Consumer Power Report #166

Published February 23, 2009

Sometimes when the debate gets heated we can lose track of basic principles and start cutting deals just to resolve a dispute. As necessary as that may be from time to time, it is important not to lose sight of the essentials. I was reminded of that recently when a fiend passed on this video of Phil Donahue’s interview of Milton Friedman. Donahue didn’t get it then and still doesn’t get it to this day, but the audience understood exactly what Dr. Friedman was saying. Enjoy!



There have been a couple of new reports on consumer-driven health care released in the past week.

One is from America’s Health Insurance Plans (AHIP) on what is happening within HSA accounts themselves. Far from the expectations of some that these are a tax shelter for fat cats, it turns out HSA activity is clearly among middle-income Americans.

The study looked at the five biggest HSA banks, comprising 1.1 million accounts from all 50 states and the District of Columbia. The rate of growth is strong, with 200,000 new accounts opened in 2005, 300,000 in 2006, 400,000 in 2007, and 175, 000 in the first six months of 2008. The age of the account holder is spread evenly with between 10 percent and 14 percent in each 10-year age period.

From January to June of 2008, 70 percent of all accounts received a “personal” deposit and 40 percent received an employer deposit; 71 percent had a withdrawal and 86 percent earned interest. Balances are growing. The average account had a balance of $663 on 1/1/07. During the course of the year that account received $1,053 in personal contributions, $531 in employer contributions, $1,032 was withdrawn , $39 was earned in interest, and $28 was paid in fees, for a year-end balance of $1,195. Similar activity took place in the first six months of 2008, leaving an average balance of $1,449 in June.

Not surprisingly, balances grow with time. Accounts opened by 2004 now have an average balance of $3,125, those opened in 2005 have balances of $1,766, those opened in 2006 have $1,736, those opened in 2007 have $1,080.

So, rather than a way for “the rich” to hoard money from the taxman, HSAs are a perfectly middle-income program featuring modest deposits, modest withdrawals, and modest interest income. In other words, they are working exactly the way we said they would.


Aetna sent out a bulletin to all its producers extolling the rise of consumer-driven health. It starts right out with a bang, saying:

“Health care consumerism continues to grow–through both consumer-directed health plans and tools that provide all health care consumers with more information about their health care choices and costs.”

Here are some examples of their growth:

  • The number of employers with 500 or more employees offering CDHPs increased from 14 percent in 2007 to 20 percent in 2008.
  • Thirty-one percent of new coverage issued in the Small Group market was for HSA/HDHPs.
  • Companies that offered an HSA for three years saw significant growth each year, reaching 29 percent in the third year.
  • In 2008, enrollment in CDHPs reached 7 percent of all covered employees, up from 5 percent the previous year.
  • In companies that offer CDHPs, employee enrollment also continues to rise–from 8 percent in 2006 to 10 percent in 2007 and 15 percent in 2008.

It continues:

“The increase of CDHPs is also tied to a more general increase in health care consumerism. A survey by the Employee Benefit Research Institute found that CDHP participants make better-informed health care decisions and are generally healthier. That’s because employers who offer CDHPs also provide more and better health information tools to their employees. In most cases, these companies promote healthy lifestyles to all their employees, not just those participating in CDHPs.”

It concludes:

“As more plan sponsors of all sizes adopt consumer-directed health plans, their impact on the entire health benefits industry will continue to grow. In fact, current economic pressures are likely to accelerate the growth of CDHPs.”

All of the points made are footnoted, with sources cited. All and all, it’s a very nice, brief, and readable piece.



Regina Herzlinger had an op-ed in the Boston Globe, “Creating a Real Health Care Market.” She points out that Massachusetts has “virtually the highest costs in the country and insurance premiums that rise more rapidly than national rates.” But the solution is not, as former governor Michael Dukakis has proposed, a return to price controls. Instead, the state should move toward a “real market, like those for computers or cars, [which] feature many competitors who offer differentiated products, and consumers who search for the best value.” Instead, the market in Massachusetts is characterized by oligopoly providers and little consumer choice of health plan, she adds.

SOURCE: Boston Globe

The internal debate within Democratic circles is heating up, as it inevitably does, between the advocates of single payer and the advocates of mandatory private coverage. David Hogberg of Investor’s Business Daily writes about a recent study and press conference by Public Citizen and Physicians for a National Health Plan blasting the Massachusetts model as a failure and calling for the nationalization of all health insurance. The article quotes me as agreeing completely with the critique of Massachusetts, but, of course, taking exception to their alternative.

SOURCE: Investor’s Business Daily

CHCC Member Marcy Zwelling-Aamot had an op-ed in the Long Beach Press Telegram. She thinks it is ironic that Tom Daschle and others have such trouble paying their taxes while making millions of dollars while “ordinary” doctors and “ordinary” patients are burdened with paperwork just to do their jobs. She writes, “Every day I spend hours filling out forms so that the government-directed Medicare Part D pharmacy plan might approve the medication that my patient has taken for the last 10 years. A person (I’m sure ordinary) who has never met my patient and has no specific education will decide if we might continue my patient’s life-saving medication. This is the plan that Congress and ‘prominent officials’ have written for us ordinary people.” Now, she adds, “As part of the stimulus package, Congress wants to spend taxpayer dollars to assist physicians in their purchase of office-based electronic medical records systems even though it has been clearly demonstrated that the systems currently available decrease productivity and may actually increase medical errors.”

SOURCE: Long Beach Press Telegram


Patient Privacy in HIT Law

The Patient Privacy Rights Coalition reports the following provisions were included in the final bill:

  • Prohibits the sale of your medical records without consent. There are exceptions for research, public health, and treatment.
  • Requires any entity using an EHR (covered entities and business associates) to keep an audit trail of all people and organizations with whom they share your information.
  • Mandates policies setting standards for technology systems to segment sensitive information.
  • Mandates policies setting standards for encryption of data.
  • Increases monetary penalties for violations, grants attorneys general authority to file suit on behalf of a state’s citizens, requires monitoring of contracts and reporting on compliance.
  • Requires breach notification.

SOURCE: Patient Privacy Rights

Mandatory HIT Participation

According to Josiah Ryan of CNS News, the Democrats who pushed the health IT provisions didn’t even know what was in the bill. He asked them whether every American will be mandated to participate in the national database. He writes, “House Energy and Commerce Chairman Henry Waxman (D-Calif.) and House Health Subcommittee Chairman Frank Pallone Jr. (D-N.J.) both told on Friday that they do not think the law mandates that every American’s health care records must be entered into the national system.”

Mr. Pallone said, “You mean that everyone has to be in the database? I don’t think so. My understanding of what we are talking about is that this is information that you use with your own doctor for your own purposes. I don’t think there is any requirement you be in some national database either totally, either collectively or with individual data that you might want to provide.”

In fact, the article goes on to say, “According to the language of the bill, it is the duty of the ‘National Coordinator for Health Information Technology’ to ensure that federal health information technology programs are ‘meeting the objectives of the strategic plan’ to, among other things, provide for ‘the electronic exchange and use of health information and the enterprise integration of such information’– and the ‘utilization of an electronic health record for each person in the United States by 2014.'”

And, “The electronic health records, or ‘EHRs,’ according to the bill, will include clinical health information, medical history, and demographics, including race, ethnicity, primary language, and gender information.”

So, all of that is going to be entered into a database on each of 300 million Americans within five years? Mmm, hmmm. Does anyone up there know what they are doing?


COBRA Provisions

Writing in Business Insurance, Jerry Geisel reports on the following COBRA provisions in the final stimulus package:

  • Any worker laid off from September 1, 2008 through December 31, 2009, will be eligible for a 65 percent subsidy of COBRA continuation premiums. This becomes effective March 1, 2009, and will last for nine months for each worker. This does not apply to workers with AGIs of $125,000 or couples with AGIs of $250,000. There is no subsidy for people who buy individual coverage instead of COBRA.
  • Employers will be required to track down any workers laid off since September and notify them of their renewed eligibility. Eligibility will end when the employee becomes “eligible for”–not just enrolled in–a new employer plan or Medicare. Employers will charge the former employees 35 percent of the premium and offset the balance against their payroll tax liability. Workers who continue to receive subsidies they are no longer eligible for will have to repay the government 110 percent of what they received.
  • The provision of extending COBRA eligibility to enrollment in Medicare was dropped.

SOURCE: Business Insurance


Here’s something I’ve been expecting for a while. Rather than the standardized medical care that has been the goal of most policy wonks, it is finally dawning on people that patients are unique and need a course of treatment that is customized to each one’s particular situation. This realization has come to have a name–Personalized Medicine–and conferences are being organized around the concept.

An article by Neal Learner in Drug Benefits News provides a nice summary. He says “the drive toward ‘personalized medicine’ is expected to accelerate in 2009,” largely because there is a growing understanding that “drugs perform differently depending on an individual’s genetic makeup.” He adds, “Some PBMs and health plans are helping to push the adoption of tailored therapies through research projects and the use of massive databases,” and quotes Keith Bradbury of Medco as saying, “We expect personalized medicine to gain momentum and garner much attention. This year will likely bring stronger evidence to help demonstrate the value of genetic testing when prescribing certain drugs.”

The article provides examples of drugs that are tailored to specific genetic make-ups and that may be harmful to people without that genetic profile.

SOURCE: Drug Benefit News

This personalized medicine development will likely have an even greater impact on biologics than on chemical pharmaceuticals. Indeed, it opens up a whole new era for such treatments. So it is timely that there is a big dispute in the industry right now over what is known as “follow-on biologics (FOBs).” FOBs are the biologic equivalent of generic drugs and there is a dispute raging over how long the original innovator should have patent rights and “data exclusivity” before copy-cat manufacturers can jump on a new development.

This is also a burning issue in Congress, as a slew of bills were introduced in the last Congress that would have allowed exclusive rights to the new biologic from anywhere from zero to 14 years, according to a new study by Henry Grabowski of Duke and Joseph DiMasi of Tufts. This study is a response to an unpublished paper by Lawrence Kotlikoff that supported minimal exclusivity periods.

I won’t try to repeat the arguments here, but there is clearly an important question in play. Kotlikoff argues that a minimal period would encourage competition. Grabowski and DiMasi counter that biologics are extremely difficult to develop and test. If the innovators can’t benefit from the investment, they will innovate less. They also argue there is plenty of competition already in developing the new biologics.

How Congress answers these questions will be a matter of life or death for many thousands of Americans. My take is the last thing we want to do is discourage new developments at the very time when customized and personalized medicine is finally becoming accepted.

SOURCE: Duke University Working Papers

Finally, as I mentioned, all of this is getting enough attention to warrant conferences devoted to the topic. One firm has announced an upcoming conference, “CBI’s Premier Forum for Payors on Genomics and Personalized Medicine” on March 12 -13 in Baltimore (convenient for CMS bureaucrats).

The conference announcement says, “The adoption of genetic testing and new bio-technology products is driven by the insurer’s willingness to pay for new products. With the patient at the forefront of health care decision making, payors are facing increased pressure to design benefit programs that allow patients to get the best access to care resulting in better health outcomes. Most recently, the push has been on personalized medicine, in an effort to make more informed health care decisions and reduce unnecessary side effects and costs.”

SOURCE: Center for Business Intelligence