Dear Friends and Colleagues:
Attached an interesting editorial from yesterdays New York Times focusing on the issue of government subsidies for health insurance companies offering Medicare Advantage plans.
What is the problem?
About a fifth of elderly Americans now belong to private Medicare Advantage plans, which — thanks to government subsidies — often charge less or offer more than traditional Medicare. The government pays private plans 12 percent more, on average, than the same services would cost in the traditional Medicare fee-for-service program. The private plans use some of this money to make themselves more attractive to beneficiaries — by reducing premiums or adding benefits not covered by basic Medicare — and siphon off the rest to add to profits and help cover the plans’ high administrative costs ( and boost their CEO salaries)
What are the results?
The biggest subsidies — averaging 19 percent above cost — go to private fee-for-service plans, which are the fastest-growing part of the Medicare Advantage program. Those companies receive $54 Billion over five years resulting in an average premium increase of $2 to pay for those subsidies.
"If private health plans are supposedly so great at delivering high-quality care while holding down costs, why does the government have to keep subsidizing them so lavishly to participate in the Medicare program?"
What Should Be Done?
* Eliminate the subsidies
* Offer traditional Medicare plans with lower premiums and less adminstrtaive overhead
* Force private companies to compete with traditional Medicare plans
The proponents of market based health care services often forget that more then 50% of each dollar spent spent for health care services is provided by the government NOT INCLUDED the tax subsidies for employer-based health insurance.
Instead of calling for market based health care (which even conservatives do not support) , we should hold our government accountable on how it spends our health care dollars and eliminate corporate welfare programs (i.e subsidies).
Yours
Bernd
====================================================================================
April 21, 2007
Editorial
The Medicare Privatization Scam
If private health plans are supposedly so great at delivering high-quality care while holding down costs, why does the government have to keep subsidizing them so lavishly to participate in the Medicare program?
About a fifth of elderly Americans now belong to private Medicare Advantage plans, which — thanks to government subsidies — often charge less or offer more than traditional Medicare. As Congress struggles to find savings that could offset the costs of other important health programs, it should take a long and hard look at those subsidies.
The authoritative Medicare Payment Advisory Commission estimates that the government pays private plans 12 percent more, on average, than the same services would cost in the traditional Medicare fee-for-service program. The private plans use some of this money to make themselves more attractive to beneficiaries — by reducing premiums or adding benefits not covered by basic Medicare — and siphon off the rest to add to profits and help cover the plans’ high administrative costs.
Although the insurance industry insists that the subsidies are much lower and are warranted by the benefits provided, Thomas Scully, who headed the Medicare program for the Bush administration until 2003, told reporters recently that the subsidies were too large and ought to be reduced by Congress.
The largest private enrollment is in health maintenance organizations, which typically deliver care a bit more cheaply than standard Medicare and should not need their 10 percent subsidies, on average, to compete. The biggest subsidies — averaging 19 percent above cost — go to private fee-for-service plans, which are the fastest-growing part of the Medicare Advantage program. Unlike the H.M.O.’s, which at least manage a patient’s care and bargain hard with doctors and hospitals, these plans ride on the coattails of standard Medicare, typically providing access to the same doctors and paying them at the same rates. Thanks to the big subsidies they get, such plans are often a good deal for beneficiaries, charging less for the same benefits or adding benefits without raising prices.
The main losers are the beneficiaries in the standard Medicare program, whose monthly premiums are roughly $2 higher to help pay for the subsidies, and the taxpayers who pick up part of the tab. The subsidies also erode the long-term solvency of Medicare, which needs to rein in costs, not increase them with handouts to insurance companies.
When the Democrats first won control of Congress, it seemed possible that they might eliminate the subsidies — saving some $54 billion over five years — to finance a $50 billion expansion of a health insurance program for low-income children. But the insurance industry has mounted a furious lobbying campaign to head off any cuts.
Congress ought to eliminate the subsidies completely unless it is willing to subsidize the same benefits — at enormous cost — for the far greater number of people enrolled in standard Medicare. It is time to level the playing field and force private plans to really compete with traditional Medicare.
Sunday, April 22, 2007
Saturday, April 21, 2007
Different Opinions On Medicare
Dear Friends and Colleagues:
Attached you find two articles highlighting two different opinions regarding the function, role and success of the Medicare program.
The first article by Paul Krugman is entitled "The Plot Against Medicare. In it he author correctly states that:
"The 2003 Medicare legislation created Part D, the drug benefit for seniors — but unlike the rest of Medicare, Part D isn’t provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies. As a result, Medicare — originally a system in which the government paid people’s medical bills — is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.....Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion — about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits."
He concludes stating that
" Public opinion is strongly in favor of universal health care, and for good reason: fear of losing health insurance has become a constant anxiety of the middle class. Yet even as we talk about guaranteeing insurance to all, privatization is undermining Medicare — and people who should know better are aiding and abetting the process."
In the second article from the Wall Street Journal "The Competence Man" the author touts the leadership of the Dr. McClellan, the former CMS head, who was implementing the Medicare Part D program.
"His success, in particular with the drug benefit, rests in two broad ideas. The first was to design a program that immediately attracted a critical mass of private players to provide price and choice competition.
Dr. McClellan's other strategy -- and the flip side of the coin -- was to get seniors enrolled quickly. His team designed an Internet program that allowed seniors to punch in their information and examine the best plans. His agency reached out to local organizations -- church groups, community centers -- and enlisted their aid in explaining details."
According to the author private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans. The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year -- unheard of in government. And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.
Even though I respect Dr.McClellan's efforts I consider Medicare Part D as the biggest mistake of the Bush administration.
Medicare is an example of a single-payer system serving the senior segment of our population. Its its not a "decrepit program" and outsourcing its services to private companies provides drug companies with mega-profits on the expense of US tax payers.
Who is going to pay the estimated $ 8 Trillion price tag for the Medicare Part D program? Our children and grand children!
By then Bush and Co. won't be around, our government will have to use its entire federal budget for the payment of a gigantic debt load created by inflated entitlement programs and we may have to ask ourselves: what did we do to stop it?
Yours
Bernd
=======================================================================================
New York Times, April 20, 2007 Op-Ed Columnist
The Plot Against Medicare
By PAUL KRUGMAN
The plot against Social Security failed: President Bush’s attempt to privatize the system crashed and burned when the public realized what he was up to. But the plot against Medicare is faring better: the stealth privatization embedded in the Medicare Modernization Act, which Congress literally passed in the dead of night back in 2003, is proceeding apace.
Worse yet, the forces behind privatization not only continue to have the G.O.P. in their pocket, but they have also been finding useful idiots within the newly powerful Democratic coalition. And it’s not just politicians with an eye on campaign contributions. There’s no nice way to say it: the N.A.A.C.P. and the League of United Latin American Citizens have become patsies for the insurance industry.
To appreciate what’s going on, you need to know what has been happening to Medicare in the last few years.
The 2003 Medicare legislation created Part D, the drug benefit for seniors — but unlike the rest of Medicare, Part D isn’t provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies.
As a result, Medicare — originally a system in which the government paid people’s medical bills — is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.
In the case of the drug benefit, the private drug plans add an extra, costly layer of bureaucracy. Worse yet, they have much less ability to bargain for lower drug prices than government programs like Medicaid and the Veterans Health Administration. Reasonable estimates suggest that if Congress had eliminated the middlemen, it could have created a much better drug plan — one without the notorious “doughnut hole,” the gap in coverage once your annual expenses exceed $2,400 per year — at no higher cost.
Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion — about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits.
With the Democratic victory last fall, you might have expected these things to change. But the political news over the last few days has been grim.
First, the Senate failed to end debate on a bill — in effect, killing it — that would have allowed Medicare to negotiate over drug prices. The bill was too weak to have allowed Medicare to get large discounts. Still, it would at least have established the principle of using government bargaining power to get a better deal. But in spite of overwhelming public support for price negotiation, 42 senators, all Republicans, voted no on allowing the bill to go forward.
If we can’t even establish the principle of negotiation, a true repair of the damage done in 2003 — which would require having Medicare offer seniors the option of getting their drug coverage directly, without involving the insurance companies — seems politically far out of reach.
At the same time, attempts to rein in those Medicare Advantage payments seem to be running aground. Everyone knew that reducing payments would be politically tough. What comes as a bitter surprise is the fact that minority advocacy groups are now part of the problem, with both the N.A.A.C.P. and the League of United Latin American Citizens sending letters to Congressional leaders opposing plans to scale back the subsidy.
What seems to have happened is that both groups have been taken in by insurance industry disinformation, which falsely claims that minorities benefit disproportionately from this subsidy. It’s a claim that has been thoroughly debunked in a study by the Center on Budget and Policy Priorities — but apparently the truth isn’t getting through.
Public opinion is strongly in favor of universal health care, and for good reason: fear of losing health insurance has become a constant anxiety of the middle class. Yet even as we talk about guaranteeing insurance to all, privatization is undermining Medicare — and people who should know better are aiding and abetting the process.
=======================================================================================
Competence Man, April 20th, 2007 Wall Street Journal
Republicans won a big victory this week, shooting down a Democratic plan for more government-run health care. The GOP victors, and free-marketeers, might send their thank-you notes to Dr. Mark McClellan.
Dr. McClellan is the 43-year-old internist who, until recently, held the thankless job of running Medicare. He was handed the further thankless task of designing and implementing Congress's tepid 2003 Medicare reform. And he's the big brain who then wrung every last ounce out of that authority to create a striking new model for Medicare competition that is today not only performing beyond expectations, but is changing the political health-care debate.
High praise, yes, but borne out by this week's GOP defeat of a bill to allow the government to fix Medicare drug prices. That was a top Democratic promise this last election, as the party sought to play off public anger over health-care costs. Liberals saw it as an important step toward their all-government, health-care nirvana. Nancy Pelosi and Harry Reid also felt this was an issue on which they could once again roll Republicans, by flashing the impoverished-senior-citizens card.
Instead, Dr. McClellan's new model came online and wowed the older class. Private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans. The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year -- unheard of in government. And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.
This success has rebutted Democratic criticisms of the drug benefit and shown up those who tar the Bush administration as incompetent. The program's success emboldened Republicans to vote for free-market health care this week. Democrats have seen flagging public support for their program of more government and fewer drugs. While Mr. Reid held his caucus together this week, some are worried about bashing a drug benefit that has an 80% senior approval rating. "Congress only wishes it had an 80% approval rating," chuckles former Democratic Sen. John Breaux, an author of the 2003 reform. "A lot of folks campaigned last year on 'We're going to fix this program,' only to be told by seniors, 'Wait a minute, it ain't broke.'"
None of this was inevitable, but goes back to the competent Dr. McClellan. President Bush came to town pushing Medicare reform, and had a shot at an historic overhaul. The GOP could offer the carrot of a new drug benefit, in return for opening the entire decrepit program to private competition. Instead, Bush and Co. became more interested in claiming credit for an $8 trillion entitlement, and settled for meager reform.
Dr. McClellan nonetheless took this pared-down opportunity and used it to show private competition can work. His success, in particular with the drug benefit, rests in two broad ideas. The first was to design a program that immediately attracted a critical mass of private players to provide price and choice competition. At the time, nobody thought that possible. Mr. Breaux remembers Congress worrying that so few private players would participate that whole areas of the country would lack private drug plans.
Dr. McClellan's solution was a program that gave companies maximum freedom to design plans, bundle drugs and turn a profit. He was a salesman, talking up the opportunities and even traveling to New York to reassure Wall Street. It worked, and by the first days of business most seniors were being courted by anywhere from 11 to 23 plan sponsors. Those numbers have only grown, creating so much competition that sponsors are eliminating deductibles, lowering premiums, offering more drugs. It's also led to smart cost-cutting and efficiencies; an estimated 60% of Medicare prescriptions are now for generics.
Dr. McClellan's other strategy -- and the flip side of the coin -- was to get seniors enrolled quickly. His team designed an Internet program that allowed seniors to punch in their information and examine the best plans. His agency reached out to local organizations -- church groups, community centers -- and enlisted their aid in explaining details. A call center at one point handled 400,000 plan questions a day. Today, some 90% of Medicare recipients are enrolled in the benefit, numbers that have further attracted private players, further spurred competition, further lowered prices. "This is how you come in under budget, increase satisfaction," says the man himself, Dr. McClellan. He adds, humbly, "Nobody should think this is perfect yet, but it's clearly accomplishing some good things."
Good things or no, the reforms are still at risk. There was a time when Democrats believed in Medicare reform, but now most prefer it as a political stick to beat President Bush. There are also liberals -- Henry Waxman, Pete Stark -- who understand this is a crucial moment in the national debate over government-versus-private health care, and will do what they can to sabotage the reforms.
Expect, therefore, more votes over Medicare's right to price-fix. If a broad bill can't pass, liberal politicians will instead target individual, high-cost drugs, arguing that since Medicare foots most of the bill for these products, it should have the right to "negotiate." The real goal will be to get any foot in the price-setting door, making it harder for private companies to craft flexible drug packages, and laying the groundwork for more price-setting down the road.
Expect, too, a push to starve the competitive programs of cash. Critics know how effective this is, having siphoned dollars out of the old Medicare Advantage program in the 1990s, causing private plans to drop out, and giving the program a bad name. Dr. McClellan's reforms, and a Republican Congress, have re-energized the program, but the key to future success is in the budget. Republicans would do well to spend more time touting the competition successes of the reform, rather than the drug giveaway.
In a perfect world, the Bush administration would never have swallowed that entitlement in the first place. In our imperfect world, it at least had the wisdom to hand the reform challenge to a guy who was able to demonstrate the merits of health-care competition, and optimistically, pave the way for broader reform down the road.
Write to kim@wsj.com1.
Attached you find two articles highlighting two different opinions regarding the function, role and success of the Medicare program.
The first article by Paul Krugman is entitled "The Plot Against Medicare. In it he author correctly states that:
"The 2003 Medicare legislation created Part D, the drug benefit for seniors — but unlike the rest of Medicare, Part D isn’t provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies. As a result, Medicare — originally a system in which the government paid people’s medical bills — is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.....Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion — about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits."
He concludes stating that
" Public opinion is strongly in favor of universal health care, and for good reason: fear of losing health insurance has become a constant anxiety of the middle class. Yet even as we talk about guaranteeing insurance to all, privatization is undermining Medicare — and people who should know better are aiding and abetting the process."
In the second article from the Wall Street Journal "The Competence Man" the author touts the leadership of the Dr. McClellan, the former CMS head, who was implementing the Medicare Part D program.
"His success, in particular with the drug benefit, rests in two broad ideas. The first was to design a program that immediately attracted a critical mass of private players to provide price and choice competition.
Dr. McClellan's other strategy -- and the flip side of the coin -- was to get seniors enrolled quickly. His team designed an Internet program that allowed seniors to punch in their information and examine the best plans. His agency reached out to local organizations -- church groups, community centers -- and enlisted their aid in explaining details."
According to the author private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans. The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year -- unheard of in government. And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.
Even though I respect Dr.McClellan's efforts I consider Medicare Part D as the biggest mistake of the Bush administration.
Medicare is an example of a single-payer system serving the senior segment of our population. Its its not a "decrepit program" and outsourcing its services to private companies provides drug companies with mega-profits on the expense of US tax payers.
Who is going to pay the estimated $ 8 Trillion price tag for the Medicare Part D program? Our children and grand children!
By then Bush and Co. won't be around, our government will have to use its entire federal budget for the payment of a gigantic debt load created by inflated entitlement programs and we may have to ask ourselves: what did we do to stop it?
Yours
Bernd
=======================================================================================
New York Times, April 20, 2007 Op-Ed Columnist
The Plot Against Medicare
By PAUL KRUGMAN
The plot against Social Security failed: President Bush’s attempt to privatize the system crashed and burned when the public realized what he was up to. But the plot against Medicare is faring better: the stealth privatization embedded in the Medicare Modernization Act, which Congress literally passed in the dead of night back in 2003, is proceeding apace.
Worse yet, the forces behind privatization not only continue to have the G.O.P. in their pocket, but they have also been finding useful idiots within the newly powerful Democratic coalition. And it’s not just politicians with an eye on campaign contributions. There’s no nice way to say it: the N.A.A.C.P. and the League of United Latin American Citizens have become patsies for the insurance industry.
To appreciate what’s going on, you need to know what has been happening to Medicare in the last few years.
The 2003 Medicare legislation created Part D, the drug benefit for seniors — but unlike the rest of Medicare, Part D isn’t provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies.
As a result, Medicare — originally a system in which the government paid people’s medical bills — is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.
In the case of the drug benefit, the private drug plans add an extra, costly layer of bureaucracy. Worse yet, they have much less ability to bargain for lower drug prices than government programs like Medicaid and the Veterans Health Administration. Reasonable estimates suggest that if Congress had eliminated the middlemen, it could have created a much better drug plan — one without the notorious “doughnut hole,” the gap in coverage once your annual expenses exceed $2,400 per year — at no higher cost.
Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion — about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits.
With the Democratic victory last fall, you might have expected these things to change. But the political news over the last few days has been grim.
First, the Senate failed to end debate on a bill — in effect, killing it — that would have allowed Medicare to negotiate over drug prices. The bill was too weak to have allowed Medicare to get large discounts. Still, it would at least have established the principle of using government bargaining power to get a better deal. But in spite of overwhelming public support for price negotiation, 42 senators, all Republicans, voted no on allowing the bill to go forward.
If we can’t even establish the principle of negotiation, a true repair of the damage done in 2003 — which would require having Medicare offer seniors the option of getting their drug coverage directly, without involving the insurance companies — seems politically far out of reach.
At the same time, attempts to rein in those Medicare Advantage payments seem to be running aground. Everyone knew that reducing payments would be politically tough. What comes as a bitter surprise is the fact that minority advocacy groups are now part of the problem, with both the N.A.A.C.P. and the League of United Latin American Citizens sending letters to Congressional leaders opposing plans to scale back the subsidy.
What seems to have happened is that both groups have been taken in by insurance industry disinformation, which falsely claims that minorities benefit disproportionately from this subsidy. It’s a claim that has been thoroughly debunked in a study by the Center on Budget and Policy Priorities — but apparently the truth isn’t getting through.
Public opinion is strongly in favor of universal health care, and for good reason: fear of losing health insurance has become a constant anxiety of the middle class. Yet even as we talk about guaranteeing insurance to all, privatization is undermining Medicare — and people who should know better are aiding and abetting the process.
=======================================================================================
Competence Man, April 20th, 2007 Wall Street Journal
Republicans won a big victory this week, shooting down a Democratic plan for more government-run health care. The GOP victors, and free-marketeers, might send their thank-you notes to Dr. Mark McClellan.
Dr. McClellan is the 43-year-old internist who, until recently, held the thankless job of running Medicare. He was handed the further thankless task of designing and implementing Congress's tepid 2003 Medicare reform. And he's the big brain who then wrung every last ounce out of that authority to create a striking new model for Medicare competition that is today not only performing beyond expectations, but is changing the political health-care debate.
High praise, yes, but borne out by this week's GOP defeat of a bill to allow the government to fix Medicare drug prices. That was a top Democratic promise this last election, as the party sought to play off public anger over health-care costs. Liberals saw it as an important step toward their all-government, health-care nirvana. Nancy Pelosi and Harry Reid also felt this was an issue on which they could once again roll Republicans, by flashing the impoverished-senior-citizens card.
Instead, Dr. McClellan's new model came online and wowed the older class. Private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans. The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year -- unheard of in government. And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.
This success has rebutted Democratic criticisms of the drug benefit and shown up those who tar the Bush administration as incompetent. The program's success emboldened Republicans to vote for free-market health care this week. Democrats have seen flagging public support for their program of more government and fewer drugs. While Mr. Reid held his caucus together this week, some are worried about bashing a drug benefit that has an 80% senior approval rating. "Congress only wishes it had an 80% approval rating," chuckles former Democratic Sen. John Breaux, an author of the 2003 reform. "A lot of folks campaigned last year on 'We're going to fix this program,' only to be told by seniors, 'Wait a minute, it ain't broke.'"
None of this was inevitable, but goes back to the competent Dr. McClellan. President Bush came to town pushing Medicare reform, and had a shot at an historic overhaul. The GOP could offer the carrot of a new drug benefit, in return for opening the entire decrepit program to private competition. Instead, Bush and Co. became more interested in claiming credit for an $8 trillion entitlement, and settled for meager reform.
Dr. McClellan nonetheless took this pared-down opportunity and used it to show private competition can work. His success, in particular with the drug benefit, rests in two broad ideas. The first was to design a program that immediately attracted a critical mass of private players to provide price and choice competition. At the time, nobody thought that possible. Mr. Breaux remembers Congress worrying that so few private players would participate that whole areas of the country would lack private drug plans.
Dr. McClellan's solution was a program that gave companies maximum freedom to design plans, bundle drugs and turn a profit. He was a salesman, talking up the opportunities and even traveling to New York to reassure Wall Street. It worked, and by the first days of business most seniors were being courted by anywhere from 11 to 23 plan sponsors. Those numbers have only grown, creating so much competition that sponsors are eliminating deductibles, lowering premiums, offering more drugs. It's also led to smart cost-cutting and efficiencies; an estimated 60% of Medicare prescriptions are now for generics.
Dr. McClellan's other strategy -- and the flip side of the coin -- was to get seniors enrolled quickly. His team designed an Internet program that allowed seniors to punch in their information and examine the best plans. His agency reached out to local organizations -- church groups, community centers -- and enlisted their aid in explaining details. A call center at one point handled 400,000 plan questions a day. Today, some 90% of Medicare recipients are enrolled in the benefit, numbers that have further attracted private players, further spurred competition, further lowered prices. "This is how you come in under budget, increase satisfaction," says the man himself, Dr. McClellan. He adds, humbly, "Nobody should think this is perfect yet, but it's clearly accomplishing some good things."
Good things or no, the reforms are still at risk. There was a time when Democrats believed in Medicare reform, but now most prefer it as a political stick to beat President Bush. There are also liberals -- Henry Waxman, Pete Stark -- who understand this is a crucial moment in the national debate over government-versus-private health care, and will do what they can to sabotage the reforms.
Expect, therefore, more votes over Medicare's right to price-fix. If a broad bill can't pass, liberal politicians will instead target individual, high-cost drugs, arguing that since Medicare foots most of the bill for these products, it should have the right to "negotiate." The real goal will be to get any foot in the price-setting door, making it harder for private companies to craft flexible drug packages, and laying the groundwork for more price-setting down the road.
Expect, too, a push to starve the competitive programs of cash. Critics know how effective this is, having siphoned dollars out of the old Medicare Advantage program in the 1990s, causing private plans to drop out, and giving the program a bad name. Dr. McClellan's reforms, and a Republican Congress, have re-energized the program, but the key to future success is in the budget. Republicans would do well to spend more time touting the competition successes of the reform, rather than the drug giveaway.
In a perfect world, the Bush administration would never have swallowed that entitlement in the first place. In our imperfect world, it at least had the wisdom to hand the reform challenge to a guy who was able to demonstrate the merits of health-care competition, and optimistically, pave the way for broader reform down the road.
Write to kim@wsj.com1.
Sunday, April 15, 2007
Florida Health Information Network
Dear Friends and Colleagues:
Just returned from Israel where I gave a presentation at an international conference in Jerusalem (Israel Medicine Association-World Fellowship Conference) about the implementation of electronic health records in medical practice. The paper was well received and doctors present were especially interested in the SFHII (South Florida health Information Initiative) project. As a result I was invited to give the same presentation in Germany in November.
Reviewing the stack of Miami Herald editions I found an interesting article (April 13, 2007) highlighting the issue of a statewide health information network.
Of course, financing and privacy issues remain major obstacles that need to be addressed
Organized medicine should head the struggle for the widespread adoption of electronic health records and the connectivity of such systems for the benefit of our patients, to improve the efficacy and safety of medical care.
Yours
Bernd
;-)
Posted on Fri, Apr. 13, 2007
Lawmakers consider statewide medical database
BY MONICA HATCHER
The healthcare industry is usually among the first to adopt cutting-edge technology to improve the practice of medicine. But when it comes to keeping and sharing patient information, it's often accused of being stuck in the age when leeches were considered state of the art.
More than 80 percent of doctors still rely on handwritten records and manila folders to organize and track patient histories, according to National Center for Health Statistics.
Florida lawmakers are now considering several bills that would create a healthcare information network, where physicians could access a statewide Internet database of medical records. Despite concerns over expense and privacy, advocates -- including the Florida Medical Association -- say electronic records promise greater patient safety, more efficiency and reduced healthcare costs for consumers.
''Banking is moving forward, business is moving forward, government is moving into the information age, but the medical care is staying stagnant,'' said Rep. Denise Grimsley, R Lake Placid, who is co-sponsoring HB 1121, which will likely come up for a final vote in the full house next week.
Similar Senate measures are pending scheduling. Grimsley's bill builds on a two-year initiative to create regional online medical record databases around the state, including one in Miami-Dade County.
PILOT PROGRAM
The South Florida Health Information Initiative launched a pilot system in October linking Mercy Hospital with nine clinics affiliated with the Health Choice Network. Through a Web-based portal, physicians can access and update an individual's health information at ''the point of care,'' or when they are face to face with a patient.
Several hospitals in South Florida already use electronic record systems internally, but other doctors and hospitals can't get to them.
Carladenise Edwards, executive director for SFHII, said her program is designed to eventually become the main regional gateway that allows local systems to talk to each other.
''Our ultimate goal is to improve the quality of healthcare by maximizing the use of technology,'' Edwards said.
COST THEORIES
Advocates believe the lack of access to information is one reason for duplicate and unnecessary treatments that drive up costs. Mailing or faxing paper records wastes time and opens the door to errors because of illegible handwriting.
In addition, an electronic system would take the guesswork out of treating patients who end up incoherent in an emergency room.
The Helen Bentley Health Center in Coconut Grove is one participant in the pilot program. Medical director Anthony Stanley said he's glad he no longer needs to call nurses and technicians in his office for help deciphering patient records penned by other doctors.
''This is going to expedite better patient care, minimize patient care,'' Stanley said.
Not all in the medical field are on board, however.
Edwards said recruiting participants to the pilot program is an ongoing struggle. Many are reluctant to adopt the technology largely because of the cost of buying software and hardware, she said. Others have cited concerns for patient privacy.
``It's a very political process. Some of them are anxious to be involved. Others are sitting back and waiting for it to be mandated.''
In the last two years, the Agency for Health Care Administration has given $3.5 million in grants to regional health organizations for network development and training. Grimsley's bill would provide for about $25 million to build the state network over the next three years.
PAST LEGISLATION
Financial restraints led to the rejection of similar measures last year. Debate over whether it was the government's role and not the private sector's to build the statewide system also stymied legislation.
The bills have moved farther and swifter this session, but in a tight economic environment, getting funding could again prove a significant hurdle.
''Electronic records -- electronic anything, is very expensive,'' said Linda Renn, a lobbyist with the Florida Health Information Management Association. ``I wouldn't say it's pie in the sky, but [bill supporters] are going to have to explain why this is important.''
Just returned from Israel where I gave a presentation at an international conference in Jerusalem (Israel Medicine Association-World Fellowship Conference) about the implementation of electronic health records in medical practice. The paper was well received and doctors present were especially interested in the SFHII (South Florida health Information Initiative) project. As a result I was invited to give the same presentation in Germany in November.
Reviewing the stack of Miami Herald editions I found an interesting article (April 13, 2007) highlighting the issue of a statewide health information network.
Of course, financing and privacy issues remain major obstacles that need to be addressed
Organized medicine should head the struggle for the widespread adoption of electronic health records and the connectivity of such systems for the benefit of our patients, to improve the efficacy and safety of medical care.
Yours
Bernd
;-)
Posted on Fri, Apr. 13, 2007
Lawmakers consider statewide medical database
BY MONICA HATCHER
The healthcare industry is usually among the first to adopt cutting-edge technology to improve the practice of medicine. But when it comes to keeping and sharing patient information, it's often accused of being stuck in the age when leeches were considered state of the art.
More than 80 percent of doctors still rely on handwritten records and manila folders to organize and track patient histories, according to National Center for Health Statistics.
Florida lawmakers are now considering several bills that would create a healthcare information network, where physicians could access a statewide Internet database of medical records. Despite concerns over expense and privacy, advocates -- including the Florida Medical Association -- say electronic records promise greater patient safety, more efficiency and reduced healthcare costs for consumers.
''Banking is moving forward, business is moving forward, government is moving into the information age, but the medical care is staying stagnant,'' said Rep. Denise Grimsley, R Lake Placid, who is co-sponsoring HB 1121, which will likely come up for a final vote in the full house next week.
Similar Senate measures are pending scheduling. Grimsley's bill builds on a two-year initiative to create regional online medical record databases around the state, including one in Miami-Dade County.
PILOT PROGRAM
The South Florida Health Information Initiative launched a pilot system in October linking Mercy Hospital with nine clinics affiliated with the Health Choice Network. Through a Web-based portal, physicians can access and update an individual's health information at ''the point of care,'' or when they are face to face with a patient.
Several hospitals in South Florida already use electronic record systems internally, but other doctors and hospitals can't get to them.
Carladenise Edwards, executive director for SFHII, said her program is designed to eventually become the main regional gateway that allows local systems to talk to each other.
''Our ultimate goal is to improve the quality of healthcare by maximizing the use of technology,'' Edwards said.
COST THEORIES
Advocates believe the lack of access to information is one reason for duplicate and unnecessary treatments that drive up costs. Mailing or faxing paper records wastes time and opens the door to errors because of illegible handwriting.
In addition, an electronic system would take the guesswork out of treating patients who end up incoherent in an emergency room.
The Helen Bentley Health Center in Coconut Grove is one participant in the pilot program. Medical director Anthony Stanley said he's glad he no longer needs to call nurses and technicians in his office for help deciphering patient records penned by other doctors.
''This is going to expedite better patient care, minimize patient care,'' Stanley said.
Not all in the medical field are on board, however.
Edwards said recruiting participants to the pilot program is an ongoing struggle. Many are reluctant to adopt the technology largely because of the cost of buying software and hardware, she said. Others have cited concerns for patient privacy.
``It's a very political process. Some of them are anxious to be involved. Others are sitting back and waiting for it to be mandated.''
In the last two years, the Agency for Health Care Administration has given $3.5 million in grants to regional health organizations for network development and training. Grimsley's bill would provide for about $25 million to build the state network over the next three years.
PAST LEGISLATION
Financial restraints led to the rejection of similar measures last year. Debate over whether it was the government's role and not the private sector's to build the statewide system also stymied legislation.
The bills have moved farther and swifter this session, but in a tight economic environment, getting funding could again prove a significant hurdle.
''Electronic records -- electronic anything, is very expensive,'' said Linda Renn, a lobbyist with the Florida Health Information Management Association. ``I wouldn't say it's pie in the sky, but [bill supporters] are going to have to explain why this is important.''
Sunday, April 08, 2007
Health Care Reform Now
Dear Friends and Colleagues:
I hope that you have spent a relaxing Eastern and Passover Holiday.
Attached you find an interesting article from the Wall Street Journal entitled “Perverse Incentives in Health Care.”
The author claims that in health care delivery mediocrity is the rule and excellence, where it exists, is distributed randomly. There is no systematic reward for excellence and no penalty for mediocrity. As a result, excellence tends to be the result of the energy and enthusiasm of a few individuals, who usually receive no financial reward for their efforts.
Due to the fixed price-system (i.e. third-party payors) high-quality, low-cost care is not financially rewarding. Hospitals and doctors can make more money providing inefficient, mediocre care(i.,e, volume based care)
The author correctly states that in health care, contracts and prices are imposed by large impersonal bureaucracies. The individual physician has virtually no opportunity to offer a different bundle of services for a different price. As a result, very little entrepreneurship is possible.
Bottom line: When doctors and hospitals do not compete on the basis of price, they do not compete at all.
Where third-party payment is the norm, markets tend to be bureaucratic and stifling. But in those health-care sectors where third-party payment is rare or nonexistent, the market is vibrant, entrepreneurial and competitive.
I agree with the authors observation that many believe (including our AMA) that health savings accounts (HSAs) will radically reform the health-care system. Yet this is also a reform that focuses on demand, not supply. Even with an HSA plan in hand as you approach the doctor's office, you should know that your insurer has already spelled out what services will be paid for, which ones will not and how much will be paid. HSAs, therefore, will not free doctors to take advantage of telephone, email, computerized records or any other truly innovative service. Like school vouchers, HSAs create new freedom on the buyer side without loosening the shackles on those who produce. The reform is commendable. But real innovation must come from the supply side of the market.
Why are our patients flogging to in-store clinics, traveling to Thailand for surgery or are buying prescriptions from Canada? Because they seek the best price for the care they need. Our health care system is not market based, but controlled by bureaucrats and legislators
Meanwhile, organized medicine is still battling every year to avoid further Medicare cuts instead focusing on comprehensive health care reform.
Our health care system is on life-support and we are still afraid to pull the plug. If we don’t do it someone will do it for us.
Lets jump-start the market-oriented process, promote entrepreneurship, instead of stifling it.
Change has to happen NOW!!!
============================================================================
Perverse Incentives in Health Care
By JOHN C. GOODMAN
Wall Street Journal April 5, 2007; Page A13
Our public-school system and our health-care system may seem as different as night and day. Yet both systems share something in common: Mediocrity is the rule and excellence, where it exists, is distributed randomly.
In both cases the reason is the same. There is no systematic reward for excellence and no penalty for mediocrity. As a result, excellence tends to be the result of the energy and enthusiasm of a few individuals, who usually receive no financial reward for their efforts.
Research by John Wennberg and his colleagues at Dartmouth Medical School suggest that if everyone in America went to the Mayo Clinic, our annual health-care bill would be 25% lower (more than $500 billion!), and the average quality of care would improve. If everyone got care at Intermountain Healthcare in Salt Lake City, our health-care costs would be lowered by one-third.
Of course, not everyone can get treatment at Mayo or Intermountain. But why are these examples of efficient, high-quality care not being replicated all across the country? The answer is that high-quality, low-cost care is not financially rewarding. Indeed, the opposite is true. Hospitals and doctors can make more money providing inefficient, mediocre care.
In a normal market, entrepreneurs in search of profit would solve this problem by repackaging and repricing their services in order to make customer-pleasing adjustments. Yet in health care, contracts and prices are imposed by large impersonal bureaucracies. The individual physician has virtually no opportunity to offer a different bundle of services for a different price. As a result, very little entrepreneurship is possible.
Sometime in the early 20th century, lawyers, accountants and most other professionals discovered that the telephone was a useful instrument for communicating with clients. Yet even today, consultations with doctors by telephone are quite rare. Sometime in the late 20th century most other professionals discovered email. Yet only 21% of patients exchange email with their physicians; of these, slightly more than 2% do so on a frequent basis.
One would be hard-pressed to find a lawyer in the U.S. today who does not keep client records electronically. Ditto for accountants, architects, engineers and virtually every other profession. Yet although the computer is ubiquitous and studies show that electronic medical record systems have the capacity to improve quality and greatly reduce medical errors, no more than one in five physicians or one in four hospitals have such systems.
Why has the practice of medicine (as opposed to the science of medicine) changed so little in the modern era? The reason is because of the way we pay for medical care, particularly the way we pay doctors. At last count, there were about 7,500 specific tasks Medicare pays for. Telephone consultations are not among them. Nor are email consultations or electronic record keeping. What is true of Medicare is also true of Blue Cross and most employer plans.
Things are made worse by the fact that patients do not usually pay for health care with money; they typically pay with their time instead. As in Canada and most other developed countries, health care in the U.S. is mainly rationed by waiting, not by price.
When the doctor's time is rationed by waiting, the primary care physician's practice is usually fully booked, unless the practice is new or located in a rural area. As a result, there is very little incentive to compete for patients the way other professionals compete for clients. Because time -- not money -- is the currency we use to pay for care, the physician does not benefit very much from patient-pleasing improvements and is not harmed very much by an increase in patient irritations. Bottom line: When doctors and hospitals do not compete on the basis of price, they do not compete at all.
Where third-party payment is the norm, markets tend to be bureaucratic and stifling. But in those health-care sectors where third-party payment is rare or nonexistent, the market is vibrant, entrepreneurial and competitive.
Take cosmetic and Lasik surgery, for example. In both markets, patients pay with their own money. They also have no trouble finding what is virtually impossible to find for other types of surgery -- a package price covering all aspects of the procedure. People can compare prices, and in some cases quality. Providers are competing on price and quality and competition pays off. Over the past decade and a half, the number of cosmetic procedures grew sixfold along with numerous technological innovations of the type that are blamed for rising costs everywhere else in health care. Yet despite tremendous growth and technological change, the real price of cosmetic surgery declined. Over the past decade the real price of Lasik surgery fell by 30%.
The market for prescription drugs is another area where a great many people are paying out of pocket. In response, Rx.com was the first online outlet that began competing based on price and quality (they make fewer mistakes than local pharmacies). Wal-Mart's new policy of offering a month's supply of generic drugs is yet another example. Can anybody imagine Wal-Mart offering the same deal to Blue Cross?
Perhaps the most spectacular instance of a health-care product developing outside the third-party payment system is the walk-in clinic. These can be found in shopping malls and drug stores in the upper Midwest and they are spreading like wildfire around the country. They post prices. There is very little waiting. They maintain records electronically. The quality of service is comparable to traditional primary care at half the cost.
I know what you're probably thinking. Markets may work for certain specialized services; but can they work for run-of-the-mill hospital surgery? Medical tourism is proving that the answer is yes. If you're willing to leave the country you too can have access to efficient, high-quality health care. In India, Thailand and elsewhere around the world, facilities are offering U.S. citizens virtually every kind of procedure for package prices, covering all the costs of treatment, and sometimes airfare and lodging as well. These prices are often one-fifth to one-third the cost in the U.S. and care is often delivered in high-quality facilities that have electronic medical records and meet American accreditation standards.
One part of our health-care system (the part where third parties are absent) is teeming and bristling with entrepreneurship and innovation. In the other part (where third parties pay the bills), entrepreneurship has been all but extinguished. How can we make the latter more like the former?
Public and private efforts to reform the health-care system have been actively underway for the past two decades. The results have been disappointing, to say the least, and they all have one thing in common: They focus on the demand side of the medical marketplace.
Managed care, practice guidelines, pay-for-performance -- each of these short-lived fads involves buyers of care telling the providers how to practice medicine. Does no one notice how strange this is? In normal markets, buyers do not instruct sellers on how to efficiently produce their products. Even the HMO movement is a demand-side reform in this context. The HMO doctor is just as trapped as the fee-for-service physician and just as unable to rebundle and reprice his services in innovative ways.
Some believe that health savings accounts (HSAs) will radically reform the health-care system. Yet this is also a reform that focuses on demand, not supply. Even with an HSA plan in hand as you approach the doctor's office, you should know that your insurer has already spelled out what services will be paid for, which ones will not and how much will be paid. HSAs, therefore, will not free doctors to take advantage of telephone, email, computerized records or any other truly innovative service. Like school vouchers, HSAs create new freedom on the buyer side without loosening the shackles on those who produce. The reform is commendable. But real innovation must come from the supply side of the market.
One would think that health insurers and employers would find it in their self interest to break the mold. To the extent that entrepreneurs raise quality and lower price, the insurance product itself should become more attractive to potential customers. The trouble is that the entire third-party payment system is completely dominated by government (principally through Medicare and Medicaid). Private insurers tend to pay the way the government pays and providers who break Medicare rules in order to better serve the patient risk being barred from the entire Medicare program.
A possible way out of this morass is to start with government. Under the current system, Medicare and Medicaid stifle entrepreneurial activity and financially punish efforts to lower costs or improve quality. Why can't these agencies reward improvements instead? Suppose an entrepreneur offered to replicate the Mayo Clinic in other parts of the country -- potentially saving Medicare 25% of costs and improving quality of care along the way. Medicare should be willing to pay, say, 12.5% more than its standard rates in order to achieve twice that amount in lower total costs. That would leave the entrepreneur with a 12.5% profit -- an amount that one would hope would encourage other entrepreneurs to enter the market with even better ideas.
Once government agencies jump-start the entrepreneurial process in this way, private insurers are likely to follow suit. In this way, government could promote entrepreneurship, instead of stifling it.
Mr. Goodman is president of the National Center for Policy Analysis.
I hope that you have spent a relaxing Eastern and Passover Holiday.
Attached you find an interesting article from the Wall Street Journal entitled “Perverse Incentives in Health Care.”
The author claims that in health care delivery mediocrity is the rule and excellence, where it exists, is distributed randomly. There is no systematic reward for excellence and no penalty for mediocrity. As a result, excellence tends to be the result of the energy and enthusiasm of a few individuals, who usually receive no financial reward for their efforts.
Due to the fixed price-system (i.e. third-party payors) high-quality, low-cost care is not financially rewarding. Hospitals and doctors can make more money providing inefficient, mediocre care(i.,e, volume based care)
The author correctly states that in health care, contracts and prices are imposed by large impersonal bureaucracies. The individual physician has virtually no opportunity to offer a different bundle of services for a different price. As a result, very little entrepreneurship is possible.
Bottom line: When doctors and hospitals do not compete on the basis of price, they do not compete at all.
Where third-party payment is the norm, markets tend to be bureaucratic and stifling. But in those health-care sectors where third-party payment is rare or nonexistent, the market is vibrant, entrepreneurial and competitive.
I agree with the authors observation that many believe (including our AMA) that health savings accounts (HSAs) will radically reform the health-care system. Yet this is also a reform that focuses on demand, not supply. Even with an HSA plan in hand as you approach the doctor's office, you should know that your insurer has already spelled out what services will be paid for, which ones will not and how much will be paid. HSAs, therefore, will not free doctors to take advantage of telephone, email, computerized records or any other truly innovative service. Like school vouchers, HSAs create new freedom on the buyer side without loosening the shackles on those who produce. The reform is commendable. But real innovation must come from the supply side of the market.
Why are our patients flogging to in-store clinics, traveling to Thailand for surgery or are buying prescriptions from Canada? Because they seek the best price for the care they need. Our health care system is not market based, but controlled by bureaucrats and legislators
Meanwhile, organized medicine is still battling every year to avoid further Medicare cuts instead focusing on comprehensive health care reform.
Our health care system is on life-support and we are still afraid to pull the plug. If we don’t do it someone will do it for us.
Lets jump-start the market-oriented process, promote entrepreneurship, instead of stifling it.
Change has to happen NOW!!!
============================================================================
Perverse Incentives in Health Care
By JOHN C. GOODMAN
Wall Street Journal April 5, 2007; Page A13
Our public-school system and our health-care system may seem as different as night and day. Yet both systems share something in common: Mediocrity is the rule and excellence, where it exists, is distributed randomly.
In both cases the reason is the same. There is no systematic reward for excellence and no penalty for mediocrity. As a result, excellence tends to be the result of the energy and enthusiasm of a few individuals, who usually receive no financial reward for their efforts.
Research by John Wennberg and his colleagues at Dartmouth Medical School suggest that if everyone in America went to the Mayo Clinic, our annual health-care bill would be 25% lower (more than $500 billion!), and the average quality of care would improve. If everyone got care at Intermountain Healthcare in Salt Lake City, our health-care costs would be lowered by one-third.
Of course, not everyone can get treatment at Mayo or Intermountain. But why are these examples of efficient, high-quality care not being replicated all across the country? The answer is that high-quality, low-cost care is not financially rewarding. Indeed, the opposite is true. Hospitals and doctors can make more money providing inefficient, mediocre care.
In a normal market, entrepreneurs in search of profit would solve this problem by repackaging and repricing their services in order to make customer-pleasing adjustments. Yet in health care, contracts and prices are imposed by large impersonal bureaucracies. The individual physician has virtually no opportunity to offer a different bundle of services for a different price. As a result, very little entrepreneurship is possible.
Sometime in the early 20th century, lawyers, accountants and most other professionals discovered that the telephone was a useful instrument for communicating with clients. Yet even today, consultations with doctors by telephone are quite rare. Sometime in the late 20th century most other professionals discovered email. Yet only 21% of patients exchange email with their physicians; of these, slightly more than 2% do so on a frequent basis.
One would be hard-pressed to find a lawyer in the U.S. today who does not keep client records electronically. Ditto for accountants, architects, engineers and virtually every other profession. Yet although the computer is ubiquitous and studies show that electronic medical record systems have the capacity to improve quality and greatly reduce medical errors, no more than one in five physicians or one in four hospitals have such systems.
Why has the practice of medicine (as opposed to the science of medicine) changed so little in the modern era? The reason is because of the way we pay for medical care, particularly the way we pay doctors. At last count, there were about 7,500 specific tasks Medicare pays for. Telephone consultations are not among them. Nor are email consultations or electronic record keeping. What is true of Medicare is also true of Blue Cross and most employer plans.
Things are made worse by the fact that patients do not usually pay for health care with money; they typically pay with their time instead. As in Canada and most other developed countries, health care in the U.S. is mainly rationed by waiting, not by price.
When the doctor's time is rationed by waiting, the primary care physician's practice is usually fully booked, unless the practice is new or located in a rural area. As a result, there is very little incentive to compete for patients the way other professionals compete for clients. Because time -- not money -- is the currency we use to pay for care, the physician does not benefit very much from patient-pleasing improvements and is not harmed very much by an increase in patient irritations. Bottom line: When doctors and hospitals do not compete on the basis of price, they do not compete at all.
Where third-party payment is the norm, markets tend to be bureaucratic and stifling. But in those health-care sectors where third-party payment is rare or nonexistent, the market is vibrant, entrepreneurial and competitive.
Take cosmetic and Lasik surgery, for example. In both markets, patients pay with their own money. They also have no trouble finding what is virtually impossible to find for other types of surgery -- a package price covering all aspects of the procedure. People can compare prices, and in some cases quality. Providers are competing on price and quality and competition pays off. Over the past decade and a half, the number of cosmetic procedures grew sixfold along with numerous technological innovations of the type that are blamed for rising costs everywhere else in health care. Yet despite tremendous growth and technological change, the real price of cosmetic surgery declined. Over the past decade the real price of Lasik surgery fell by 30%.
The market for prescription drugs is another area where a great many people are paying out of pocket. In response, Rx.com was the first online outlet that began competing based on price and quality (they make fewer mistakes than local pharmacies). Wal-Mart's new policy of offering a month's supply of generic drugs is yet another example. Can anybody imagine Wal-Mart offering the same deal to Blue Cross?
Perhaps the most spectacular instance of a health-care product developing outside the third-party payment system is the walk-in clinic. These can be found in shopping malls and drug stores in the upper Midwest and they are spreading like wildfire around the country. They post prices. There is very little waiting. They maintain records electronically. The quality of service is comparable to traditional primary care at half the cost.
I know what you're probably thinking. Markets may work for certain specialized services; but can they work for run-of-the-mill hospital surgery? Medical tourism is proving that the answer is yes. If you're willing to leave the country you too can have access to efficient, high-quality health care. In India, Thailand and elsewhere around the world, facilities are offering U.S. citizens virtually every kind of procedure for package prices, covering all the costs of treatment, and sometimes airfare and lodging as well. These prices are often one-fifth to one-third the cost in the U.S. and care is often delivered in high-quality facilities that have electronic medical records and meet American accreditation standards.
One part of our health-care system (the part where third parties are absent) is teeming and bristling with entrepreneurship and innovation. In the other part (where third parties pay the bills), entrepreneurship has been all but extinguished. How can we make the latter more like the former?
Public and private efforts to reform the health-care system have been actively underway for the past two decades. The results have been disappointing, to say the least, and they all have one thing in common: They focus on the demand side of the medical marketplace.
Managed care, practice guidelines, pay-for-performance -- each of these short-lived fads involves buyers of care telling the providers how to practice medicine. Does no one notice how strange this is? In normal markets, buyers do not instruct sellers on how to efficiently produce their products. Even the HMO movement is a demand-side reform in this context. The HMO doctor is just as trapped as the fee-for-service physician and just as unable to rebundle and reprice his services in innovative ways.
Some believe that health savings accounts (HSAs) will radically reform the health-care system. Yet this is also a reform that focuses on demand, not supply. Even with an HSA plan in hand as you approach the doctor's office, you should know that your insurer has already spelled out what services will be paid for, which ones will not and how much will be paid. HSAs, therefore, will not free doctors to take advantage of telephone, email, computerized records or any other truly innovative service. Like school vouchers, HSAs create new freedom on the buyer side without loosening the shackles on those who produce. The reform is commendable. But real innovation must come from the supply side of the market.
One would think that health insurers and employers would find it in their self interest to break the mold. To the extent that entrepreneurs raise quality and lower price, the insurance product itself should become more attractive to potential customers. The trouble is that the entire third-party payment system is completely dominated by government (principally through Medicare and Medicaid). Private insurers tend to pay the way the government pays and providers who break Medicare rules in order to better serve the patient risk being barred from the entire Medicare program.
A possible way out of this morass is to start with government. Under the current system, Medicare and Medicaid stifle entrepreneurial activity and financially punish efforts to lower costs or improve quality. Why can't these agencies reward improvements instead? Suppose an entrepreneur offered to replicate the Mayo Clinic in other parts of the country -- potentially saving Medicare 25% of costs and improving quality of care along the way. Medicare should be willing to pay, say, 12.5% more than its standard rates in order to achieve twice that amount in lower total costs. That would leave the entrepreneur with a 12.5% profit -- an amount that one would hope would encourage other entrepreneurs to enter the market with even better ideas.
Once government agencies jump-start the entrepreneurial process in this way, private insurers are likely to follow suit. In this way, government could promote entrepreneurship, instead of stifling it.
Mr. Goodman is president of the National Center for Policy Analysis.
Wednesday, February 21, 2007
In-Store Clinics
" Given the stresses expected to bear upon delivery of services in the future, such models deserve consideration as
one potential mechanism for managing a particular class of medical problems, serving a particular patient need, and
maximizing patient benefit with limited resources."
Dear Friends and Colleagues:
Attached a very interesting article from todays NEJM reviewing the issue of in-store clinics.
The author emphasizes the following:
* Payers note that primary care is less expensive when delivered at in-store clinics than when provided in a doctor's office or emergency room,
* patients value the convenience and low price,
* entrepreneurs see a profitable business model
* proponents of consumer-driven health care see services that can be paid for out of health savings accounts.
* Physicians, however, express concern about the quality of care and the potential impact on their businesses.
How is the care in-store clinic health care delivery structured?
* Care is intended to be quick,inexpensive, and convenient: visits and waiting times are short,the charge is usually less than $50, and extended hours are offered along with ample parking.
* It's not surprising, then,that patients and investors have taken notice. Although only7% of respondents in a 2005 poll said they had ever used such a service, 41% said they would be likely to do so.
* Diagnoses are made by using a simple binary test(such as for a streptococcal throat infection) or by applying a rigid, protocol-based decision rule. In some cases, no diagnosis is required (such as for a hepatitis vaccination).
* In addition,the conditions treated and therapies offered require no or minimal follow-up (for instance, clinics offer diabetes screening but not treatment), and decisions can be guided by highly specified protocols.
* More important, the conditions can be diagnosed and treated quickly.
What are the concerns doctors have with the emergence of in-store clinics?
* The effect of this specialized care delivery model on traditional primary care practices may be to remove some patients and services from the doctor's office, leaving a sicker population behind.
The in-store clinics raise important issues regarding the future design of primary care delivery including:
1. In-store clinics reflect a well-designed operating system in which all the elements — location, physical structure, information systems, staffing, clinical and business processes, and range of services — are aligned to meet a particular population's needs efficiently and effectively.
2. In-store clinics place patients in a new role, as they become responsible for sorting their medical problems according to their complexity. Because some menu items are diagnoses, there is an implicit assumption that patients can make their own clinical judgments, relying on clinics only to confirm the diagnosis and deliver the treatment.
3. Prognosticators see an impending crisis caused by the convergence of a reduced supply of physicians and nurses and an increased demand for health care as baby boomers age and develop chronic conditions. Service models such as in-store clinics may efficiently provide services to a small slice of the population, freeing up primary care practitioners and emergency rooms to deal with more complex cases, for which they are more appropriately configured.
4. In-store clinics are certainly entering the market at the low end of medical complexity. However, they have, by design, limited ability to move "up" into coverage of more complex conditions or problems. The menu of services consistent with their operating model is short, and taking on others would undermine their operations and their customer value proposition. Consequently, it is unlikely that in their current form they will usurp the core business of primary care practitioners.
The author concludes stating that " Whether or not this model becomes a permanent feature of the health care landscape, the thinking behind it — in terms of operating-system alignment, alternative approaches to stratification and capacity creation, and the patient's role — may well influence the design of future delivery systems."
A VERY IMPORTANT ASPECT WE CAN FOCUS ON LIMITING THE SPREAD OF IN-STORE CLINICS IN OUR STATE
Clinics are located in states that allow prescribing by nurse practitioners, and physician involvement is limited.
WE CAN LIMIT THE IN-STORE CLINICS IN FLORIDA BY FOCUSING ON THE SCOPE OF PRACTICE ISSUE AND TIGHTEN THE SUPERVISION ASPECT!!!
THIS WILL GIVE US ENOUGH TIME TO EVALUATE THE PERFORMANCE OF IN-STORE CLINICS AS IT RELATES TO PATIENT SAFETY AND THE RELATIONSHIP BETWEEN NPs AND PAs WITH THE SUPERVISING PHYSICIANS.!!!!!!
Yours truly,
Bernd
NEJM 02-22-2007
The Rise of In-Store Clinics — Threat or Opportunity?
Richard Bohmer, M.B., Ch.B., M.P.H.
The recent acquisition by the pharmacy chain CVS of MinuteClinic, a chain of in-store clinics founded in Minnesota, has put this model of primary care delivery back in the spotlight. Although still not widespread, the model is increasing in prevalence (see table) and appeals to several stakeholders: payers note that primary care is less expensive when delivered at in-store clinics than when provided in a doctor's office or emergency room, patients value the convenience and low price, entrepreneurs see a profitable business model, and proponents of consumer-driven health care see services that can be paid for out of health savings accounts. Physicians, however, express concern about the quality of care and the potential impact on their businesses.
The typical in-store clinic is a kiosk — a small, thin-walled structure located inside a store — staffed by a nurse practitioner. The clinics differ from the old "doc-in-the-box" model in that they are neither routinely staffed by a physician nor intended to provide all primary care services. Indeed, the range of services — posted as a "menu" on the company's Web site or on the kiosk — is strikingly small, including common adult vaccinations, screening tests, and treatment for simple conditions.
But for these circumscribed services, the clinics provide a compelling value proposition. Care is intended to be quick, inexpensive, and convenient: visits and waiting times are short, the charge is usually less than $50, and extended hours are offered along with ample parking. It's not surprising, then, that patients and investors have taken notice. Although only 7% of respondents in a 2005 poll said they had ever used such a service, 41% said they would be likely to do so.2 And since 2000, when the concept was developed by QuickMedx (which later became MinuteClinic), at least 10 other companies have entered the market and several hundred clinics have been opened or are being planned. The California HealthCare Foundation expects thousands to open in the near future.1
At the heart of the appeal are well-thought-out business and operational models, both dependent on the limited services menu. Overhead is low because staffing, real estate, and financing costs are low, and some of these overhead costs are shared with the store. Clinics are located in states that allow prescribing by nurse practitioners, and physician involvement is limited. In addition, their focus on out-of-pocket payment limits accounts-receivable costs. Affiliations with drugstores benefit both partners: patients appreciate the convenience of being able to fill prescriptions on the spot, and the clinic draws customers to the store.
The operational model is equally well constructed. The originators based their design on the McDonald's hamburger chain, in which customers select items from a limited menu. The services listed are highly standardized interventions and require no physician evaluation. Diagnoses are made by using a simple binary test (such as for a streptococcal throat infection) or by applying a rigid, protocol-based decision rule. In some cases, no diagnosis is required (such as for a hepatitis vaccination). In addition, the conditions treated and therapies offered require no or minimal follow-up (for instance, clinics offer diabetes screening but not treatment), and decisions can be guided by highly specified protocols. More important, the conditions can be diagnosed and treated quickly.
Some concerns have been raised, however, about quality of care. Critics worry that important, albeit rare, diagnoses and opportunities to address other concomitant health issues may easily be missed by nurse practitioners following rigid protocols. Questions have also been raised about the potential lack of continuity of care: when care is fragmented, with different clinics or clinicians providing care at different times, trends suggestive of serious underlying conditions may be missed, and if clinics have no explicit after-hours arrangements, complications arising from daytime care may go unaddressed. In addition, past experience suggests that for-profit clinics might be motivated to overservice patients.
These drawbacks have thus far remained theoretical. Clinics have worked to maintain good relationships with local primary care practitioners,3 some have software that searches for patterns of repeated presentations, and the strict reliance on evidence-based protocols should prevent overservicing. Both the American Medical Association and the American Association of Family Practice support the concept of pluralism in primary care services.3 Moreover, these clinics raise important issues regarding the future design of primary care delivery.
First, in-store clinics reflect a well-designed operating system in which all the elements — location, physical structure, information systems, staffing, clinical and business processes, and range of services — are aligned to meet a particular population's needs efficiently and effectively. Health care services tend to be loosely stratified, typically by patient age, by body system, or by disease. Although these variables are often rough proxies for the complexity of medical problems, complexity itself is not usually an organizational rubric. In-store clinics, by contrast, stratify the primary care market into more and less complex care and are carefully configured to serve the needs of the less sick. Focus on a small segment of the market facilitates such operating system alignment.
The effect of this specialized care delivery model on traditional primary care practices may be to remove some patients and services from the doctor's office, leaving a sicker population behind. Some practitioners will see this as "cream skimming" and a threat to their revenue, particularly if they rely on income from short appointments for simple cases to subsidize the cost of more time-consuming appointments for more complex cases. But others may see in-store clinics as a way to improve their patients' access to care, decompress their busy waiting rooms, free them up to spend more time with patients, and serve the uninsured, a group of patients whom they may wish to avoid.
Second, in-store clinics place patients in a new role, as they become responsible for sorting their medical problems according to their complexity. Because some menu items are diagnoses, there is an implicit assumption that patients can make their own clinical judgments, relying on clinics only to confirm the diagnosis and deliver the treatment. The clinics' highly engineered business and operational models are very sensitive to misclassification. Attracting patients for whom the clinic is not configured — for instance, someone with an acute, life-threatening disease — would cause a serious delay for others in the queue and weaken the customer value proposition of speed and convenience. Clinics, however, say that such occurrences are less common than one might fear; Michael Howe, the chief executive officer of MinuteClinic, notes that less than 10% of patients are turned away at his company's clinics, which have never had a patient present with chest pain, for instance. With regard to the circumscribed set of conditions on the menu, patients have turned out to be capable diagnosticians. Moreover, some patients — and not just those in higher socioeconomic groups — seem to be happy with this role and comfortable arranging their own care.
Third, prognosticators see an impending crisis caused by the convergence of a reduced supply of physicians and nurses and an increased demand for health care as baby boomers age and develop chronic conditions.4 Service models such as in-store clinics may efficiently provide services to a small slice of the population, freeing up primary care practitioners and emergency rooms to deal with more complex cases, for which they are more appropriately configured. In fact, primary care practices and emergency departments could themselves use such a model, both to improve access to care and to create spare capacity. Indeed, several provider organizations have already opened their own in-store clinics, using their powerful local brand to attract consumers.
Finally, some wonder whether this model is a "disruptive innovation" — that is, a service or technology that enters a market at the low end, initially not performing as well as higher-end incumbents, then improves until it captures the whole market.5 In-store clinics are certainly entering the market at the low end of medical complexity. However, they have, by design, limited ability to move "up" into coverage of more complex conditions or problems. The menu of services consistent with their operating model is short, and taking on others would undermine their operations and their customer value proposition. Consequently, it is unlikely that in their current form they will usurp the core business of primary care practitioners.
Whether or not this model becomes a permanent feature of the health care landscape, the thinking behind it — in terms of operating-system alignment, alternative approaches to stratification and capacity creation, and the patient's role — may well influence the design of future delivery systems. If these clinics are to complement existing services, they will have to ensure continuity of care by building effective relationships with local primary care physicians and by developing systems to track patients who have multiple appointments in order to identify patterns suggestive of underlying illnesses. However, concern about the quality of care is not a reason to reject such models out of hand. Given the stresses expected to bear upon delivery of services in the future, such models deserve consideration as one potential mechanism for managing a particular class of medical problems, serving a particular patient need, and maximizing patient benefit with limited resources.
Source Information
Dr. Bohmer is a senior lecturer in business administration at Harvard Business School, Boston.
An interview with Dr. Bohmer can be heard at www.nejm.org.
References
1. Scott MK. Health care in the express lane: the emergence of retail clinics. Prepared for the California Healthcare Foundation. (Accessed January 30, 2007, at http://www.chcf.org/topics/view.cfm?itemID=123218.)
2. Many agree on potential benefits of onsite clinics in major retail stores that can provide basic medical services, yet large number are also skeptical. Wall Street Journal Online/Harris Interactive health-care poll. October 26, 2005. (Accessed January 30, 2007, at http://www.harrisinteractive.com/news/newsletters/wsjhealthnews/wsjonline_hi_health-carepoll2005vol4_iss21.pdf.)
3. Store-based health clinics. Report 7 of the Council on Medical Service (A-06). June 2006. (Accessed January 30, 2007, at http://www.ama-assn.org/ama1/pub/upload/mm/372/a-06cmsreport7.pdf.)
4. Bodenheimer T. Primary care -- will it survive? N Engl J Med 2006;355:861-864. [Free Full Text]
5. Christensen CM, Bohmer RMJ, Kenagy J. Will disruptive innovations cure health care? Harv Bus Rev 2000;78:102-112. [ISI][Medline]
one potential mechanism for managing a particular class of medical problems, serving a particular patient need, and
maximizing patient benefit with limited resources."
Dear Friends and Colleagues:
Attached a very interesting article from todays NEJM reviewing the issue of in-store clinics.
The author emphasizes the following:
* Payers note that primary care is less expensive when delivered at in-store clinics than when provided in a doctor's office or emergency room,
* patients value the convenience and low price,
* entrepreneurs see a profitable business model
* proponents of consumer-driven health care see services that can be paid for out of health savings accounts.
* Physicians, however, express concern about the quality of care and the potential impact on their businesses.
How is the care in-store clinic health care delivery structured?
* Care is intended to be quick,inexpensive, and convenient: visits and waiting times are short,the charge is usually less than $50, and extended hours are offered along with ample parking.
* It's not surprising, then,that patients and investors have taken notice. Although only7% of respondents in a 2005 poll said they had ever used such a service, 41% said they would be likely to do so.
* Diagnoses are made by using a simple binary test(such as for a streptococcal throat infection) or by applying a rigid, protocol-based decision rule. In some cases, no diagnosis is required (such as for a hepatitis vaccination).
* In addition,the conditions treated and therapies offered require no or minimal follow-up (for instance, clinics offer diabetes screening but not treatment), and decisions can be guided by highly specified protocols.
* More important, the conditions can be diagnosed and treated quickly.
What are the concerns doctors have with the emergence of in-store clinics?
* The effect of this specialized care delivery model on traditional primary care practices may be to remove some patients and services from the doctor's office, leaving a sicker population behind.
The in-store clinics raise important issues regarding the future design of primary care delivery including:
1. In-store clinics reflect a well-designed operating system in which all the elements — location, physical structure, information systems, staffing, clinical and business processes, and range of services — are aligned to meet a particular population's needs efficiently and effectively.
2. In-store clinics place patients in a new role, as they become responsible for sorting their medical problems according to their complexity. Because some menu items are diagnoses, there is an implicit assumption that patients can make their own clinical judgments, relying on clinics only to confirm the diagnosis and deliver the treatment.
3. Prognosticators see an impending crisis caused by the convergence of a reduced supply of physicians and nurses and an increased demand for health care as baby boomers age and develop chronic conditions. Service models such as in-store clinics may efficiently provide services to a small slice of the population, freeing up primary care practitioners and emergency rooms to deal with more complex cases, for which they are more appropriately configured.
4. In-store clinics are certainly entering the market at the low end of medical complexity. However, they have, by design, limited ability to move "up" into coverage of more complex conditions or problems. The menu of services consistent with their operating model is short, and taking on others would undermine their operations and their customer value proposition. Consequently, it is unlikely that in their current form they will usurp the core business of primary care practitioners.
The author concludes stating that " Whether or not this model becomes a permanent feature of the health care landscape, the thinking behind it — in terms of operating-system alignment, alternative approaches to stratification and capacity creation, and the patient's role — may well influence the design of future delivery systems."
A VERY IMPORTANT ASPECT WE CAN FOCUS ON LIMITING THE SPREAD OF IN-STORE CLINICS IN OUR STATE
Clinics are located in states that allow prescribing by nurse practitioners, and physician involvement is limited.
WE CAN LIMIT THE IN-STORE CLINICS IN FLORIDA BY FOCUSING ON THE SCOPE OF PRACTICE ISSUE AND TIGHTEN THE SUPERVISION ASPECT!!!
THIS WILL GIVE US ENOUGH TIME TO EVALUATE THE PERFORMANCE OF IN-STORE CLINICS AS IT RELATES TO PATIENT SAFETY AND THE RELATIONSHIP BETWEEN NPs AND PAs WITH THE SUPERVISING PHYSICIANS.!!!!!!
Yours truly,
Bernd
NEJM 02-22-2007
The Rise of In-Store Clinics — Threat or Opportunity?
Richard Bohmer, M.B., Ch.B., M.P.H.
The recent acquisition by the pharmacy chain CVS of MinuteClinic, a chain of in-store clinics founded in Minnesota, has put this model of primary care delivery back in the spotlight. Although still not widespread, the model is increasing in prevalence (see table) and appeals to several stakeholders: payers note that primary care is less expensive when delivered at in-store clinics than when provided in a doctor's office or emergency room, patients value the convenience and low price, entrepreneurs see a profitable business model, and proponents of consumer-driven health care see services that can be paid for out of health savings accounts. Physicians, however, express concern about the quality of care and the potential impact on their businesses.
The typical in-store clinic is a kiosk — a small, thin-walled structure located inside a store — staffed by a nurse practitioner. The clinics differ from the old "doc-in-the-box" model in that they are neither routinely staffed by a physician nor intended to provide all primary care services. Indeed, the range of services — posted as a "menu" on the company's Web site or on the kiosk — is strikingly small, including common adult vaccinations, screening tests, and treatment for simple conditions.
But for these circumscribed services, the clinics provide a compelling value proposition. Care is intended to be quick, inexpensive, and convenient: visits and waiting times are short, the charge is usually less than $50, and extended hours are offered along with ample parking. It's not surprising, then, that patients and investors have taken notice. Although only 7% of respondents in a 2005 poll said they had ever used such a service, 41% said they would be likely to do so.2 And since 2000, when the concept was developed by QuickMedx (which later became MinuteClinic), at least 10 other companies have entered the market and several hundred clinics have been opened or are being planned. The California HealthCare Foundation expects thousands to open in the near future.1
At the heart of the appeal are well-thought-out business and operational models, both dependent on the limited services menu. Overhead is low because staffing, real estate, and financing costs are low, and some of these overhead costs are shared with the store. Clinics are located in states that allow prescribing by nurse practitioners, and physician involvement is limited. In addition, their focus on out-of-pocket payment limits accounts-receivable costs. Affiliations with drugstores benefit both partners: patients appreciate the convenience of being able to fill prescriptions on the spot, and the clinic draws customers to the store.
The operational model is equally well constructed. The originators based their design on the McDonald's hamburger chain, in which customers select items from a limited menu. The services listed are highly standardized interventions and require no physician evaluation. Diagnoses are made by using a simple binary test (such as for a streptococcal throat infection) or by applying a rigid, protocol-based decision rule. In some cases, no diagnosis is required (such as for a hepatitis vaccination). In addition, the conditions treated and therapies offered require no or minimal follow-up (for instance, clinics offer diabetes screening but not treatment), and decisions can be guided by highly specified protocols. More important, the conditions can be diagnosed and treated quickly.
Some concerns have been raised, however, about quality of care. Critics worry that important, albeit rare, diagnoses and opportunities to address other concomitant health issues may easily be missed by nurse practitioners following rigid protocols. Questions have also been raised about the potential lack of continuity of care: when care is fragmented, with different clinics or clinicians providing care at different times, trends suggestive of serious underlying conditions may be missed, and if clinics have no explicit after-hours arrangements, complications arising from daytime care may go unaddressed. In addition, past experience suggests that for-profit clinics might be motivated to overservice patients.
These drawbacks have thus far remained theoretical. Clinics have worked to maintain good relationships with local primary care practitioners,3 some have software that searches for patterns of repeated presentations, and the strict reliance on evidence-based protocols should prevent overservicing. Both the American Medical Association and the American Association of Family Practice support the concept of pluralism in primary care services.3 Moreover, these clinics raise important issues regarding the future design of primary care delivery.
First, in-store clinics reflect a well-designed operating system in which all the elements — location, physical structure, information systems, staffing, clinical and business processes, and range of services — are aligned to meet a particular population's needs efficiently and effectively. Health care services tend to be loosely stratified, typically by patient age, by body system, or by disease. Although these variables are often rough proxies for the complexity of medical problems, complexity itself is not usually an organizational rubric. In-store clinics, by contrast, stratify the primary care market into more and less complex care and are carefully configured to serve the needs of the less sick. Focus on a small segment of the market facilitates such operating system alignment.
The effect of this specialized care delivery model on traditional primary care practices may be to remove some patients and services from the doctor's office, leaving a sicker population behind. Some practitioners will see this as "cream skimming" and a threat to their revenue, particularly if they rely on income from short appointments for simple cases to subsidize the cost of more time-consuming appointments for more complex cases. But others may see in-store clinics as a way to improve their patients' access to care, decompress their busy waiting rooms, free them up to spend more time with patients, and serve the uninsured, a group of patients whom they may wish to avoid.
Second, in-store clinics place patients in a new role, as they become responsible for sorting their medical problems according to their complexity. Because some menu items are diagnoses, there is an implicit assumption that patients can make their own clinical judgments, relying on clinics only to confirm the diagnosis and deliver the treatment. The clinics' highly engineered business and operational models are very sensitive to misclassification. Attracting patients for whom the clinic is not configured — for instance, someone with an acute, life-threatening disease — would cause a serious delay for others in the queue and weaken the customer value proposition of speed and convenience. Clinics, however, say that such occurrences are less common than one might fear; Michael Howe, the chief executive officer of MinuteClinic, notes that less than 10% of patients are turned away at his company's clinics, which have never had a patient present with chest pain, for instance. With regard to the circumscribed set of conditions on the menu, patients have turned out to be capable diagnosticians. Moreover, some patients — and not just those in higher socioeconomic groups — seem to be happy with this role and comfortable arranging their own care.
Third, prognosticators see an impending crisis caused by the convergence of a reduced supply of physicians and nurses and an increased demand for health care as baby boomers age and develop chronic conditions.4 Service models such as in-store clinics may efficiently provide services to a small slice of the population, freeing up primary care practitioners and emergency rooms to deal with more complex cases, for which they are more appropriately configured. In fact, primary care practices and emergency departments could themselves use such a model, both to improve access to care and to create spare capacity. Indeed, several provider organizations have already opened their own in-store clinics, using their powerful local brand to attract consumers.
Finally, some wonder whether this model is a "disruptive innovation" — that is, a service or technology that enters a market at the low end, initially not performing as well as higher-end incumbents, then improves until it captures the whole market.5 In-store clinics are certainly entering the market at the low end of medical complexity. However, they have, by design, limited ability to move "up" into coverage of more complex conditions or problems. The menu of services consistent with their operating model is short, and taking on others would undermine their operations and their customer value proposition. Consequently, it is unlikely that in their current form they will usurp the core business of primary care practitioners.
Whether or not this model becomes a permanent feature of the health care landscape, the thinking behind it — in terms of operating-system alignment, alternative approaches to stratification and capacity creation, and the patient's role — may well influence the design of future delivery systems. If these clinics are to complement existing services, they will have to ensure continuity of care by building effective relationships with local primary care physicians and by developing systems to track patients who have multiple appointments in order to identify patterns suggestive of underlying illnesses. However, concern about the quality of care is not a reason to reject such models out of hand. Given the stresses expected to bear upon delivery of services in the future, such models deserve consideration as one potential mechanism for managing a particular class of medical problems, serving a particular patient need, and maximizing patient benefit with limited resources.
Source Information
Dr. Bohmer is a senior lecturer in business administration at Harvard Business School, Boston.
An interview with Dr. Bohmer can be heard at www.nejm.org.
References
1. Scott MK. Health care in the express lane: the emergence of retail clinics. Prepared for the California Healthcare Foundation. (Accessed January 30, 2007, at http://www.chcf.org/topics/view.cfm?itemID=123218.)
2. Many agree on potential benefits of onsite clinics in major retail stores that can provide basic medical services, yet large number are also skeptical. Wall Street Journal Online/Harris Interactive health-care poll. October 26, 2005. (Accessed January 30, 2007, at http://www.harrisinteractive.com/news/newsletters/wsjhealthnews/wsjonline_hi_health-carepoll2005vol4_iss21.pdf.)
3. Store-based health clinics. Report 7 of the Council on Medical Service (A-06). June 2006. (Accessed January 30, 2007, at http://www.ama-assn.org/ama1/pub/upload/mm/372/a-06cmsreport7.pdf.)
4. Bodenheimer T. Primary care -- will it survive? N Engl J Med 2006;355:861-864. [Free Full Text]
5. Christensen CM, Bohmer RMJ, Kenagy J. Will disruptive innovations cure health care? Harv Bus Rev 2000;78:102-112. [ISI][Medline]
Sunday, February 18, 2007
Medicare Part D
"Most Americans are aware that our health-care system is in deep trouble, a dog's breakfast ofprivate providers and insurers that has weak and inconsistent incentives for quality control and cost containment."
Dear Friends and Colleagues;
Greetings from the cold, but sunny Jerusalem.
Attached a very interesting and informative article published in yesterdays Wall Street Journal reviewing the effect and performance of the Medicare Part D program.
Part D is a massive social experiment on the ability of a privatized market to deliver social services effectively.
The author and researcher claims that in terms of health delivered per dollar of cost, our health care system is grotesquely inefficient. We spend $6,102 per person on health care each year, nearly 17% of GDP. Our neighbor Canada's single-payer system costs $3,165 per person per year, about half our expenditure, or 10% of their GDP. The Canadian costs and health outcomes are typical of developed countries, where government managed and financed systems predominate. The extra cost of our system is not buying us better health. The probability of dying between ages 15 and 60, a good indicator of failure of a health-care system to prevent and treat disease, is 8.1% for females in the U.S.; in Canada, the same probability is 5.7%.
f current trends continue, health care in the U.S. as a proportion of GDP will rise to 40% by 2050, a level that will break the current system of financing health through employers, pension funds and Medicare/Medicaid.
The authors then continue analyzing the performance of the Medicare Part B program and gives it a mixed report card:
My overall conclusion is that, so far, the Part D program has succeeded in getting affordable prescription drugs to the senior population. Its privatized structure has not been a significant impediment to delivery of these services. Competition among insurers seems to have been effective in keeping a lid on costs, and assuring reasonable quality control. We do not have an experiment in which we can determine whether a single-product system could have done as well, or better, along these dimensions, but I think it is reasonable to say that the Part D market has performed as well as its partisans hoped, and far better than its detractors expected.
Does this mean that Part D proves that privatization will be effective in other segments of the health-care market?
The authors cautions and points out that:
* the success of Part D depends substantially on thoughtful and muscular management of the market.A health insurance market like Part D probably requires this level of active management to work well; after-the-fact oversight in the style of the SEC or FTC is inadequate. If privatization is going to work elsewhere in health care, active market management will be needed.
* consumer-directed health care works only if consumers can understand the consequences of their choices. In much of medicine, providers are the agents that guide consumers through these choices. If consumer-directed health care is to be effective, these providers must give sound advice on both the health and financial consequences of alternative choices. This is possible if the incentives to providers and consumers are right, but the design of such markets should not be left to chance.
Yours
Bernd Wollschlaeger,MD,FAAFP
A Dog's Breakfast
By DANIEL L. MCFADDEN
February 16, 2007; Page A15
Last year, Medicare underwent a major expansion with the addition of Part D prescription drug coverage. A controversial feature of this new program was its organization as a market in which consumers could choose among various plans offered competitively by different insurers and HMOs, rather than the single-payer, single-product model used elsewhere in the Medicare system. Proponents of this design touted the choices it would offer consumers, and the benefits of competition for product quality and cost; opponents objected that consumers would be overwhelmed by the complexity of the market, and that it was unnecessarily generous to pharmaceutical and insurance companies.
Part D is a massive social experiment on the ability of a privatized market to deliver social services effectively. With the support of the National Institute on Aging, my research group has monitored consumer choices and outcomes from the new Part D market. I will summarize our findings, but first I want to provide some perspective on the American health-care system and the questions that study of Part D may help answer.
Most Americans are aware that our health-care system is in deep trouble, a dog's breakfast of private providers and insurers that has weak and inconsistent incentives for quality control and cost containment. Many consumers cannot obtain health insurance at reasonable cost, and financing the system is stressing employers, pension funds, and the government's Medicare and Medicaid programs.
In terms of health delivered per dollar of cost, our system is grotesquely inefficient. We spend $6,102 per person on health care each year, nearly 17% of GDP. Our neighbor Canada's single-payer system costs $3,165 per person per year, about half our expenditure, or 10% of their GDP. The Canadian costs and health outcomes are typical of developed countries, where government managed and financed systems predominate. The extra cost of our system is not buying us better health. The probability of dying between ages 15 and 60, a good indicator of failure of a health-care system to prevent and treat disease, is 8.1% for females in the U.S.; in Canada, the same probability is 5.7%.
In the future, things are going to get much worse. If current trends continue, health care in the U.S. as a proportion of GDP will rise to 40% by 2050, a level that will break the current system of financing health through employers, pension funds and Medicare/Medicaid.
There are a number of reasons for this gathering storm. First, the U.S. population is getting older, and the old require more medical maintenance. Second, we are getting wealthier, and staying alive is the ultimate luxury good. Third, we demand expensive medical innovations, such as dialysis, MRIs, transplants, stents and biotech. About a third of all medical costs are incurred in the last year of life, and are at best marginally effective. The incentives in the system do not force hard choices.
To deal with this future, three substantial reforms are needed. First, we need to wring out some of the inefficiencies. Something like 30% of our health costs come from administrative overhead, legal costs and defensive medicine. These could be largely eliminated in a comprehensive reform; we just need to emulate best practice in other developed countries.
Second, we need universal health insurance coverage, with active emphasis on preventive medicine that is effective in reducing later medical events and costs. Perhaps this can be accomplished by cobbling together existing sources of finance, as in Gov. Arnold Schwarzenegger's current proposal for California. However, eventually we will have to go to a system that is not channeled through employers, something like a tax-financed medical voucher system.
Third, we need incentives that match choice of expensive treatments with consumers' willingness to pay for them, a benefit-cost analysis that places treatment choices and financial responsibility on the individual.
This brings us to Medicare Part D. This experiment in privatizing the prescription drug insurance market and the interface between insurers and consumers gives the individual the right, and responsibility, to make insurance plan choices that are in his or her self-interest. If consumers are up to this task, then their choices will ensure that the plans, and insurers, that succeed in the market are ones that meet their needs. However, if many are confused or confounded, the market will not get the signals it needs to work satisfactorily. The success or failure of the Part D market is a bellwether for proposals to spread consumer-directed health care across the system, putting health and financial choices in the hands of consumers, and utilizing the forces of market competition to rationalize the system.
So, how well has the Part D market worked? We now have one year of experience, including a second open enrollment period in which consumers could switch plans, or enroll if they had not done so earlier. We can ask whether consumers were satisfied with this market, whether their choices were consistent with their interests, and whether Part D insurance has had a positive effect on health outcomes. To do this, my group is tracking about 2,200 consumers age 65 and up from opening of the initial enrollment period in mid-November 2005. We interviewed them just before enrollment began, and again just after the initial enrollment period ended on May 15, 2006. Here are some of the things we have found:
Consumers were quite confused about the Part D program before enrollment began, with 40% knowing little or nothing about what the program offered, and 17% indicating that they were unlikely to enroll. Start-up problems, widely publicized, further clouded the program's future. However, when the initial enrollment period closed, only 7.4% of the age 65-plus eligible population of 35.8 million were not enrolled in Part D or comparable prescription drug coverage. It helped that monthly premiums, predicted to be about $37, were substantially lower, averaging around $24, with some plans available for premiums as low as $6 to $10. It helped that about 68% of the population was automatically enrolled, either through employer or union based plans or through Medicaid, VA or federal employee coverage. It also helped that Part D incorporates an annual subsidy of about $1,200 per enrollee, so that most potential enrollees benefit immediately.
Failure to enroll turned out to be a minor problem, but making Part D voluntary rather than mandatory did have some consequences. About 1.2 million seniors who use enough prescription drugs so that they would immediately benefit from enrolling failed to do so. Mostly, these were not the very poor, who were picked up by Medicaid and by outreach programs, but poorly educated people above the poverty line.
General opinions elicited after the close of the initial enrollment period give Part D a mixed report card. Seventy-seven percent liked having a choice of plans, but 58% thought the program was not well designed; 77% say they would have preferred to have prescription drugs provided automatically as part of Medicare Part A; 58% are less satisfied with Medicare as a result of Part D; and large majorities dislike formulary restrictions and the gap, a range of out-of-pocket costs where the Part D standard plan offers no benefits.
However, when one looks at plan choices made, one finds that consumers were relatively consistent in recognizing their self-interest. Most consumers selected among the lowest-cost plans available in their area. Consumers with significant drug needs enrolled early, while those with no immediate needs mostly enrolled later to preserve their option value of obtaining insurance at non-penalized rates. There is some evidence that consumers did not fully appreciate the consequences of the gap, and enhanced policies that covered the gap were not heavily demanded, even though the additional coverage they offered was close to actuarially fair.
The picture that emerges is that elderly consumers were mostly able to navigate the Part D market and reach reasonable choices, despite its novelty and complexity. Two concerns with insurance markets that also arise for the Part D market are adverse selection, in which only the sickest seek insurance, and insurers respond by cherry-picking, refusing coverage for individuals and conditions likely to increase claims; and moral hazard, in which insurance coverage encourages additional treatments by reducing the incremental costs of these treatments.
Adverse selection has so far been avoided in the Part D market because the voluntary enrollment rate is high, including a high proportion of healthy seniors who currently are net contributors to the system. Further, adverse selection is not a problem for plan switchers because participating insurers must take all comers, and are reimbursed by Medicare based on each individual's experience rating. There is moral hazard in the sense that prescription drug use is increasing for seniors newly insured under part D, to 4.4 from 3.3 prescriptions on average per month, according to our survey.
This increase must be assessed in terms of its health consequences. Dana Goldman at RAND Corporation has found that making at least some drugs available to seniors at lower cost more than pays for itself in decreased incidence and cost of health problems. For example, reducing the copay on statins to $10 from $45 for a 30-day supply increased plan prescription drug payments, but the increased adherence of patients to the therapy at the lower copayment reduced cardiovascular incidents and attendant hospitalization costs, so that total annual health costs per patient in his study fell to $5,180 from $5,470.
A recent study of the VA population indicates that statins increase adult life expectancy by nearly two years, apparently because they act as anti-inflamatories as well as reducing cholesterol. Anecdotal evidence indicates that Part D coverage will reduce medical problems and hospitalization costs enough to offset a significant portion of its cost. However, reduced adherence to therapies by consumers who hit the gap will probably have a significant adverse effect on health outcomes that we will begin to see in 2007. A humorous proposal is that employers could lower their total health-care bills by putting statins and anti-hypertensives in the water cooler. What is clear is that an integrated approach is needed to evaluating health-care costs, and programs like Part D that can deliver effective preventative drugs may pay for themselves.
My overall conclusion is that, so far, the Part D program has succeeded in getting affordable prescription drugs to the senior population. Its privatized structure has not been a significant impediment to delivery of these services. Competition among insurers seems to have been effective in keeping a lid on costs, and assuring reasonable quality control. We do not have an experiment in which we can determine whether a single-product system could have done as well, or better, along these dimensions, but I think it is reasonable to say that the Part D market has performed as well as its partisans hoped, and far better than its detractors expected.
Does this mean that Part D proves that privatization will be effective in other segments of the health-care market? Here, I think caution is advised. First, the success of Part D depends substantially on thoughtful and muscular management of the market. The former head of Medicare, Mark McClellan, and a dynamic, no-nonsense 75-year-old government bureaucrat, Abby Block, bullied insurers to make sure there were, in her words, "no bad choices." It is unclear whether their successors will be as successful in standing toe-to-toe with the industry and making sure consumers' interests are protected.
A health insurance market like Part D probably requires this level of active management to work well; after-the-fact oversight in the style of the SEC or FTC is inadequate. If privatization is going to work elsewhere in health care, active market management will be needed.
Finally, consumer-directed health care works only if consumers can understand the consequences of their choices. In much of medicine, providers are the agents that guide consumers through these choices. If consumer-directed health care is to be effective, these providers must give sound advice on both the health and financial consequences of alternative choices. This is possible if the incentives to providers and consumers are right, but the design of such markets should not be left to chance.
Mr. McFadden, the E. Morris Cox professor of economics and director of the Econometrics Laboratory at Berkeley, is a 2000 Nobel laureate in economics.
URL for this article:
http://online.wsj.com/article/SB117159975453110920.html
Dear Friends and Colleagues;
Greetings from the cold, but sunny Jerusalem.
Attached a very interesting and informative article published in yesterdays Wall Street Journal reviewing the effect and performance of the Medicare Part D program.
Part D is a massive social experiment on the ability of a privatized market to deliver social services effectively.
The author and researcher claims that in terms of health delivered per dollar of cost, our health care system is grotesquely inefficient. We spend $6,102 per person on health care each year, nearly 17% of GDP. Our neighbor Canada's single-payer system costs $3,165 per person per year, about half our expenditure, or 10% of their GDP. The Canadian costs and health outcomes are typical of developed countries, where government managed and financed systems predominate. The extra cost of our system is not buying us better health. The probability of dying between ages 15 and 60, a good indicator of failure of a health-care system to prevent and treat disease, is 8.1% for females in the U.S.; in Canada, the same probability is 5.7%.
f current trends continue, health care in the U.S. as a proportion of GDP will rise to 40% by 2050, a level that will break the current system of financing health through employers, pension funds and Medicare/Medicaid.
The authors then continue analyzing the performance of the Medicare Part B program and gives it a mixed report card:
My overall conclusion is that, so far, the Part D program has succeeded in getting affordable prescription drugs to the senior population. Its privatized structure has not been a significant impediment to delivery of these services. Competition among insurers seems to have been effective in keeping a lid on costs, and assuring reasonable quality control. We do not have an experiment in which we can determine whether a single-product system could have done as well, or better, along these dimensions, but I think it is reasonable to say that the Part D market has performed as well as its partisans hoped, and far better than its detractors expected.
Does this mean that Part D proves that privatization will be effective in other segments of the health-care market?
The authors cautions and points out that:
* the success of Part D depends substantially on thoughtful and muscular management of the market.A health insurance market like Part D probably requires this level of active management to work well; after-the-fact oversight in the style of the SEC or FTC is inadequate. If privatization is going to work elsewhere in health care, active market management will be needed.
* consumer-directed health care works only if consumers can understand the consequences of their choices. In much of medicine, providers are the agents that guide consumers through these choices. If consumer-directed health care is to be effective, these providers must give sound advice on both the health and financial consequences of alternative choices. This is possible if the incentives to providers and consumers are right, but the design of such markets should not be left to chance.
Yours
Bernd Wollschlaeger,MD,FAAFP
A Dog's Breakfast
By DANIEL L. MCFADDEN
February 16, 2007; Page A15
Last year, Medicare underwent a major expansion with the addition of Part D prescription drug coverage. A controversial feature of this new program was its organization as a market in which consumers could choose among various plans offered competitively by different insurers and HMOs, rather than the single-payer, single-product model used elsewhere in the Medicare system. Proponents of this design touted the choices it would offer consumers, and the benefits of competition for product quality and cost; opponents objected that consumers would be overwhelmed by the complexity of the market, and that it was unnecessarily generous to pharmaceutical and insurance companies.
Part D is a massive social experiment on the ability of a privatized market to deliver social services effectively. With the support of the National Institute on Aging, my research group has monitored consumer choices and outcomes from the new Part D market. I will summarize our findings, but first I want to provide some perspective on the American health-care system and the questions that study of Part D may help answer.
Most Americans are aware that our health-care system is in deep trouble, a dog's breakfast of private providers and insurers that has weak and inconsistent incentives for quality control and cost containment. Many consumers cannot obtain health insurance at reasonable cost, and financing the system is stressing employers, pension funds, and the government's Medicare and Medicaid programs.
In terms of health delivered per dollar of cost, our system is grotesquely inefficient. We spend $6,102 per person on health care each year, nearly 17% of GDP. Our neighbor Canada's single-payer system costs $3,165 per person per year, about half our expenditure, or 10% of their GDP. The Canadian costs and health outcomes are typical of developed countries, where government managed and financed systems predominate. The extra cost of our system is not buying us better health. The probability of dying between ages 15 and 60, a good indicator of failure of a health-care system to prevent and treat disease, is 8.1% for females in the U.S.; in Canada, the same probability is 5.7%.
In the future, things are going to get much worse. If current trends continue, health care in the U.S. as a proportion of GDP will rise to 40% by 2050, a level that will break the current system of financing health through employers, pension funds and Medicare/Medicaid.
There are a number of reasons for this gathering storm. First, the U.S. population is getting older, and the old require more medical maintenance. Second, we are getting wealthier, and staying alive is the ultimate luxury good. Third, we demand expensive medical innovations, such as dialysis, MRIs, transplants, stents and biotech. About a third of all medical costs are incurred in the last year of life, and are at best marginally effective. The incentives in the system do not force hard choices.
To deal with this future, three substantial reforms are needed. First, we need to wring out some of the inefficiencies. Something like 30% of our health costs come from administrative overhead, legal costs and defensive medicine. These could be largely eliminated in a comprehensive reform; we just need to emulate best practice in other developed countries.
Second, we need universal health insurance coverage, with active emphasis on preventive medicine that is effective in reducing later medical events and costs. Perhaps this can be accomplished by cobbling together existing sources of finance, as in Gov. Arnold Schwarzenegger's current proposal for California. However, eventually we will have to go to a system that is not channeled through employers, something like a tax-financed medical voucher system.
Third, we need incentives that match choice of expensive treatments with consumers' willingness to pay for them, a benefit-cost analysis that places treatment choices and financial responsibility on the individual.
This brings us to Medicare Part D. This experiment in privatizing the prescription drug insurance market and the interface between insurers and consumers gives the individual the right, and responsibility, to make insurance plan choices that are in his or her self-interest. If consumers are up to this task, then their choices will ensure that the plans, and insurers, that succeed in the market are ones that meet their needs. However, if many are confused or confounded, the market will not get the signals it needs to work satisfactorily. The success or failure of the Part D market is a bellwether for proposals to spread consumer-directed health care across the system, putting health and financial choices in the hands of consumers, and utilizing the forces of market competition to rationalize the system.
So, how well has the Part D market worked? We now have one year of experience, including a second open enrollment period in which consumers could switch plans, or enroll if they had not done so earlier. We can ask whether consumers were satisfied with this market, whether their choices were consistent with their interests, and whether Part D insurance has had a positive effect on health outcomes. To do this, my group is tracking about 2,200 consumers age 65 and up from opening of the initial enrollment period in mid-November 2005. We interviewed them just before enrollment began, and again just after the initial enrollment period ended on May 15, 2006. Here are some of the things we have found:
Consumers were quite confused about the Part D program before enrollment began, with 40% knowing little or nothing about what the program offered, and 17% indicating that they were unlikely to enroll. Start-up problems, widely publicized, further clouded the program's future. However, when the initial enrollment period closed, only 7.4% of the age 65-plus eligible population of 35.8 million were not enrolled in Part D or comparable prescription drug coverage. It helped that monthly premiums, predicted to be about $37, were substantially lower, averaging around $24, with some plans available for premiums as low as $6 to $10. It helped that about 68% of the population was automatically enrolled, either through employer or union based plans or through Medicaid, VA or federal employee coverage. It also helped that Part D incorporates an annual subsidy of about $1,200 per enrollee, so that most potential enrollees benefit immediately.
Failure to enroll turned out to be a minor problem, but making Part D voluntary rather than mandatory did have some consequences. About 1.2 million seniors who use enough prescription drugs so that they would immediately benefit from enrolling failed to do so. Mostly, these were not the very poor, who were picked up by Medicaid and by outreach programs, but poorly educated people above the poverty line.
General opinions elicited after the close of the initial enrollment period give Part D a mixed report card. Seventy-seven percent liked having a choice of plans, but 58% thought the program was not well designed; 77% say they would have preferred to have prescription drugs provided automatically as part of Medicare Part A; 58% are less satisfied with Medicare as a result of Part D; and large majorities dislike formulary restrictions and the gap, a range of out-of-pocket costs where the Part D standard plan offers no benefits.
However, when one looks at plan choices made, one finds that consumers were relatively consistent in recognizing their self-interest. Most consumers selected among the lowest-cost plans available in their area. Consumers with significant drug needs enrolled early, while those with no immediate needs mostly enrolled later to preserve their option value of obtaining insurance at non-penalized rates. There is some evidence that consumers did not fully appreciate the consequences of the gap, and enhanced policies that covered the gap were not heavily demanded, even though the additional coverage they offered was close to actuarially fair.
The picture that emerges is that elderly consumers were mostly able to navigate the Part D market and reach reasonable choices, despite its novelty and complexity. Two concerns with insurance markets that also arise for the Part D market are adverse selection, in which only the sickest seek insurance, and insurers respond by cherry-picking, refusing coverage for individuals and conditions likely to increase claims; and moral hazard, in which insurance coverage encourages additional treatments by reducing the incremental costs of these treatments.
Adverse selection has so far been avoided in the Part D market because the voluntary enrollment rate is high, including a high proportion of healthy seniors who currently are net contributors to the system. Further, adverse selection is not a problem for plan switchers because participating insurers must take all comers, and are reimbursed by Medicare based on each individual's experience rating. There is moral hazard in the sense that prescription drug use is increasing for seniors newly insured under part D, to 4.4 from 3.3 prescriptions on average per month, according to our survey.
This increase must be assessed in terms of its health consequences. Dana Goldman at RAND Corporation has found that making at least some drugs available to seniors at lower cost more than pays for itself in decreased incidence and cost of health problems. For example, reducing the copay on statins to $10 from $45 for a 30-day supply increased plan prescription drug payments, but the increased adherence of patients to the therapy at the lower copayment reduced cardiovascular incidents and attendant hospitalization costs, so that total annual health costs per patient in his study fell to $5,180 from $5,470.
A recent study of the VA population indicates that statins increase adult life expectancy by nearly two years, apparently because they act as anti-inflamatories as well as reducing cholesterol. Anecdotal evidence indicates that Part D coverage will reduce medical problems and hospitalization costs enough to offset a significant portion of its cost. However, reduced adherence to therapies by consumers who hit the gap will probably have a significant adverse effect on health outcomes that we will begin to see in 2007. A humorous proposal is that employers could lower their total health-care bills by putting statins and anti-hypertensives in the water cooler. What is clear is that an integrated approach is needed to evaluating health-care costs, and programs like Part D that can deliver effective preventative drugs may pay for themselves.
My overall conclusion is that, so far, the Part D program has succeeded in getting affordable prescription drugs to the senior population. Its privatized structure has not been a significant impediment to delivery of these services. Competition among insurers seems to have been effective in keeping a lid on costs, and assuring reasonable quality control. We do not have an experiment in which we can determine whether a single-product system could have done as well, or better, along these dimensions, but I think it is reasonable to say that the Part D market has performed as well as its partisans hoped, and far better than its detractors expected.
Does this mean that Part D proves that privatization will be effective in other segments of the health-care market? Here, I think caution is advised. First, the success of Part D depends substantially on thoughtful and muscular management of the market. The former head of Medicare, Mark McClellan, and a dynamic, no-nonsense 75-year-old government bureaucrat, Abby Block, bullied insurers to make sure there were, in her words, "no bad choices." It is unclear whether their successors will be as successful in standing toe-to-toe with the industry and making sure consumers' interests are protected.
A health insurance market like Part D probably requires this level of active management to work well; after-the-fact oversight in the style of the SEC or FTC is inadequate. If privatization is going to work elsewhere in health care, active market management will be needed.
Finally, consumer-directed health care works only if consumers can understand the consequences of their choices. In much of medicine, providers are the agents that guide consumers through these choices. If consumer-directed health care is to be effective, these providers must give sound advice on both the health and financial consequences of alternative choices. This is possible if the incentives to providers and consumers are right, but the design of such markets should not be left to chance.
Mr. McFadden, the E. Morris Cox professor of economics and director of the Econometrics Laboratory at Berkeley, is a 2000 Nobel laureate in economics.
URL for this article:
http://online.wsj.com/article/SB117159975453110920.html
Sunday, February 04, 2007
Health Information Technology
Attached you find a link to several interesting articles from the recent edition of Health Affairs about the medical information technology applications.
Data gathered in electronic health records on the experience of millions of patients have the potential to dramatically accelerate clinical research and provide the nation with timely, urgently needed knowledge about the value of new medical technologies, researchers report in a special edition of Health Affairs on "rapid learning" published January 26. Strategies for advancing rapid learning in health care was the topic of a Health Affairs-sponsored conference in Washington, D.C., today that included an appearance by AHRQ Director Carolyn Clancy, as well as several authors from the January 26 issue.
A webcast of the briefing is available at:
www.rwjf.org/newsroom/activitydetail.jsp?id=10195&type=3
The attached prologue accurately reflects on the content and purpose of the articles.
Yours
Bernd
http://content.healthaffairs.org/cgi/content/full/hlthaff.26.2.w107/DC2
26 January 2007
Rapid Learning:
Getting Technology Into Practice
PROLOGUE: Amid persistent concerns about performance and quality, the health sector remains ambivalent about electronic health records (EHRs). Champions of accelerated adoption of health information technology (IT) have been unable to generate a groundswell of demand, despite excellent arguments for health IT's potential to save money, improve quality, and transform care. It may be, though, that the strongest argument for speeding IT adoption is still largely below the radar.
The dramatic pace of biomedical innovation has dazzled America but created nagging tensions as well. Our insatiable demand for new drugs and technologies is driving unsustainable growth in health spending. An explosion of new knowledge has strained clinicians' learning capacity and fostered subspecialization and fragmentation of care. Clinical research and regulatory capabilities are swamped with urgent questions about the safety and effectiveness of new treatments.
But on scattered islands within the dominant system, promising approaches to managing innovation are beginning to surface, and their foundation is the EHR. In organizations such as the Veterans Health Administration (VHA), Kaiser Permanente, and the Geisinger Health System, the richness of data capture in fully deployed patient record systems is enabling clinicians and researchers to answer practical questions about safety, effectiveness, and cost more efficiently than the traditional process of randomized clinical trials (RCTs) possibly could.
The implications of these approaches for the future of "rapid learning" are spelled out in an overview paper by Lynn Etheredge. "An inadequate knowledge base limits initiatives to improve health system performance," Etheredge writes. "With large, computer-searchable databases, studies that would now take years will be doable, at low expense, in a matter of weeks, days, or hours." Case studies accompanied by commentaries explore how EHR database research is being used at the VHA (for diabetes research and care), Kaiser (for cancer research and care), and Geisinger (to close the "inferential gap" between RCTs and real-world clinical decisions). David Eddy offers his vision for a health system that will use predictive models from large, merged databases of EHRs to advance the biomedical sciences as well as clinical care. Sean Tunis and colleagues suggest strategies to use large new government clinical care databases to support Medicare coverage decisions, comparative effectiveness studies, and postmarket drug safety surveillance.
The rapid-learning efforts described here were originally presented at a March 2006 conference in Washington, D.C., organized by Etheredge and Health Affairs and sponsored by the Robert Wood Johnson Foundation. The publication of the papers is also supported by Kaiser Permanente and the federal Agency for Healthcare Research and Quality.
Data gathered in electronic health records on the experience of millions of patients have the potential to dramatically accelerate clinical research and provide the nation with timely, urgently needed knowledge about the value of new medical technologies, researchers report in a special edition of Health Affairs on "rapid learning" published January 26. Strategies for advancing rapid learning in health care was the topic of a Health Affairs-sponsored conference in Washington, D.C., today that included an appearance by AHRQ Director Carolyn Clancy, as well as several authors from the January 26 issue.
A webcast of the briefing is available at:
www.rwjf.org/newsroom/activitydetail.jsp?id=10195&type=3
The attached prologue accurately reflects on the content and purpose of the articles.
Yours
Bernd
http://content.healthaffairs.org/cgi/content/full/hlthaff.26.2.w107/DC2
26 January 2007
Rapid Learning:
Getting Technology Into Practice
PROLOGUE: Amid persistent concerns about performance and quality, the health sector remains ambivalent about electronic health records (EHRs). Champions of accelerated adoption of health information technology (IT) have been unable to generate a groundswell of demand, despite excellent arguments for health IT's potential to save money, improve quality, and transform care. It may be, though, that the strongest argument for speeding IT adoption is still largely below the radar.
The dramatic pace of biomedical innovation has dazzled America but created nagging tensions as well. Our insatiable demand for new drugs and technologies is driving unsustainable growth in health spending. An explosion of new knowledge has strained clinicians' learning capacity and fostered subspecialization and fragmentation of care. Clinical research and regulatory capabilities are swamped with urgent questions about the safety and effectiveness of new treatments.
But on scattered islands within the dominant system, promising approaches to managing innovation are beginning to surface, and their foundation is the EHR. In organizations such as the Veterans Health Administration (VHA), Kaiser Permanente, and the Geisinger Health System, the richness of data capture in fully deployed patient record systems is enabling clinicians and researchers to answer practical questions about safety, effectiveness, and cost more efficiently than the traditional process of randomized clinical trials (RCTs) possibly could.
The implications of these approaches for the future of "rapid learning" are spelled out in an overview paper by Lynn Etheredge. "An inadequate knowledge base limits initiatives to improve health system performance," Etheredge writes. "With large, computer-searchable databases, studies that would now take years will be doable, at low expense, in a matter of weeks, days, or hours." Case studies accompanied by commentaries explore how EHR database research is being used at the VHA (for diabetes research and care), Kaiser (for cancer research and care), and Geisinger (to close the "inferential gap" between RCTs and real-world clinical decisions). David Eddy offers his vision for a health system that will use predictive models from large, merged databases of EHRs to advance the biomedical sciences as well as clinical care. Sean Tunis and colleagues suggest strategies to use large new government clinical care databases to support Medicare coverage decisions, comparative effectiveness studies, and postmarket drug safety surveillance.
The rapid-learning efforts described here were originally presented at a March 2006 conference in Washington, D.C., organized by Etheredge and Health Affairs and sponsored by the Robert Wood Johnson Foundation. The publication of the papers is also supported by Kaiser Permanente and the federal Agency for Healthcare Research and Quality.
Monday, January 15, 2007
Health Care Reform Ideas
Dear Friends and Colleagues:
Attached an article from todays Miami Herald and a response in the form of a Letter to the Editor.
============================================================================
Monday, January 15, 2007
Letter To The Editor
The interview with Brian Keeley, CEO of Baptist Health South, revealed a common misperception about how to solve America’s healthcare crisis. Locked into an ideological feud Democrats and Republicans either tout the benefits of a government-controlled system (Medicare For All) or the advantages of a free market system. Both sides are wrong.
Currently, local, state and federal government entities control 45% of all health care dollars spent and the number of uninsured is still rising, approaching almost one-third of all citizens in South Florida.
The so-called “free enterprise system” is riddled with mandates and regulations preventing an individual to obtain affordable insurance coverage and excluding those who suffer from even minor ailments.
A desired universal healthcare coverage should be based on the following:
1) Complete transparency and proper financial management of America’s domestic healthcare programs with full accountability of every tax-dollar spent;
2) Emphasis on prevention, individual choices and access to affordable medications;
3) Deregulation of the health insurance industry, removing insurance mandates and creation of an open national insurance market;
4) Comprehensive malpractice reform by establishing a medical court system and mandatory medical error reporting mechanisms, thereby guaranteeing the rights of patients and protecting the economic viability of the medical practitioner;
5) Creation of regional and national information sharing mechanism that allow for the immediate access to protected and safe guarded patient information, which will reduce the duplication of medical tests and avoid fatal medication errors.
America health care system is indeed in a deadly death spiral. We don’t need a Democratic or Republican solution. We need an American solution to provide health care for all.
Bernd Wollschlaeger,MD,FAAFP
Vice-President, Dade County Medical Association
16899 NE 15th Avenue
Miami,FL 33162
Phone: (305) 940-8717
============================================================================
Posted on Mon, Jan. 15, 2007
Reversing U.S. healthcare's 'death spiral'
Brian Keeley, head of South Florida's largest healthcare company, discusses what to do about the nation's health problems and his own firm's role.
BY JOHN DORSCHNER
jdorschner@MiamiHerald.com
Brian Keeley is a mix of big-time business executive, philosopher and social innovator.
As chief executive of Baptist Health South Florida, he has created over the past 20 years a strong nonprofit system of five hospitals in affluent southern Miami-Dade County and the Keys at a time when many stand-alone facilities were going under or being sold to for-profit chains.
The system has become South Florida's largest nongovernment employer, with more than 11,200 workers, and the region's biggest healthcare firm, with $1.5 billion in annual revenue and a net surplus of $136 million.
Even with all this success, Keeley is concerned about America's conflicting views of healthcare. He succinctly portrays the tensions this way: ``We all want the absolutely best care, and we want someone else to pay for it.''
Like many industry leaders, he is convinced the country's healthcare system is in a ''death spiral,'' because the number of uninsured keeps rising. These people tend to skip primary care and end up in emergency rooms, where they run up big bills that they frequently can't pay, meaning hospitals must charge private insurers more to make up for these losses. That tends to make private health insurance less affordable, causing more companies to drop coverage, increasing the number of uninsured, and so on.
At times a bubbly cheerleader for new ideas, Keeley has announced recently two major initiatives: Baptist Health South Florida will favor using vendors who provide health insurance for their employees and it plans to provide affordable housing to attract workers.
Q: America spends twice as much on healthcare as other industrial countries, but we have the same or shorter life expectancy. Do we spend too much?
A: Yes, America spends a lot, for various reasons. One is the demands of the American consumer, but also we have a highly fragmented, highly inefficient system. And we're the only one of those [industrial] countries without a national, single-payer system.
Q: Where is one area where we cut back on costs and not hurt healthcare?
A: I think the administrative overhead and the lack of any integrated medical record system is a huge opportunity. We have so much duplication because we have these little silos of information in each doctor's office and every hospital. And no one talks to each other, and so consequently when the physicians order things they have no idea what other doctors ordered.
If we could come up with a single electronic medical record system that everybody shared, in my estimation we could save trillions of dollars because everybody is accessing the same information. . . . Everybody has to share. I am an extremely strong advocate of this.
Q: America has 45 million uninsured. Give me a short take on how to get people covered.
A: You can take the Democratic approach -- universal health [insurance], government control. Or you can take the Republican approach -- the free enterprise system. I'm for the free enterprise system.
The system will not self-correct right now. The market forces aren't aligned to make it self-correct.
I love what Massachusetts is doing with the mandate [requiring employers to provide insurance]. They have less of a problem. Their uninsured is 6 to 8 percent. In Florida it's 19 percent and in South Florida it's approaching 30 percent. . . . California is similar to what they're doing in Massachusetts, maybe a little more aggressive. California has about 20 percent uninsured, so they're similar to us. . . .
But I love the idea of a mandate: If you're going to play in the arena, you have to provide health insurance, and if you don't, guess who picks it up? We do because there's a cost shift to the private sector [in which private insurers have to pay higher premiums to cover hospitals' costs for treating the uninsured], or they're put on Medicaid rolls and we pay through our taxes. So a mandate makes tremendous sense to me if we're going to operate under the free enterprise system.
Q: Hospital gross charges are often three or four times what private insurers or Medicare pays. Why not just do away with gross charges?
A: The complex gross charge structure is incongruent, incoherent, indefensible. I will not defend the way hospitals charge, but we don't control that because we have all these impositions that are brought down on us by the federal government, which by the way pays us two different ways for Medicare and Medicaid.
And then every managed care company decides at its own discretion that they're going to pay us differently.
If we had a uniform, single methodology for reimbursing hospitals and physicians, we could save a huge amount of money, but it's beyond our capability to force that upon these payers out there, because they're the ones who set the rules. And we need to make this consumer-friendly, especially as we have this major shift to consumer-driven healthcare.
Q: Baptist Health South Florida has a very healthy bottom line, and insurance companies say you charge too much. As a nonprofit, how would you explain your surpluses?
A: Yes, we do have a profitable operation. And we're mission driven. We're faith based. And what that means is every single penny gets pumped back into the community for the benefit of the community, through charity care, through community service, through building new hospitals, like Homestead, which nobody would ever build down there because we're still losing $7 [million] to $10 million in Homestead.
We're making a huge commitment over there and in West Kendall [where Baptist plans another new hospital]. So it's not going in anybody's pockets.
By having a strong bottom line, we can also give a significant amount of charity care. People are eligible for charity if they earn up to 300 percent of the federal poverty level -- in contrast to Jackson, where it's up to 200 percent.
Attached an article from todays Miami Herald and a response in the form of a Letter to the Editor.
============================================================================
Monday, January 15, 2007
Letter To The Editor
The interview with Brian Keeley, CEO of Baptist Health South, revealed a common misperception about how to solve America’s healthcare crisis. Locked into an ideological feud Democrats and Republicans either tout the benefits of a government-controlled system (Medicare For All) or the advantages of a free market system. Both sides are wrong.
Currently, local, state and federal government entities control 45% of all health care dollars spent and the number of uninsured is still rising, approaching almost one-third of all citizens in South Florida.
The so-called “free enterprise system” is riddled with mandates and regulations preventing an individual to obtain affordable insurance coverage and excluding those who suffer from even minor ailments.
A desired universal healthcare coverage should be based on the following:
1) Complete transparency and proper financial management of America’s domestic healthcare programs with full accountability of every tax-dollar spent;
2) Emphasis on prevention, individual choices and access to affordable medications;
3) Deregulation of the health insurance industry, removing insurance mandates and creation of an open national insurance market;
4) Comprehensive malpractice reform by establishing a medical court system and mandatory medical error reporting mechanisms, thereby guaranteeing the rights of patients and protecting the economic viability of the medical practitioner;
5) Creation of regional and national information sharing mechanism that allow for the immediate access to protected and safe guarded patient information, which will reduce the duplication of medical tests and avoid fatal medication errors.
America health care system is indeed in a deadly death spiral. We don’t need a Democratic or Republican solution. We need an American solution to provide health care for all.
Bernd Wollschlaeger,MD,FAAFP
Vice-President, Dade County Medical Association
16899 NE 15th Avenue
Miami,FL 33162
Phone: (305) 940-8717
============================================================================
Posted on Mon, Jan. 15, 2007
Reversing U.S. healthcare's 'death spiral'
Brian Keeley, head of South Florida's largest healthcare company, discusses what to do about the nation's health problems and his own firm's role.
BY JOHN DORSCHNER
jdorschner@MiamiHerald.com
Brian Keeley is a mix of big-time business executive, philosopher and social innovator.
As chief executive of Baptist Health South Florida, he has created over the past 20 years a strong nonprofit system of five hospitals in affluent southern Miami-Dade County and the Keys at a time when many stand-alone facilities were going under or being sold to for-profit chains.
The system has become South Florida's largest nongovernment employer, with more than 11,200 workers, and the region's biggest healthcare firm, with $1.5 billion in annual revenue and a net surplus of $136 million.
Even with all this success, Keeley is concerned about America's conflicting views of healthcare. He succinctly portrays the tensions this way: ``We all want the absolutely best care, and we want someone else to pay for it.''
Like many industry leaders, he is convinced the country's healthcare system is in a ''death spiral,'' because the number of uninsured keeps rising. These people tend to skip primary care and end up in emergency rooms, where they run up big bills that they frequently can't pay, meaning hospitals must charge private insurers more to make up for these losses. That tends to make private health insurance less affordable, causing more companies to drop coverage, increasing the number of uninsured, and so on.
At times a bubbly cheerleader for new ideas, Keeley has announced recently two major initiatives: Baptist Health South Florida will favor using vendors who provide health insurance for their employees and it plans to provide affordable housing to attract workers.
Q: America spends twice as much on healthcare as other industrial countries, but we have the same or shorter life expectancy. Do we spend too much?
A: Yes, America spends a lot, for various reasons. One is the demands of the American consumer, but also we have a highly fragmented, highly inefficient system. And we're the only one of those [industrial] countries without a national, single-payer system.
Q: Where is one area where we cut back on costs and not hurt healthcare?
A: I think the administrative overhead and the lack of any integrated medical record system is a huge opportunity. We have so much duplication because we have these little silos of information in each doctor's office and every hospital. And no one talks to each other, and so consequently when the physicians order things they have no idea what other doctors ordered.
If we could come up with a single electronic medical record system that everybody shared, in my estimation we could save trillions of dollars because everybody is accessing the same information. . . . Everybody has to share. I am an extremely strong advocate of this.
Q: America has 45 million uninsured. Give me a short take on how to get people covered.
A: You can take the Democratic approach -- universal health [insurance], government control. Or you can take the Republican approach -- the free enterprise system. I'm for the free enterprise system.
The system will not self-correct right now. The market forces aren't aligned to make it self-correct.
I love what Massachusetts is doing with the mandate [requiring employers to provide insurance]. They have less of a problem. Their uninsured is 6 to 8 percent. In Florida it's 19 percent and in South Florida it's approaching 30 percent. . . . California is similar to what they're doing in Massachusetts, maybe a little more aggressive. California has about 20 percent uninsured, so they're similar to us. . . .
But I love the idea of a mandate: If you're going to play in the arena, you have to provide health insurance, and if you don't, guess who picks it up? We do because there's a cost shift to the private sector [in which private insurers have to pay higher premiums to cover hospitals' costs for treating the uninsured], or they're put on Medicaid rolls and we pay through our taxes. So a mandate makes tremendous sense to me if we're going to operate under the free enterprise system.
Q: Hospital gross charges are often three or four times what private insurers or Medicare pays. Why not just do away with gross charges?
A: The complex gross charge structure is incongruent, incoherent, indefensible. I will not defend the way hospitals charge, but we don't control that because we have all these impositions that are brought down on us by the federal government, which by the way pays us two different ways for Medicare and Medicaid.
And then every managed care company decides at its own discretion that they're going to pay us differently.
If we had a uniform, single methodology for reimbursing hospitals and physicians, we could save a huge amount of money, but it's beyond our capability to force that upon these payers out there, because they're the ones who set the rules. And we need to make this consumer-friendly, especially as we have this major shift to consumer-driven healthcare.
Q: Baptist Health South Florida has a very healthy bottom line, and insurance companies say you charge too much. As a nonprofit, how would you explain your surpluses?
A: Yes, we do have a profitable operation. And we're mission driven. We're faith based. And what that means is every single penny gets pumped back into the community for the benefit of the community, through charity care, through community service, through building new hospitals, like Homestead, which nobody would ever build down there because we're still losing $7 [million] to $10 million in Homestead.
We're making a huge commitment over there and in West Kendall [where Baptist plans another new hospital]. So it's not going in anybody's pockets.
By having a strong bottom line, we can also give a significant amount of charity care. People are eligible for charity if they earn up to 300 percent of the federal poverty level -- in contrast to Jackson, where it's up to 200 percent.
Sunday, January 14, 2007
Doctor Faces Criminal Charges
Dear Friends and Colleagues:
Attached an article from today's Miami Herald reporting that a Miami-Dade heart surgeon facing criminal charges for perjury and fraud for allegedly exaggerating his qualifications about his experience doing open-heart surgery while giving a deposition for the plaintiff in a Michigan malpractice case, in which the federal government was the defense.
I personally know Dr. Zakharia and was saddened to hear that a dedicated surgeon faces such serious charges.
What can we learn from this case?
Yours
Bernd
Attached an article from today's Miami Herald reporting that a Miami-Dade heart surgeon facing criminal charges for perjury and fraud for allegedly exaggerating his qualifications about his experience doing open-heart surgery while giving a deposition for the plaintiff in a Michigan malpractice case, in which the federal government was the defense.
I personally know Dr. Zakharia and was saddened to hear that a dedicated surgeon faces such serious charges.
What can we learn from this case?
- Carefully prepare your testimony
- If in doubt do not guess, but answer " I have to get back to you"
- Be prepared that your entire performance records are discoverable and can be subpoenaed.
Yours
Bernd
| Posted on Tue, Jan. 09, 2007 |  |
| |
| COURTS Heart surgeon faces criminal charges In a rare move, a federal grand jury indicted a Miami heart surgeon for allegedly lying in a Detroit malpractice case. jdorschner@MiamiHerald.com Alex Zakharia, 68, a Miami-Dade heart surgeon for more than 30 years, is facing criminal charges in Detroit for perjury and fraud. The doctor was indicted by a federal grand jury, which alleged that he exaggerated his qualifications about his experience doing open-heart surgery while giving a deposition for the plaintiff in a Michigan malpractice case, in which the federal government was the defense. Zakharia told The Miami Herald on Monday that the defense lawyers didn't understand him, he didn't exaggerate and the issue of his experience wasn't even material to the central subject in the case, which he said involved botching the presurgery tests of a patient. ''They should be going after the doctors who did this to this veteran, instead of a doctor who gave his honest opinion,'' Zakharia said. He has hired a lawyer and hopes to have the case resolved shortly. The qualifications of doctor-witnesses are often challenged in hotly contested malpractice lawsuits, but officials of the Florida Medical Association and the Florida Justice Association, the new name for the state's trial lawyers group, could not immediately recall any other examples of doctors being criminally charged with misstating their qualifications. Many doctors testify against other doctors only in proceedings far from their own states, and the Florida Medical Association has been pushing the Legislature to pass a law licensing out-of-state medical witnesses so that juries can be sure of their qualifications. Trial lawyers have vehemently opposed the measure, which has repeatedly failed to pass. The charges against Zakharia were pushed by the U.S. Attorney's Office in the Eastern District of Michigan, which was also the office that provided the defense attorneys in the malpractice lawsuit, brought by a man whose last name was Rodgers against the Veterans Administration and the U.S. government. Zakharia said notes in the medical case file clearly indicated that, before the coronary bypass surgery, an ultrasound to detect blocked carotid arteries was inconclusive and needed to be redone. But new tests were not done before surgery. During his deposition in that case, Zakharia was asked by defense attorneys about his qualifications on coronary bypass surgery. The indictment alleges Zakharia testified he performed 10 to 12 such operations a year and was the lead surgeon during the operations. When defense attorneys said records of the hospitals he mentioned -- Cedars and Miami Heart -- did not support his claims, he said the hospital records were in error, the government alleges. Later, an attorney ''who had paid him thousands of dollars to testify as an expert witness,'' asked him about the discrepancies in his experience, and Zakharia continued ''to mislead the attorney concerning the extent of his surgical experience,'' the indictment alleges. Zakharia said Monday he participated in those surgeries, but he made his role clear to attorneys. ``I told them I'm not the lead surgeon. I assist.'' But the indictment includes a portion of a transcript: Q: ``When you say you are doing about 10 CABG procedures a year, are you the attending physician, the guy in the chest doing the sewing and cutting?'' A: Yes. I'm not including many cases where I assist or supervise other younger surgeons, you know.'' Q: ``You would be the man who signs the operative note?'' A: ``Yes.'' Zakharia said Monday he doesn't testify in many malpractice cases and maintains a full practice. He will turn 69 later this month. ''I'm held in very high regard,'' he said. ``I did five procedures and saw 16 patients today.'' | |
HealthCare Reform Plan in California
TOPIC: Health Care Reform in California
"But when you look at the math, they actually benefit. Everyone is left with a better deal,
even though everyone has to chip in." (Governor Schwarzenegger)
even though everyone has to chip in." (Governor Schwarzenegger)
Governors Schwarzeneggers bold healthcare reform proposal has triggered a wave of support and opposition.
Dear Friends and Colleagues:
I think its important to understand his proposal and to learn how to refine such an approach, so that it can achieve what it is supposed to achieve.
California now has about 6.5 million people who are uninsured or underinsured, a higher level than any other state. According to the Census Bureau, 15.9% of Americans lacked health insurance in 2005; in California, it was 19.4% ( in South Florida almost 30%!!).
The plan would require employers with 10 or more workers to provide health insurance or pay a 4% tax on all wages covered by Social Security: The plan would be financed by charging a "dividend" (i.e .TAX) of 2% on doctors' revenue and 4% on hospitals' and $10 billion to $15 billion in new money coming into the medical system from so many people being insured, as well as a proposed increase in the state's Medi-Cal plan.
Such a "tax", camouflaged as a "dividend", guarantees opposition from California physicians who already voiced their concerns.
David Henderson brings up a very important point; does universal coverage provided by the government work?
He raises two concerns:
"Why doesn't increased government power tend to solve the problem of the uninsured? There are two main reasons. First, when government provides health insurance, many people who take advantage of it drop their own privately provided health insurance. In a 1996 article in the Quarterly Journal of Economics, Harvard economists David M. Cutler and Jonathan Gruber found a 50% "crowding-out effect." As the federal Medicaid program expanded, for every two people who gained insurance through Medicaid, one dropped private health insurance. Although this is a net addition of one, the costs to taxpayers are much higher than expected because now half of the newly covered, instead of paying their own way as they previously did, become wards of the state.
Second, of the 46 million or so people without health insurance at any given time, about 45% will have health insurance within four months. This is one of the main findings of a 2003 study by the Congressional Budget Office, "How Many People Lack Health Insurance and for How Long?" That shouldn't be surprising in a country where most private health insurance is employer-provided and most unemployment spells last 11 weeks or less. Solutions that involve government mandates on employers or employees will, therefore, miss connecting with about half of the people who are uninsured at a given point in time."
Maybe Governor Schwarzenegger should consider the following:
1) Abolish or reduce government mandates, which have contributed to an increase in insurance premiums
2) Open the market place and let insurance providers from all over the US compete for customers, thereby allowing average citizens to buy health insurance in the same way as they currently can but car insurance.
Again David Henderson points out:
"In the last few decades, state governments, the main regulators of health insurance in the individual and small-group markets, have mandated coverages for many kinds of health care. According to the Council for Affordable Health Insurance (CAHI), a pro-market association of insurance carriers, there were 1,843 state mandates in 2006. Among the most common, and most expensive, mandates are chiropractic care, treatment for alcoholism and drug abuse, and mental health benefits. California's government mandates coverage for all of the above, as well as for many other benefits, including, for example, infertility treatment -- a very expensive benefit.
Abolishing these mandates would allow people who don't want to be covered for these things to buy cheaper insurance, while still allowing those who want them to buy and pay for them. Would such an approach work? That's like asking whether, if the government currently required new cars to have CD players, eliminating that requirement would lower the price of a car. Of course it would work.""
=====================================================================================
Schwarzenegger Embarks
On Fight for Health Plan
By JIM CARLTON
January 9, 2007; Page A2
(See Corrections & Amplifications item below.)
California Gov. Arnold Schwarzenegger proposed a sweeping plan to mandate universal health care in the nation's most-populous state, putting forth measures that would require employers to pay into the health-care system as well as tax hospitals and doctors to help offset medical coverage's spiraling costs.
The move makes Mr. Schwarzenegger, a Republican, the latest governor to try to tackle a problem -- covering the uninsured -- that the federal government has been unable to solve. Massachusetts Gov. Mitt Romney, who is seen as a Republican contender for the presidency, struck a bipartisan deal with his state's legislature last year mandating universal health care in the Bay State. Mandates for some employers to pay more of their share if they don't already have been passed in Vermont and Maryland, as well as New York City and San Francisco. Maryland's law was thrown out by a federal judge last year after a legal challenge.
California, with 36 million residents, could influence other states to follow suit. But Mr. Schwarzenegger also faces potentially one of the fiercest battles of his political career, because his plan calls for some level of sacrifice from many of the parties affected.
The governor anticipated criticism in his remarks yesterday to a Sacramento gathering of his staff and business executives, saying the long-term rewards of having lower medical costs would make the pain worthwhile. "It appears we are taking something away from everyone here," Mr. Schwarzenegger said by video link as he recuperated from a broken leg injury he suffered while skiing over the holiday break in Sun Valley, Idaho. "But when you look at the math, they actually benefit. Everyone is left with a better deal, even though everyone has to chip in."
The governor said his plan to charge a "dividend" of 2% on doctors' revenue and 4% on hospitals' would be more than offset by what his office estimates would be $10 billion to $15 billion in new money coming into the medical system from so many people being insured, as well as a proposed increase in the state's Medi-Cal plan.
California now has about 6.5 million people who are uninsured or underinsured, a higher level than any other state. According to the Census Bureau, 15.9% of Americans lacked health insurance in 2005; in California, it was 19.4%.
The Schwarzenegger plan drew some skepticism. "There may be some unintended consequences," said Joel Fox, president of the Small Business Action Committee in Sacramento, in a panel discussion organized by the governor's administration after the speech. "For example, will some businesses opt out of covering employees and go into the pool [of state-insured workers], thus overwhelming the pool? Will some companies cherry-pick their employees so that they hire those more easily covered, instead of guys like me that are older?"
Allan Zaremberg, president of the California Chamber of Commerce, questioned whether the plan would really make health care more affordable for those who already are insured. Mr. Zaremberg said the taxes on doctor and hospital revenues could be passed onto consumers and the companies that already provide insurance in higher premiums.
Others praised the plan. Officials of Blue Cross of California called it "bold and visionary," singling out the provision to provide medical coverage to all uninsured children in the state, even those of illegal immigrants. "Taking each part separately, there's something for everyone to hate, but taken as a whole, there's a lot to like," said Bruce Bodaken, chairman, president and Chief Executive of Blue Cross of California.
Some other business leaders, including the chief executive of California-based grocery titan Safeway Inc., are also backing the plan. One reason: They already pay to fund medical plans for their employees, and resent the competitors who don't. On balance, the governor likely will have a tougher time persuading members of his own party to back the measure than the Democratic lawmakers who control the California Legislature. Indeed, Mr. Schwarzenegger's plan isn't hugely different from versions recently proffered by state Senate President Don Perata and Assembly Speaker Fabian Nunez. Mr. Nuñez said in an interview that he just had a few issues with the governor's plan -- most important, that it would shift money from one program for the poor into this health-care program. "On its face, this is a good start," Mr. Nuñez said.
he California government could allow any Californian to buy health insurance from any willing insurer in any state and be subject to the regulations of that state. That way, people could shop for the degree of paternalism they want. If they want insurance from a state that requires many coverages, they could do so and pay the high premiums that result. If they want bare-bones coverage, they could do so also. The result would surely be that some of the current uninsured would buy insurance. Were I in the market for individual insurance and given the choice, I would not bother paying for coverage for alcohol or drug abuse.
---- Mark Golden contributed to this article.
======================================================================================
Terminatorcare
By DAVID R. HENDERSON
January 10, 2007; Page A17
MONTEREY, Calif. -- On Monday, Arnold Schwarzenegger presented his proposal for reducing the number of Californians who lack health insurance. His proposal is almost indistinguishable -- except in details -- from that of the Democrats who dominate the California Assembly and Senate.
The Democrats tend to favor solutions involving regulations, government spending and taxes, and Senate President Pro Tem Don Perata's proposal -- the main contending Democrat plan -- hits the trifecta. It would require employers to provide health insurance; give them the option of paying a tax instead of providing health insurance; and increase spending by expanding both the Medi-Cal and Healthy Families programs, which provide care to low-income children -- including children of illegal immigrants and the disabled.
[graphic]
Mr. Schwarzenegger's solution hits the trifecta also. He would require employers with 10 or more workers to provide health insurance or pay a 4% tax on all wages covered by Social Security: Look for employers with 10 to 12 employees to get creative about outsourcing. And look as well, as Harvard economist Jonathan Gruber has documented, for wages to fall in firms that offer health insurance because of the mandate. Gov. Schwarzenegger would throw in a 2% tax on doctors and a 4% tax on hospitals to help fund Medi-Cal, California's name for Medicaid. And he would expand Medi-Cal to adults earning as much as 100% above the poverty line and to children, even those here illegally, in poor and middle-income families. He hopes, by doing this, to shift $5 billion of Medi-Cal's annual cost to the federal government.
There are two problems with such solutions. First, they infringe on economic freedom, preventing, in Robert Nozick's phrase, "capitalist acts between consenting adults." Second, government solutions rarely work.
Why doesn't increased government power tend to solve the problem of the uninsured? There are two main reasons. First, when government provides health insurance, many people who take advantage of it drop their own privately provided health insurance. In a 1996 article in the Quarterly Journal of Economics, Harvard economists David M. Cutler and Jonathan Gruber found a 50% "crowding-out effect." As the federal Medicaid program expanded, for every two people who gained insurance through Medicaid, one dropped private health insurance. Although this is a net addition of one, the costs to taxpayers are much higher than expected because now half of the newly covered, instead of paying their own way as they previously did, become wards of the state.
Second, of the 46 million or so people without health insurance at any given time, about 45% will have health insurance within four months. This is one of the main findings of a 2003 study by the Congressional Budget Office, "How Many People Lack Health Insurance and for How Long?" That shouldn't be surprising in a country where most private health insurance is employer-provided and most unemployment spells last 11 weeks or less. Solutions that involve government mandates on employers or employees will, therefore, miss connecting with about half of the people who are uninsured at a given point in time.
But what if the governor could solve some of the problem by making health insurance cheaper? He can -- not by regulating more, but by deregulating.
Let me explain. In the last few decades, state governments, the main regulators of health insurance in the individual and small-group markets, have mandated coverages for many kinds of health care. According to the Council for Affordable Health Insurance (CAHI), a pro-market association of insurance carriers, there were 1,843 state mandates in 2006. Among the most common, and most expensive, mandates are chiropractic care, treatment for alcoholism and drug abuse, and mental health benefits. California's government mandates coverage for all of the above, as well as for many other benefits, including, for example, infertility treatment -- a very expensive benefit.
Abolishing these mandates would allow people who don't want to be covered for these things to buy cheaper insurance, while still allowing those who want them to buy and pay for them. Would such an approach work? That's like asking whether, if the government currently required new cars to have CD players, eliminating that requirement would lower the price of a car. Of course it would work.
It is important, though, not to overstate its benefits. The gain to Californians from abolishing these mandates would not be huge. CAHI compiled data from America's Health Insurance plan and eHealthInsurance for the individual market and from the federal government for the small-group market and found that in 2003, although California had more mandated coverages than all but six other states, it had among the lowest insurance rates for individual health insurance policies ($1,885 versus a top rate of $6,048 for New Jersey.)
The reason, explains CAHI, is that in other ways California is much less regulatory than many other states. It does not, for example, require guaranteed issue on individual policies -- which drives up premiums by forcing insurance companies to supply policies to all comers, regardless of health status. Yet the governor's proposal would reverse this somewhat and prevent insurance companies from saying no because of age and health.
California should not, contra Gov. Schwarzenegger, do new regulatory harm; rather it should repeal existing regulations that cause harm -- so as to make health insurance even more affordable.
There is one other way to deregulate: The California government could allow any Californian to buy health insurance from any willing insurer in any state and be subject to the regulations of that state. That way, people could shop for the degree of paternalism they want. If they want insurance from a state that requires many coverages, they could do so and pay the high premiums that result. If they want bare-bones coverage, they could do so also. The result would surely be that some of the current uninsured would buy insurance. Were I in the market for individual insurance and given the choice, I would not bother paying for coverage for alcohol or drug abuse.
If a version of Gov. Schwarzenegger's plan passes, the only thing certain is that there will be more regulation, more government spending and more taxes. A better path would be to deregulate, and thus achieve some increase in the number of insured -- without new spending or taxes or regulation.
Mr. Henderson, a research fellow at Stanford's Hoover Institution, was the senior economist for health policy with President Reagan's Council of Economics Advisers (1982-84). He is co-author of "Making Great Decisions in Business and Life" (Chicago Park Press, 2006).
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