Health Reform and Medicare: Part I

Posted on: September 30, 2009  |   Author: Thomas L. Greaney
Filed Under: Access to Care, Healthcare Reform, Medicaid, Medicare   |   Leave a Comment

Medicare Signing

Medicare Signing

Here’s a pop quiz on health reform:  Which prominent Republican said the following:

And if you don’t [oppose this health care legislation] and if I don’t do it, one of these days you and I are going to spend our sunset years telling our children, and our children’s children, what it once was like in America when men were free.

OK, it’s a trick question: the answer is Ronald Reagan, paid spokesman for the American Medical Association’s Women’s Auxiliary, speaking in 1961 against the bill that ultimately emerged as Medicare.  (A recording of his “coffee klatsch” talk, “Ronald Reagan Speaks Out Against Socialized Medicine,” is here.

Although what political scientist Jonathan Oberlander has termed “a politics of consensus” lasted for some thirty years after Medicare’s enactment, bipartisanship broke down in 1995 when Newt Gingrich targeted Medicare for cuts of 30% and urged privatization using managed care.  By the lights of conservative Republicans, severe cuts in traditional Medicare would encourage flight to managed care alternatives, so that, in the famous phrase of Newt Gingrich, Medicare would “wither on the vine.” (1 St. Louis U.J. Health L. & Pol’y 5-43 (2007), Abstract). Although President Clinton used the Republicans’ Medicare reform to his own benefit (polls showed that his defense of Medicare helped him secure re-election), ultimately much of the Republicans’ agenda for reform was adopted in 2003. Since then Republicans have not relented in their criticism of the program– with some in leadership positions even questioning the government’s role in health care for seniors. (SeeRachel Maddow’s cable television show featuring a parade of video clips of Republicans bashing Medicare, including former Speaker DeLay –echoed by Representative Roy Blunt–asserting that “Medicare shouldn’t be a government program”).

Last week Republicans on the Senate Finance Committee opposing health reform switched gears and adopted a much more enthusiastic view of Medicare.  After long decrying the program’s faults and fiscal problems, they were now soberly warning that any cuts in the program will hurt Medicare beneficiaries.  A related tack has been to characterize the plan as a straightforward transfer from seniors to the uninsured. As Senator Kyle recently put it, “Seniors should not foot the bill for the uninsured. Medicare should not be the piggy bank for new non-Medicare spending, a new entitlement.”

To be sure, there is no small irony in the Republicans’ new-found enthusiasm for Medicare.  However politically astute exposing this hypocrisy may be, Democrats still find themselves on the horns of a serious policy dilemma.  Their problem is the result of the ingenious design of the Medicare Advantage program. Adopted with virtually no Democratic support in 2003, the Medicare Modernization Act of 2003 (MMA) took a variety of steps designed to encourage migration to private HMOs and PPOs (Medicare Advantage plans).  Although deploying a heavy dose of government subsidies and creating a deeply flawed competitive bidding system, the MMA succeeded in encouraging large numbers of seniors to join Medicare Advantage plans.

MMA signing

MMA Signing

Elsewhere, I’ve analogized the design of  the MMA to “nation building”: an ambitious attempt to create markets and competition where little existed before, but funded by enormous public subsidies. Viewed less charitably, the new laws seem more like an insurgency. Incentives contained in the Medicare Modernization Act are geared to undermine traditional Medicare: large subsidies are given to private payers that in turn produce extra service benefits, a structure designed to lure seniors into private plans, while doing little to improve traditional Medicare.

For today’s reformers, there is both opportunity and risk.  Medicare pays far more to private plans than it would pay if they stayed in traditional Medicare.  (The Commonwealth fund estimates that these extra payments will amount to $11.9 billion, or $1,100 per enrollee, in 2009).   Some private plans do little to contain costs: so-called “private fee for service” plans offer no provider networks and simply funnel higher payments to intermediaries.  But other plans, primarily HMOs, do provide care at lower costs than traditional fee for service plans. Such plans introduce market pressures on providers that are sorely lacking under fee for service payment. Importantly, under the MMA one must return a large part of that differential to beneficiaries in the form of additional services (such as vision or hearing) or reduced cost sharing or reduced premiums.

So what is the net of cost control incentives, subsidies to private plans, and enhanced benefits?  Economist Austin Frakt’s study of extra payments to Medicare Advantage plans suggests that on balance they have not produced net benefits:

[F]or each additional dollar spent by the federal government (taxpayers) on the program since 2003, just $0.14 of it can be attributed to additional value (consumer surplus) to beneficiaries …What do we make of the other $0.86? That goes to the insurance companies but doesn’t come out “the other end” in the form of value to beneficiaries. In part it is accounted for by the costs of the additional benefits and in part it is captured as additional insurer profit.

But undermining all Medicare Advantage programs is bad policy and bad politics.

Health reformers hoping to capture some $400-500 billion in savings by eliminating subsidies to Medicare Advantage plans face a difficult political dilemma. Over 22% of Medicare beneficiaries are enrolled in a Medicare Advantage plan and are happily receiving “extra” benefits from them. While cutting subsidies will eliminate large amounts of wasteful spending that can be used to finance expanding insurance to all, some reductions in benefits will occur and in the future private plans may offer fewer additional benefits.  Adding another horn to the dilemma is the fact that many Medicare HMOs are delivering cost-effective alternatives in their markets and helping to encourage changes in medical practice.  Senator Nelson of Florida has sought to “grandfather” (i.e. protect) HMOs that deliver care below the cost of fee for service providers in their markets.  Yet even here, this sensible exception has run into political headwinds.  Pitting equity against efficiency, members of the Senate Finance Committee were eager to point out that the grandfather clause would be applied primarily in regions with the highest costs.

Reformers will need a fine scalpel and steady hand in order to perform surgery on Medicare Advantage.

In my next post I will discuss some other–and arguably more important in the long run– reforms to Medicare: those seeking to move away from fee for service payment and to nudge providers to adopt new forms of delivering care.

Tracking cardiovascular disease at its beginnings

Posted on: September 9, 2009  |   Author: Jeff
Filed Under: Other, Public Health Policy   |   Leave a Comment

Children who eat a typical western diet have “fatty streaks” in their arteries by age three, and have atherosclerotic plaque in their arteries by adolescence. This leads to cardiovascular diseases, the deadliest group of diseases in the world. Recognizing the significance of the problem, as well as the importance of prevention from the earliest age possible, the American Heart Association (AHA) wants to establish clinical standards for assessing children’s arteries. For example, the AHA recommends that researchers use ultrasounds to measure the thickness of the carotid artery in children’s necks, while they discourage the use of tests that measure calcium deposits in the arteries due to radiation exposure during testing. For now, the standards would only apply to children involved in clinical research.

Commentary: Should private physicians test children for early signs of cardiovascular diseases? That’s an important question. It could redefine the standard of care for treating children and change our basic approach to preventing cardiovascular diseases.

If the AHA recommended that it be done, it could significantly improve the long-term health of our nation’s youth. I am guessing that a tiny, tiny percentage of people know that almost all children have plaque in their arteries. As such, parents have no reason to ask doctors to check their children. If the AHA recommended it, however, they might do so. Odds are, the results of the test would show plaque, and the parents would be mortified to learn that they have been unknowingly harming their children and potentially causing them to develop heart disease, strokes, and other illnesses down the line. Those parents might be motivated to make healthy dietary changes for themselves and, maybe more importantly, their children. Or, as maybe some of the coauthors of the AHA’s recommendations would like (two coauthors were paid consultants to pharmaceutical companies, at least in the past), doctors in the future will give children powerful drugs, like cholesterol-lowering statins, to lower their risks of developing disease in the future. It would open up a huge market. You know, get ‘em hooked while they’re young.

However, based on the article, it appears the AHA evaded the two most important questions, i.e., whether kids should be tested, and what should be done for the kids who test poorly. The AHA expressly limited their recommendations to researchers, which suggests their primary goal is to obtain data, not influence how private physicians treat children. The AHA might just be a little hesitant to tell physicians what to do at this point. But one appropriate response-get parents to help their children develop healthy habits at an early age-shouldn’t be premature or even controversial.

At any rate, the AHA has made a significant step by helping determine how children should be tested. Answers to the other questions will just have to wait.

Modern Medicine, September 4, 2009.

Swine Flu Hits Campuses

Posted on: September 3, 2009  |   Author: Jeff
Filed Under: Health Information, Liability & Litigation, Public Health Policy   |   Leave a Comment

School is back in session, and American colleges and universities are on the alert for cases of H1N1 influenza (“swine flu”). 165 schools, representing about 2 million total students, are reporting cases ofthe illness, which can spread more easily among children and young adults. College campuses may be especially vulnerable because there are large numbers of people in small areas who interact frequently. Already in just the first two weeks of school, 1,640 cases have been reported, spread out among 55% of the reporting schools. This suggests that about 7.9 students out of every 10,000(0.079%) are infected. The highest rates are in the Southeast and far Northwest.

Fortunately, no deaths have occurred, and it appears the illness is “relatively mild” among students “at this early stage.” So that’s good.

Commentary: Ah, back to school. Students everywhere are studying, learning, making new friends, and maybe giving them swine flu. It’s not like any new school year I can remember. Just today, on September 2, 2009, St. Louis University sent a mass email notifying students that there had been five cases of “suspected” swine flu among students, four of whom lived off campus.

Like SLU, schools need to be completely upfront about public health hazards with their students, staff, and the surrounding community. The worst thing a school can do is delay releasing information out of fear it could
harm the school. The information puts people on notice that the risk is real, and allows them to take precautions against it, which they otherwise would not have. For instance, I have never been concerned about swine flu…until I saw that email. Because SLU sent it, I will take care to not spread germs, and if I feel sick, I will know to seek care immediately so I can get treatment and reduce the risk of spreading anything to others.

If common decency isn’t enough to encourage some schools to act, there’s always the fear of legal liability. Either way, the information should get out, and it should help keep swine flu’s impact as insignificant as
possible.

The Washington Post, September 3, 2009