July 09, 2010
2:44 pm
Let’s begin with a couple of basic truths.
First, that government-imposed price controls are antithetical to genuine, consumer-focused health reform. The only way to achievable sustainable reform that improves health outcomes and contains cost is through medical innovation, developing new treatments, technologies and medications to keep people healthier and making healthcare more cost-effective.
The second truth is that the health reform process taking place right now will not follow a simple linear path. Regulators and lawmakers will face a number of forks in the road and will have to make decisions that will determine the ultimate course of reform and the way patients and health providers will be affected.
With those premises in mind, it’s becoming increasingly clear that health reform at the national level must avoid some of the paths being taken by the state of Massachusetts.
A Wall Street Journal op-ed piece this week by Joseph Rago points out that while the Bay State has succeeded in its goal of achieving an insured populations (not counting those who are gaming the system by buying insurance, keeping it long enough to avoid state penalities, and then dumping it), cost containment has not been accomplished. Consequently, state politicians are trying to force costs down through government controls.
Governor Deval Patrick’s insurance commissioner has rejected the vast majority of requested premium increases submitted by state insurers. These increases are deemed necessary to cover expected claims, with health costs rising at eight percent annually. With these artificial price caps in place, insurers are essentially being forced to sell their products at a financial loss.
A state appeals board has reversed many of these price controls, saying they ignored “economic realities” – “economic realities” being the fact that three major insurers are now under administrative oversight because of concerns about their financial viability.
And now, the governor wants to extend this rate review process to cover hospitals and physician groups, which could effectively impose the same price controls on providers that are currently undermining health insurers. Also, as Rago points out, the state is using its “determination of need” process to restrict the use of certain medical technologies.
At a time when our population needs improved access to insurance, a growing supply of healthcare providers and medical innovation that can achieve long-term quality improvements and cost reductions, government price controls take us farther away from all of those goals.
What we’re learning from the Massachusetts experience is that there are certain roads that deserve to be less traveled.
June 21, 2010
3:39 pm
Last Friday in this space, we examined the impact public programs like Medicare and Medicaid, with their underpayments for healthcare services, are having on escalating healthcare costs for employers and private payers.
Now, USA Today, in today’s front page headline, is placing a spotlight on another Medicare-related problem. Seniors are having more difficulty finding physicians who will take Medicare patients, a problem only exacerbated by the current congressional stalemate over Medicare payment cuts.
According to the article, on average, Medicare only pays physicians 78 percent of what private insurers do. The American Academy of Family Physicians, the American Osteopathic Association and the American Medical Association all say that doctors are limiting their participation in the program.
John Rother, policy director for AARP, fears that this trend will serve to make the current shortage of primary care physicians even worse. He said this is a problem becoming increasingly visible in states like Illinois, North Carolina and New York.
We’re increasingly seeing the perils of an overreliance on public programs for coverage. Whether it’s cost-shifting to private payers, making healthcare more expensive for millions of Americans, or a reduction in access due to providers being unable to accept low reimbursements, the evidence is mounting that payment reform is essential to achieving a sustainable, workable healthcare system.
June 18, 2010
12:19 pm
A report from the PricewaterhouseCoopers (PwC) Health Research Institute says that U.S. employers will see their healthcare costs increase by nine percent in 2011.
What’s instructive, in terms of setting future health policy, is why those costs are increasing.
According to PwC, hospital and physician costs will account for 81 percent of the health insurance premiums that employers are paying. And the reason those costs are escalating is because hospitals are being forced to shift more costs onto the backs of private payers and employers due to Medicare underpayments. PwC points out that this cost shifting is the primary driver behind higher healthcare costs for businesses.
I’ve always found it mind-boggling when policymakers argue that we can improve our healthcare system and our economy by moving more Americans into public coverage programs. With these programs paying less than the actual cost of delivering healthcare, someone else – employers and private payers, predominantly – has to pick up the slack. PwC points out that, with Medicare reducing payment rates to hospitals in 2011, this cost-shifting will exacerbate. This is not a positive development in an economy struggling to create jobs.
Cyril F. Chang, director of the Methodist Le Bonheur Center for Healthcare Economics, said in HealthLeaders Media that policymakers are trying to reduce healthcare expenditures by reducing Medicare payments. “Right now,” he said, “it seems to me the major instruments they are using to slow down the growth of cost are Medicare cutbacks.”
But we already know what results from this approach. Costs aren’t reduced, but merely shifted over to private payers. The real solution must come from meaningful healthcare delivery and payment reforms. As discussed in this space previously, many private sector providers are already succeeding with innovative delivery reforms. The challenge is to transform these localized successes into national policy, a process that needs to be placed on the fast track.
June 16, 2010
12:30 pm
Here’s why you read news stories all the way to the end.
In yesterday’s New York Times, there was an interesting article about healthcare in Rwanda. The upshot of the piece was that 92 percent of Rwandans have health coverage, at a cost of just $2 per person per year. Then, in the early paragraphs of the story, came the obligatory potshot at the U.S. healthcare system, with a Rwandan editorial writer quoted as saying he had met an American college student passing through the country and found it “absurd, ridiculous that I have health insurance and she didn’t.”
In other words, it’s the same moral that the Times and other publications have been drilling into readers’ heads for some time now: Even poor nations have a better healthcare system than Americans do.
Then, you read down to the latter paragraphs of the article and a different picture emerges.
A Boston-based health charity, Partners in Health is operating two hospitals and a network of clinics throughout Rwanda and absorbing the costs. In fact, over half of the country’s healthcare costs are being covered by other countries, with the United States providing the greatest share.
And, even with this assistance, healthcare in Rwanda still has its tragic side. There is only one neurosurgeon and three cardiologists for a population of nearly 10 million. MRI scans and dialysis are virtually nonexistent and waits for general surgery can extend for weeks.
I’m not a trained journalist, but it strikes me that a more interesting lead to the story would concern the generosity of other countries and health providers, trying to raise the standards of healthcare in a third world country. That, to me, seems more to the point than another rehashing of the tired old cheap shots at healthcare in this country.
June 10, 2010
2:04 pm
One of the best overviews I’ve seen of the issues facing health insurers – and, for that matter, health providers – as we move forward toward health reform implementation comes in this month’s issue of Health Affairs. It’s an article written by Healthcare Leadership Council member Troyen Brennan, executive vice president of CVS Caremark, and University of Melbourne professor David Studdert. For those speculating on the coverage-and-cost obstacles, as well as opportunities in the new health reform law, this piece is well worth reading.
Among the key points made by Brennan and Studdert:
• Under the Patient Protection and Affordable Care Act, medical underwriting will be virtually eliminated. The authors write that insurers should still be able to construct reasonable risk pools, but many insurers fear that the new insurance mandates will fall short of compelling compliance. This is a worry we’ve expressed frequently in this space.
• When Massachusetts launched its own health reforms, all stakeholders in the state wanted the reforms to work. This is not the case with the federal version, as exemplified by 20 states suing to overturn the new law. The smart money, they write, is on the suits failing and insurers would be prudent to plan for the new exchanges in 2014 rather than waiting for the Supreme Court to rule.
• Various players in the new exchanges will face difficult cross-pressures. Insurers will be under pressure to keep health coverage affordable, even though the legislation “does not do enough to change the fundamental cost drivers in health care.” That places state insurance commissioners in the undesirable position of trying to hold the line on consumer costs while also maintaining the solvency of insurance carriers.
• There still exists a critical lack of details on important issues such how insurance products can be sold across state lines (a door opened by the new law), the amount of transparency required, and how the costs of disease prevention factors into the new medical loss ratio requirements.
Brennan and Studdert write that, through new care models and payment reforms, the new law does provide opportunities to reduce care costs without compromising quality, but that success will rest upon the ability of providers, regulators and insurers to productively cooperate.
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