Consumer Power Report #213

Published March 22, 2010

Health reform came to its ultimate, final, really big, humongous, historic, eye-popping, earth-shattering, sooper-dooper, conclusion this weekend. All to the music of a deal-making, posturing, arm-twisting, poll-ignoring band of crass politicians. I haven’t seen the new version of Alice In Wonderland yet, but could it be any more bizarre than this circus?

What a freak show.

It’s our own fault. We elected these clowns. We have only ourselves to blame. What happened this weekend is not the end. The whole enterprise will be tied up in court for years and will likely never be implemented.

Here are a couple of links of interest:

Joe Scarborough and Lawrence O’Donnell discussing the end game

FireDogLake on the special interest deal-making including a pertinent quote from John Shadegg

A survey showing that nearly half of all practicing physicians could retire under various health reform scenarios



Fortunately, Washington is only a teensy part of America, and once you get out of the Beltway things make more sense. Take, for instance, Indiana Gov. Mitch Daniels. He wrote a wonderful article in The Wall Street Journal about Indiana’s experience in providing HSAs to state employees. Unlike the boasting of the DC crowd, he starts off modestly, saying, “perhaps some fresh experience from Middle America would be of value.”

Five years ago he started offering HSAs to state employees. Only 4 percent signed up the first year. But 70 percent are in the program now. Why? Because the state pays the full premium and adds another $2,750 into the account, which is money the employee owns. For high utilizers, the state also covers the difference between the HSA deposit and the total out-of-pocket exposure of $8,000, presumably through an HRA.

Both employees and the state are saving money. Mr. Daniels writes, “State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative.” And, “Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option.”

But he adds, “Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an average lower cost per prescription of $18.”

It’s a pity the governor would have to state the obvious, but for those slow learners he writes, “The Indiana experience confirms what common sense already tells us: A system built on “cost-plus” reimbursement (i.e., the more a physician does, the more he or she gets paid) coupled with “free” to the purchaser consumption, is a machine perfectly designed to overconsume and overspend. It will never be controlled by top-down balloon-squeezing by insurance companies or the government. There will be no meaningful cost control until we are all cost controllers in our own right.”

It would be nice if the clowns in Washington would learn how to read.

SOURCE: Mitch Daniels


On the other hand, there are still skeptics out there. The Nashville Post quotes an HCA executive as saying, “I don’t see CDHPs moving the needle on overall health care costs.” Actually the executive, Franke Elliott, isn’t as skeptical as the headline makes him out to be. Deeper in the article he says, “The early results I have seen vary, but do suggest overall utilization trends are lower for people enrolled in CDHPs than in more traditional insurance products.” But he adds that he isn’t sure what is driving the trend. It could be better behavior but it could also be selection.

He also thinks consumerism works best on low-dollar services and is worried about people who incur expenses before the account is funded. These were legitimate concerns three or four years ago, but the fellow needs to keep up with the literature. Indiana protects people who haven’t saved much in the account, and it is seeing plan-wide savings, not just on the low-cost stuff.

SOURCE: Nashville Post

Boyles on Bank Activity

Meanwhile, the market continues to sizzle. Writing in the Consumer Driven Market Report, Bill Boyles finds the number of HSA accounts grew 25.6 percent in 2009 and now serve 11.4 million Americans. He finds HRA approaches are also growing fast and “are giving HSAs a run for the money,” especially in the mid-market and with public employees.

Mr. Boyles takes a first look at what smaller community banks and credit unions are doing in the space and finds more than 1,000 institutions are now providing 5.4 million HSAs, mostly in checking accounts. Those accounts generated $8 billion in deposits “during a time when financial institutions are desperately seeking deposits to add stability.”

More specifically, he reports Wells Fargo had a 24.8 percent increase in HSA accounts in 2009, HealthEquity grew 36 percent, Fifth Third grew 77.9 percent, and PNC Bank more than doubled in the past year.

SOURCE: Consumer Driven Market Report 2010 Issue #2 (not available online, but there is a summary at HealthTrakGlobal

High-Deductible Plans Have Worst Utilization

And HealthTrak also reports this: For more than a year, health plans have reported that an end-of-year spending spree was discovered by members with high-deductible health plans, in effect a “use-it-or-lose it” (UOL) effect. Now comes word from a national health plan chain that HDHPs with a spending account almost eliminate UOL, meaning lower spending and higher profitability. The implications are huge: It means high-deductible plans alone are worst than CDH, and employers and carriers need to include an account immediately.

SOURCE: HealthTrakGlobal

Clintonista Likes Singapore

Now for something really different. Matt Miller, former Clintonista and now with the left-wing Center for American Progress, had an op-ed in the Washington Post touting Singapore as a model for health reform.

Miller has always been a rarity in liberal circles — someone who is actually willing to think about facts instead of just spouting old rhetoric. He acknowledges that part of Singapore’s success (health spending is 4 percent of GDP and rising at the rate of inflation) is due to what he views as a conservative emphasis on personal responsibility. He writes, “roughly one-third of health spending in Singapore is paid directly by individuals (who typically buy catastrophic coverage as well); in the United States, by contrast, nearly 90 percent is picked up by third-party insurers, employers and governments. Singaporeans make these payments out of earnings as well as from health savings accounts.”

But he appeals to liberals by saying, “There’s also a massive public role — adequate savings for retirement and health expenses are mandated by government (employees must sock away 20 percent of earnings each year, to which employers add 13 percent). Public hospitals provide 80 percent of the acute care, setting affordable pricing benchmarks with which private providers compete.” And fat kids aren’t coddled, “they get no lunch and mandatory exercise periods during school.”

Why can’t we do that here? Because, “Every dollar of health care ‘waste’ is somebody’s dollar of income. As a stable advanced democracy, we’re so overrun by groups with stakes in today’s waste that real efficiency gains are perennially blocked.” Yep.

He expects that no matter the outcome of today’s political battles, health costs will rise to 20 percent of the GDP by 2019, leaving very little left over to pay for education, infrastructure, or anything else we would like to do as a nation.

SOURCE: Washington Post

Harvard Med School Dean Says Start Over

The dean of the Harvard Medical School, Jeffrey Flier, MD, co-wrote an article in The Wall Street Journal with David Goldhill on “Reviving the Health-Care Debate.” For a hint of what they say, the article is sub-headed, “One lesson of the past 40 years is that government and insurers cannot provide effective quality or cost discipline.”

They walk us through some of the basics — that health insurance is not health care, and that health and health care are not the same thing. They also say, “Discovering new therapies may impact future health more than extending insurance using today’s therapeutic arsenal.”

They go on — “There are a number of interesting ideas that could encourage price and quality competition. We favor finding ways to give patients more control over their health care expenditures. This would both improve cost discipline and health outcomes. One way to do that would be to encourage the purchase of high-deductible insurance coupled with putting money aside in health savings accounts, including a shift to HSAs of some of the funds now paid to insurance premiums. This would give patients a powerful incentive to focus on the cost of their care.”

They add that “the highly regulated approach of the plans that have advanced in Congress is unlikely to work. One lesson of the past 40 years is that government, employers and insurers cannot alone provide effective quality or cost discipline in health care.”

They encourage us to start over and get it right.

SOURCE: Wall Street Journal


While we’re in Massachusetts, let’s check in to see how the Bay State model for ObamaCare is doing. Not so great, according to The Wall Street Journal. While the rate of non-insurance is down considerably, costs are through the roof. To the point that, “Democratic Governor Deval Patrick landed a neutron bomb, proposing hard price controls across almost all Massachusetts health care.” He has proposed price controls on hospitals and doctors, as well as insurers.

The article says, “average Massachusetts insurance premiums are now the highest in the nation. Since 2006, they’ve climbed at an annual rate of 30% in the individual market.” But adds, “Incredibly, the average ‘medical loss ratio’ in Massachusetts for individual policies is 112%–that is, insurers pay $1.12 in benefits for every $1 in premiums.”

Yet in many ways Massachusetts provides some of the best health care in the world. The article says, “the state’s own reports mainly show that the dominant reason health costs are rising is medical progress and technological innovation. Massachusetts health care, with its abundance of academic medical centers and high-quality specialists, is the envy of the world.” Alas, “This is the true target of Mr. Patrick’s price controls: The goal is to engineer a cheaper system through brute force so government can pay for health care for all. What inevitably suffers is the quality of care for individual patients.”

SOURCE: Wall Street Journal

Meanwhile, “Boston Medical Center, the state’s largest provider of medical treatment to the poor, is bracing for dramatic financial losses, which some fear will force it to slash programs and jeopardize care for thousands of poverty-stricken families,” according to the Boston Globe. It goes on, “Ironically, hospital officials blame the downturn partly on changes ushered in with the state’s groundbreaking mandatory health insurance law, which Boston Medical Center supported and that benefited many of its patients. As part of the law, the state phased out special subsidies for hospitals that treat large numbers of poor patients, a significant shock for Boston Medical Center.”

Hospital CEO Elaine Ullian is cited as saying, “the state is paying for the health insurance program, now considered a possible national model by President Obama’s administration, on the backs of the poor.” She goes on, “Our hope and belief was that more money would come through. A principle of reform was that Medicaid rates would be higher, when in fact Medicaid rates went down rather than up.”

This is the kind of awakening a whole lot of industries that have supported ObamaCare will experience in the next few years.

SOURCE: Boston Globe

Grace-Marie Turner of the Galen Institute thinks the Massachusetts experience will undermine any political ambitions Mitt Romney may have. She writes, “Former Massachusetts governor and likely 2012 presidential aspirant Mitt Romney has been on the wrong side of the defining political battle of our time.” She adds, “Mr. Romney needs to be more honest about his Massachusetts experiment and its failings.”

She ticks off a long list of problems in the state, especially the shortage of primary care physicians. She says, “The difficulties in getting primary care have led to an increasing number of patients who rely on emergency rooms for basic medical services.”

She contrasts the Massachusetts experience with Indiana, noting, “One of the challengers Mr. Romney could face in 2012 is Gov. Mitch Daniels of Indiana. Mr. Daniels went in a very different direction in tackling the problem of the uninsured. He created a program targeted to lower-income uninsured people who weren’t eligible for Medicaid or employer insurance. Mr. Daniels’s Healthy Indiana program has a fixed budget and relies on shared responsibility between the newly insured and the government in managing health spending.”

SOURCE: Wall Street Journal


Finally, here is a series of videos and a range of topics put together by Ron Bachman, MAAA, of the Center for Health Transformation. Ron is an actuary who spent a long time at PriceWaterhouseCoopers and is a thought leader on HSAs. These videos are based on radio interviews he did, with graphic illustrations added. Pretty clever use of the resource.

Medicare Advantage

Excise Taxes

Catastrophic Benefits

Health Reform Disappointing

Tea Party Patriots

Essential Benefits