Consumer Power Report #154

Published November 24, 2008

Our events last week were terrific. We hope to have videos posted on the Web site shortly, but a few highlights:

We had an excellent roundtable meeting of CHCC members. It was held at the offices of Dezenhall Resources, a health care consulting firm in downtown DC (the infamous K Street Corridor). It was good to see so many friends and supporters of the organization. We had an in-depth discussion of how Consumers for Health Care Choices plans to respond to the challenges of the coming year and the amazing support The Heartland Institute has provided.

We also engaged in some serious self-criticism of some of the initiatives that did not pan out as well as we had hoped. Our Consumer Education Workshops, for instance, did not attract the attendance we needed to make them sustainable. Perhaps the market has moved beyond a need for this kind of elementary education. But we will be able to continue this effort without direct sponsorship.

The presentations during our post-election workshop were sobering, but it is reassuring to know there are a lot of very capable people working on health care freedom. What is needed now is a broad-based coalition of individuals and organizations that are willing to go beyond their narrow focus to work on a comprehensive agenda.

Dick Armey, the keynote speaker at our awards banquet, was excellent at suggesting the importance of such an agenda and the outlines of an approach. It is past time for all of the advocates of freedom to come together to work on health care with those of us who specialize in this area, and Dick Armey’s presentation suggested that FreedomWorks is ready for the challenge.

Congratulations to our Award winners:

  • Roy Ramthun as Pioneer in Public Policy
  • Linda Gorman as Pioneer in Health Economics
  • Jordan Shlain, MD, as Pioneer in Medical Practice

These are just three of the thousands of people all around the United States who are putting the principles of liberty to work in health care every day of the week.



Finance Committee Chairman Max Baucus (D-MT) released a 90-page white paper that will be the basis for his reform proposal about to be introduced as legislation. Word has it that there is tension between Baucus and Senator Kennedy, who chairs the Senate HELP committee, about who will get credit for massive health reforms in the coming Congress. Baucus was quoted as saying this will take three years to enact, and Kennedy’s time horizon is not that long.

In any event, I reviewed his executive summary and fear he is misdiagnosing the problems. To wit:

  • He talks about “the underinsured.” That is a euphemism for CD health, but CD health is the ONE success story out there. It is actually reducing health care spending, increasing knowledge, and improving patient behavior. This notion that no one should ever have to pay for a health service is a fantasy.
  • He talks about uncompensated care and blames it on the uninsured. But the greatest source of uncompensated care is underpayment by Medicare and Medicaid. The uninsured is a trivial contributor.
  • He talks about expanding Medicaid and SCHIP. But one-third of the uninsured are already eligible for those programs; they just don’t bother to enroll. He does not say how he will change that.
  • He hopes that wellness and prevention will lower costs. But there is no evidence to support any of that. In fact wellness and prevention tend to RAISE, not lower, costs.
  • He wants to focus on wellness and prevention “RATHER THAN on illness and treatment” (emphasis added.) YIKES!!! So he will deny treatment of heart disease for a 50-year-old so that a 30-year-old can get an annual physical? Good luck with that idea.
  • He bemoans the fact that people wait until they need coverage to enroll, but he will add costs to the young and healthy by eliminating “discrimination” against people with pre-existing conditions and requiring guaranteed issue–policy that will make it MORE likely that people will wait until the last minute to get coverage.
  • He wants a Medicare buy-in for people of age 55. But he ignores the facts that 1. Medicare already has $34 trillion in unfunded liabilities. 2. That people on Medicare already pay 20 percent + of their incomes in out-of-pocket spending (speak of “underinsured”). 3. That it pays only half of the elderly’s health care spending. And 4. That it is a massively clumsy and inefficient program that could never be sold on the private market.
  • He wants employers who don’t provide coverage to pay for the uninsured. But he ignores the effect on job creation and wages, which is especially curious in a time of recession and growing unemployment.
  • He thinks health IT will solve a lot of problems despite all the evidence that it doesn’t.

Baucus’s plan is just a laundry list of wishful thinking. All those folks who insist that medicine be “evidence-based” should apply the same standard to public policy.

SOURCE: Baucus White paper


Our friend, Merrill Matthews, over at the Council for Affordable Health Insurance, wrote an op-ed for the Washington Times debunking some of the hopes of the Obama campaign (and Baucus) for cost-free health reform.

He says Obama made three big promises:

  • Computerizing medical records would save $77 billion a year.
  • Reducing administrative costs would save $46 billion a year.
  • Improving prevention and chronic disease programs would save $81 billion a year.

As a result, according to the Obama campaign, each family’s health care costs would drop by $2,500 per year.

Matthews goes on to debunk each of these claims. But he does so very conservatively and doesn’t go as far as I would. For instance, the health information technology estimate is based on a RAND analysis, which Matthews accepts as basically valid while cautioning that the savings would take 15 years to realize. In fact, the RAND study was not valid. It looked solely at the positive literature on the subject and ignored all of the documentation that disputed its conclusions. Any fair reading of the available research would have to conclude that widespread adoption of this technology would be as likely to raise costs as lower them, and result in more medical errors rather than fewer. That does not mean that savings are not possible, just that we won’t know until it is actually adopted.

Matthews concludes, “What Mr. Obama’s plan really lacks–and why it will certainly fail–is a way to get the economic incentives aligned correctly so that consumers have a reason to be value-conscious shoppers in the health care marketplace. Instead, he distorts incentives even more than they are by imposing more mandates, regulations, and price controls.”

SOURCE: Washington Times


Some of the key components of the Baucus approach include an “insurance exchange” and mandatory coverage, modeled roughly after Massachusetts. But Massachusetts is hardly clear sailing.

Harvard’s Robert Blendon continues his superlative work in measuring public opinion around health care issues in a new study of the attitudes of Massachusetts residents about that state’s health reforms. The study, published in Health Affairs, not only looks at current opinions, but tracks attitudes through the debate and consideration of the plan.

One of the findings is how opinion changes once people are made aware of the costs and consequences of a reform proposal. Blendon tested attitudes towards various reform ideas in 2003. He found that 82 percent of respondents favored “expanding existing state programs,” but when told that “these programs would require raising taxes to pay for the cost” support dropped to 55 percent. Similarly with other ideas:

  • 76 percent supported an employer mandate, but that dropped to 35 percent when told that employers might have to lay off workers
  • 70 percent supported tax credits and deductions for the uninsured, but that dropped to 36 percent when people were told it might not cover the full cost of the coverage.
  • 56 percent supported an individual mandate, but that dropped to 22 percent when told it will cause financial hardship for the people affected.
  • 50 percent supported single payer, but that dropped to 30 percent when people were told they might have to wait longer for hospital and specialist care.

This is part of the reason Massachusetts developed its approach that included a little bit of everything–there was no consensus on a single best approach. Of these various approaches, the one with the least support once the trade-offs are made clear was the mandate on individuals. Blendon’s article notes the mandate was the “most politically controversial” part of the legislation, gaining only 52 percent support.

That level of support has increased since the law was enacted and implemented, to 57 percent in 2007 and 58 percent in 2008. But that population-wide number hides some alarming trends. Blendon writes of his 2007 survey, “Upon hearing descriptions and costs of subsidized and unsubsidized plans for an average uninsured person, 62 percent thought that it was unfair to require an uninsured person to sign up and pay for an unsubsidized plan like this. Forty-four percent thought that it was unfair to require an uninsured person to sign up and pay for a subsidized plan.”

Today, the people most supportive of the individual mandate are the people least affected by it–69 percent of people making $75,000 or more per year support it while only 49 percent of those making between $25,000 and $50,000 do. Sixty-nine percent of people with college degrees support it, but only 45 percent of those with high school or less do.

There is a growing concern among all residents that the law is hurting, rather than helping, the uninsured, with the percentage saying it is hurting growing from 15 percent in 2006 to 33 percent in 2008. The percentage saying it is helping the uninsured has dropped from 67 percent in 2006 to 45 percent in 2008.

The survey digs deeper into this trend. It breaks out the population that is directly affected by the law from those who are not. Of those directly affected by the law, 60 percent say it is hurting them personally and only 22 percent say it is helping. Fifty-one percent say that health care costs have gone up and only 14 percent say they have gone down. As a result, only 37 percent of those directly affected now support the mandate, as opposed to 62 percent of those not affected.

Blendon cautions that these developments could presage a backlash against the law, especially if “more people report increasing costs.”

SOURCE: Health Affairs


There has been a slew of articles recently about the growing impact of consumer-driven health care on health care services. We have predicted for years that once market penetration reached a certain level, there would be a profound impact on the actual delivery of services … and now, for the first time in memory, the utilization of services is actually dropping. This is particularly striking during a time of recession. Always in the past the use of services has increased during recessions as people rush to get services before they get laid off and lose their coverage. But this time there is no such rush because people would have to use some of their own money to get those services, and they are more concerned about preserving their funds as they face unemployment.

The best of the batch is by Joanne Wojcik in Business Insurance. She reports that experts are worried that employees may be “skimping on essential health care” because people have cut the number of prescriptions filled by 2 percent in the past year and have reduced physician office visits by 1.2 percent. It also cites a survey by the National Association of Insurance Commissioners (NAIC) that found 22 percent of consumers have reduced their physician visits and 11 percent have reduced their use of prescriptions.

Now, one might think that after all these decades of hysteria about rising health care costs and the unnecessary use of health care services, people would see this as a positive development. But, no. The experts now have a whole new set of reasons to be hysterical. One such advocate is quoted as saying, “we can’t afford to extend cost-cutting to medical care.” Huh?

SOURCE: Business Insurance

A press release by an online company called “checkMD” and published on MarketWatch finds that half the people in an online survey say they are going to the doctor less often because of rising health care costs. Jon Black, the company CEO, calls this trend “shocking,” and adds, “With climbing health care costs and challenging economic times, Americans are under more pressure to carefully evaluate providers to make informed choices.” And this is “shocking” because … ?

SOURCE: MarketWatch

The trend is even affecting hospitals. An article in the Milwaukee Journal Sentinel reports that Columbia St. Mary’s hospital is laying off 74 workers (out of 5,300 employees). CEO Leo Brideau is quoted as saying, “This is the first time that I’ve seen health care not be recession-proof.” But reporter Guy Boulton explains, “This is the first economic downturn, though, in which health plans with high deductibles have become common. People facing high deductibles are more likely to hold off on elective procedures or try less-costly treatments first. That is one of the underlying goals of plans with higher deductibles–to encourage people to spend health care dollars wisely. But such plans are apparently reducing demand for some health care services throughout the country.”

The hospital’s net income dropped to $12.6 million, down from $46.6 million in 2007 and $58.4 million in 2006 (not bad for a non-profit). Of course, it attributes this to a rise in bad debts, but the article says its investment income shrank by $11.3 million with all the turmoil on Wall Street. The article adds that Wheaton Franciscan also has eliminated 20 jobs.

SOURCE: Journal Sentinel

The New York Times also weighs in on the issue, though it doesn’t attribute it to growing CDHP enrollment, but to the sinking economy. The article by Reed Abelson says patients are deferring elective surgery like knee replacements, hernia repairs, and weight-loss surgeries, and these are the kinds of procedures that are “most lucrative” for hospitals. He says that a survey of 112 nonprofit hospitals found admissions are down 2 percent to 3 percent from a year ago and that is “already having a profound impact on many hospitals’ profitability.” As a consequence hospitals are moving rapidly to cut costs–laying off workers, consolidating facilities, and freezing construction and other capital spending.

David Rock, a consultant in New York, is quoted as saying, “It’s safe to say hospitals are no longer recession proof.”

SOURCE: New York Times; BizTimes