to change their current form of coverage.
  3. The Obamacare statute does not specify that cash contributions made to an HSA will be counted towards the new federal actuarial value standards.  And a February bulletin released by HHS in advance of upcoming rulemaking indicates that under the Administration’s approach, not all contributions into an HSA will count towards the new minimum federal standards – meaning some HSA policies will not be considered “government-approved.”

Both individually and collectively, these provisions in Obamacare will have the effect of limiting access to new and innovative consumer-directed health plans like Health Savings Accounts.  The Health Affairs article illustrates that not only will these onerous regulations prevent many Americans from keeping the plans they have and like – by limiting access to consumer-directed health plans, Obamacare will also raise, not lower, health costs for many Americans.

A Modest Proposal for IPAB’s Defenders

Several months ago I began experiencing problems walking on my left foot.*  I was born with deformed bones in my left foot, and the pressure from walking on this abnormal foot structure for more than 30 years began to take its toll.  I visited several podiatric and orthopedic specialists to evaluate my options; non-invasive methods like orthotics and therapy helped, but it became apparent to me that they weren’t really solving the problem, as opposed to delaying the inevitable.  So I consulted with a surgeon, and he arrived at a plan of action – fusions, grafts, and a tendon lengthening – which should significantly alleviate my pain and improve my gait.  Feeling comfortable with the surgeon’s level of expertise and with his recommended treatment plan, I scheduled surgery for a few weeks from now.

However, the recent debate over the IPAB – Obamacare’s body of unelected bureaucrats who will control Medicare spending – has prompted me to reconsider my decision.  After all, who am I to decide how my own health care should be handled?

  • Paul Krugman has taught me that “Patients are Not Consumers” and that “making [health care] decisions intelligently requires a vast amount of specialized knowledge”;
  • The Center for American Progress, in making “The Case for Bureaucrats in Health Care,” has taught me that health care is different from buying shoes;
  • Ezra Klein has taught me that “consumer-directed health care is a silly idea” because “patients are not qualified to evaluate good care”; and
  • CMS Administrator Donald Berwick has taught me that “I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care.  That is for leaders to do.”

These statements have left me in a serious conundrum, and forced me to reconsider my thinking.  After all, I’m not an expert on health care – I’m not even close:

  • I don’t have a PhD in economics, which, as Secretary Sebelius recently pointed out, qualifies individuals as “experts” in how to run a health care system;
  • Neither I nor my surgeon graduated from an Ivy League school; and
  • I don’t even know all the words to Fair Harvard.

I do however now recognize that I am not only clearly incapable of making my own health care choices, but also that my health – and our entire country – would be better off leaving those choices to “experts” who are my intellectual superiors.  After all, President Obama promised that the stimulus would prevent unemployment from rising above 8 percent – and who thinks joblessness is still a major problem more than two years later?  And just look at how Obamacare has already delivered the $2,500 reduction in premiums that candidate Obama repeatedly promised.

So all I need now is to find a suitable “expert” to tell me whether I should have the surgery or take the painkiller.  Therein lies my open request to IPAB’s defenders, to provide me with the enlightened knowledge of my own medical condition that I so clearly lack:

  • Peter Orszag – supporter of IPAB as a way “to improve Medicare’s cost-effectiveness” – can tell me whether my surgery will cost too much;
  • Zeke Emanuel can tell me where my procedure fits on his chart for the allocation of scarce medical resources; and
  • Dr. Berwick can tell me if I’m one of those cases where “Most people who have serious pain do not need advanced methods; they just need the morphine and counseling that have been available for centuries.”

I do hope that one of these individuals – or indeed other political commentators who have supported IPAB in recent weeks – can tell me how I should proceed when it comes to my foot.  After all, I now realize that my surgeon could be recommending an operation just for the reimbursement check – because most medical professionals base their decision-making processes on whether they will obtain a $50,000 payday (as opposed to Obamacare’s “experts,” whose decisions will be based on the fact that “the social budget is limited – we have a limited resource pool”).

There is a catch however:  While I will defer my own opinion to those of the “experts,” I do expect that any individual who passes judgment on my case will assume full financial and legal liability for same.  That may be a problem for some of IPAB’s defenders.  After all, Section 3403 of the statute exempts the IPAB and its members from ANY legal liability associated with its decisions.

And therein lies the point of this proposal, and this story:  If the IPAB’s defenders – and its so-called “experts” – aren’t willing to put their own money where their mouths are, then how good will this board of unaccountable bureaucrats be?

 

* And just in case you were wondering, the facts of this story are real, as is the sarcasm…