Author Archives: James Henderson

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.”

Will the Repeal of ObamaCare Kill 22,000 People?

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I’m intrigued by folks who aren’t at all hesitant to express an opinion on just about anything; no matter how uninformed they are on the issue.  Paul Krugman (who I’ve talked about before) is one of those individuals.  Nobel Laureate in economics and syndicated columnist writing in the New York Times, Krugman recently wrote an interesting piece based on junk science entitled “Death by Ideology.”  Arguing that Mitt Romney’s pledge to repeal ObamaCare will result in the deaths of “thousands, and probably tens of thousands, of excess deaths of Americans each year,”  Krugman once again shows that his ideology trumps sound economic analysis. 

Is Krugman right?  Will the repeal of ObamaCare result in needless suffering and death?  How could Romney be so callous?  Where does Krugman get his information?  In 2002 the Institute of Medicine (IOM) published a report on the consequences of being uninsured.  In it they estimated that the uninsured have a 25% higher mortality rate than the insured and the result was 18,000 excess deaths annually.  The Urban Institute updated that report in 2006 and raised that number to 22,000. 

At the time of the original IOM study, there were only two empirical studies on the mortality consequences of being uninsured (Franks et al. in the 1993 Journal of the American Medical Association and Sorlie et al. in the 1994 Archives of Internal Medicine).  The two observational studies used similar methodology and not surprisingly came up with similar results, being uninsured was associated with a 25% higher mortality rate.  Notice I said “associated with.”  Using the methodology of the two reports, it is impossible to make causal inference.  In other words, inferences about the causal relationship between lack of insurance and mortality using the observational approach are dubious.  Even more questionable is the large statistical error associated with the estimates.  Both studies found the 95% confidence interval to range from no increase in mortality to a 50% increase, or between zero excess deaths to 36,000 excess deaths.  Instead of saying there are 18,000 excess deaths from uninsurance, IOM could have easily said going without insurance may have no impact on mortality or it could result in as many as 36,000 excess deaths. 

Richard Kronik writing in Health Services Research in 2009 (“Health insurance coverage and mortality revisited”) looked at the issue again using a much larger data base than either of the previous studies.  Kronik goes through a series of adjustments to the difference in mortality between the insured and the uninsured.  When the data is adjusted by age and sex, the mortality rate for the uninsured is 70%  higher. 

 Without going into the statistical details Kronik adjusted for other differences between the two groups, including race, education, and income.   With every adjustment, the difference in mortality rates narrowed.  When smoking status, BMI, self-reported health status, and physical activity were added, the difference vanished completely.  The 95% confidence interval after taking into consideration differences between the two groups was between minus 5% and plus 12%.  In other words, there is a good chance that the uninsured have a 5% lower mortality rate than the insured. 

These results do not mean that we should not worry about improving access to medical care by expanding insurance coverage.  But let’s stop the nonsense of calling Mitt Romney and Paul Ryan cruel and callous, wanting to kill people by taking away their insurance.  We’ve got too much to do to improve the efficiency of our health care system and expand access to those vulnerable population groups, the chronically ill and the elderly.  For my money, let’s fix Medicare first to make it sustainable for those of us nearing the age of reckoning.  I for one am not interested in a real world application of the carrousel scene in the 1976 movie “Logan’s Run.”  Look it up if you are not familiar with it.

Will ObamaCare lead to Death Panels?

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Before you write off this blog post as the ranting of a madman, understand that when confronted with a controversial issue, I carefully consider all the evidence before opining.  The question is actually addressing the role that the Independent Payment Advisory Board (IPAB) will play in implementing the goals of the Affordable Care Act (ObamaCare, the term that the President himself has embraced). 

To begin with we have to understand exactly the powers of the IPAB.  I’ve written about it on several occasions.  This 15-member appointed board will be formed in 2013.  We have been assured by the President that IPAB will not ration medical care.  If we are to believe this statement (by the way the legislation itself reads that way), we have to understand what is meant by rationing.  There are actually three different ways to ration medical care.  One way is to ration explicitly.   For example, establish a rule that says anyone over 70 years of age is not eligible for hip replacement surgery.  That is what most of us think when we consider the meaning of the term.  A second way to ration is to set spending targets for medical care spending.  For example, we could mandate a target growth rate for medical care spending.  Or a third way to ration is to establish a fee schedule that must be followed when providing medical care to seniors. 

So the question is “Will ObamaCare (through the IPAB) ration care in any of these three ways”?  The answer is “Yes.”  The legislation clearly gives the board the authority to set provider fees with the intention of targeting a growth rate in overall medical care spending.  ObamaCare provides IPAB with the legislative authority to ration care.  Setting the fee for hip replacement surgery so low that no surgeon will provide the procedure will accomplish the same result as an outright ban on procedure.  The difference between the two approaches is that the board can say that it doesn’t ration care, that physicians are the bad guys for not providing the care. 

Will IPAB lead to death panels?  Sarah Palin was excoriated by the media when she voiced her concern to the American public during the reform debate.  We were told that the term “death panel” does not appear in the legislation.  True.  But Sarah Palin was considering the mandatory end-of-life counseling in the original legislation, which by the way, did not make it into the final bill.  She did not specifically mention the IPAB, which was called the “Independent Medicare Advisory Board” in the original bill.  The new name better reflects the new powers, not just over Medicare but over all payers. 

That still is not enough evidence to cause alarm, except of course among skeptics like me.  My concern (not voiced publicly until now), is based on what ObamaCare supporters have been writing about the future of medical care delivery.  The first article was in the British medical journal Lancet in 2009 (Principles for evaluating scarce medical interventions) coauthored by Ezekiel Emanuel, an Obama health policy adviser and considered a candidate for one of the positions on IPAB.  The most controversial aspect of the approach described in this article is the notion of the “complete lives system,” which prioritizes younger people who have not lived complete lives to be first in line for scarce medical resources.  Not enough evidence yet to be too alarmed. 

Next, I came across an article written by M. Gregg Bloche, another health care adviser to President Obama.  “Beyond the ‘R Word’? Medicine’s New Frugality” (New England Journal of Medicine, May 24, 2012) addresses the powers of the IPAB “to nudge providers toward more frugal practice by changing Medicare payment policies – and clinician’s incentives.”  There is still no direct mention of a power to ration because “the R word threatens long-term cost containment.”  Supporters are still dancing around the issue, but not embracing it. 

By summer’s end the popular press gets involved.  Eduardo Porter in the August 21, 2012, New York Times wants to ration health care, but do it more fairly.  In his article Porter targets his angst more directly on “older adults in their last year of life.”  Medicare spends six times as much on seniors who die during the year than those who survive.  He then goes on to say that we should follow the lead of the UK in their explicit use of their board, the National Institute for Health and Clinical Excellence (NICE), to set a value on the worth of each year of a person’s life.  Porter adds “rationing is inevitable in a world with finite resources.”  Should I be alarmed yet? 

Two weeks later, on September 6, Ezekiel Emanuel and colleagues published “A Systemic Approach to Containing Health Care Spending” in the New England Journal of Medicine.  This time his suggestion is to set payment rates for medical care to limit spending growth to global targets.  In other words, all payers and providers would be bound by the same government-determined fee schedule in order to keep overall medical care spending at specified levels; i.e., caps on spending growth set at the average growth in wages.  It’s beginning to look a lot like rationing to me. 

Finally, on September 16, Steven Rattner (counselor to the Secretary of the Treasury in the Obama administration) takes us “Beyond ObamaCare” in his New York Times article, providing literally the last nail in the proverbial coffin when he begins his article with “WE need death panels.”  His suggested target is end-of-life care.  “The big money in Medicare is found in reducing the cost of treating people in the last year of life, which consumes a quarter of the program’s budget.”  Well, at least somebody else connected the dots for me. 

The President may be denying that his health care plan contains the elements of full-blown European-style rationing, but his surrogates are spreading the word in various media outlets, or as Smokey Robinson wrote in his 1966 MoTown hit:

So get ready, so get ready – cause here I come. 

(Get ready cause here I come).

I’m on my way.

Get ready cause here I come.

The Temptations were talking about a love that’s true.  I’m afraid that in our case, we’re talking about something quite different.

The 1st Presidential Debate

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Wednesday night 58 million television viewers watched presidential hopeful Mitt Romney square off against President Barak Obama in the 2012 campaign’s first presidential debate.  By most accounts Romney won the contest hands down.  But in my opinion the real winner was the American voting electorate.  Romney was clear and decisive.  He did not look or sound like the caricature portrayed by the Democrats and the lapdog media.  At the risk of being redundant, I’ll add my insight to the growing commentary. 

Healthcare overall and Medicare specifically was appropriately emphasized in this domestic policy debate.  What I found interesting was Romney’s command over the topic and Obama’s lack of command.  Romney’s thoughts were organized and he showed a command of the facts.  Obama was disjointed and relied on overused sound bites describing his plan and Romney’s approach to Medicare reform. 

Obama actually made the first reference to health care; describing the “$716 billion we were able to save from the Medicare program by no longer overpaying insurance companies by making sure that we weren’t overpaying providers. And using that money, we were actually able to lower prescription drug costs for seniors by an average of $600, and we were also able to make a — make a significant dent in providing them the kind of preventive care that will ultimately save money throughout the system.” 

Romney was quick to reply that Obama had just described a savings of “$1 for every $15 you’ve cut. They’re [seniors] smart enough to know that’s not a good trade.  I want to take that $716 billion you’ve cut and put it back into Medicare. By the way, we can include a prescription program if we need to improve it.  But the idea of cutting $716 billion from Medicare to be able to balance the additional cost of Obamacare is, in my opinion, a mistake.” 

Romney referred to the $716 billion four more times, explaining that it’s not savings at all, if it’s spent to fund provisions in Obamacare.  Wisely, the President never mentioned the number again.  Obama talked about the popular insurance provisions in reform plan: no lifetime limits, dependents up to age 26 remaining on their parents’ insurance plans, elimination of pre-existing conditions exclusions, the 85% minimum for insurance plan spending relative to the premium, and that’s about it. 

Romney accepted these provisions as part of the replacement pledge (of course after the repeal).  These are provisions that are in the Massachusetts plan passed when he was governor of that state, emphasizing the bipartisan nature of that legislation and the strictly partisan process that led up to the passage of Obamacare.  After possibly his best public defense of Romneycare to date, he quickly moved on to a description of the Independent Payment Advisory Board, the 15-member unelected board of experts that will make important decisions on pricing and spending that will affect access to medical care in both the public and private sectors. 

President Obama’s response to IPAB was bringing up the cost-saving success of the Cleveland Clinic and its integrated approach to medical care delivery.   In his mind the success is somehow an example of what IPAB is all about.  “Now, so what this board does is basically identifies best practices and says, let’s use the purchasing power of Medicare and Medicaid to help to institutionalize all these good things that we do.”  Romney was quick to counter with a devastating retort “ In my opinion, the government is not effective in — in bringing down the cost of almost anything.  As a matter of fact, free people and free enterprises trying to find ways to do things better are able to be more effective in bringing down the cost than the government will ever be.  Your example of the Cleveland Clinic is my case in point, along with several others I could describe.  This is the private market. These are small — these are enterprises competing with each other, learning how to do better and better jobs. I used to consult to businesses — excuse me, to hospitals and to health care providers. I was astonished at the creativity and innovation that exists in the American people.” 

Romney concluded by saying that “in order to bring the cost of health care down, we don’t need to have a board of 15 people telling us what kinds of treatments we should have. We instead need to put insurance plans, providers, hospitals, doctors on target such that they have an incentive, as you say, performance pay, for doing an excellent job, for keeping costs down, and that’s happening.  Innermountain Healthcare does it superbly well, Mayo Clinic is doing it superbly well, Cleveland Clinic, others.”  OUCH!

All in all, it was a good night for Romney and a shot of adrenaline for his campaign.  The President will obviously rethink his strategy for the next two debates.  It will be interesting to see how many will view the next debate between Vice President Biden and Congressman Ryan.  This may turn out to be the best reality TV of the season.

Cheerleaders and Analysts

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On Tuesday (September 25, 2012) I picked up my Wall Street Journal and like I always do, turned to the Opinion page.  One of the headlines caught my eye, “The Democrats’ Market-Friendly Health-Care Alternative.”   I thought it curious.  The Democrats have a new approach; something other than the Affordable Care Act?   Before I read the article though, I saw the author, Ezekiel J. Emanuel.  For those not familiar with Dr. Emanuel, let me give you some background.  He’s the brother of the mayor of Chicago and former White House Chief of Staff for President Obama, Rahm Emanuel.  He’s a medical doctor and author of dozens of academic journal articles, including an interesting one that introduced the “complete lives system” to the world (Govind Persad et al., “Principles for allocation of scarce medical interventions,” Lancet, 2009). 

The NFL’s recent woes with its replacement referees had me thinking about all things football; not what happens on the field, but on the sidelines and in the broadcast booth.  After reading Emanuel’s piece, it became clear to me that some people are analysts and some people are cheerleaders.  And it’s not that I disagree with Emanuel (though I do), it’s my disappointment that some people are so quick to shed all vestiges of analytical objectivity to push an agenda. 

Take for example, Colin Cowherd, ESPN analyst and sports analyst.  Cowherd is a pretty opinionated guy and pushes his perspective hard; to the point where everybody else is wrong and he’s right.  He’s not a cheerleader though, he’s an analyst.  He uses fact and logic.  He listens to other perspectives.  He may agree or disagree, but he doesn’t come off like a cheerleader.  He leaves his analyst’s hat on and doesn’t trade it for pompoms to join the pep squad. 

I am convinced that Emanuel is behaving more like a cheerleader than an analyst.  Let me give you a few examples from the article to make my point.  In the first paragraph he claims that the ACA encourages “providers to be more efficient, innovative and focused on keeping patients healthy.”  He references a Medicare program, the Acute Care Episode (ACE) Demonstration that is being piloted in 5 hospitals.  In San Antonio’s Baptist Hospital the gain-sharing incentives helped reduce short term costs by more than $2,000 per case for designated episodes.  In addition to the early success in San Antonio, clinically integrated programs such as Geisinger Health Systems have had similar success.  Right now it will be difficult to expand ACE beyond orthopedic and cardiac care because there are no standards for constructing “episodes.” 

There is no also reason that such an integrated program cannot be created outside the ACA.  In fact, Geisinger and Kaiser-Permanente have been providing care in integrated systems for a long time without the help of the ACA.  On the downside, there are very few systems around the country that have the necessary market share to absorb the risk and invest in the technological infrastructure to successfully take advantage of the benefits of integration.  There is also a danger with too much integration.  Efficiency lowers price, but only in competitive markets.  Extensive integration increases concentration and reduces competition.  The results are either higher prices or more regulation to control prices.  Pilot projects are fine, but are they scalable to the larger system? 

According to Emanuel the alternative is nothing more than “shifting the financial burden to patients, businesses and states.”  This statement is an obvious reference to the Ryan premium support plan for Medicare.  Emanuel, showing no faith in market forces, then states that “there is no evidence that competition among insurance plans would do anything to address the underlying costs of health-care providers.”  But David Cutler, Harvard economist and fellow cheerleader, published a study in August 2012 New England Journal of Medicine and found that the competitive bidding process in the existing Medicare Advantage program resulted in 9 private plans that were cheaper than traditional Medicare.  His work mirrors that of Feldman, Coulam, and Down (American Enterprise Institute, “Competitive bidding can help solve Medicare’s fiscal crisis”) that shows a 9.5% savings.  Even Robert Pear writing in the New York Times (“Despite Democrats’ Warnings, Private Medicare Plans Find Success”) concludes that Medicare’s two privately-run programs, Medicare Advantage and the out-patient prescription drug program, Part D, are both quite popular and relatively successful in controlling spending.   Maybe if we say “private plans shift the financial burden” often enough, people will start to believe it. 

In the third paragraph Emanuel states that the CBO “found that administrative costs of private insurance are higher than such costs in Medicare.”  Well, the CBO (and many other cheerleaders) may have come up with such a finding, but that doesn’t make it so.  The estimated administrative costs of Medicare are between 2.8 and 3.4%; adding Medicare costs that are paid by other government agencies to support Medicare raises the estimate to 5.7 to 6.4%.  Using the same metric, the administrative expense of private insurance is estimated to be between 14 and 22%, but this includes non-administrative costs such as the cost of disease management services provided by the insurance company and premium taxes charged by some states that amount to an estimated 11.4 to 13.2%.  A more accurate accounting of private administrative costs would be between 2.6 and 8.8%.  Using a different metric, administrative costs measured on a per beneficiary basis (rather than per dollar spent) show that private insurance is actually more efficient.  Relative efficiency depends on how you measure it.  Cheerleaders always use the one that is most favorable to their side. 

Further, Emanuel argues that the Ryan approach will result in too much competition and “no single insurer would have sufficient market share to catalyze changes in the way health care is paid for and delivered.”  If the truth were known, the Obama approach will result in too much concentration with large, vertically integrated health care systems dominating the landscape.  The emphasis on accountable care organizations (ACO) has led to a flurry of merger activity with hospitals acquiring physicians’ practices at record levels.  These systems will integrate 5 levels of provision: general practitioners, specialists (and the clinics they both work in), hospitals, rehabilitation centers, and health plans.  We’ll see their geographic influence stretching for hundreds of miles covering tens of thousands of lives.  Emanuel voices concern that the Ryan plan will lead to “return to the managed care days of the 1990s.”  The Obama plan will lead to massive closed-panel HMOs with their limited access to providers and services. 

Finally, Emanuel extols the benefits of the Independent Payment Advisory Board (IPAB) with its powers to set prices, raise taxes, and do just about anything that Congress can do.  The 15-member board is accountable to no one.  Quorums are one-half of the appointed members with no minimum number.  If the Senate only confirms one person, then that person performs the duties of the board.  If no one is confirmed, then the Secretary of HHS is responsible.  Don’t put it past the president to use recess appointments to fill the positions, even if the Senate is in session.  IPAB is not required to hold hearings or accept public comment, and its decisions are not subject to judicial review.  Now that’s something to cheer about. 

I agree with Emanuel “Americans face a clear choice between two competing visions.”  I also disagree with his depiction of those competing visions.  Calling Obama’s plan a market-friendly health-care alternative doesn’t make it market friendly.  Pointing out a few beauty marks and ignoring all the warts is not analysis. 

I expect Baylor’s cheerleaders to rabidly support their team, emphasizing 9 touchdowns scored and 700 yards total offense.   But I doubt if Colin Cowherd will feel the same way.  He’ll likely point out that Baylor’s defense gave up 10 touchdowns and 800 yards total offense, resulting in a 70-63 loss.  But that’s the difference between a cheerleader and an analyst.

Broken Promises

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The Impact of the ACA on Middle-Class Taxes

“And I can make a firm pledge; under my plan no family making less than $250,000 a year will see any form of tax increase.”
    –Barack Obama, Sept. 12, 2008, Dover, New Hampshire

Now to be fair, Barak Obama is not the first president to break a promise, and he’s likely not the last either.  I remember in 1988 when George H.W. Bush pledged “read my lips, no new taxes” and eventually caved to Congressional pressure and broke that promise.  One of the big differences between then and now is the media’s virtually ignored Obama’s broken promise and never let us forget Bush’s. 

For of you who need a reminder of the new taxes on those of us who make less than $250,000, I’ll chronicle a few.  It didn’t take long for the President to break his promise.  On February 4, 2009, a mere 15 days after taking office, he signed legislation raising the federal excise tax on cigarettes by 158%.  By the way, this tax is one of the most regressive taxes we have and impacts the poor disproportionately. 

A year later, President Obama signed the Affordable Care Act, which by most accounts has at least 15-20 new taxes that affect Americans who make less than $250,000.  I’ll try to be brief. 

  • The first tax created by the act was the 10% excise tax on indoor tanning services (effective July 1, 2010). 
  • The individual mandate tax.  Is it a penalty?  Is it a tax?  The only reason it matters is that Justice Roberts said it is a tax, which makes the mandate constitutional.  Otherwise, we’re not having this conversation.  At any rate, by 2016 it will be a 2.5% income tax on anyone that does not purchase a qualified insurance plan. 
  • The employer mandate tax.  A business that employs more than 50 full-time workers must provide a qualified plan for its workers (not their dependents).  Failure to do so can result in a $3,000 penalty per worker, if even one worker receives a subsidy to purchase insurance from a state exchange.  As a result, fewer workers will have jobs and those who do will be paid less.  (This is great news in light of the recent news that median per capita income has fallen to $50,054, its lowest levels since 1995.) 
  • A 2.3% tax on medical device manufacturers.  This tax will make everything from hearing aids, motorized wheel chairs, and hip implants more expensive. 
  • A 5% tax on elective cosmetic medical procedures (whether paid for by insurance or out-of-pocket).  This will work like a simple sales tax. 
  • A health insurance premium tax will be levied on all insurance companies.  This is a tax that will be passed on to all purchasers of insurance in the form of higher premiums. 
  • The law creates a cap of $2,500 on the amount of pre-tax income you can put in your flexible spending account.  The result of this provision is you’ll have to pay your copays and deductible with before-tax dollars. 
  • Those of you with health savings accounts, health reimbursement accounts, and flexible spending accounts may already be aware that as of January 1, 2011, you can no longer use your account to purchase over-the-counter medications without a prescription. 
  • Cadillac tax on high-premium insurance plans.  Any insurance policy with an individual premium over $10,200 or a family premium over $27,500 will be taxes at a 40% marginal rate.  You may not think this provision affects you, but the cap is incremented annually by the CPI plus 1%.  Recently, premiums are increasing much more than that.  It may not be too long before your plan makes you a target for this tax. 

Another tax that affects everyone is the tax you pay every time you fill your car with gasoline.  When President Obama took office in 2009, the price of a gallon of regular gasoline was $1.84.  Since that day, the price of gasoline has risen to $3.86 per gallon, and in many parts of the US it’s approaching $4.  If you drive 12,000 miles annually and your car averages 20 MPG, you’re spending $100 per month more on gasoline than you did when Obama took office. 

At the same time, supporters of this policy are trying to convince us that it’s for our own good.  I’m sure George Harrison was thinking that the “Tax Man” never saw a tax he didn’t like.

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman.

Beatle’s, Revolver, 1966.

Obama’s Medicare Cuts by Region

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There’s been a lot written about the $741 billion in spending cuts in the Medicare program that are used to finance insurance exchange subsidies and Medicaid expansion for younger Americans.  The reality of the cuts provides a powerful argument for the need to reform traditional fee-for-service Medicare to ensure its long-run viability. 

Robert Book and Michael Ramlet explore a different aspect of the cuts by estimating the regional impact of the Medicare spending reductions introduced by the Affordable Care Act (ACA).   Their study, a part of the University of Minnesota’s Carlson School working paper series, uses data from the analysis presented to Congress by the Congressional Budget Office (CBO) on June 24, 2012. 

According to CBO estimates the $741 billion cuts are achieved by reducing payments to hospitals ($260 billion), other providers except physicians ($155 billion), Medicare Advantage ($156 billion), disproportionate share hospital (DSH) payments ($25 billion), and miscellaneous other provisions ($114 billion).  Physicians don’t escape completely.  A 30% reduction in their payments is scheduled to go into effect on January 1, 2013, amounting to almost $250 billion over the next decade.  (To be fair, the physician payment cuts are not part of the ACA.) 

The reductions hit parts of the US where seniors congregate, including California, Texas, and Florida.  Combined losses in those three states represent 20% of the total, or $148 billion.  Pennsylvania, Illinois, Michigan, Ohio, New Jersey, North Carolina, and Massachusetts complete the top ten.  Their losses total $142 billion meaning that these ten states lose $290 billion, or approximately 40% of the total. 

Cuts are good right?  Remember that someone’s spending is someone else’s income.  These spending cuts represent cuts in revenues to hospitals, hospices, home health agencies, skilled nursing facilities, and private insurance companies.  To the extent that these payment changes result in greater efficiency in health care delivery, they are a good thing.  However, Medicare actuaries estimate that 40% of all US hospitals will face insolvency by the end of the decade because of these cuts.  They simply will not be able to adjust their practices quickly enough to avoid the consequences. 

Good luck in finding a provider all you seniors . 

Book and Ramlet’s study is available at http://www.carlsonschool.umn.edu/medical-industry-leadership-institute/publications/documents/BookandRamletpaperonMedicare.pdf.  The CBO report can be found at http://www.cbo.gov/sites/default/files/cbofiles/attachments/43471-hr6079.pdf.

Hypocracy? You be the judge

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If you’ve been following my blog, you know that one of the major critics of the Ryan Medicare plan is Harvard’s David Cutler.  Avik Roy revealed in yesterday’s Forbes online that Cutler along with Jonathan Gruber  (MIT economist) proposed a similar premium support plan for Medicare in 2010.  At the time the two were Obama advisers and recommended similar “privatization” for Medicaid and SCHIP.  It’s time for Obama to admit that the Ryan plan is a legitimate option that should be considered or just pretend that he didn’t read the memo.  You can read Roy’s article at http://www.forbes.com/sites/aroy/2012/09/13/top-obama-advisers-proposed-voucherizing-medicare-way-back-in-2010/.