Diagnosing IPAB as a Bad Concept

February 28, 2012
2:12 pm

Tomorrow (Wednesday, Feb. 29), the House Energy and Commerce health subcommittee is scheduled to vote on legislation that would repeal the Independent Payment Advisory Board (IPAB).  IPAB is the provision within the Affordable Care Act health reform law that empowers a 15-member board of political appointees to make recommendations to cut Medicare spending, cuts that would take effect unless Congress provides its own alternative plan.  It’s a startling transfer of authority from the legislative branch to the executive, without any judicial review to provide checks and balances.

The nation’s physicians have made it clear that they think IPAB is, to put it bluntly, a bad idea that will do more harm than good to Medicare beneficiaries.

On Monday, the American Medical Association sent a letter to the health subcommittee leadership, referring to the struggles Congress has had with the issue of Medicare payments to physicians, writing, “adding additional formulaic cuts through IPAB is just not rational and would be detrimental to patient care, especially as millions of Baby Boomers enter Medicare.”

And, prior to the AMA’s communication, a group of 24 medical specialty societies sent its own letter to the Energy and Commerce health subcommittee, sharing the concern that “the strict budgetary targets and other limits imposed on the IPAB will ultimately threaten the ability of our nation’s seniors and disabled to obtain the health care they need, when they need it.”  The specialists added, “Leaving Medicare payment decisions in the hands of an unelected, unaccountable body with minimal congressional oversight will negatively affect timely access to quality health care.”

The physicians have diagnosed the system correctly.  At a time in which Medicare needs structural reforms to continue providing quality care, but with an emphasis on value and cost-effectiveness, IPAB is a blunt instrument that will indiscriminately cut Medicare spending in a way that undermines both quality and patient access to care.

By the way, over 290 patient and health care organizations, including the Healthcare Leadership Council,  have also sent a letter to Capitol Hill urging IPAB elimination.

Let’s hope tomorrow’s subcommittee markup is the first step toward repeal of an ill-conceived idea.

The Utah Experiment and the Importance of Information

February 24, 2012
7:59 am

Massachusetts received the lion’s share of attention, but one other state had also created a health insurance exchange before Congress passed the Affordable Care Act health reform law.  The Utah Health Exchange (UHE) is an experiment that warrants close watching.

The Utah approach is focused heavily on the value of consumer information.  As the state’s lieutenant governor Greg Bell puts it, the UHE is an Internet-based portal.  In his words, “It is a single shopping point where consumers can evaluate their options, and then brokers, agents and employers can share information.”  This is a consumer-centered approach that has appeal to other states.  In fact, U.S. Senator Tom Coburn (R-OK) recently recommended that his state adopt the Utah model.

At the Healthcare Leadership Council, we’ve witnessed firsthand the benefits of equipping consumers with comparative health insurance information.  When we launched an initiative called Health Access America a few years ago, we commissioned public opinion research that found 50 percent of uninsured Americans had no idea how or where to find information on health plan benefits and costs.  By setting up web-based portals that allowed consumers to compare different plans, we saw a difference in the number of people purchasing health coverage.

It will be interesting to see statistics emerging from Utah in terms of the impact consumer-friendly information has on insurance acquisition without an individual mandate (a key difference between the Massachusetts and Utah approaches to health reform) and how head-to-head competition between plans in the web-based exchange affects coverage cost and value.

What’s a “Fair Share” for Medicare Beneficiaries?

February 17, 2012
12:40 pm

There’s a very illuminating story in the newest edition of National Journal (no, I can’t link to the article because it’s subscription-only material, but I urge you to check out the Meghan McCarthy article “A Fair Share” on page 38) regarding the actual out-of-pocket healthcare costs for Medicare beneficiaries.

The President’s proposed budget, released this past Monday, calls for over $32 billion in new beneficiary costs over the next decade assessed in the form of higher co-pays, deductibles and premiums for higher-income seniors.  (More on the President’s proposed Medicare provisions here.) As President Obama said last fall, he is asking “the wealthiest Americans…to pay their fair share.”

What Ms. McCarthy points out in her article is that seniors, without even accounting for any Obama-proposed increases, are already paying plenty for Medicare coverage.  As she writes:

  • Americans under 65 spend, according to the Kaiser Family Foundation, about three percent of their income on healthcare. Medicare beneficiaries spend 16 percent, and that figure is expected to reach 26 percent by 2020.
  • Under the Affordable Care Act, private sector employees who pay more than 9.5 percent of their income for health insurance will qualify for coverage in a state exchange and possibly be eligible for premium subsidies.  According to Kaiser, seniors were spending an average eight percent of their incomes on Medicare premiums in 2006 and had no access to competitive insurance exchanges or subsidies.
  • The White House wants 25 percent of beneficiaries, or 19 million people, to pay higher Medicare premiums or “more of their fair share.”  Kaiser, according to Ms. McCarthy, has estimated that this 25 percent threshold will affect people not typically considered wealthy.

The National Journal article gets right to the heart of the dilemma.  Under Medicare’s current structure, there are limited options to achieve financial solvency.  Ms. McCarthy wrote, “And without an alternative to Medicare’s fee-for-service system, the government is limited to cutting provider payments – which the president’s budget also does, or asking seniors to cough up extra cash.”

And that raises the question, should there be other options?  More to the point, shouldn’t Medicare beneficiaries, who are paying plenty for their healthcare, have the same option under-65 consumers will soon enjoy to shop in a competitive exchange for the health plan that offers the best value for their particular health needs and status?

Medical Liability Reform: An Inside Look at the Obstacles

February 10, 2012
3:19 pm

A great deal of news was made last month when journalist Ryan Lizza gained access to and posted a 56-page memo that was written by White House economic advisor Lawrence Summers early in the Obama presidency, outlining the possible steps the Administration could take in addressing the economic crisis.

Another White House memo unearthed by Lizza, one that received a significantly lesser degree of attention but that is fascinating nonetheless, has also entered the public domain, this one on the decision making process related to medical liability reform.

The July 2009 White House memo, written to the President by advisors Nancy-Ann DeParle and Susan Sher, can be found here.  And the New Yorker blog post regarding the memo is here.

I’ll leave this memorandum for readers to absorb with a minimum of commentary on my part.  There are some interesting points, though, worth noting:

          ·         The memo underscores the challenge in getting liability reform legislation through the U.S. Senate.  As   DeParle and Sher note, “Majority Leader Reid has made it clear that he opposes any medical malpractice reform, creating a difficult environment for Democrats to step forward.” (Although, on a brighter note, the memo states that Senator John Kerry (D-MA) had privately expressed interest in working toward reform and Senator Tom Carper (D-DE) wished to work with the White House on a liability reform proposal.)

          ·         A footnote in the memo undermines the efficacy of caps on non-economic damages as a liability reform option, saying there is no evidence that caps have reduced the frequency of medical liability claims.  (Actually, there have been studies in Texas showing a decline in the number of malpractice suits since the state adopted tort reform.)

          ·         Even though the President didn’t choose it as his preferred option, his advisors did place before him the possibility of providing some form of liability “safe harbor” to physicians who practice evidence-based healthcare guidelines.  The Healthcare Leadership Council is among the organizations exploring this approach as a liability reform option, incorporating investment in health information technology – and the increased ability to access evidence-based practice guidelines — as a factor in providing greater protection to healthcare providers against litigation.

The Ramifications of an Unwise Tax

February 07, 2012
3:37 pm

Even before its implementation, for which the Internal Revenue Service issued regulations last Friday, the medical device tax is already taking a heavy toll.

Late last year, a major device manufacturer, Stryker (a Healthcare Leadership Council member) announced that it was reducing its workforce by five percent to prepare for the financial hit that comes with the new 2.3 percent excise tax.  Similarly, another device maker, Covidien, said it would lay off 200 workers in the United States and move some of its production to Costa Rica and Mexico – again, to compensate for this new tax created as part of the Affordable Care Act.

So, the tally thus far is hundreds of jobs lost to a tax that hasn’t even taken effect yet.  The question is, how much more damage needs to be done before Congress takes corrective action.

The logic behind the medical device tax – which is a 2.3 percent tax on revenues, not profits – has always been severely flawed.  Device manufacturers, tax proponents said, would not be hurt because the money lost to increased taxes would be recouped from the millions of additional Americans acquiring health insurance when health reform takes full effect in 2014 and a commensurate increase in health services utilization.

That argument, though, doesn’t hold up against even casual scrutiny.  The vast majority of newly insured citizens will be the young, healthy ‘invincibles’ who have heretofore elected to bypass health coverage.  From this population group, there won’t be a heavy demand for coronary stents or artificial hips.  In fact, most medical devices are used in acute care settings, where health providers are already required to provide care for the uninsured. 

There is hope on the horizon.  Representative Erik Paulsen (R-MN) has gained over 225 cosponsors – a majority of the House of Representatives – for his legislation to repeal the device tax, and he has indicated that he has the word of the congressional leadership that his measure will be brought to a vote early this year.

The Paulsen bill should be enacted by the House, and the Senate should swiftly follow suit, before more jobs are lost to a tax that doesn’t even possess an acceptable rationale.