Consumer Power Report #168

Published March 9, 2009

A recent meeting I was supposed to attend was cancelled because the group I was supposed to meet with got a last-minute invitation to attend the Big White House Summit on health care. Mmmm, hmmm.

The stock market continues to tank, unemployment continues to rise, GM is talking bankruptcy despite the billions and billions of taxpayer dollars it has wasted in the past quarter, CitiGroup shares are worth under a dollar–and the Health Care Establishment (the “stakeholders”) is getting together at the White House to divvy up all the money you and I put into health care every year. I don’t know about you, but I’m not only feeling stimulated, but just bursting with confidence that salvation is just around the corner.

President Barack Obama would like Congress to authorize some $650 billion as a “down payment” on … well, we don’t really know, do we? They’ll authorize the money without having a clue as to what is being authorized. That sounds a lot like the $700 billion TARP bill and the $800 billion stimulus package. Congress votes to spend money without having a clue as to how it will be spent. Why bother electing Members of Congress if all they do is write blank checks? Welcome to Venezuela, Hugo!

It is hard to feel optimistic. And yet–consumer-driven health care continues to be the one policy initiative that is actually working in the real world. Everything else that has been tried has failed–Massachusetts, Maine, Vermont, Tennessee, Kentucky, small group reform, community rating, SCHIP, Medicaid, managed care, COBRA, HIPAA, and on and on. None of it has worked as promised and a lot of it has made conditions worse, not better.

People talk about “evidence-based medicine” all the time. If we had evidence-based public policy, the policy wonks would be singing hallelujahs about consumer-directed health. But don’t hold your breath. That would get in the way of the real agenda, which has nothing to do with what works and what fails. It is all about who is in control. Period.



The Manitowoc Herald Times reports that a local broker and TPA are trying to discourage the city of Manitowoc from adopting HSAs for its employees, arguing in favor of an HRA instead. The issue was raised by the chair of the city finance committee, Jim Brey, who noted Manitowoc County had saved $500,000 by switching to an HSA. According to the article, the two critics, broker Mike Stollfus and Joe Holt, dismissed the comparison, saying, “There are no guarantees that HSAs will save money for the city.”

They go on to argue that, “A vast majority of HSAs end up being used as retirement accounts” (which is actually not true), and “they lock up large amounts of money that can no longer be used by the city to pay higher claims.”

Mr. Brey concluded, “I don’t think that was a very level presentation. They obviously benefit by selling this stuff to the city of Manitowoc.” The article says, “Brey said he plans to have Manitowoc County Personnel Director Sharon Cornils meet with city aldermen to discuss the county’s successes with health savings accounts.”

SOURCE: Herald Times

Patrick McIlheran sums up the experience of Manitowoc County in an op-ed in the Twin Cities Pioneer Press. He asks how HSAs have been working, and the head of AFSCME responds, “I’d agree, from a financial standpoint, it’s worked out well for the employees and the county.” Mr. McIlheran says, “as other governments struggle to cut costs and Washington mutters about reforming health insurance, Manitowoc is more evidence that giving power to patients actually works.”

He adds, “The costs, says County Executive Bob Ziegelbauer, are ‘much, much less than where we would have been if we hadn’t done this.’ The plan’s premiums did jump 18 percent last year, he says, though the county figures that’s because the insurer initially guessed low. The county’s now self-funded and, says Ziegelbauer, it is paying in 2009, per employee, just what it was paying in 2006. Before going to HSAs, costs were doubling every five years or so.”

But he notes that public employee unions are generally opposed to the idea, due entirely to an ideological preference for single payer, and concludes, “So even when governments use HSA-style plans to give away money, as Indiana now does in funding Medicaid, they run into ideological opposition. The question isn’t whether HSAs and markets work but whether they can be permitted to work.”

SOURCE: Pioneer Press


The next time you hear someone talk about how Medicare is a wonderful program and a model for what all of America should be doing, you may want to refer them to a new study from the Kaiser Family Foundation, “Health Care on a Budget.” The researchers, Juliette Cubanski, Anthony Damico, and Tricia Newman, found that despite Medicare’s massive unfunded liabilities, the average household on Medicare still spends 14.1 percent of its income on health care. This contrasts sharply with the 4.3 percent spent by non-Medicare households.

For Medicare households, 62.9 percent of spending goes to premiums for Part B, Part D, and Medigap, 18.1 percent goes to prescription drugs, 15.3 percent to medical services, and 3.8 percent to medical supplies.

I was puzzled about how long term-care expenses were treated in this analysis, so I asked the authors. Tricia Neuman directed me to another study by the same authors, “Revisiting Skin in the Game.” She said the first study included only the “non-institutionalized population,” so it would include what people pay for LTC premiums but not for stays in a nursing home. The second study includes that population and also provides trends since 1997.

This second study is even more alarming, showing that the median out-of-pocket spending for Medicare beneficiaries has grown from 11.9 percent of income in 1997 to 16.1 percent in 2005. This is in spite of the advent of Medicare Part D. It breaks out the population in facilities and finds that almost all of their income is spent on health care. The median income of this population is $11,000 and the median OOP spending is $9,776.

But meanwhile, the issue of out-of-pocket spending is considered important enough that the Senate HELP committee held a hearing on it a couple of weeks ago. The argument is that anyone who spends 10 percent of their income on health care is “underinsured.” If that is the case, then Medicare is the source of massive “underinsurance.” And perhaps Congress should fix its own responsibilities before telling the rest of us what we should be doing.

One of the witnesses at the Senate hearing was Grace-Marie Turner of the Galen Institute. Her testimony is available at the Committee’s Web site. It was good, but one thing she missed was one enormous irony. A couple of years ago JAMA published a study arguing that anyone who spends more than 10 percent of income on health is shouldering an unfair “burden.” Paradoxically, the authors of the JAMA article found that the population least likely to spend more than 10 percent of their income on health care is the uninsured. Only 10.5 percent of the uninsured reach the 10 percent threshold, while 18.2 percent of the privately insured and 19.4 percent of the publicly insured do. So, if 10 percent of income is used as the standard, the people least likely to be “underinsured,” are the uninsured! Go figure.

SOURCES: KFF, “Health Care on a Budget”; KFF, “Skin in the Game”; < a href="">Senate Finance Committee
“Changes in Financial Burdens for Health Care,” by Jessica Banthin and Didem Bernard Journal of the American Medical Association, December 13, 2006 I don’t think it is available on-line without a subscription.


Now, some people might prefer to stay off Medicare, given the problems cited above. And, given that the federal government has no way to pay for the coverage of future beneficiaries, one might think they would encourage people to make other arrangements if they can.

But, as I wrote in an op-ed in the Washington Examiner last week, that ain’t the case. In fact, if you refuse to take Medicare, the federal government will punish you by confiscating your Social Security. That is what Brian Hall discovered when he turned 65. He had been collecting Social Security for three years while maintaining his HSA with the federal Mail Handler’s Union. He would have liked to continue that arrangement, but attorneys for the Department of Health and Human Services argued in court that they have no way to send Social Security checks to people who are not on Medicare–even though they had been doing precisely that for three years in Mr. Hall’s case.

SOURCE: DC Examiner

Sally Pipes of the Pacific Research Institute had an op-ed in the New York Post that takes on “Bam’s Bad Medicine.” She writes, “the president intends to spend all this money on the basis of several pernicious myths common in the health-care debate. As a result, his reforms would ultimately hand the health-care system over to the government and lead to rationing.”

She notes, for instance, that Obama’s proposal to require drug companies to “rebate” 20 percent of the cost of drugs to state Medicaid programs may lower Medicaid spending but will result in higher costs for the rest of us. And she takes on the proposals to ration health care based on “comparative effectiveness” through an American version of Britain’s NICE program. She writes, “Last summer, British patients with kidney cancer were denied access to four lifesaving drugs. NICE’s clinical and public health director said of the drugs at the time, ‘Although these treatments are clinically effective, regrettably the cost to the NHS is such that they are not a cost-effective use of NHS resources.'”

So, if Mom’s of a “certain age,” forget about providing life-saving care to her. It wouldn’t be “cost effective” to keep an old lady alive.

SOURCE: Pacific Research Institute

The Cleveland Plain Dealer wrote up a recent talk Regina Herzlinger gave to “an audience of local academics and health-care industry types.” The paper isn’t quite sure what to make of her. It seems positively surprised that what she says makes sense. Certainly that she “hammers home her points with wit and charm” makes it easier to listen to what she has to say. And it concludes that, “Herzlinger’s recipe sounds enticing if you look at health care through her economic lens: a $2.3 trillion market in which consumers are in the dark on the question of value.” Apparently the audience agreed. Professor J.B. Silvers of Case University said, “The evaluations came in, and everybody loved her–even people who shouldn’t have loved her.” Hmmmm. Remind me to work on my wit and charm.

The odd thing, to my mind, is that Professor Herzlinger’s analysis should be the least bit exotic. It is completely commonsensical and routine in any other area of the economy. But she told me once that she was invited to address the Harvard School of Public Health (or maybe it was the School of Medicine) and was told it was the first time the students had heard any prescription other than single payer. I guess, like global warming, the best way to win a debate is to banish any contrary opinions.

SOURCE: Cleveland Plain Dealer



For all the partisan talk about a federal health board, its interesting to note that it was originally designed, and in my opinion could be implemented, as a consumer-driven approach for healthcare – not a top down strategy to ration healthcare. I think there is an awful lot of negative spin being put out there on this concept but I don’t agree with it. I think the idea needs to be vetted to really see what’s under the cover and not be crushed underfoot so easily by groups that think anything Democrats do is wrong. I get that distinct impression when I read many comments on this topic.

I have been to a few summits with key thought leaders – one at the HFMA where very conservative CFOs were supporting the notion of a Federal Health Board to help to assess value – comparative effectiveness – and how the payment system needs to be changed to respond to this value. Our incentives are all screwed up in healthcare.

When I buy a car I go to to see what they think. I respect their judgment. But that’s just part of what I use to make my own decision. Why shouldn’t we support an entity to do comparative effectiveness in healthcare? An independent board that reviews everything and comes out with its own decisions – one that is respected, maybe within NIH or elsewhere? I don’t want to go through the mountains of research – I just need a synopsis and then I can dig deeper if I want, get information from family, friends, my doctor and then make an informed decision.

I just don’t get all the hoopla around the Board. I think we should try it and see what happens. Here is the original author of the Board concept – Jerome Grossman who I had the pleasure of meeting before he passed away. Please note his root reason for the board. I have his full article on it at the Institute. Talk soon!

John Casillas
Chair, Medical Banking Institute
Executive Director, Medical Banking Project
401 Pond View Court | Franklin, TN | 37064
Phone: 615.794.2009 Ext. 114| Fax: 615-468-7606

A taste of reality —

It’s 9:00 pm and I was making my final rounds in the hospital. I came upon a young girl, hysterical and crying, and I asked if I could help. Well, it seems that she did not have the advanced directive with her and the hospital staff was “threatening” that they could not respect her father’s wishes to NOT be resuscitated. The doctor on call did not know the patient. As it turned out, the doctor was on the phone with the nurse at the time. I picked up the phone and asked if he could help and just make the patient a DNR so that the staff would not do anything until the family brought the advance directive. He said yes, and I walked over — hugged the young woman and told her to go be with her father and just worry about loving him for as long as she could.

Then a woman, hysterical middle aged was angry because the case manager told her that her father had to go home that evening. He would need IV antibiotics (2 of them) — what would she do at home??? I explained how that worked with home health, and told her that she would not be left with doing anything that she could not handle. The woman was sure that her primary doctor did not even know that her father was in the hospital. Her father had only seen a hospitalist who had explained nothing. I gave her my cell number and told her to call me when she got home if she had any problems, and I would make sure that the primary doctor “got into the loop.”

My point — this is reality — this is what our patients live with day to day. This is more than how much we get paid — this is about life and death and the health of the nation.

Our healthcare system has evolved into an administrative nightmare and it will only get worse unless we stand up and do something.

And let me assure you — these patients were insured!!!

Marcy Zwelling-Aamot, MD
Long Beach, CA
President-elect, SIMPD