Consumer Power Report #164

Published February 9, 2009

Wow! Two weeks and the wheels are already falling off the bus. The commentators who were saying a month ago that this was the smoothest transition in history forgot to thank George W. Bush for that. But now that the training wheels are off and Dad has gone back to Texas, those same commentators are saying it is the worst transition since William Henry Harrison in 1841.

I don’t know about that. This administration is reminding me more and more of Jimmy Carter, whose early approval ratings exceeded Obama’s. Has there ever been a more checkered line-up of Cabinet appointees?

The loss of Daschle is an enormous blow to Obama’s health care ambitions. Daschle was an inspired choice for his ability to navigate the Senate while also having a grasp of health care. There is no one else like that, other than Hillary Clinton perhaps, but she is otherwise engaged now.

Which is not to say the institutional Democrats need an effective secretary of HHS to drive home the agenda. They already know what they want to do, and they have the votes to do it. Mr. Daschle’s main contribution to the cause has already been offered–don’t be too specific, and do it fast before the opposition can gather steam.

That’s probably good advice for getting a law passed. But then comes implementation, which must be very specific. Suddenly, instead of spouting platitudes like “cover the children,” someone will have to make decisions about who gets paid, how much, for what. That’s when it will get ugly as all the pigs start fighting for their place at the trough.

Let’s hope it takes place in time for the 2010 elections.



So we have a new SCHIP law. Molly Sandvig of the Physician Hospital Association informs us that the Senate version was adopted by the House without the poison pill on physician-owned specialty hospitals. The expansion relies entirely on cigarette taxes to pay for such things as dental care, mental health care, coverage of legal immigrants without the current five-year waiting period, and an additional four million children. The cost will be $33 billion over five years, or $6.6 billion per year. That will require 10.6 billion packs of cigarettes to be sold every year. At a pack a day, it will require 29,041,950 smokers to pay for the program–10 percent of the entire country.

Usually these cigarette taxes are justified by saying smokers should pay for the health care costs they incur, and if the taxes encourage them to quit less revenue will be needed. But it is hard to imagine how adults quitting smoking will lower the dental costs of the kids.

More likely it will result in an increase in smuggling, hijacking, moonshine cigarettes, and a huge increase in sales by the Indian nations. So, on top of the SCHIP costs, let’s consider the added costs of police, courts, jails, and lost lives associated with organized crime. Welcome to the New Utopia!

SOURCE: Kaiser Network

The administration also reversed the Bush rule on SCHIP that required states to cover 95 percent of kids in families making under 200 percent of poverty before they expanded eligibility to higher-income families, like New York’s desire to cover families at 400 percent of poverty. Now the states can cover whoever is most likely to vote, and that ain’t the poor folk.

SOURCE: Obama Memorandum

And the ol’ “Stimulus Package” continues on its merry way in Congress. Whatever else it will do, it will include $1.2 billion for a new “Comparative Effectiveness Research Center” (CERC, which will be pronounced “curse,” no doubt), and $20 billion for Health Information Technology (HIT). I hear the HIT provision will sprinkle money around–$1 million for each hospital and $60,000 for each doctor’s office–to pay for new computers and software … provided, of course, that the providers buy the programs the Obama Administration deems worth buying and agrees to report this information to a central database.

Well, that will be handy for the CERC. It will be able to tap into those patient files to make sure Doctor Jones is lecturing his patients on the need to eat right, exercise daily, and quit smoking. No, wait, he can’t tell them to quit smoking or the kids will lose their insurance coverage. Oh, my. It is all so complicated in the New Utopia.

SOURCE: New York Daily News


Michael Cannon and I have been “exchanging views” on the Cato blog. Unfortunately, Cato’s blog doesn’t appear to have a way for readers to leave comments. That’s too bad, because this is exactly the kind of issue that lends itself to wide discussion. Michael and I have our views, but they are no more valid than yours. The question is really about what you would prefer in health care financing and delivery. So go to the Cato Web site, read the exchange, and send me your comments. I will see if they can be posted somehow, or at least we will compile them here.

SOURCE: Cato Blog

CHCC members Greg Dattilo and Dave Racer have published a little booklet, “Why Health Care Costs So Much, The Solution: Consumers.” This is the first in a series that also will deal with the government’s role, employers, health care providers, insurance companies, and the faith community. The book is 72 pages with illustrations and is very easy to read. It offers ways consumers can actually cut their own costs–today!–and provides resources for helping them do it. Unlike almost anything that crosses my desk, I didn’t disagree with a word of it. This is solid stuff that could go a very long way towards revolutionizing the entire health care system, with no help from politicians.

SOURCE: Alethos Press

Uwe Reinhardt sent me a short video showing a fire department working under supposed capitalist conditions. An apartment building is in flames and the firemen have only one net to catch the people trapped inside, so victims in various apartments start bidding to be the one person who can be saved.

It’s pretty amusing and is intended to suggest that capitalism and health care don’t mix. But does it really? I think it shows just the opposite.

First, the public (socialized) fire department is clearly under-equipped for the task at hand. Ten or so people need to be rescued but they have only one net. That being the case, how should they allocate the resource? By random lottery? Or by choosing the person most worthy of rescue by some criteria–perhaps a child with the most years yet to live, or perhaps an elderly person who merits being saved for her many years of service to society, or perhaps the person with the greatest earning potential who will contribute the most to society’s well-being in the future? Or, most likely, the city councilman who votes on salary increases for the firemen holding the net? Are these methods better than an auction?

More importantly, with all these people bidding to be saved, a capitalist fire department will not want to forego the earning opportunity. It will invest in more nets to save more people and collect more money.

So it was with Ben Franklin and his privately owned Union Fire Company, which later led to the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. By the way, this company did not believe in community rating. It charged wooden houses triple the premium as brick houses and denied coverage for houses with trees in front of them.

SOURCE: Fire Fighter Video


John Goodman has alerted me to two new papers in Health Affairs that call into question the underlying premise of the core idea kicking around health policy circles–that prevention and disease management (all powered with information technology) will be able to restructure health care to become more effective and efficient. This bit of wishful thinking is shared by Newt Gingrich, Hillary Clinton, and most of the health care establishment that hopes to gain more power in a reformed health care system.

Unfortunately, the evidence for the premise has always been sketchy at best. There have been some isolated instances that would seem to support the premise, but just as many that contradict it. True believers embrace the support and ignore the contrary evidence. By the way, this practice of paying attention only to the information that agrees with your predispositions does not bode well for the future of “evidence-based medicine,” either. In any case, these two articles provide powerful evidence that basing public policy on wishful thinking is not such a great idea.

The abstract for the study by Louise Russell on prevention says, “Over the four decades since cost-effectiveness analysis was first applied to health and medicine, hundreds of studies have shown that prevention usually adds to medical costs instead of reducing them. Medications for hypertension and elevated cholesterol, diet and exercise to prevent diabetes, and screening and early treatment for cancer all add more to medical costs than they save. Careful choices about frequency, groups to target, and component costs can increase the likelihood that interventions will be highly cost-effective or even cost-saving.” In other words, prevention works only when it is targeted at high-risk populations, and even then may not be cost-effective even if it improves health.

On disease management, David Bott, Mary Kapp, Lorraine Johnson, and Linda Magno, all with the Centers for Medicare & Medicaid Services, write, “We summarize [CMS’s] experience with disease management (DM) in fee-for-service Medicare. Since 1999, the CMS has conducted seven DM demonstrations involving some 300,000 beneficiaries in thirty-five programs. Programs include provider-based, third-party, and hybrid models. Reducing costs sufficient to cover program fees has proved particularly challenging. Final evaluations on twenty programs found three with evidence of quality improvement at or near budget-neutrality, net of fees. Interim monitoring covering at least twenty-one months on the remaining fifteen programs suggests that four are close to covering their fees.” So, even if the standard for success is merely getting “near budget neutrality,” only three of 20 programs within Medicare have been successful.

SOURCE: Goodman’s Blog; Health Affairs on Prevention; Health Affairs on Disease Management


I promised in the last issue some good stuff on consumer-driven health. Here are some particulars:

Celent has begun a benchmarking survey of banks in the HSA business. It finds while most of the economy and retirement accounts have been tanking, HSA accounts continue to grow, making them the one bright spot in the banking business. They say, “For the six-month period from January to July 2008, accounts grew by 22 percent, while total balances grew by 40 percent. Given the financial industry’s current liquidity crisis, such balance gains should come as very welcome news.” They add that not all banks are making money on the accounts and customer service is not great at many, especially at the big full-service banks. They conclude, “Banks’ declining revenues and need for ongoing resource allocation indicates that the fate of many HSA programs is still uncertain, and as such, the market continues to await a ‘shakeout.'”

SOURCE: Celent Press Release

Writing in the Detroit Free Press, Michigan state Rep. Leon Drolet relates the battle he waged when he was a commissioner of Macomb County. He wanted the county, which faced a $20 million deficit and was about to raise taxes, to adopt the practices of Oakland County, which had no deficit, was not planning lay-offs, and had no plans to raise taxes. The secret? Oakland County adopted a defined contribution approach to retirement benefits and installed health savings accounts.

SOURCE: Detroit Free Press

The San Francisco Business Times reports that the recession is great for HSAs, although market penetration in California has been lagging behind the rest of the nation. It says even Kaiser Permanente expects to reach 1 million people enrolled in its high-deductible plans by mid-year. CHCC member Cora Tellez is quoted as saying her company, Sterling HSA, saw the number of new accounts grow by 97 percent in 2008. The article goes on, “‘I see a big takeoff, big growth,’ said Tellez, propelled in part by business from Kaiser. ‘They’ve moved (into this niche) in a very big way,’ she said. ‘We have a lot of Kaiser members in our plan.'” The article adds, “David Brown, area president at Gallagher Benefits Services in San Francisco, agreed that California may soon start catching up with other parts of the country in embracing HSA-compatible and other high-deductible plans, due to economic considerations. Until recently, Kaiser’s market dominance, the historical strength of HMOs in California, the perception that HSAs reflected a conservative Republican philosophy, and the state’s lack of a tax benefit for HSAs worked against them in the Golden State.” But both HSAs and HRAs are now starting to take off.

SOURCE: San Francisco Business Journal