Consumer Power Report #211

Published February 19, 2010

It is time. The surprise retirement by Evan Bayh underscores that the times have changed. Dramatically. The American people have gotten a taste of what it will be like if the federal government runs everything in this country — the banks, the automakers, the energy companies, health insurers, hospitals, doctors, you name it — and we don’t like it one bit.

Senator Bayh was a swell guy, but he didn’t have the fortitude to vote against a federal takeover of the health care system. This in spite of public opinion being overwhelmingly against it. This in spite of the most corrupt backroom deal-making ever.

He was in for the fight of his life and he decided to duck. He joins a growing list of incumbent duckers. People who voted against the wishes of their constituents and don’t want to face the consequences.

Let us hope they are all replaced by people who will listen. But we can’t just trust the new guys to do the right thing. We tried that in 1994 and learned that once someone goes to Washington he or she will succumb to the lobbyists and the bureaucrats just like the old guys did. This time we have to be as vigilant after the election as we were before the election. We will need a people’s lobby that will be there every day to remind these guys who they are working for.



ABC News reports that “lawmakers in more than two-thirds of the states are forging ahead with constitutional amendments to ban government health insurance mandates.” It says the push is not deterred by the difficulties of ObamaCare in Congress. If anything, the federal government coming as close as it did to requiring every citizen to buy health insurance provided an awakening among state legislators that they cannot be complacent.

These proposals typically amend the state constitution to ensure that people cannot be forced to buy something. The article quoted Clint Bolick of Arizona’s Goldwater Institute as saying, “These amendments are a way to manifest grass roots opposition (to federal health insurance mandates). They kind of have a life of their own at this point. So while some of the pressure may be off, I think that this movement has legs.”

Arizona led the charge with a referendum that nearly passed two years ago, and the proposal is back on the ballot for November. Some people argue that the Supremacy Clause of the U.S. Constitution would override these state provisions, but I’m not so sure that is true. It would likely be true if these provisions were just laws enacted by a state legislature, but as amendments to the state constitutions, they may have more authority.


At the same time, some states are going even further and enacting resolutions to remind the federal government of the Tenth Amendment to the Constitution, which states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

These resolutions were introduced in 42 states in 2009 and 2010. They are merely resolutions and do not have the force of law, but they are important reminders that the federal government is supposed to have limited powers and is not allowed to just do any damned thing it wants.

SOURCE: The Tenth Amendment Center has a model resolution and keeps track of state activities; The Wall Street Journal’s Law Blog has featured this movement

Georgia is taking the unprecedented step of allowing interstate sales of health insurance. This has never really been a federal issue. States are free to allow out-of-state companies to market products in their states. An article in the Rome News-Tribune reports that a bill has been introduced in the House that “would allow individuals and families to buy health plans that have been approved for sale in other states.” Governor Sonny Perdue is a big supporter, saying, “This legislation will open up the individual insurance market and allows consumers to find the plan that best fits their needs. It will also help the uninsured find a plan that works for them.” Similar legislation is pending in the Senate.

SOURCE: Rome News-Tribune

But in its own unique way, California is trying to adopt a single-payer system. The Associated Press reports that the state Senate has already passed such a bill in spite of a veto threat from Governor Schwarzenegger. The governor’s spokeswoman is quoted, “Any elected official who thinks it’s a good idea to strap the state with tens of billions of dollars from a government-run health care system is clearly not in touch with what voters need and deserve.” Indeed. The state is all but bankrupt already, and the last time something like this was attempted the price tag was $14 billion a year. Hey, it’s only money!

SOURCE: Yahoo News

Reason magazine takes a look at the dismal track record of state “reform” efforts to date. It cites New York as “exhibit A” for its guaranteed issue and community rating provisions. It says, “In 1994 just under 752,000 individuals were enrolled in individual insurance plans, about 4.7 percent of the nonelderly population. This put New York roughly in line with the rest of the U.S. Today that figure has dropped to just 0.2 percent. By contrast, between 1994 and 2007 the total number of people insured in the individual market across the U.S. rose from 4.5 percent to 5.5 percent.”

It adds Washington state as another example. “In 1996 similar reforms in Washington state preceded massive premium spikes in the individual market. Some premiums increased as much as 78 percent in the first three years of the reforms–10 times the rate of medical inflation.” And Reason cites a Health Affairs study as saying, “in addition to Washington and New York, the individual insurance markets in Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, and Vermont ‘deteriorated’ after the enactment of guaranteed issue.”

It also notes about Massachusetts that, “Health insurance premiums in the Bay State have risen significantly faster than the national average, according to the Commonwealth Fund, a nonprofit health foundation. At an average of $13,788, the state’s family plans are now the nation’s most expensive.”

SOURCE: Reason Magazine


So now in Massachusetts they are pushing for a global system of capitated fees that will rachet down over time. An editorial in the Boston Globe supports this effort saying, “But for such a global system to hold down costs, that annual amount has to go on a diet, with each year’s increase ratcheted downward.” Now, it escapes me how a state government feels it has the authority to dictate how a private insurer pays a private provider for a private service. But this is Massachusetts, after all, and Attorney General Martha Coakley is one of the biggest proponents of doing this.

Massachusetts hired the Rand Corporation to estimate the cost savings that might come from different approaches. The result is a curious mix of wishful thinking and selective perception. The study says it started with “an initial set of 75 broad approaches to cost containment,” from which it culled a subset of 12 options “for which there was some evidence of savings potential and some available data for making projections.”

Curiously omitted from the analysis is any form of consumer-driven health, despite evidence aplenty of dramatic cost savings (see CPR #210 for a report from Cigna of a 26 percent reduction in costs over four years of experience.) Rather, Rand looks solely at the flavor-of-the-week fads such as “bundled payments.” This despite there existing absolutely zero experience with bundled payments in real-world conditions or any evidence that it saves anything.

Rand is not deterred by any lack of evidence and estimates that bundled payments would save between 0.1 percent and 5.9 percent over a 10-year period. Now that is quite a range, but Rand covers itself by saying, “the estimates of savings from all 12 options are very tentative, because none has a proven history of reducing spending.”

Let’s repeat — none of the 12 options has a proven history of reducing spending. Rand goes on, “the amount of the reduction is highly uncertain, as indicated by the spread between the high and low savings estimates in the figure.”

But Rand does not let the lack of data get in the way of its optimism. It says, “If health care spending could be held to the rate of growth in the state’s GDP, then health spending in the state would be only $107 billion by 2020, representing a cumulative savings of 8 percent between 2010 and 2020.” Why, yes indeedy. And as my mother used to say, “If wishes were horses, beggars would ride.”

And you wonder why American public policy is in such a mess?

SOURCE: Boston Globe; Rand Write-up


Most of these swell ideas for cost containment never work out. BusinessWeek had a devastating article about disease management saying, “Washington wants to pump big money into so-called disease management, though there’s scant evidence that it works.”

The article cites the experience of General Electric, which ran an ambitious program but, “didn’t see any compelling evidence that disease management saved money or substantially improved worker health.” The company decided not to continue the program, but, “Disease management–despite a series of studies finding that it doesn’t deliver what it promises–has caught on throughout the business world. Employers and government agencies are spending a total of $2.5 billion a year on the services.”

The article says, “outside analysts say the case for disease management–and the data its marketers emphasize–typically rely on exaggeration and ignore the cost of the service itself.” In fact the Rand Corporation “issued a report for the state of Massachusetts concluding that disease management could increase employer and government spending in the state by $6.7 billion over 10 years with little overall benefit.” And, “outside consultants hired by Medicare determined in 2008 that disease management used in a pilot for 200,000 patients raised spending but didn’t reduce hospitalizations, emergency-room visits, or death from chronic disease.”

And yet disease management remains popular with politicians who are grasping at straws to “fix health care.” The article says, “Congress and the Obama administration are poised to commit billions of Medicare dollars in coming years to a health care solution that may do little good. ‘We have already wasted a lot of money on disease management,’ says Randall Brown, director of health research at Mathematica, a for-profit research firm in Princeton, N.J., that studies preventive care on behalf of government agencies. ‘I’m worried we could throw more money down the drain.'”

SOURCE: Business Week


The chickens are coming home to roost. After a year in which all the major Washington players engaged in the most cynical opportunism I’ve ever seen, they are beginning–just beginning–to reconsider their strategy and perhaps move to where advocates of consumer-driven health care have been all along. The most public is the rethinking at PhRMA where President Billy Tauzin will be replaced by–who knows?

Replacing Tauzin is no guarantee that PhRMA will become a staunch advocate of free markets. It may still decide that the industry’s best interests will be served in making deals with Congressional Democrats and the Obama administration. But from what we hear from the Hill, PhRMA lobbyists will be getting a pretty cold reception in the next Congress should the Republicans win a majority in either house.

Of course, similar though less-public dynamics are playing out in the AMA, AHIP, and all the other DC-based interest groups that sought “a place at the table.”

SOURCE: PhRMA; More PhRMA; Wall Street Journal on WellPoint; Wall Street Journal on Pfizer

The “House of Medicine” is also in turmoil these days. A list went around of the medical groups that opposed the Senate bill. It included 42 organizations representing nearly a half-million physicians. Some of these groups are now forming a coalition to stand as an alternative to the AMA. They are supporting the right of physicians to privately contract with their patients, to determine quality in medical care, and to advocate for liability reform.

Probable membership of this new coalition includes:

Kansas Medical Society
Medical Association of the State of Alabama
Medical Society of the District of Columbia
Florida Medical Association
Medical Association of Georgia
Medical Society of South Carolina
American Academy of Facial Plastic and Reconstructive Surgery
American Association of Neurological Surgeons
American Society of General Surgeons
Congress of Neurological Surgeons
International Federation of Facial Plastic Surgery Societies