Consumer Power Report #144

Published September 13, 2008

Robert Samuelson wrote an important op-ed in both Newsweek and the Washington Post this week. In it he says the current obsession with universal coverage is “utterly wrong. The central problem is not improving coverage. It’s controlling costs.” He points out that we all have a lot of important things to do with our money and “greater health spending should not have the first moral claim on our wealth.”

He adds that health care spending in the United States is already amazingly egalitarian. “Probably in no other area is spending so equal–not in housing, clothes, transportation or anything.” Specifically, “annual health spending per person is nearly identical for the richest and poorest Americans.”

Poorest Fifth — $4,477
Second Poorest — $4,426
Middle Fifth — $4,388
Second Richest — $4,941
Richest Fifth — $4,451

He adds that, because so much of health care is of marginal benefit, it is doubtful that the uninsured are greatly disadvantaged in their care. “One study compared the insured and uninsured after the onset of a chronic illness–say, heart disease or diabetes. Outcomes differed little. Here are the results. After about six months, 20.4 percent of the insured and 20.9 percent of the uninsured judged themselves ‘better’; 32.2 percent of the insured and 35.2 percent of the uninsured rated themselves ‘worse.’ The rest saw no change.”

He concludes that, “We need more realism on health care. Access to unlimited care paid for by someone else may be ruinous for us as a society. Sensible limits must somehow be imposed.”

Unfortunately, Mr. Samuelson’s suggestions for what should be done are a laundry list of platitudes–electronic record keeping, better case management, fewer dubious tests, etc.

SOURCE: Newsweek



Not mentioned by Mr. Samuelson, but usually on any list of painless remedies, is “Pay for Performance (P4P).” But like most platitudes, the reality of P4P may be worse than the problem it is trying to solve, according to Dr. Sandeep Jauhar in The New York Times.

Dr. Jauhar writes, “On the surface, (P4P) seems like a good idea: reward doctors and hospitals for quality, not just quantity. But even as it gains momentum, the initiative may be having untoward consequences.” He cites an earlier example of “quality improvement”–surgical report cards. “In the early 1990s, report cards were issued on surgeons performing coronary bypasses. The idea was to improve the quality of cardiac surgery by pointing out deficiencies in hospitals and surgeons; those who did not measure up would be forced to improve. But studies showed a very different result. In a survey in New York State, 63 percent of cardiac surgeons acknowledged that because of report cards, they were accepting only relatively healthy patients for heart bypass surgery.”

In the case of P4P, he writes, “Consider the requirement from Medicare that antibiotics be administered to a pneumonia patient within six hours of arriving at the hospital. The trouble is that doctors often cannot diagnose pneumonia that quickly. Under P4P, there is pressure to treat even when the diagnosis isn’t firm. So more and more antibiotics are being used in emergency rooms today, despite all-too-evident dangers like antibiotic-resistant bacteria and antibiotic-associated infections.”

He concludes, “Whenever you try to legislate professional behavior, there are bound to be unintended consequences.”

SOURCE: New York Times


David P. Lind and Associates took umbrage at the way I characterized an article in the Des Moines Register about the company’s latest survey of CD health plans in Iowa. It said the percentage of Iowa employers offering CD plans dropped from 26 percent in 2007 to 17 percent in 2008. I was so astonished by the finding (and the fact that I could find no reference to the 2007 study anywhere on the Web) that I concluded they were making it up.

Mr. Lind has since shared the study with me, and I need to apologize. It looks like a credible survey, though it is still a wonder that I could find no mention of it anywhere. And even within the 2007 survey, it lists the kind of benefit programs offered by employers as 26 percent HMO/POS, 74 percent PPO, and 9 percent Traditional Indemnity (page 11). It isn’t until page 28 that CDHPs are mentioned.

In fact, if CDHPs are considered a subset of PPOs, the story gets even more interesting. The survey shows that average PPO deductibles from 1999 to 2007 rose from $305 to $853 for singles (180 percent) and from $693 to $1,749 for families (152 percent). So the average deductible for a PPO in Iowa is not much different than a qualifying deductible for an HSA plan. A couple more years of this and every PPO could become an HSA-qualified plan. No wonder there is little premium saving for a CDHP in that state.

SOURCE: David P. Lind Associates 2007 Survey

Of course I was not the only person who found the Lind survey results less than credible. Inside Consumer Directed Care ran an article featuring the Lind survey but also the United Benefits Advisors survey we mentioned last week and forthcoming studies by Mercer and Towers Perrin, all of which register substantial enrollment gains from 2007 to 2008. Towers Perrin’s Jay Savan is quoted in the article as saying, “I can certainly confirm higher enrollment and would be surprised if our findings don’t demonstrate lower costs and cost increases associated with D+CDH offerings.” Sander Domaszewicz of Mercer says the Lind results “are completely inconsistent with what we found.” Even Gary Claxton of the Kaiser Family Foundation is cited as saying that the Towers Perrin “findings are similar to those expected in KFF’s annual health care survey, which is scheduled for release before the end of September.”

SOURCE: Inside Consumer Directed Care, September 12, 2008 (I don’t believe it is available on the Web unless you are a paid subscriber)

Another article contradicting the Iowa results can be found in the trade publication, Industrial Market Trends. The article by Jorina Fontelera cites the Mercer study cited above and reports from PricewaterhouseCoopers, the Health Research Institute, and Aon Consulting. The piece mostly discusses expected costs of coverage for 2009, but it also looks at how employers are responding. It says, “employers are trying to keep from passing on the costs to their employees or keep the burden minimal by implementing consumer-directed health plans (CDHP) with health savings accounts (HSA) and wellness programs.” It quotes Guardian’s Kerry Mansberg as saying, “We’ve seen a big emphasis on HSAs and high-deductible plans as a way of lowering upfront costs but having a good catastrophic plan.”

SOURCE: Industrial Market Trends


There hasn’t been a lot published about Sarah Palin’s position on health care, even though with her emphasis on domestic affairs and McCain’s historic ambivalence on health care, she is likely to be the point person on the issue if McCain wins the election.

The one major article was published in the Washington Post and revealed a lot about both Gov. Palin and the Washington Post. The article by Matthew Mosk was headlined, “Palin’s Efforts to Reform Health Care Are Complicated.” Complicated? Well, no. The article focused on her belief that more competition would “reduce costs and lead to better care,” so she “pushed forcefully” to get rid of Certificate of Need. The effort was killed by the legislature, according to the article.

But Mr. Mosk wasn’t content to simply report the story. He suggests her position was influenced by $34,000 in campaign contributions and the influence of “an industry lobbyist who served as a top political advisor.” Of course, the article makes no mention of how much the supporters of CON spent to lobby and donate money to kill the proposal.

The article also quotes the CEO of a Juneau hospital who supports CON as saying the governor listened to all sides and simply disagreed with his position, and did it “in a respectful way.”

SOURCE: Washington Post


To flesh out the story a bit, we asked our friend and Alaska legislative aide Jeremy Thompson to write up something more detailed about the governor’s health care positions:

The articles about Gov. Sarah Palin’s approach to health care policy have been trickling across the wire. The Washington Post tried to hint at her reform efforts being driven by campaign donors. Modern Healthcare was naturally interested in the Certificate of Need portion of the bill. And, there have been some non-profits that have praised the only major piece of health care legislation that she introduced back in January for its free-market approach.

The impetus for the legislation was a special council established by the governor that met several times throughout 2007. The appointees on the council were the subject of a lot of debate when the commission was being designed. Whenever a council or task-force is created, there is an intense effort by stakeholders to stack the appointees in a certain way. The end result was somewhat a mixed bag. Chief among the deficiencies of this council, was that no one from the health insurance brokering community was represented. In fact, no one on the council could be described as a categorical advocate for the consumer. Also, the providers were probably over-represented. The membership included an insurer, a nurse, a professor of nursing, four doctors, a public health nurse, a city mayor, and five other representatives from the provider category. The good news is that when the discussion started and the appointees started opening up, it was apparent there were at least two consumer advocates on the council. Among the presentations given, Jim Frogue, from the Center for Health Transformation was by far the most vocal in support for consumer-driven health care.

The recommendations by the council, like the council make-up, were a mixed bag, but there were some shining examples worth noting. As a short-term strategy, they recommended the state “foster better informed consumers,” by setting up a Web site to allow consumers to check prices, and “promote health savings accounts and high deductible insurance plans–for individuals and employers.” As a short-term strategy, the council recommended the state “promote insurance that is portable, consumer-focused and consumer owned, purchased with pre-tax dollars.” To have a state put that in writing is an encouraging victory.

In January 2008, Governor Palin introduced her legislation. It wasn’t perfect, but what proved to be fatal to the legislation was the full repeal of Alaska’s Certificate of Need program. There was an intense lobbying effort against the bill by the large providers in the state because of the repeal, with some very outspoken critics in the legislature. Opposition to the repeal was the overt response. The covert opposition was that the bill was constantly held up in committee. Given that the Certificate of Need repeal could have been easily removed, it demonstrates that the opposition to the bill was more than the repeal.

There were three parts to the legislation. The first part set up a Health Care Commission with 10 members. The appointments would have been made by the governor and the commissioners. What was unique about the makeup of the commission, however, was that the department of Health and Social Services, the largest department of the executive branch, did not have a large stake in the Commission. The state Medical Director was the only representative from the Health and Social Services department. More often than not, in Alaska, HSS is an advocate for the larger providers in the state and stands in the way of effective reform. The provider lobby may have seen this as a threat depending on who was elected governor.

The second part of the legislation established a health care information office and defined the kind of information it would be providing. Some of the requirements would have been victories or losses, depending on the commissioner that would write the regulations based on the legislation. Given that the HSS department in Alaska has very broad authority explicitly granted in statute, all legislation could potentially be a two-edged sword. The attempt in the beginning was to create an office and Web site that would help consumers. It didn’t fully achieve that until later in the process, when another piece of legislation was added to specifically include a number of things that were not in the original bill.

The provider lobby said little to nothing about the pricing requirements, but the legislation moved unusually slowly over what little ground it did cover in the process. It underscores the problem reform-minded legislators have when attempting to give consumers the tools they need to make choices. No one wants to be on record as opposed to consumer information. But, while one can be in favor of legislation on paper, one can actively work against it behind the scenes. Those who saw pricing transparency as a form of witch-hunting also tried to influence the process by adding some heavy-handed requirements to one of the revisions.

The third part of the legislation repealed the certificate of need. Ironically, the biggest voice of opposition was a lobbyist who had been a member of the Governor’s Health Strategies Planning Council the previous year.

It was a good first step. Had the legislation passed, it would have provided some decent tools for consumers and more competition in Alaska’s health care market. The commission would have only been as good as the people sitting on it, but that’s a given risk. If and how Palin will change as vice president is still an unanswered question. McCain declares he picked Palin because she is a maverick, but vice presidents still have to follow the president’s lead. One thing is certain, if McCain asks Palin what she thinks, she has the integrity to speak her mind, and if her legislation is any indication, health care consumers may have a decent advocate.

Jeremy D. Thompson
Legislative Aide
Senator Fred Dyson
[email protected]