Consumer Power Report #221

Consumer Power Report #221
May 13, 2010

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)

I was in Louisiana this week giving talks to Baton Rouge and New Orleans health underwriters. I’m afraid I didn’t have any good news for them, other than that the chances that the Supreme Court will throw out this monstrosity have grown with the retirement of Justice Stevens. Whatever else might be said about Elena Kagan, it is unlikely she would be as far-left as Stevens has been and she would likely have to recuse herself from ruling on ObamaCare.

Apparently there was no “severability” clause written into this law, which shows how amateurish the process was. Virtually every bill I’ve ever read includes a provision that if any part of the law is ruled unconstitutional the rest of the law will remain intact. Not this one. That will likely mean that the entire law will be thrown out if a part of it is found to violate the Constitution.

I don’t expect the November elections will be enough to overturn this law, though the Republicans may be growing a spine with the refusal to nominate Senator Bob Bennett for re-election in Utah. That, along with the loss of the Democrat primary in West Virginia by Alan Mollohan, suggests voters are fed up with the Washington Establishment of both parties.

And for good reason. One of the saddest articles I’ve come across was Former Senate Majority Leader Bill Frist’s praise of this health care law here He thinks the law is swell and is “proud” of Obama for getting it passed. This is the man the Senate Republicans chose to be their leader during the Bush years.

Is there any wonder that people are disgusted?

-- Greg Scandlen


IN THIS ISSUE:


THE BERWICK NOMINATION

The nomination of Don Berwick to head CMS is proving controversial. I was surprised by the nomination. Berwick is okay as an academic, if a bit inconsistent. Last year we wrote in praise of a piece he published in Health Affairs, but had to condemn another piece published in the New England Journal of Medicine just a week later. In the first it seemed he wanted to empower patients, but in the second he wanted to empower bureaucracies. Overall he came across as confused.

That is fine in a scholar, but not so great for the administrator of the second largest health insurer in the world. CMS directly controls about one-third of all the money in health care in the United States and employs some 4,500 people. As far as I know, Berwick has never administered anything more than a small think tank in Cambridge. Now they want to put him in charge of not only running the Medicare and Medicaid programs, but of also implementing a vastly complex and brand-new law that expands federal authority in unprecedented ways? Berwick’s wistful musings hardly seem up to the task.

More importantly, now that he has become so public people are looking into his background and finding some things that are more than a little disturbing. Last week we cited Robert Goldberg’s report on Berwick’s speech to a British audience celebrating the 60th anniversary of the National Health Service. In it he was contemptuous of consumer choice and private enterprise, favoring the “joy” and “romance” of political leaders running the show.

Since then there has been more commentary coming out on this nominee, including fine articles by Heartland’s Ben Domenech, Jeffrey Anderson in the Weekly Standard, and American Spectator’s Philip Klein. These confirmation hearings should be very illuminating – assuming the Senate Republicans can rent some backbone.

SOURCE: Ben Domenech on Berwick; Philip Klein on Berwick; Jeffrey Anderson on Berwick; Berwick in Health Affairs; Berwick in the New England Journal


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.”

SOURCE: New York Times

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.”

SOURCE: Asbury Park Press

Writing for Kaiser Health News, James Capretta writes, “the IPAB--a 15 member independent panel, to be appointed by the president and confirmed by the Senate--is now charged with enforcing an upper limit on annual Medicare spending growth. That’s right: Medicare spending is now officially capped.”

He explains, “the IPAB is strictly limited in what it can recommend and implement. It can’t change cost-sharing for covered Medicare services. Indeed, it can’t change the nature of the Medicare entitlement at all, or any aspect of the beneficiary’s relationship to the program. The only thing it can do is cut Medicare payment rates for those providing services to the beneficiaries."

So, essentially, it is more of the same SGR-type cuts that have worked so well in the past.

SOURCE: Kaiser Health News

One idea being pushed by “reformers” is the notion of a “medical home.” But like a lot of swell ideas, the advocates tend to cherry-pick the information that supports the idea and ignore anything that counters it. Buz Cooper, MD, of the University of Pennsylvania, reviewed articles recently published in Health Affairs and JAMA about Group Health’s version of a medical home. He says, “The big news is that costs for patients in their Medical Home were a full 2% lower than in conventional practices, hardly a great success – it wasn’t even statistically significant. But was even this small difference due to the Medical Home, or was it because Medical Home patients were less likely to consume care?”

The articles he references said the study group and the control group were similar in age, sex and diagnosis, but they plumb forgot to compare the groups for health status, education, or income – which are the most important factors in determining outcomes. He also notes patients dropped out of the pilot program at alarming rates. It started 2006 with 9,200 patients enrolled but ended 2009 with only 7,018.

SOURCE: Buz Cooper’s blog

With all of these pressures on physicians one might think that the AMA would be out there defending the profession. Well, think again. Scott Becker, an attorney/accountant, writes that the AMA is “the worst trade association ever.” He writes, “The American Medical Association has been in existence for 162 years now, making it the oldest trade association in the nation, but this organization doesn't have a clue anymore as to what a trade association is about.”

He goes on:

Last year, the AMA gave its support to a fledgling health reform process whose ultimate success was very much in doubt at the time. In return for that support, the AMA wanted at minimum two basic things: federal tort reform and a permanent fix of Congress' noxious sustainable growth rate.

Now health reform has become law, and what does the AMA have to show for its early support? No SGR-fix, no tort reform and a number of new payment problems created by the new law. Here are just four examples.

  • a powerful new advisory board that can lower physician fees with little Congressional oversight.
  • an estimated 15 million previously uninsured people who will be covered at very low-paying Medicaid rates.
  • the prospect of intra-professional conflict as Medicare reimbursements for some areas may be raised and, under the zero-sum game of Medicare spending, physician reimbursements will probably fall.
  • the demise of physician-owned hospitals. No new facilities can be built after this year and existing facilities cannot expand upon the date of enactment.

What were they thinking? Mr. Becker says, “AMA President J. James Rohack, MD, has repeatedly said the AMA's early support of the health reform bills gave it a front-row seat at the bargaining table, where it would be able to finesse more physician-friendly provisions into the final law.”

In fact, the AMA had zero influence. Becker writes, “Congress was still assuring the AMA until the end that the SGR-fix had a chance, and the AMA believed them. As recently as last month, just before the final health reform vote, Dr. Rohack was still promising in a conference call to reporters he'd hold Congress' "feet to the fire" and make it pass a permanent fee-fix. But it was too late.”

There is plenty more, but you get the drift.

SOURCE: BeckerASC


RISK POOLS IN TROUBLE ALREADY

One of the least reported-on aspect of the new law is how people who have been doing the right thing will get screwed. According to USA Today, some 35 states currently have pools for high-risk people who can’t get coverage in the individual market (the small group market is already guaranteed issue due to HIPAA.) Some 200,000 people pay between 125 percent and 200 percent of “standard” premiums to secure this coverage. The new federal requirement sets up temporary risk pools to ensure the rest of the market can access coverage. It requires the premiums to be set at standard rates. Problem is, that to be eligible for this new coverage an applicant has to have been uninsured for six months. That means the 200,000 people who have been paying 200 percent of premium to maintain coverage will not be allowed to participate in the new program. They will have to continue paying double premiums while their uninsured brethren get coverage for half the cost. Welcome to the Animal Farm where some pigs are more equal than others.

Writing in Forbes, Thomas Tobin says the new risk pools are expected to cover 2 million people, but, “there's no way that $5 billion, which is what's been budgeted, will cover the cost of covering 2 million people. The real cost will be more like $40 billion.” He wonders what will happen when the money runs out.

Maybe that is why 18 states, including Texas, Florida, and Arizona, have decided not to participate in running these new pools, according to Fox News. They don’t want to be saddled with the bill for Obama’s empty promises.

SOURCE: USAToday; Forbes; 18 states opt out -- Fox News

Greg Scandlen

Greg Scandlen is a senior fellow of The Heartland Institute and founder and director of... (read full bio)