#261: Flexibility – Loved, Overused, Conflicting

Published February 28, 2011

“Flexibility.” It’s a word everyone in politics loves. They love it so much, they overuse it, deploying it in situations where it conflicts directly with the facts.

That’s the case today, where President Barack Obama is claiming to embrace flexibility in a speech to the nation’s governors. The New York Times reports:

Seeking to appease disgruntled governors, President Obama plans to announce on Monday that he supports amending the 2010 health care law to allow states to opt out of its most burdensome requirements three years earlier than currently permitted.

You may recall my past discussions of this idea. It’s introduced in the U.S. Senate as a bipartisan piece of legislation offered by Democrat Ron Wyden of Oregon and Republican Scott Brown of Massachusetts, two prominent moderates. Wyden in particular talks a great game when it comes to health policy – which is a shame, since his legislation is little more than a meaningless nod in the direction of flexibility.

The two-page long Wyden-Brown legislation does essentially one thing: it moves the timeline for the “Waivers for State Innovation” portion of Obama’s health care law up from 2017 to 2014. The waivers are outlined in detail in section 1332 of the law, which contains a laundry list of things the waivers won’t cover.

The secretary of Health and Human Services is directed to grant waivers for states only if their alternative plans, among other requirements, “will provide coverage that is at least as comprehensive as the coverage defined in section 1302 (B) and offered through Exchanges established under this title as certified by Office of the Actuary of the Centers for Medicare & Medicaid Services.” They must “provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable as the provisions of this title would provide.” And they must “provide coverage to at least a comparable number of its residents as the provisions of this title would provide.”

In other words, this is not, as the Times reports, allowing states to “opt out of its most burdensome requirements” in any way, shape, or form. The burdensome anti-market coverage requirements are still there (it must be as or more comprehensive); the coverage and cost-sharing provisions on out-of-pocket spending are still there (preventing high deductible HSA-based plans); and most damning of all, they require states to demonstrate that “at least a comparable number” of state residents will be provided coverage under the plan.

On that last point, I followed up with Wyden’s office to find out what “at least a comparable number” means. As I reported last March in response to a Wyden interview with the Huffington Post, his own staff acknowledged the requirement would mean states must demonstrate that any alternate plan they had would cover as many or a greater number of people than covered under a plan wherein people are required to purchase coverage under penalty of law.

To summarize: States could get an exemption approved by the secretary of HHS only if they prove they can cover as many or more people with the non-individual mandate plan, while also meeting all of the burdensome requirements within Obamacare for the amounts of coverage – and all of this would be approved only at the discretion of Kathleen Sebelius.

This is, of course, laughable. It brings to mind Henry Ford’s comment, “Any customer can have a car painted any colour that he wants so long as it is black.”

The likely result is what we’re seeing already in Vermont where, as Cato’s Mike Cannon points out, Gov. Peter Shumlin is considering a single-payer approach. Indeed, beyond single-payer, I see few other policy options that this restrictive waiver system would allow.

If you want even more detail on the limits and policy problems of Wyden-Brown, Stuart Butler breaks down the facts in a superb post at the New England Journal of Medicine‘s Health Policy and Reform site. If this is the president’s way of embracing flexibility, the governors in the room should recognize it for the false nod it is, and reject it outright.

— Benjamin Domenech



The Wall Street Journal has a lengthy editorial regarding the FDA’s rejection in May 2010 of the drug pixantrone for treating non-Hodgkin’s lymphoma as an example of how far the agency has overreached its initial mission. In this case, the drug was rejected “not because pixantrone failed in a clinical trial – in fact, it was a qualified success.” The WSJ reports that instead, the FDA determined the clinical trial was not “flawlessly executed.”

The real ethical problem here is what is essentially the FDA’s rigid protocol mandate even for experimental drugs for terminal illnesses. A major debate erupted last year over the Roche drug PLX4032 for advanced melanoma, which had to continue a trial even though it is an historic medical breakthrough: Doctors described a “Lazarus effect” from the drug, even as control patients died amid obviously ineffective standard therapies.

The Catch 22 is that if a trial deviates from protocol, even with such impressive real-world results, it becomes more difficult to generate the “proof” beyond any doubt that the FDA requires. Protocol violations are punished: The FDA sat on the colon cancer treatment Erbitux for years because it was a case of “good drug, bad development plan,” as cancer drugs chief Richard Pazdur put it at a Congressional hearing in 2002.

From the looks of it, this is a case of classic bureaucratic deification of protocol to the detriment of the patient, the doctor, the drugmaker, and the marketplace.

SOURCE: The Wall Street Journal


According to a study released at the annual meeting of of the American Academy of Orthopaedic Surgeons (AAOS), “nearly 35 percent of all imaging costs ordered for 2,068 orthopaedic patient encounters in Pennsylvania were ordered for defensive purposes.” The study, conducted by John Flynn, associate chief of orthopaedic surgery at Children’s Hospital of Philadelphia, along with med student Robert Miller, tracked the work of orthopaedic surgeons in detail, providing some interesting data on the defensive medicine front.

According to Flynn, 72 orthopaedic surgeons, who are members of the Pennsylvania Orthopaedic Society, voluntarily participated in this study, which included some 2,068 patient encounters throughout the state of Pennsylvania. Most patients in this study were adults. The study found that 19 percent of the imaging tests ordered were for defensive purposes. Defensive imaging was responsible for $113,369 of $325,309 (34.8 percent) of total imaging charges for this patient cohort, based on Medicare dollars. The overall cost of these tests was 35 percent of all imaging ordered because the most common test was an MRI, an imaging test which costs more than a regular X-ray.

SOURCE: American Academy of Orthopaedic Surgeons


Galen Institute head and friend of CPR Grace-Marie Turner outlines the tug of war over Medicaid in her latest KHN column – she’s betting on the governors to win this battle, in large parts because, as she notes, “These pleas for flexibility are bipartisan.” And we’re talking real flexibility here, not fake:

For example, Democratic Gov. Jerry Brown of California is asking for permission to cut $1.7 billion from his state’s Medicaid program by limiting most recipients to no more than 10 physician visits a year. Arizona’s Republican Gov. Jan Brewer proposed tightening eligibility so the state could cut 280,000 people from its Medicaid rolls. Sebelius told her that Arizona didn’t need to ask permission but could reduce its rolls by allowing an existing waiver to expire in September. But few other states have similar options.

Specifically, the new health overhaul law will require states to expand coverage by 2014 to all citizens under 133 percent of poverty – about $30,000 a year for a family of four. Recent estimates show that this will mean adding an additional 20 million people to the rolls by 2019. Under the new law, the program will grow to 84 million enrollees and will cost nearly $900 billion by 2019. This increasing enrollment will be accompanied by growing cost burdens on the states.

SOURCE: Kaiser Health News


For more on the subject of Grace-Marie’s column, it’s worth reading the American Action Forum’s latest report on Medicaid sustainability. The AAF offers several short-term and long-term solutions for reform – dealing with immediate budgetary challenges and long-term systemic problems – for governors to consider. A capped waiver, however, has to take primacy as a step all states should consider, since it “provides states with fixed, upfront funding over a predetermined period of time.”

In January 2009, Rhode Island took the lead on this aspect of reform and became the first state in the nation to cap its entire Medicaid program. The state received approval to operate the Rhode Island Medicaid program under an aggregate budget ceiling of $12.075 billion through 2013. The approved Global Consumer Choice Compact Waiver established an expedited 45 day approval process for any changes to benefits or the Medicaid program; set new levels of care for determination of long term care eligibility; allowed for benefits in any optional or mandatory program to be customized; placed a priority on preventative services; created a healthy choice account to reward healthy behavior; and implemented new purchasing strategies that focused on quality and competition.

In the first 18 months Rhode Island’s global waiver yielded $100 million in savings, staving off eligibility limitations. The state projects that it will have saved $146 million by June 2011 with an additional $50 million gained through program integrity efforts and aggressively tracking fraud, waste, and abuse. Concurrent with the substantial savings, new expenditure growth in the Rhode Island Medicaid program has declined from over 8 percent to 3 percent in the past 18 months.

We’ll have more on this subject in next week’s CPR.

SOURCE: American Action Forum