Consumer Power Report #160

Published January 12, 2009

I was in a meeting where we were talking about Republican support in the Senate for an individual mandate. Probably a quarter of Senate Republicans support the idea, thinking that is the only way to get “market reforms” (like guaranteed issue and community rating) through. These are all terrible ideas and I said so. But some of the people at the meeting cautioned me against being too public in my criticism of Republicans. We wouldn’t want to embarrass our friends, I was told.

Wrong. This is precisely why the Republicans are in political trouble. People who knew better were too cowardly to tell them when they were wrong. I notice the Democrats have no such qualms. Democrats are not afraid to attack President-elect Barack Obama when they think he is wrong. Why should we handle Republicans with kid gloves? If they are that fragile and thin-skinned, they need to find another profession.

The fact is that mandatory insurance coverage on all Americans would be the greatest intrusion by government into our personal lives–ever. Telling Joe the Plumber that he has to buy health insurance before he feeds his children is obscene and immoral. And I, for one, am perfectly happy to tell them that.

This issue is mostly about politicians making things worse. Fact is, Republican or Democrat, when politicians try to tell you what to do, they will always get it wrong. How could they do otherwise? They don’t know you. They don’t know your needs or your values or your resources. Why in the world should they think they know better what you should do than you do?



American Medical News ran an article headlined, “Florida Consumer-Driven Medicaid Reform in Limbo.” I confess I haven’t paid a lot of attention to this program. It was created by Governor Jeb Bush and it was called “consumer-driven,” so I took it on faith that it was a step in the right direction. And I was pretty excited that new Louisiana Governor Bobby Jindal was working on something similar. In fact, he even recruited Alan Levine as his secretary of health. Mr. Levine had created the program in Florida and intended to replicate it in Louisiana.

Mr. Levine joined us at the Corporate Roundtable meeting we had in New Orleans in March 2008, and that was when I started to get worried. His focus was all on “performance metrics” rather than consumer empowerment. He was talking about “measurable results” and incentivizing behaviorial change–hmmmmmm.

Now my worry is confirmed. According to the article, the Florida program isn’t remotely consumer-driven. It gives people a choice of HMOs and rewards them credits of up to $125/year for keeping up with immunizations and various screenings. It seems to be all about controlling people’s behavior rather than empowering them to make their own decisions.

Physicians hate it and, in growing numbers, are refusing to participate. Apparently the HMOs use very restricted formularies on what drugs are allowed. The “Legislature’s research office also cited difficulties assessing what drugs each pilot plan covers and comparing the coverage,” according to the article. If a “research office” can’t find out what drugs are covered, how can Medicaid recipients figure it out?

The article goes on to say, “Disenrollment data collected by state contractors between October 2006 and June 2008 found that 24 percent of enrollees left a plan because it did not feature a particular primary care or specialty physician.” And while enrollees have “earned” $17 million in credits for compliance, they’ve used only $5 million of that. Very likely they don’t even know they have earned the credits or what to do with them.

What a mess. And by using the “consumer-driven” terminology, they will give real consumerism a bad name. This is doubly disturbing because Florida was one of the first states to use the “Cash & Counseling” program for personal care services with Medicaid enrollees. Cash & Counseling has been enormously successful because it dumped the concept of assigning case managers in favor of giving people a pool of money they could use to buy services directly. Pity that Florida didn’t apply that model here.

SOURCE: American Medical News

So, something similar is happening in Louisiana. The Times Picayune reports that Mr. Levine shares Governor Jindal’s “conviction that Louisiana’s health care program for the poor needs to be fundamentally transformed and that the best way to do it is by applying private-sector, managed-care principles.”

Managed care principles? Really? Aren’t these the same principles that have been resoundingly rejected by the private sector? Of course, one advantage of dealing with the Medicaid population is that they don’t get to walk away from such programs if they aren’t happy with them.

The article goes on to say, “The plan is similar to one that Levine helped steer through the Florida Legislature when he headed that state’s counterpart to DHH.” And, as in Florida, physicians hate the idea. The state’s pediatricians and the Louisiana Medical Society have expressed opposition to the proposal, according to the article.

It is also getting resistance within the legislature. The article says, “the administration’s fast-track approach to Louisiana Health First has rubbed [legislators] the wrong way, and as the debate has progressed, Levine has shown a willingness to swing sharp elbows with those who disagree with the plan.”

And an opinion piece by Walt Garrington in the Alexandria (LA) Town Talk argues, “The Jindal plan’s longer-term goal of a government program to match individuals with a private health insurance plan also misses the point. Health care prices will not go down until individuals–not insurance companies and not government entities–are responsible for paying for much of their own health care costs.” He concludes, “We must convince Jindal and the legislature to choose a different path, for government monopolies, once formed, are the most difficult to break up.”

SOURCES: Times Picayune; The Town Talk; Interview with Alan Levine


Vermont is considering cuts in its Catamount health program. This is the state’s version of Maine’s Dirigo Care and it isn’t faring much better.

Catamount became effective in the fall of 2007 after the legislature was promised it would cut Vermont’s uninsured rate to 4 percent by 2010 and enroll 25,000. As of November, 2008 it had 6,120 people enrolled in the subsidized version and 932 people in the unsubsidized version of the plan. But the program is budgeted at $19.2 million for this fiscal year. That is $3,173 per enrollee–on top of whatever the enrollees are paying for the coverage.

An article in the Rutland Herald tries to support the program with a couple of anecdotes. One is a 29-year-old woman who is paying $65/month; the article supposes private coverage would have cost her $400/month. Another is a young couple that the article supposes would have paid $1,300/month. It seems unlikely that private coverage would cost that much, and if it does perhaps the state should fix its regulations to make such coverage more competitive.

SOURCE: Rutland Herald

In Colorado, health insurance “reforms” mean higher costs for most employers, according to an article by Katie Redding in the Aspen Times. She writes, “As the second part of a law reforming state health insurance takes effect this month, some Aspenites with group health plans could see their premiums rise by as much as 25 percent. The bump is in addition to regular annual increases.”

This is because state legislators decided it would be nifty to require community rating for employer groups of 50 or more employees. So it did away with an existing law that allowed carriers to discount premiums by 25 percent for companies with healthier employees. This is after already dumping a provision that allowed a 10 percent rate-up for companies with less-healthy employees.

The article reports that brokers in the state arranged to have their clients renew their coverage in December to avoid the rate increase in January, so the full impact won’t be felt for another year.

Now what kind of thinking leads a politician to conclude that the best way to deal with the problem of the uninsured is to raise prices by 25 percent for those who are already insured? Good grief!

SOURCE: Aspen Times


The simple fact is that the politicians can’t do anything right. They don’t know enough and their tools are too clumsy. The more they try to do the worse things get. John R. Graham of the Pacific Research Institute offers up some more evidence in an op-ed in the Des Moines Register. He writes, “Many in the health care community have succumbed to the utopian delusion that government investments in ‘prevention’–eating better, exercising more, and so on–will cut society’s health bill by curbing the growth of the many chronic diseases brought on by bad lifestyle choices.”

He calls it “preventionitis” and says, “Preventionitis-afflicted politicians tout conclusions like those in a new report funded by three weighty nonprofit groups [that found] investing $10 per person annually in ‘prevention’–encouraging physical activity, better nutrition, and smoking cessation–would result in savings 5.6 times greater than costs within five years.” For a total saving of $16 billion.

That’s chicken feed compared to the $2.2 trillion annual cost of health care, “but that hasn’t stopped politicians from spreading preventionitis far and wide.” He goes on to cite nanny-state bans on transfats, requirements to list calories on fast food menus, and other remedies that often backfire and make conditions worse than they were before. He writes, “In fact, one study found that of healthy people, the obese, and smokers, the healthy end up costing taxpayers the most.” That is because they live longer to consume more health care services as they age.

Mr. Graham doesn’t make this argument, but I contend that the campaign to reduce smoking has contributed to the rise in obesity as people with oral fixations substitute eating for smoking. It would be interesting to test the theory.

SOURCE: Des Moines Register

Writing in Forbes, Paul Howard of the Manhattan Institute says, “Unless trends change soon, a lack of primary care providers would endanger the nation’s well-being and drive up health care costs.” He cites a study we reported on here a few weeks ago by the Physician’s Foundation that found 50 percent of physicians intend to retire or reduce their case load over the next three years and a study in JAMA that found only 2 percent of medical students plan to go into primary care. Why? Because, “Physicians report spending an increasing amount of time dealing with red tape from insurers that reduces the time they can spend with patients and increases back-room costs. And as administrative burdens rise, reimbursements from both private and public insurers–Medicare and Medicaid–have stayed constant or gone down.”

He adds, “Ironically, even as the nation’s primary care infrastructure crumbles, policymakers are debating universal health insurance schemes that would inject millions more patients into an already strained system,” and cites Massachusetts as a harbinger of things to come.

He suggests what could be done to improve the situation, “We can do it by paying more for primary care excellence, expanding choice and competition at the level of basic health care, and removing incentives in the system that lead to overspending and defensive medicine.” But that would mean undoing the policies the politicians have put into place.

SOURCE: Forbes Magazine

I got a call from a reporter looking for a comment on this problem in primary care. She said some people want to address the shortage of primary care physicians by getting nurses to do more of it. I said that’s not the answer since the looming shortage of nurses is every bit as bad.

An Associated Press article by Dinesh Ramde illustrates what I meant. She writes, “The long-standing U.S. nurse shortage has led to chronic understaffing that can threaten patient care and nurses’ job satisfaction, and the problem is expected to worsen.”

She explains, “The U.S. Bureau of Labor Statistics predicts about 233,000 additional jobs will open for registered nurses each year through 2016, on top of about 2.5 million existing positions. But only about 200,000 candidates passed the Registered Nurse licensing exam last year, and thousands of nurses leave the profession each year.”

So what’s the problem here? Manpower shortages are easy to fix. It is simple supply and demand. Pay people more and you’ll get more people entering the profession. But that means you may have to raise your charges to cover the added costs. Nurses typically work for institutions like hospitals and nursing homes, but these facilities get most of their income from Medicare and Medicaid. Facilities are not allowed to charge Medicare and Medicaid more. The prices are set by government fiat. So once again, our helpful politicians have created a crisis where there should be none.

SOURCE: Associated Press


Meanwhile, real consumer-driven care continues to be an unmitigated success. Joanne Wojcik had an article in Crain’s Benefits Outlook that describes the experience of Sperian Protection, Inc. in Smithfield, Rhode Island. The company has 1,000 U.S.-based employees and started offering HSAs in 2004 after its PPO premiums were scheduled to rise by 37 percent. Even though only 30 percent of its employees have so far opted for the HSA, its rate increases have been dropping–from 3.6 percent in 2006 to 2.6 percent in 2007, and 1.8 percent in 2008.

To encourage greater HSA adoption, the company contributes $250 to an individual and $500 to a family HSA to help offset deductibles of $1,150 and $2,300 respectively. Workers also pay $15 less per week for single coverage and $30 per week for family coverage. The company also pays 100 percent for preventive care and provides 100 percent coverage above the deductible.

The company’s human resources manager, Michael Vittoria, says there hasn’t been any significant selection and adds, “We have people with multiple sclerosis in our HSA, and they get $1,000 injectibles. They know they have this upfront deductible, but they also know they have 100 percent coverage after they hit that deductible. This provides incentives for people to manage their chronic conditions.”

SOURCE: Crain’s Benefits Outlook

Tom Murphy of the Associated Press reports on a new Watson Wyatt survey of 2,400 workers in large companies that shows “workers are significantly less willing to pay higher premiums to keep out-of-pocket expenses like deductibles and copays lower this year compared with 2007. Only 19 percent of employees surveyed this year were willing to opt for higher premiums, compared with 38 percent last year.”

Cathy Tripp of Watson Wyatt is quoted as saying, “Some employees that have for years overpaid for coverage have now looked at how much they actually consume and realized it’s not the right choice.”

SOURCE: Medical News Today