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Health Care is Now All About Politics

I really hate it that I have to write about Obamacare every week. Unfortunately, the law is so sweeping and so onerous that it has taken all of the air out of the room and left little time to discuss anything else. We don’t get to look at any other developments around the world or domestically in medicine or health care financing. We aren’t even able to deal with the stalking horses of Health Information Technology or Comparative Effectiveness Research, which slightly preceded ObamaCare by being inserted into the “stimulus package.”

It isn’t just us. There are a flood of conferences around the country aimed at employers and providers on topics such as “how to transform your business into an Accountable Care Organization.” As if anyone wanted to be an Accountable Care Organization before this damned law was passed. No one even knew, or knows today, what an Accountable Care Organization is, but when the Feds put up a hunk of moolah everyone jumps to get a piece of it. 

And it isn’t just today. This will be going on for the next twenty years. Already there are new proposals floating around in Congress to “improve and enhance” Obamacare. Every time a politician sneezes the entire health care system will reach for a hankie. And not one minute or one dollar of all of this has anything to do with actually caring for patients.

Health care is now about nothing except politics.

Once More to Massachusetts

Writing in the Wall Street Journal on July 7, Joseph Rago looks at how the Bay State is doing as a model for ObamaCare and concludes, “the Massachusetts plan couldn’t be a more damning indictment of ObamaCare.” He begins with the arbitrary price controls on insurance premiums that ignored the advice of the state’s professional insurance regulators, and were eventually reversed by a state appeals board. Still, he says, “the five major state insurers have so far collectively lost $116 million due to the rate cap. Three of them are now under administrative oversight because of concerns about their financial viability.”

Now, the governor “wants to export the rate review beyond the insurers to hospitals, physician groups and specialty providers-presumably to set medical prices as well as insurance prices,” and a state senator “has introduced a new bill that will make physician participation in government health programs a condition of medical licensure.”

Robert Samuelson takes a similar view in The Washington Post and decides that the Massachusetts experience is “not encouraging.” He says, “The state did the easy part: expanding state-subsidized insurance coverage. It evaded the hard part: controlling costs and ensuring that spending improves people’s health.”

He acknowledges that the state reduced the numbers of uninsured and slightly improved access, “But much didn’t change. Emergency rooms remain as crowded as ever (and) state leaders have proved powerless to control costs.” He adds that state spending on health care has risen from 16% of its budget in 1990, to 22% in 2000, and 35% this year. Health care is squeezing out everything else the state is expected to do.

He says, “A year ago, a state commission urged another approach: Scrap the present “fee-for-service” system,” in favor of a “global budget.” “But the commission offered no blueprint, and efforts to craft consensus among providers, consumer groups and insurers have failed. State Senate President Therese Murray, an advocate of payment change, has given up for this year. ‘Nobody is in agreement on anything,’ she told the Boston Globe.”

He concludes, “What’s occurring in Massachusetts is the plausible future: Unchecked health spending shapes government priorities and inflates budget deficits and taxes, with small health gains. And they call this “reform”?

Meanwhile, in the Boston Globe Kay Lazar writes, “The relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead, a trend that, some analysts say, could eventuallyweigh heavily on the state’s already-stressed budget.”

She cites one broker who has lost 90 employer clients to the state plan since April and another consultant who has been asked to help 400 workers get state subsidized coverage. State officials are unconvinced it is a trend, but the last survey was done at the end of 2009. The article says, “company owners say, it has become far cheaper to pay the state penalty for not covering their workers – roughly $295 annually per employee – than to pay thousands more in premiums.” It adds that the federal penalty that goes into effect in 2014 does not impose any penalty on firms with fewer than 50 employees, so we can expect a flood of small employers dropping coverage then.

Also from the Boston Globe is an article by Elizabeth Clooney that reports “primary care doctors (are) harder to find.” She bases her reporting on a study issued by the state and says, “Massachusetts has the highest ratio of doctors per population in the country, but that doesn’t mean its residents can find a primary care physician who is accepting new patients.” More specifically, she writes, “Last year 60 percent of family medicine doctors’ offices were accepting new patients, down from 70 percent in 2007 (and) only 44 percent of internal medicine practices were accepting new patients, down from 66 percent in 2005.” In fact, “last year 22 percent of residents said they had trouble obtaining health care, despite statewide gains in insurance coverage.”

Legislator Laments “Federal Incoherency” in Medicaid

A Democrat state representative in Washington discusses his frustration in trying to deal with federal chaos in funding for Medicare and Medicaid. He writes, “expect cash-strapped states to cut Medicaid eligibility, reduce benefits and increase co-pays. All with an additional 16 million Medicaid enrollees expected in 2014 when the federal health-care-reform bill expands eligibility. This is hardly what was hoped for back in March. A federal commitment to health care cannot be only rhetorical. Nor can we feel sanguine about the ability to assume new obligations when old ones are neglected.”

States, Meant to Implement ObamaCare, Have No Money

It’s already 2011, if you are interested in state budgets. Almost all the states entered Fiscal Year 2011 on July 1 and the prognosis is grim.

California is $19.1 billion in the red and the legislature has gone home without passing a budget. So Gov. Schwarzenegger has said he will cut the wages of state employees to the federal minimum of $7.25/hour, at least for those employees whose unions are not willing to negotiate new contracts.

In New York, Gov. Patterson sat down to veto 6,900 budget additions that had been passed by the legislature and he still doesn’t expect the budget to be in balance.

And so it goes across the U.S. with only a couple of exceptions. One exception is Indiana, which has balanced its budget by not relying on federal funds. Gov. Mitch Daniels said, “It would have never entered our mind to put funny money like that into the budget.” Good thing because Congress did not pass the “stimulus” money many states were counting on.

Another exception is New Jersey, where Gov. Chris Christie managed to cut spending by 8.8% from last year and refused demands to raise taxes on “millionaires.” Now he has called for a special session of the legislature to limit property tax hikes to no more than 2.5% per year.

In Oregon they tried raising taxes on “the rich.” The state passed a referendum in January to substantially raise taxes on those making more than $125,000 per year and on corporations, but the hoped-for revenues never materialized, so Gov. Kulongoski is calling for a 9 percent across-the-board cut in state spending.

What does all this have to do with health care? Everything. The new Obamacare law relies on the states to implement a lot of the provisions, including the new high-risk pools, Medicaid expansions, tighter policing on insurance practices, and creation of the “insurance exchanges.” But even when most of the program costs are covered by the Feds, the cost and administrative burden of setting up the programs are left to the states. They don’t have any money. Such costs would have to come from cuts in other programs such as public safety, education, health care for the indigent, and nutrition programs for the poor.

Time magazine reports, “Insurance commissioners, with such a vital role to play in enforcing the new health-reform law, have a lot on their shoulders. Offices will need to bulk up, actuaries will need to be hired. California, which recently investigated insurer Anthem over its proposed rate hikes in the individual-health-insurance market, had to hire an outside actuarial firm to review the company’s books.”

So, instead of fighting fires, paving roads, or feeding children, the states will be hiring actuaries to satisfy their masters in Washington.

Wait Times at ER May Increase

ER wait times may increase as a result of the nation’s new health care law. The uninsured are not the only users of the ER. In fact, the biggest users of the ER are Medicaid recipients, the number of which will increase by roughly 16 million under the new law, making matters worse. We also face a physician shortage that helps account for long wait times in emergency rooms … and that shortage will be made worse by the health care law.

Dr. Arthur L. Kellermann of RAND Corporation says, “More people will have coverage and will be less afraid to go to the emergency department if they’re sick or hurt and have nowhere else to go. … We just don’t have other places in the system for these folks to go.”

ER crowding has been a long-standing problem in the U.S. A 2009 report by the Government Accountability Office, Congress’s investigative arm, found ER patients who should have been seen immediately waited nearly a half-hour. It is highly unlikely the problem will disappear over night.

Massachusetts Struggles with Reform

Massachusetts, the prototype of Obamacare, continues to struggle with its reform scheme. An article by Jim Stergios and Amy Lischko in the Boston Globe opines, “The Commonwealth’s 2006 health care reform was supposed to help address rising health insurance costs for small businesses. It hasn’t — and small businesses are paying the price.”

They explain, “The lack of focus on small businesses is evident. The Connector took three years to make information about provider networks and participating primary care providers for small businesses available on its website. It took over two years to launch a small employer pilot program; in more than a year it attracted just 65 businesses and has now been replaced by a new program that offers only seven plans.”

The authors compare this to a similar effort in Utah that was more focused on helping business and less on building a bureaucracy. The Massachusetts Connector has a $40 million administrative budget that employs 45 people earning an average $100,000 salary. In contrast, the Utah Exchange has just two employees and a budget of $600,000. The authors write, “Fewer than 1,500 small business employees receive coverage through the Connector. In Utah, with a far smaller population, about 55,000 small business employees have purchased health insurance through the Exchange. It offers 66 plans from a number of carriers, including the largest ones in the state.”

Lawsuit Update

The lawsuits against this bill are looking like winners. A blog called 60 Second Activist summarized where they are now. It says –

“The New York Times’ Kevin Sack reports that the lawsuits challenging the constitutionality of Obamacare could actually invalidate the new law. “Some legal scholars, including some who normally lean to the left, believe states have identified the law’s weak spot and devised a credible theory for eviscerating it,” Sack wrote.

and –

Jonathan Turley of the George Washington University Law School, agreed that the arguments against Obamacare are compelling. “There are few cases in the history of the court system that have a more significant assertion by the government,” Turley said.

It adds -

One of the outside attorneys who will be handling the case for states, David B. Rivkin, Jr., countered, “Every decision you can make as a human being has an economic footprint…To say that is enough for your behavior to be regulated transforms the Commerce Clause into an infinitely capacious font of power…” The case will be heard on September 14 before U.S. District Judge Roger Vinson in Pensacola. Vinson, 70, was appointed to the bench in 1983 by President Reagan and is now on senior status, a form of semi-retirement for federal judges.

On the other hand, a blog on the New England Journal web site by Sara Rosenbaum and Jonathan Gruber makes the case for why they think the law will prevail. It is not a very compelling argument because it relies far too much on social policy fallacies, like that the uninsured incur a lot of uncompensated care and that non-insurance is a major cause of bankruptcy. These folks seem to actually believe their own propaganda, which is always dangerous.

The Costs of ObamaCare for Business

At Health Care News, Charles Arp, a small business owner in Illinois, shares his experience trying to qualify for the supposedly “generous” tax credits under Obama’s law:

“Talk about unintended consequences! My firm would have to reduce its workforce and cut employee wages to benefit from the newly enacted Patient Protection and Affordable Care Act. Is this what the objective should be? I would never consider taking such action. Most of the employees have worked at Pinney for twenty years or more. It did get me thinking, though: Maybe we could divide Pinney Printing Company into two smaller firms. While I’m no expert at gaming the government, like some people, it’s certainly a possibility many will consider. I feel foolish now, after getting my hopes up for a government solution to our problem.”

Across the country, soon thousands of other employers will have similar experiences.

Health Savings Accounts Still Growing

It is already old news, but AHIP has issued its latest survey of HSA enrollment (PDF). The survey found that 10 million people were enrolled in HSA-qualified coverage as of January 1, 2010, an increase of 25% from a year ago.

The states with the greatest numbers enrolled were California (1,018,000), Ohio (651,000), Florida (639,000), Texas (637,000), Illinois (575,000), and Minnesota (361,000). The states with the greatest market penetration were Vermont (13.8%), Colorado (9.2%), Minnesota (9.2%), Arkansas (8.2%), Indiana (8.1%), and Ohio (8.0%).The report includes details on average premium, average deductible, and market segments.

EBRI also released a report on Consumer Driven Health Care this month. This one is focused on the accounts themselves, including balances and amounts rolled over. It found in August of 2009 there were 5 million HRA and HSA accounts with $7.1 billion in assets. This is up from 1.2 million accounts and $835 in assets in 2006. Average account balances were $1,419 in 2009, up from $606 in 2006. But the average balance grew modestly in the past two years (3% in 2008 and 5% in 2009.)

The report gives a lot of detail on the characteristics of those enrolled, but of greatest interest to me are the income and educational levels of enrollees. EBRI finds that 45% of CDHP enrollees had incomes of $50,000 to $99,999, while only 38% of traditional plan enrollees did. This might suggest some selection based on income, but the difference in education was even greater, with 46% of CDHP enrollees having a college degree and another 21% with a graduate degree. This compares to 23% and 11% respectively for traditional plan enrollees. These results suggest that education is a far more important factor in selecting a CDHP plan than income is. The report also says, “There are no statistically significant differences in self-reported health status between CDHP and traditional plan enrollees.”

CFO magazine reports on another study, this one from Towers Watson and the national Business Group on Health. It finds that 50% of employers now offer some form of CDHP and that is expected to rise to 60% in the coming year. It adds that CDHPs now cover 15.4% of all employees. The article says concerns linger about whether employees can handle the out-of-pocket cost involved with a CDHP, but “a recent analysis of the data by Towers Watson and the NBGH suggests that at least some employee concerns may be unwarranted.” It quotes Ted Nussbaum as saying, “The perception is that because CDHPs are based on a high deductible, employees pay considerably more, but we’re just not finding that to be the case.”

The article also says that savings depend on the take-up rate among employees. It says, “Compared with the $7,826 average cost per employee in a non-CDHP plan, those with more than 50% of the workforce enrolled in CDHP plans saw an average $978 savings per employee, while those with under 20% enrollment saw only an $83 savings per employee.” The article also reports that renewal rates have not been as favorable as companies stay with the program longer.

Docs on the Ropes

Physicians are getting hit from all sides. An article by Pauline Chen, MD, in the New York Times illustrates why physicians are angry. It is largely due to the interference of third-party payers in the practice of medicine. She quotes Dr. Daniel Palestrant of Sermo as saying, “Physicians have concerns about the power and undue influence of third parties and insurance companies. When it comes to medical practice, they are saying this just doesn’t work. They are acting in effect like the canaries in a coal mine.”

She adds, “These canaries may be right. Last year, a study published in the health policy journal Health Affairs found that physicians in private practice on average spent nearly three weeks in time and $68,000 in staffing per year dealing with the particular administrative constraints of third-party payers.

It isn’t just private third party payers that are a problem. Public ones like Medicare and Medicaid are even worse. The administrator of an oncology practice in Little Silver, New Jersey wrote to the Asbury Park Press, “I am horrified to see the federal government making decisions on health care based on economic rather than medical criteria.” She says, “The average national reimbursement is now only $30.31 per hour for the second through eighth hour of chemotherapy. This fee must cover the cost of staff, facilities, drugs and administration – even biohazard waste management.”

She explains that they are reimbursed for chemo drugs below cost, so they end up paying for part of it themselves.  The writer concludes, “The continued cuts to cancer care services are rapidly dismantling the cancer care system in this country. This is an untenable situation.”