John R. Graham
Friday, October 10, 2008Doctors & Consumer-Driven Health Care: The Glass Is Half FullSurvey Shows Surprising Awareness of Costs By John R. GrahamCategories: HSAs, etc.The American Journal of Managed Care just published an article asking family doctors whether they were ready to practice in a consumer-driven environment. Call me an optimist, but I think the results are quite promising. The article cites a January 2007 survey from the health plans' major trade association, AHIP, which claimed 4.5 million in consumer-driven plans. The survey of physicians was conducted in May and June of 2007. (Although I'm not certain that the authors fully understand what a consumer-driven plan is: they refer to "medical savings accounts" when they are likely referring to any or all of Health Savings Accounts, Health Reimbursement Arrangements, or Flexible Spending Arrangements). Despite such a small fraction of the population covered by consumer-driven plans, 40 percent of physicians reported that such patients were in their practices, although they only comprised 5 percent of their patients. Despite this small number, one quarter of the doctors reported having heard "much" or "a great deal" about consumer-driven plans. Over half reported an understanding of how much out-of-pocket costs such patients faced. Although not all doctors with such patients understood these matters, they understood them better than doctors without such patients. Furthermore, almost half of doctors with such patients viewed consumer-driven plans positively, while less than one fifth viewed them negatively. These are very good outcomes, given the low penetration of consumer-driven plans at the time. In his latest (outstanding) newsletter, Greg Scandlen suggests that consumer-driven health care has reached the tipping point. I think so, too, and I certainly hope so. In the light of recent electoral polling data, I expect that we might be in a defensive position for the next few years.
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Thursday, October 9, 2008School-Based Health Centers: One-Stop Shopping for Government Dependency!Should The Same People Who Run The K-12 School Monopoly Control Our Kids' Health Care? By John R. GrahamCategories: California, Retail ClinicsCalifornia Governor Schwarzenegger recently signed a bill (SB 564) to fund school-based health centers that will provide primary and associated care to K-12 students. According to the trade association (!) that lobbied for the bill, California currently has 153 school-based health centers, which appear to be mostly funded by local government. SB 564 is their lobbyists' first success at winning direct funding from state government. Well, sort of: the river of cash will still need an appropriations bill to start flowing, and that's questionable given the state's perpetual budget crisis. This bill invites serious questioning from various angles. First, if school-based health centers are effective, then the state should not be taxing people to fund them. Instead, it should be up to local governments. Second, if kids need primary care that they don't get from doctors, then the state should not be competing against convenient, retail clinics, that are springing up to serve communities' needs. Third, if parents need financial assistance to get primary health care for their kids, then the state should fund the parents, not the providers, especially from distant Sacramento. Fourth, California's K-12 school system can't even school the kids properly. Almost one half of freshmen admitted to California State University campuses require remedial classes! Come on! I'm sure these lobbyists for the school-based health centers have our kids' best interests at heart, but if our schools can't even get education right, do they really expect us to believe that they can get our kids' health care right?
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Monday, October 6, 2008Federal Appeals Court OKs San Francisco's Tax-Mad Healthy Access PlanEven if Supreme Court Overturns It, We Need A Better Solution Than ERISA By John R. GrahamCategories: California, Insurance RegulationI have written a lot about San Francisco's Healthy Access Plan. SF HAP taxes small businesses, which cannot afford to provide health benefits, to fund the city's public health bureaucracy. It's a job-killer, gives no evidence of improving access to health care, and shakes down hospitals, too. The Golden Gate Restaurant Association, relying on compelling precedent, sued the city in federal court, claiming that SF HAP violated the federal Employee Retirement Income Security Act (ERISA). The issue at hand is whether ERISA "pre-empts" state laws that compel employers to set up a health plan or fund the government to provide one. The U.S. 9th District Court of Appeals just found in favor of the city, allowing the SF HAP to proceed. This appears to oppose the U.S. 4th District Court of Appeals's 2007 finding in the so-called "Maryland Wal-Mart" case, which said that Maryland's law to tax employers for health benefits did violate ERISA. It looks like this case will go all the way to the Supreme Court, where my friend Greg Scandlen anticipates victory for the Golden Gate Restaurant Association and preservation of ERISA. That's well and good. However, I've previously hinted that ERISA not a law that gives much encouragement to advocates of consumer-driven health care. (And I have not been alone.) Now that its status as an obstacle to the growth of government-dictated health care is wobbling, maybe it's time to come off the fence and question the overall benefits of the law more forcefully. First, its advocates note that ERISA allows large businesses to establish nationally uniform benefits for their employees, avoiding the bureaucratic requirements of complying with a patchwork of laws in all fifty states. True, but how important is that, really? Wal-Mart has businesses in fourteen national markets, including Mexico, Canada, India, and Japan. The logic of pre-emption suggests that International Labor Organization or World Health Organization policies should "pre-empt" national law, so as to reduce administrative costs of administering benefits! Second, eliminating a federal pre-emption motivates states to compete against one another. Tax competition is a well-understood benefit of keeping the burden of taxation at the state and local level: states must cut taxes to attract capital and labor. Why not apply the same thinking to regulation? If IBM had an incentive to lobby in Albany, NY, or Hewlett-Packard to lobby in Sacramento, CA, to keep regulation of health benefits conducive to keeping jobs in-state, everyone would be better off. Third, moving regulation to the federal level makes it harder for individuals to escape than if states regulate. Today, ERISA-regulation is considered "lighter" than state-regulation of health insurance. However, Congress has recently increased its power through the Genetic information Non-Discrimination Act (GINDRA) and an expensive mental health parity bill (the Wellstone bill) that was part of last Friday's economic "bailout"! Even if the Supreme Court supports ERISA pre-emption, the momentum in Congress is to make all health insurance more bureaucratic, unresponsive, and expensive, and the Congress will change ERISA if it does not serve the purposes of government-dictated health care. Then where will the advocates of ERISA go? Canada? Switzerland? Fourth, ERISA rests upon a presumption that the government should give employers control over our health care dollars - a presumption that advocates of consumer-driven health care oppose. Far better for us to focus efforts on reforming the Internal Revenue Code to give families the tax dollars that now go to companies, rather than investing effort in propping up ERISA. Government-run health care is the problem, but ERISA is not really the solution: Let the states regulate health care.
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Friday, September 26, 2008Will Illinois' Hospital Uninsured Discount Act Protect Patients?Legislators have attacked the symptom, but not the cause, of hospitals' price gouging By John R. GrahamCategories: Certificates of Need (CON), Hospitals, IllinoisBy a unanimous vote, Illinois legislators have passed the Hospital Uninsured Discount Act, which requires that hospitals charge uninsured patients their lowest rates. The Illinois Hospital Association (which supported it) has a good summary of the bill. Specifically, for patients in urban areas with household incomes up to 600% of the Federal Poverty Line ($127,200 for a family of four) or 300% of the FPL for rural residents, hospitals' charges will be limited to a 35% mark-up over cost, and the total must be no more than 25% of household income. Well, I suppose that's well and good, but it ignores the fact that hospital prices are undeniably influenced by government action - specifically confusing Medicare rules that determine payment (as I've discussed previously, p. 9). As well, it begs the question: what is the "cost" to which a hospital can add 35% to determine its fees? Hospitals are very complex institutions, and there are lots of ways to allocate overhead and depreciate assets. The law's answer is that the federal government determines the cost! The hospital must inform the state of the costs that the federal Centers for Medicare & Medicaid Services uses to fix its prices. Specifically, it will have to submit Worksheet C, Part 1 of its Medicare Cost Report to the state Attorney-General every year. So, instead of true competition and patient choice, we have different levels of government shuffling regulatory paperwork around. Illinois' legislators' hearts are in the right place. But instead of more price-fixing they would serve patients better if they repealed the state's Certificate of Need (CON), which keeps hospital competition low and prices high. CON gives the state the power to prevent innovative competition in hospital services by requiring a new entrant to prove that its services will be required before receiving a license. Needless to say, incumbent hospitals are skilled at blocking such applications, preserving their oligopoly. Illinois ranks 31st among the states in the Provider Burden of Regulation category in PRI's Index of Health Ownership, and 31st in the specific measurement of facility Certificate of Need. Professor David Dranove of Northwestern University has described how Illinois CON has resulted in corruption: incumbent hospitals do not challenge each others' expansions, but combine to block new entrants. This has resulted in old, overcapitalized hospitals, often situated far away from recent centers of population growth (Code Red, pp. 70-71). Furthermore, our SPN colleagues at the Illinois Policy Institute have been influential in demanding a stop to the CON job in Illinois. So, the lesson for Illiois is clear: Stop the price-fixing; stop the CON!
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Thursday, September 25, 2008Enrollment in Consumer-Driven Health Plans Doubles In Two YearsAnnual Kaiser Family Foundation/HRET survey shows workers control more of their health care dollars By John R. GrahamCategories: HSAs, etc.The newly released annual Kaiser Family Foundation/Health Research & Educational Trust (KFF/HRET) Employer Health Benefits Survey is out! I'm about to criticize KFF's spin, so let me start by congratulating them on another outstanding achievement. The annual publication is an invaluable resource for those of us who want to understand what's going on out there, and both KFF and HRET must invest a lot of resources in executing the survey. I'll point out two things. First, premiums went up 5 percent in 2008, which is actually less than I'd expected and is hardly indicative of a "crisis". Second, the number of workers in consumer-driven plans (which KFF/HRET defines as eligible for a Health Savings Account or Health Reimbursement Arrangement) has doubled from 4 percent of workers in 2006 to 8 percent in 2008. It's no coincidence that growing numbers of people in consumer-driven health plans and relatively restrained premium growth go together. The right way to look at this is to understand that American families are controlling more of their health care dollars, and demanding better value for money. Another way is to moan about how higher deductibles and co-pays are forcing families to make tough decisions about how they spend their money. As usual, the good people of KFF have found the cloud inside the silver lining. Although not in the press release, the McClatchy newswire quoted KFF CEO Drew Altman's dire speculation that "we may be seeing the tip of the iceberg of a trend towards less comprehensive, skimpier insurance with higher out-of-pocket payments for working people." Actually, despite the growth of consumer-driven plans, the share of health spending controlled by patients has been shrinking. In the mid 1990s, out-of-pocket spending accounted for 30 percent of health spending amongst privately insured people. It was down to 26 percent by 2005. By 2007, workers were paying 16 percent of total premiums, down from 20 percent in 1993, for single coverage. For family coverage, it dropped from 32 percent to 28 percent. Consumer-driven health care has had a very good start, but we have a long way to go to get the health care dollars out of the "system" and into the hands of the patients who need them.
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Wednesday, September 24, 2008Medi-Cal Crisis Endures, Despite Budget ResolutionBoth Providers and Patients Suffer, As Politicians Dodge Reform By John R. GrahamCategories: California, MedicaidThree months late, governor Schwarzenegger has finally signed a budget. Unfortunately, the governor and legislators missed the chance to wrangle Medi-Cal, the state’s Medicaid program, under control. The budget agreement held the line pretty well on this gargantuan program for the short term appropriating 14.5 billion for 2008-2009 versus $14.2 billion last year. But that’s not the whole story: total Medi-Cal spending will be more than twice as much, $39.4 billion, because the federal government pays the state for most of it. But Medi-Cal’s long-term spending trend is still out of control: Between 1997-1998 and 2006-2007, MediCal spending increased at an annual rate of 7 percent, nearly doubling. And fully one third of this increase was due to increased enrollment. Because of the federal matching payments, California has an incentive to enroll more and more people into government dependency for their health care. But Medi-Cal does no favors for providers: In 2003, Medi-Cal paid physicians only 59 percent of what Medicare (itself a poor payer) paid, on average. And the situation got worse when California started drifting into this year’s budget crisis. During the special session last February, the governor signed a bill rolling back Medi-Cal providers’ fees by 10 percent, starting July 1. Doctors and pharmacists argued that the roll-back violated federal Medicaid law, and a federal judge agreed. So, the state has partially restored the cuts imposed last summer, but continues its appeal. The governor and legislature must be pretty confident they will prevail: The budget extends the 10 percent payment cut until March 1, 2009, after which providers will get some relief. Or maybe not: even if the federal court decision stands, and blows up the roll-back, the state couldn’t pay providers what the judge demands anyway. In fact, the “annual” budget doesn’t really even cover the whole fiscal year. There will have to be a special election (likely next March or June) to authorize borrowing $5 billion against future lottery receipts. So, despite years of out-of-control spending, Medi-Cal still fails both providers and patients. At its core, the problem is not a budgetary crisis: it’s a crisis of government dependency.
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Tuesday, September 23, 2008Arizona's Prop 101: Opponents of Patient Choice Sow Confusion"Freedom of Choice in Health Care Act" Is So Simple A Child Can Understand It By John R. GrahamCategories: Arizona, Single-Payer FolliesThe Arizona Republic (via the Tucson Citizen) ran an article yesterday quoting some Arizona's health care elites' concern that Proposition 101 is "too ambiguous". On the contrary, it could not be simpler. And that's what terrifies these elites. Prop 101, the "Freedom of Choice in Health Care Act", is a constitutional amendment that would prevent the state from outlawing Arizonans' freedom to spend their own money on health care of their choice (as discussed previously in this blog). Less than one hundred words long, any child who can read should be able to understand its intent. Of course, it should not be necessary for the people of any state to demand this of their government via the constitution: not long ago, such choice would have been taken for granted by any American. No longer. A recent op-ed by the state assembly's Democratic leader and a member of the Physicians for a National Health Plan made the absurd allegation that Prop 101 "protects the private insurance industry". This claim is utter nonsense. Prop 101's plain language makes clear that the state can neither forbid any Arizonan from buying private health insurance, nor can it compel him to to so. Thus, it protects Arizonans from either a government-monopoly system (like Canada's), or mandatory private health insurance (like in Massachusetts). Unfortunately, the anti-Prop 101 writers cannot understand this freedom because of their ideological blinders. Indeed, their only alternative "reform" is so-called "single-payer" health care. In Arizona, this took the shape of the Orwellian-named "Arizona Health Security Act", which would have driven every Arizonan into a government-monopoly system. Imagine a "Home Security Act" that outlawed private houses, and compelled everyone into governmen-owned barracks! Such a law would be unthinkable. The fact that it is not only thinkable, but doable, for health care, should lead all Arizonans to appreciate the need for a constitutional amendment like Prop 101.
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Monday, September 22, 2008Product Liability Law: Should FDA Approval Pre-empt State Tort Law?Regulatory Fragmentation And A Drug's Catastrophic Side-Effect By John R. GrahamCategories: Pharmaceuticals, VermontThis morning's New York Times carried a story which addressed the question of whether medicines licensed by the FDA should be above and beyond state product liability law. In legalese, it asks whether the federal Food, Drug & Cosmetics Act "pre-empts" state law. The NY Times tells the story of a Vermont musician who was forced to have her arm amputated because it became gangrenous after the inappropriate injection of a prescription drug, Phenergan. Suffering a migraine, the musician had gone to her doctor for a treatment which she had undergone many times. The risk of gangrene from Phenergan is known. That's why it's usually administered via intra-muscular injection or intravenous drip. However, in this case, the physician's assistant used "IV push" (what I suppose we might call, in a different context,"mainlining"). However, he missed the vein and injected an artery instead. The result was gangrene, and amputation. Who is responsible for this tragedy? According to the article, the FDA-approved label fully disclosed the warning. Suing the manufacturer, Wyeth, in Vermont court, the musician's lawyers argued that the label was not good enough for Vermont law, and the state Supreme Court has agreed. The FDA and Wyeth have appealed to the U.S. Supreme Court, arguing that the manufacturer could not have complied with both Vermont law and the FDA's labelling requirement. I am (thankfully) not a lawyer, so cannot anticipate who will or should win the case, but I do believe that the status quo results in a regulatory fragmentation that is harmful to the public. The musician claims that she was unaware of the risk of "IV push". But of course she was: no patient reads the label of a medicine injected in a clinic or doctor's office. That is why they are prescription drugs. And that is why the pre-emption should stand. First, Wyeth had no choice about how to sell its drug. The Durham-Humphrey amendments (1951) to the Food, Drug, & Cosmetics Act give the FDA the power to determine when a drug must be sold by prescription. Second, it is understandable that a manufacturer cannot put on "extra" labelling on top of its drug's FDA-regulated label. "Overcrowding" the label could lead to the FDA claiming that the manufacturer was not in compliance with FDA regs. Third, the practice of medicine and associated health professions (such as physician's assistant) is regulated by the states. So, a state's tort law should govern the penalty levied for malpractice - but it can go no further. Interstate commerce is regulated by Congress. Without pre-emption, drug-makers might limit their liability by forbidding physicians in high-risk states from prescribing certain medicines. However, it is far from clear that this could be legally enforced. It would also turn medical practice upside down: There has been a national, generally accepted, U.S. Pharmacopeia since 1820. Perhaps a better answer would be to unzip the Durham-Humphrey amendments, and allow drug-makers to decide whether their medicines should be sold via prescription or over-the-counter (OTC), as prevailed before 1951. That way, medicines sold OTC would expose their manufacturers to somewhat greater liability than those sold via prescription, for which the physician would bear a greater share of liability.
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Wednesday, September 17, 2008Brokeback Mountain: Are Health Costs Killing Ranchers, Farmers?Access Project Report Repeats Myths of "Underinsurance" By John R. GrahamCategories: Insurance Regulation, Iowa, Minnesota, Missouri, Montana, Nebraska, North Dakota, South DakotaOne of America's health care zombies that refuses to die is the notion (created by the Commonwealth Fund) that millions of people who have health insurance are "underinsured", largely due to policies with high co-payments and high deductibles. This results in "medical bankruptcy", another exaggeration. The Commonwealth Fund's conclusions have been picked up by an organization even more committed to "social justice", The Access Project, which advocates for ranchers and farmers in the heartland. The Access Project has just published the results of a survey of ranching and farming in a number of states - with dire conclusions. The facts are a little less dramatic than advertised. Nobody argues the case for health reform more vigorously than the bloggers at SPN, but when nine of ten ranchers and farmers have health insurance (as TAP reports), it's hard to conclude that the home on the range is surrounded by the bleached bones of homesteaders driven into medical bankruptcy. Like the Commonwealth Fund, TAP defines "underinsured" as spending more than ten percent of a household's income on health care in one year. Clearly, this definition is inadequate because it ignores the lifecycle of earning, saving, and spending. If you spent one percent of your income on health care for thirty years, and eleven percent this year, you are "underinsured". If you spend nine percent every year of your life, you are considered adequately insured! Also, like the Commonwealth Club, TAP dislikes people buying health insurance which we prefer, in the individual market. Instead, TAP prefers the group market, where the tax code drives most of us into the arms of our employers to use health plans that they prefer. This is because TAP is unwilling to understand that, although the individual pays 100% of his premiums directly in the individual market, he pays only a small fraction of the premiums in the group market. (According to TAP's survey, median spending on premiums and out-of-pocket payments for individually insured households was $11,700 in 2007, versus $5,600 for those covered in the group market.) Nevertheless, the person insured in the group market pays more indirectly, because his wages are decreased by the amount that his employer pays for his plan. Thus, the individually insured, overall, pays somewhat less for health care. (Other research, although "spun" in opposition to individual policies, calls this "actuarial equivalence".) Consumer-directed, individually purchased, health policies are not just for us arugula-eating, chardonnay-sipping, San Franciscans. They're for ranchers and farmers in America's heartland, too.
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Tuesday, September 16, 2008Massachusetts' Underwhelming Health "Reform"Emergency Room Overload Continues; State Simply Orders A Stop By John R. GrahamCategories: Hospitals, Insurance Regulation, MassachusettsMassachusetts' health care leaders continue to believe that they can solve problems by just ordering them to go away. The first step in this was the April 2006 Commonwealth Connector reform signed by Governor Romney, which simply commanded people to buy health insurance, and fined them if they did not. Subsequently, we've seen that this resulted in cost overruns, but no real improvement in access to health care. The latest evidence confirming that Massachusetts has seen no positive change is the continuing problem of hospitals' diverting ambulances to other hospitals when their ERs are overloaded. So, the Massachusetts regulator has simply ordered hospitals to stop diverting, according to the Boston Globe. Yesterday's order confirms a directive first published in July, forbidding any hospital from diverting ambulances unless the ER is on fire, or similar catastrophe. If only health reform were so easy, that it could be achieved by the stroke of a pen! Massachusetts' ambulance diversion statistics show that the Connector (which was supposed to ensure that everyone has health insurance, and access to primary care so they don't have to go to the ER) has had little effect. The state publishes the number of hours each month that hospitals divert ambulances. In 2005, the last year before the reform was enacted, ambulances were diverted for 860 hours. In 2006, it was 1290 hours. In 2008, it looks like it will be 2367 hours, an increase of two thirds over 1826 hours in 2007. It looks like all those newly insured patients are not really relieving the pressure on ERs. Repeat after me: the government cannot fix health care; it should only get out of the way.
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