Monthly Archives: November 2012

OBAMACARE: FLAWED FROM ITS INCEPTION

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Remember when Nancy Pelosi said, “But we have to pass the [health care] bill so that you can find out what is in it.”  Well, they passed it.   We’re finding out what’s in it.  And there’s a lot not to like.  This sentiment is not based on my ideological stance against big government.  This legislation is flawed and Republican opposition or not, it needs to be fixed if there is any chance of a successful outcome.  It is understandable that there are problems.  The bill was cobbled together in the first place to ensure the required votes for passage (220-215 in the House without a single Republican vote).  The House had to accept the Senate version in its entirety because of the loss of the Massachusetts seat to the Republicans.  What we have is a document with 8 glaring problems that will be its undoing unless they are addressed. 

  1. Weak individual mandate.  The tax penalty is small relative to the premiums.  The mandate lacks a strong enforcement mechanism: no garnishing of wages, no attaching assets, no jail time.  The only hammer is a lien on over-withholding.  The lesson here is don’t expect refund if you don’t have insurance.  If you plan to forego insurance, make sure you withhold only what you will owe in taxes.   The result is an incentive to game the system.  In other words, don’t buy insurance until you absolutely need coverage and then drop it when you don’t.  This will create adverse selection in insurance pools with only sick people purchasing insurance and premiums will continue their upward march. 
  2. Disruptive employer mandate.   Firms with more than 50 full-time workers (defined as those who work more than 30 hours per week) are required to provide affordable insurance for their employees.  Those that don’t are subject to a $2,000 fine per worker.  The incentive exists to reduce current workers to part-time status, and only hire part-timers in the future.  Fully, one-third of the restaurant and hospitality industry (with unskilled, low wage employees) will make the shift to part-time labor.  Papa John’s, Carl’s Jr, Olive Garden, Red Lobster, Kroger, Hampton Inn, Sheraton, Holiday Inn, and even the College of Allegheny County have already announced their intentions to limit worker hours.  Welcome to the era of the 28-hour workweek. 
  3. Ambitious Medicaid expansion.  The legislation makes Medicaid eligibility uniform across the country at 138% of the federal poverty level (approximately $30,000 for a family of four).  Because establishing eligibility standards has historically been a state’s responsibility, they vary wildly from a low of 17% of FPL in Arkansas to as much as 285% in Minnesota.   The impact of the expansion would have relatively little impact in some states and result in significant increases in state spending in others.  Texas, for example, would see about a billion dollar per year increase in state obligations to the program.  The Supreme Court ruled that the expansion was voluntary, so as many as 17 states may choose to forego expansion.  Instead of covering an additional 18 million nationwide, the expansion will add only about 11 million. 
  4. Complex insurance exchange rules.  States were expected to set up and finance their own insurance exchanges to provide coverage for uninsured residents.  These exchanges require a massive amount of information to verify user identity, certify health plans, and provide a platform for individuals to shop and purchase plans.  The systems must be able to access employment information and IRS files to determine an individual’s eligibility for subsidies.  The complexity is enormous and states do not have to comply.  They can simply sit back and let the federal government do it for them.  Sixteen have already said that they will follow that route.  There is a potential problem if the states don’t act.  The subsidy is clearly available if insurance is purchased from a state-level exchange.  Any mention of subsidies in federal exchanges is glaringly omitted from the legislation.  Expect litigation. 
  5. Medicare spending cuts.  The Congressional Budget Office (CBO) reports that the law will cut Medicare spending by $741 billion over the next ten years.  This “savings” will be used to fund the Medicaid expansion and the state-level exchange subsidies.  CBO scoring of the law indicates that these same dollars will also be used to shore up the Medicare Trust Fund.  But as any first year economics student knows, every dollar has an opportunity cost.  If spent on Medicaid coverage, it can’t be spent to save the Medicare Trust Fund.  In other words there is no “savings.”  The result will be that by the end of the decade, 1 in 7 hospitals will drop Medicare and more physicians will refuse to take new Medicare patients (already 1 in 3 do not). 
  6. Spending continues to rise.  A bill that was promised to “bend the cost curve” falls woefully short.  Currently, health care spending at 17.6% of GDP will approach 20% by the end of the decade.  Premiums will continue to rise, especially for the young who will be pooled with their elders and pay substantially more for their insurance than is actuarially fair.  Many will opt out, choosing not to buy insurance, but rather pay the tax penalty (or not), and insurance premiums for everyone who does buy insurance will be higher. 
  7. Not universal coverage.  The CBO estimates that at least 30 million will not have insurance coverage, about 10% of the non-elderly population.  States opting out of Medicaid, the problems with subsidies in the federal exchanges, and widespread gaming are likely to drive that number up substantially. 
  8. Does not improve access.  Nothing in the legislation addresses the current and future physician shortage.  Basic economics tells us that when you increase demand and do nothing to supply, prices go up or if they don’t, availability lags.  The law has a backup plan for Medicare when this happens.  It’s the Independent Payment Advisory Board (IPAB).  With Medicare price controls as their only tool, seniors can expect at best bottlenecks in their access to care.  At worst, the low hanging fruit is end-of-life care.  (If you want to read more on this topic go to https://blogs.baylor.edu/jimhenderson/2012/10/15/will-obamacare-lead-to-death-panels/). 

ObamaCare is a flawed document.  The Democrats were in such a hurry to pass it that they forgot the fundamental tenant of medical care: First, do no harm.  Well, we’re stuck with it, so what do we do?  The current makeup of body of lawmakers does not bode well for compromise.  All too often with the leadership we have, it’s either “my way or the highway.”  They say that we deserve the leaders we elect.  If that’s true, I’m fearful for the Republic. 

The opinions expressed in this blog post are mine alone, and do not reflect the opinions of Baylor University.   Baylor is not responsible for the accuracy of any of the information provided in this post.

States May Still Have The Last Say In The Matter of Healthcare Reform

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In an interview with ABC’s Diane Sawyer, House Speaker John Boehner seemed a bit confused on what his stance on the GOP’s promise to repeal ObamaCare in the new session.  The transcript of the interview shows his indecision. 

SAWYER: A couple of other questions about the agenda now. You have said next year that you would repeal the health care vote. That’s still your mission?

BOEHNER: Well, I think the election changes that. It’s pretty clear that the president was reelected, ObamaCare — is the law of the land. I think there are parts — of — the healthcare law that — are going to be very difficult to implement. And very expensive.  And as — the time when we’re trying to find a way to create a path — toward a balanced budget — everything has to be on the table.

SAWYER: But you won’t be spending the time next year trying to repeal ObamaCare?

BOEHNER: There certainly may be parts of it that we believe — need to be changed. We may do that. No decisions at this point.

A Boehner spokesperson quickly responded to the comments saying, “While ObamaCare is the law of the land, it is costing us jobs and threatening our health care.  Speaker Boehner and House Republicans remain committed to repealing the law.”

Should we be expecting a drawn out battle over ObamaCare, or should the GOP simply get over it? 

Let’s examine reality.  Regardless of what Congress does, the battle over ObamaCare is far from over.  The next step in the reform process is just beginning, implementation.  The two most important pieces of the new law are the creation of the insurance exchanges and the expansion of Medicaid, both state responsibilities. 

Beginning January 1, 2013, there are 30 states with Republican governors who are in no mood to cow tow to federal pressure to stand in line and play nice.  States are not obligated to either set up their own exchanges or expand Medicaid.  The law made it clear that if states refused to set up exchanges, the federal government would.  At this time these Republican governors do not seem to be in any hurry to spend their states’ tax dollars to set up their own exchanges.  It’s not just Republican governors either.  Only 17 states met the November 16 deadline to declare their intentions to establish their own exchanges; so few that the government has extended the deadline by 4 weeks to give them more time to reconsider. 

The federal government faces a multitude of problems in this situation.  The law does not provide appropriations for the federal government to establish exchanges and appropriations’ bills must originate in the Republican controlled House.  Additionally, there is some question whether the subsidies making insurance affordable for many American families is legal in the federal exchanges.  The law did not provide for subsidies in the section outlining how federal exchanges would work.  The IRS has ruled that subsidies are legal in federal exchanges.  Expect litigation. 

The Supreme Court in its rewriting of the legislation provided states with an option in the case of Medicaid expansion.  Ignore it completely.  Many of the Republican governors have already said that they will not expand Medicaid. 

State-level action is just one roadblock to successful implementation of ObamaCare.   There are also several design flaws in the law that must be corrected for it to have any chance of success.  I’ll discuss the flaws in my next blog entry. 

The opinions expressed in this blog post are mine alone, and do not reflect the opinions of Baylor University.   Baylor is not responsible for the accuracy of any of the information provided in this post.

Elections have Consequences

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Enough time has passed that we can sensibly discuss some of the results of last week’s election.  I’ll comment more fully on the implications of the presidential elections later in the week.  For now I’ll limit my comments to some interesting results of 5 state-level propositions relevant to health care. 

Alabama, Florida, Missouri, Montana, and Wyoming each had ballot initiatives on different aspects of the Affordable Care Act. 

  • Alabama’s Amendment 6 “prohibits any person, employer, or health care provider from being compelled to participate in any health care system.”  By a vote of 60-40 the amendment passed and the individual and employer mandates were defeated.
  • In Florida a constitutional ban on mandates to obtain health insurance was defeated by a margin of 51-49. 
  • Proposition E in Missouri prohibiting the establishment and operation of health insurance exchanges without state-level legislation, petition, or referendum passed by a vote of 62-38.  The ban also extends to gubernatorial executive order. 
  • Legislative referendum 122 passed in Montana by a vote of 67-33, prohibiting the mandatory purchase of health insurance or penalizing anyone who does not. 
  • Wyoming’s Amendment A prohibits any law compelling anyone to participate in any health care system.  The amendment was approved by a vote of 77-23. 

Two additional states have already approved constitutional amendments against mandates (Arizona and Oklahoma).  A similar measure failed in Colorado.  Of course, the supremacy clause of the US Constitution trumps state law, but these state-level initiatives are more than mere folly.  They show how unpopular the legislation is in many parts of the country and spell trouble as we move forward in implementing it.   

The opinions expressed in this blog post are mine alone, and do not reflect the opinions of Baylor University.   Baylor is not responsible for the accuracy of any of the information provided in this post.

The Liverpool Care Pathway

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I admit that I’m the kind of person who pays careful attention to events that occur around me.  Some of my friends think that I’m overly suspicious.  My mother called me a “skeptic.”  Some might even say “conspiracy theorist.”  Well, I’ll admit to the first two, but I’m far from the latter.   OK, you be the judge. 

I’ve been doing some preliminary research on the use of “clinical pathways.”  A decade-long interest in comparative effectiveness research coupled with the federal funding of the Patient Centered Outcomes Research Institute (PCORI) has led me to the conclusion that the medical care delivery system of the future will be dominated by “evidence-based” clinical pathways.   To tell you the truth (at least my version of the truth) all government dominated medical care systems emphasize clinical pathways as a resource allocation tool.  If you don’t allocate resources using some sort of pricing mechanism, you’ve got to use something else.  Enter clinical pathways based on evidence based medicine. 

A clinical pathway is a structured medical intervention plan that translates clinical guidelines into a step-by-step course of treatment intending to standardize care for a specific medical problem.  On the surface clinical pathways make a lot of sense as long as the treatment objectives are aligned with patient interests.  At this point the skeptic in me rears its ugly head and I begin questioning motives. 

Are we more interested in providing quality care or are we simply trying to reduce medical spending?  The focus of this post is not to open a discussion of the role of comparative effectiveness research in this country.  Remember I said that I was an observer and in my recent study I have observed a growing debate over a particular clinical pathway that is in use in the United Kingdom, the Liverpool Care Pathway for the Dying Patient (LCP).  The name alone raises red flags for me. 

Recognized in 2001 as a “best practice” model, the LCP was adopted for nationwide use in 2008 as the recommended end-of-life strategy for the UK’s National Health Service (NHS).  The stated aim of the program is to ensure that dying patients receive the highest standard of care as they near death.  As an alternative we might also note that it’s much cheaper for patients to die within 33 hours (the average for patients submitted to LCP) than to linger for weeks and even months using valuable medical resources that could be spent elsewhere. 

Even with the increased emphasis on using the LCP, hospitals were slow to implement.  A study found that only 16% of terminal cancer patients and 5% of non-cancer patients would receive this care.  Hospitals needed an added incentive to implement the LCP.  There is no better motivator than cash money.  So the NHS established targets for hospitals and provided bonuses for those hospitals that met or exceeded their targets. 

As more and more dying patients are assigned to the LCP, more and more hospitals are receiving bonus payments and the British press is beginning to uncover alleged abuses.  The Daily Mail has latched onto the story like a pit bull, running stories almost daily about the abuses found in the LCP.  But the Mail is notorious for uncovering “abuses.”  My frequent visits to England provide a rich source of anecdotal evidence on the problems with the NHS.  But it’s not just the Mail that has taken up the crusade.  I’ve read articles in the Observer, the Standard, the Telegraph, and the BBC News.  Even the Huffington Post has latched onto the story saying “the UK’s ‘death pathway’ may be a little too deadly.” 

Is this a preview of what ObamaCare has in store for us?  Remember that I am the one who wrote recently called the IPAB our potential “death panel” as applied to Medicare.  When the government dominates a health care system, health care spending becomes another budget item.  As a line on the budget, it becomes a target for cuts when spending exceeds targeted levels.  Budget cutters look for the low-hanging fruit first.  In medical care the low-hanging fruit is end-of-life care.

 I remember the time when all that Liverpool meant to me was the hometown of the Beatles.  If only I could return to those innocent days when all I wanted to do was “hold your hand.”