Consumer Power Report #198

Published October 22, 2009

Boy, it is getting to be wacky season in Washington. I am glad to be able to get out of town from time to time. This week I was in Pittsburgh, next week in Roanoke and Richmond, Virginia. I don’t think there has ever been a greater disconnect between what Washington is doing and what the rest of the country is thinking.

In a very fundamental sense, the people in Washington really don’t care. They are in their own little world, with their own language and their own values that have next to nothing to do with your experience. You are a minor annoyance to be placated, or if that doesn’t work, destroyed.

Just one example was the attack this week on Fox News by officials in the administration. This exceeds even Nixon’s hostility towards The New York Times and Washington Post. He expressed his rage to his staff. But I don’t think he ever went on a public rampage like this.

We are in uncharted waters, folks.



For the past year all of the special-interest groups in Washington have been trying to cooperate with health reform proposals. Their strategy has been to get a “seat at the table” so they could protect their privileged positions in health care. It has amounted to a powerful coalition in support of massive health reform.

But now that coalition seems to be unraveling. A new report from PriceWaterhouseCoopers commissioned by AHIP was the opening shot. The report found the legislation just passed by the Senate Finance Committee would raise family premiums by $4,000 a year. The Blue Cross Blue Shield Association released a similar report by the Oliver Wyman firm that had similar findings.

In both cases, the reports focused on the effect of guaranteed issue and modified community rating with only weak penalties to require the young and healthy to enroll. When combined with a host of new taxes on providers and reduced payment for Medicare and Medicaid, there will be an explosion of costs passed on to the insured population.

None of this is the least bit surprising to anyone but the administration and Congressional Democrats. The White House immediately responded by calling the report distorted, flawed, and self-serving. Senator Chuck Schumer (D-NY) has threatened to punish the industry by removing current federal anti-trust exemptions that have been in place since 1946.

SOURCE: AHIP report; BCBSA Report; White House Response; Schumer’s reaction

It isn’t just the insurance industry. Many of the groups that were willing to go along, so long as “reform” was just a bunch of platitudes and feel-good promises, are discovering it isn’t so appealing once the costs are revealed. The medical device industry met in Washington this week and discovered the prospect of paying $40 billion in new taxes is pretty daunting. Some of the companies report the new tax would be greater than their entire R&D budgets. One of the executives was quoted in the Washington Post as saying, “My European competitors are sitting on the sidelines smiling. We’re one of the few industries in the U.S. that is still growing. How many of those do you have left?”

SOURCE: Washington Post

And the American Medical Association may be having second thoughts about the wisdom of its full-throated support, according to the Washington Post. The Senate Finance bill was able to avoid contributing to the deficit only because it dumped the “SGR fix” that was included in the House bills. SGR requires annual cuts in Medicare payments to doctors, but every year Congress passes legislation to delay the cut from going into effect. This is the AMA’s biggest priority and it would cost $250 billion over 10 years.

The AMA’s House of Delegates is meeting in Houston during the first week of November. It promises to be a raucous meeting, as many doctors will show up to express their disenchantment with AMA leadership on this issue. Leadership keeps repeating Obama’s flimsy line that “we can’t afford to do nothing.” But that reasoning infuriates many practicing physicians who argue the choice is not between doing nothing and turning the entire medical profession over to the federal government.

Don’t be surprised if the AMA is the next big interest group to give up its seat at the table.

SOURCE: Washington Post

Even labor is getting ready to walk away from the table. It doesn’t like the 40 percent tax on high-cost health plans one bit. But the Obama administration is all for it. An article by Martin Vaughan in Dow Jones says, “When Baucus unveiled the plan to the Senate’s Group of Six with whom he was negotiating, he noted that there would be opposition from unions but that the White House would ‘keep the unions at bay,’ according to people present in those meetings.” Now the AFL-CIO is running ads in newspapers that say, “Unless the bill that goes to the floor of the U.S. Senate makes substantial progress to address the concerns of working men and women, we will oppose it.”

SOURCE: Union Rift

The generic and name-brand drug companies are at each other’s throats over how they will be treated, according to Kaiser Health News. The generics do not think they should be subject to a $460 million tax since they already do a lot to lower health costs. But the name brands scoff at the amount, since they will be subject to $80 billion (over 10 years). Congress is also giving the biologics a 12-year exclusivity patent and allowing generics to be prescribed with no co-payment for the first prescription. So, here we go with Congress trying to micromanage every teensy bit of the health care system. I mean, why should the level of copayments in an insurance policy be a matter for the United States Congress?

SOURCE: Kaiser Health News


The Democrats are trying to fix the SGR problem as a stand-alone bill to free up the cost from the broader health reform proposals now in Congress. This issue, along with the government-run option, is threatening to split the Democrats, according to The New York Times. They have introduced legislation (S.1776) that would repeal SGR, but it also would add $250 billion to the deficit. Several Senate Democrats are quoted in the article as opposing anything that would make the deficit bigger than it already is. The Times reports that Ben Nelson (D-NE) described a meeting of Senate Democrats as “only ‘slightly less raucous than the town hall meetings’ that erupted in many states in August.” The article also says, “The American Medical Association said Thursday that it had begun a multimillion-dollar ad campaign to whip up public support for Ms. Stabenow’s bill.” So, apparently the AMA doesn’t care about the deficit as long as the docs get more money.

SOURCE: New York Times

The New York Times ran an excellent article describing how special-interest lobbying has influenced Congress to enshrine their positions in health care. It is always worth remembering that all of the money spent in health care is actually paid to someone. Those many someones will fight tooth and nail to keep the money flowing. After all, they all have children to support, too.

The Times writes, “Lobbying by doctors, hospitals and other health care providers dimmed the prospects of various proposals to cut into their incomes.” As a result, “the last two initiatives with real bite that are still in contention — a scaled-back ‘Cadillac tax’ on high-cost health plans and a nonpartisan Medicare budget-cutting commission — are under furious assault.”

The tax on high-cost plans, it writes, is a non-starter in the House, where 157 Democrats sent a letter to Speaker Nancy Pelosi opposing the idea, and the hospitals already have been removed from the scope of any Medicare commission that may be developed.

So, to succeed in health care, it is no longer necessary to please your patients. The only customer that counts is the United States Congress.

SOURCE: New York Times

But nothing beats seeing the deliberations for yourself. It is heart-warming to know how Congress really works. Here is a video of Rep John Murtha (D-PA) chairing a meeting.

SOURCE: Congress in Action


Why, yes, yes there is. And members of Congress would know about it if they paid any attention. The Associated Press reports that more and more employers are switching to consumer-driven plans. It writes, “This year, more employers may include a new type of plan that can chop premium payments by nearly 20 percent and give consumers a tax break.”

The article describes how these plans work and then quotes the obligatory skeptic: “‘It doesn’t fit most people,’ said Jon Beyrer, vice president of wealth management for Blankinship & Foster, a Solana Beach, Cailf.-based financial advisory firm.” But it goes on to also quote someone who is very pleased: “On the flip side, Jim Green hasn’t paid a dime for health care since signing up a couple years ago for HSA-based insurance through his employer, Indiana’s state government. Green, 56, said the state pays his entire premium and contributes about $1,500 to his account every year. When he visits the doctor, he simply pulls out a charge card that takes money from the company-funded account. ‘My wife and I are not sick very often, and we don’t go to the doctor very often, so it’s covered everything we’ve had,’ he said.”

And: “Business owner Don Ehlerding faced annual premium increases as high as 20 percent until he switched to consumer-directed health plans a few years ago at his Fort Wayne, Ind., motorcycle dealerships, which employ about 30 people. Increases have since been between 8 percent and 10 percent. ‘That’s the only thing we’ve been able to do to control premium cost,’ he said.”

The article summarizes: “The percentage of employers with more than 1,000 workers who offer a consumer-directed plan has climbed from 10 percent in 2005 to 28 percent this year. That figure has jumped from 4 percent to 18 percent over the same span for companies with 200 to 999 workers.”

SOURCE: Associated Press

People are also writing to their local papers promoting consumer-driven health.

Sean O’Donnell writes to the South County Independent (Rhode Island) to say, “I believe the introduction of HSA (health savings account) eligible insurance is an idea worth reconsideration. For our local public employees HSAs promise three financial benefits: job security, a sizable new retirement account and more latitude for wage growth. For the local taxpayer, such reform will begin to take the edge off property tax increases.”

David Hanson writes to the Herald Times in Manitowoc, Wisconsin to say, among other things, that health reform should, “Encourage the expansion of high-deductible ($5,000 to $10,000) policies with complimentary health savings accounts (HSA). Health insurance is used for catastrophic coverage; HSAs for the rest. We have followed this program in our own company and found it works.”

And, in Greenville, NC, Dr. John Absher writes, “Three fundamental changes would extricate us from the current health-care crisis while posing minimal or no risk of failure.” One of his three points is “Individual, tax-free, health savings accounts should be started at birth to cover all health-care expenses after age 65. Parents should be encouraged to fund one such account for each child.”


The Mackinac Center has released a series of new videos about the Canadian system. It explains,

“As America moves closer to a government-controlled health care system, anxious Canadians want to set the record straight about life under their country’s ‘universal’ system.

“The Mackinac Center for Public Policy invites friends and allies to come along as it journeys across Canada, documenting harrowing stories from real Canadians of long waits, physician shortages, doctor lotteries, special treatment for insiders and being forced to travel abroad for basic medical care.

“They’re desperate for a way out. And they want YOU to know about it.”

Introduction: “Oh Canada?” – Meet the Canadians who have a warning for us.

“Medical Tourism” – Hear from Canadians so desperate for treatment they’re leaving the country.

“Wait List Insurance” – See what happens when Canadians try to demand better service from their system.

“Canadian Doctor Lotteries” – Find out what Canadians need to do just to get a family physician.

“Breaking the Doctors” – Discover how rationing and shortages impose impossible burdens on Canadian doctors.

“Power Plays” – See how unions, politicians, and bureaucrats take away choices from doctors and patients.