The Wonk Room

Why Comparative Effectiveness Research Will Enhance Personalized Medicine »

Our guest blogger is Michael Rugnetta, a Research Assistant to Jonathan Moreno for the Progressive Bioethics Initiative.

The roadmap for comparative effectiveness research has become much clearer and detailed these past few days with the release of two new reports. One comes from the Institute of Medicine at the National Academies and the other comes from HHS’s Federal Coordinating Committee for Comparative Effectiveness Research. The IOM released a list of 100 health topics for the Obama administration to prioritize as it spends $1.1 billion in stimulus funds dedicated to CER. More importantly, the Federal Coordinating Committee itself has stated in its report to the President and the Congress that CER should “complement the trend in medicine to develop personalized medicine,” and that it will be “an important partner in helping to bring about this new level of medical effectiveness, personalization, and innovation.” This bold vision of personalized medical innovation based on “patient-centered, pragmatic, ‘real world’ research,” clearly dwarfs the feeble criticisms of CER aired by conservatives in last week’s HELP Committee markup of the “Affordable Health Choices Act.”

While the act incorporates CER as part of its health reform agenda, there is another piece of legislation that will establish a dedicated, rigorously-organized federal Institute for CER.

Formerly known as the “Patient-Centered Outcomes Research Institute,” the creation of this federal body depends on the passage of the “Patient-Centered Outcomes Research Act,” (S. 1213) sponsored by Senators Baucus and Conrad. Upon a close reading of the bill, it is evident that the Patient-Centered Outcomes Research Institute will not just be another meaningless chunk of bureaucracy as its critics claim. The Institute’s goal will not be to simply spit out generic guidelines that your doctor must follow “or else.” Rather, the Institute has been designed to ramp up medical innovation for the common good by championing a new era of personalized medicine.

Taking a close look at the bill there is plenty of language about “evaluating and comparing the clinical effectiveness, risks, and benefits” of various tests, treatments, and devices. More importantly, the bill upholds a commitment to doing the best kind of comparative effectiveness research by making it personalized and reaching out to subpopulations. The bill charges the Institute with conducting “research and evidence synthesis that considers variations in patient subpopulations.” The bill builds upon this by later explaining what “subpopulations” means specifically:

“racial and ethnic minorities, women, age, and groups of individuals with different comorbidities, genetic and molecular subtypes, or quality of life preferences.” This also means that the institute will “include members of such subpopulations as subjects in the research as feasible and appropriate.”

More »« Less

How Does The New HELP Bill Save $400 Billion?

A comparison between the newly released table of the CBO’s analysis of Title I of the HELP Committee bill and CBO’s initial score, reveals that in order to reduce the overall costs of the bill from $1 trillion to $600 billion, the committee relied (in part) on shared responsibility, Medicaid savings, lower subsidies within the Exchange (Gateways), and new revenue from the CLASS Act.

Here is a partial comparison of how the committee reduced the price tag (all numbers are over a ten-year period):

The most interesting saving came from the reduction in subsidies. The original language allowed for $1,279 billion in subsidies, but the new bill scored a $723 billion price tag with the CBO, a 40 percent reduction. What happened? Well, the CBO concluded that by implementing an employer mandate more Americans would retain their work-place insurance and fewer would have to purchase coverage from the Exchange. As a result, the government would have to spend less money subsidizing coverage (since the employer contribution would be preserved); employers who don’t offer coverage would pay a penalty of $750 per full-time employee, $375 for each part-time employee, that would bring in an extra $52 billion for health care reform!

The bill also saves money by reducing the subsidy eligibility from 500% FPL to 400% FPL. Now, American families of four with incomes between 400% FPL ($88,000) and 150% FPL ($33,000) would receive government assistance when purchasing insurance, but the subsidies do not kick in for a family of four at $400% FPL until they have spent more than 12.5% (or $11,000) of their gross adjusted income on health insurance — a percentage that’s substantially higher than the 6% threshold most affordability experts recommend.

The bill also finds approximately $59 billion in new revenues from premiums collected for long term care paid by individuals purchasing disability insurance through the Community Living Assistance Services and Supports (CLASS) Act, legislation currently under consideration that would create an insurance program for adults who become functionally disabled. The CLASS Act establishes “a national insurance program to be financed by voluntary payroll deductions to provide benefits to adults who become severely functionally impaired.” All working adults will be automatically enrolled in the program, unless they choose not to be.

What To Make Of The CBO’s New Cost Estimate Of The HELP Bill

Jonathan Cohn and Tim Foley have some very good summaries of the Congressional Budget Office’s (CBO) new analysis of the more complete HELP bill. The CBO score will dispel some of the gloom surrounding the frustrating mark-up process and dissuade (intellectually honest) critics from using the CBO’s preliminary estimate to fearmonger about the costs of reform.

The HELP committee does not have jursidiction over Medicaid expansion or financing of reform. Thus, its bill only covers an additional 20 million Americans and costs approximately $600 billion. However, if we assume Medicaid expansion to about 150% FPL we expand coverage, but we also add to cost, bringing the final bill to somewhere around $1 trillion over 10 years. Cohn runs the numbers for what the final results may look like:

- 20 million: Number of uninsured in 2019, compared to 54 million without reform.

- 95 percent: Percentage of Americans with coverage in 2019.

- 21 million by 2019: Additional people covered through Exchange and employer mandate.

- 20 million by 2019: Additional people covered through Medicaid expansion of up to 150% FPL.

The preliminary CBO score of the early and incomplete HELP legislation placed the cost at $1 trillion and this latest analysis suggests that the committee has been able to find savings of some $400 billion ($1 trillion - $600 billion = $400 billion). Some of that new revenue will come from the employer mandate (an AP story suggests that the mandate will generate $52 billion over 10 years), but where do we get the rest? Lower subsidies (the original version may have provided subsides at 500% FPL, now it looks like it’s down to 400% FPL)? The public option? Only the yet-to-be released CBO score can provide those answers.

But the HELP Committee’s chairman’s mark - which, for the first time includes language on the public plan and the employer mandate - does offer some new details for how the mandate and the public plan could be structured:

- Employer mandate: Large employers would have to provide coverage to their workers or pay $750 per full-time employee, $375 for each part-time employee. Businesses with less than 25 employees will receive a tax credit, on a sliding scale, based on the number of workers. Ezra Klein points out, “the CBO estimates that “a mere 150,000 will lose their coverage. That’s nothing. And it means that a lot more Americans end up insured and the government spends a lot less in subsidies.”

An employer mandate is meant to strengthen the employer-based system of coverage and reduce crowd-out into the Gateway. Crowd out (and this is what critics latch on to when they claim that Obama overstated his promise to allow Americans to keep their present coverage) is less likely if employers are required to contribute a meaningful amount “to the cost of covering their uninsured workers,” because the cost of allowing their workers to be covered through other options is not much lower.

The dear colleague letter that accompanied the new mark stated that “the completed bill virtually eliminates the dropping of currently covered employees from employer-sponsored health plans,” but some may be surprised that a modest flat fee is a sufficient deterrent to dropping coverage. The decision to charge every firm the same penalty — instead of charging firms on a sliding scale based on payroll — does not account for firm size or profitability and smaller firms and firms with lower-wage workers, could be disadvantaged.

However, it should also be noted that Massachusetts requires employers with more than ten employees to either offer a “fair and reasonable” contribution for their employees’ coverage, or “pay an annual ‘fair share’ contribution of $295 per employee.” In Massachusetts, few firms reported making changes as a result of health reform, firms reported making few changes in cost sharing or in offering more plans are a result of the mandate.

- Community Health Insurance Option: Will have to compete on a level playing field with private providers and offer competitive rates and premiums. Presumably, the plan will be able to use its administrative efficiency and its market power (assuming it is able to attract a significant number of applicants and providers) to lower premiums:

- Health care providers and individuals are NOT required to participate in the new plan, it is entirely voluntary.

- The Secretary of Health and Human Services will establish the public option in every single Gateway (whether it is regional or national) and provide the national plan with start-up funds that will have to be repaid in 10 years.

- The new plan provide coverage only for the essential health benefits, but states may offer additional benefits if they choose

- Premium rates should cover the expected costs of the plan

- The rates negotiated with providers shall not be higher, in aggregate, than the average reimbursement rates paid by health insurance issuers offering qualified health plans through the Gateway.

Betsy McCaughey: Health Reform Would Force Americans Into ‘Low-Grade HMOs’

It was only a matter of time until Betsy McCaughey read the latest health care legislation and discovered, as she did some 16 years ago, a government conspiracy to deny Americans access to quality health care.

McCaughey, who has long characterized herself as a “consumer advocate,” helped topple President Clinton’s reform effort by claiming that it “will prevent you from going outside the system to buy basic health coverage you think is better…The doctor can be paid only by the plan, not by you,” she wrote. The false charge ricocheted across the media and helped drown Clinton’s efforts. It wasn’t until 1995 that James Fallows explained that McCaughey completely misinterpreted the Clinton legislation and ignored language protecting patient choice.

Sixteen-years later, McCaughey is still positioning herself as unbiased interpreter of legislative language. In a rash of recent media appearances, McCaughey has argued that “for people who are currently get their insurance from their employer because this [HELP] bill and the House bill both force employers to move their employees into low grade HMOs within five years.” Watch a compilation:

McCaughey, who claims to have read the 610 page HELP bill three times, cites passage 3101 of the HELP bill as proof of the supposed requirement. The section, which is titled AFFORDABLE HEALTH CHOICES FOR ALL AMERICANS outlines the choices of coverage. Lower income Americans could enroll in Medicaid and SCHIP, the currently uninsured could find affordable coverage from a menu of different plans offered through the health insurance exchange; Americans with employer-based coverage could continue in their current plans or, after a period of time, also buy coverage through the exchange (or ‘Gateway,’ as the HELP bill calls it).

Nothing in the section McCaughey cites — or the bill — requires employers to move their employees into HMO plans. To the contrary, the passage on employers stresses that employers will have the choice to enroll their employees in a plan through the exchange. Under section (g), PORTALS TO STATE GATEWAY, the bill states, “A qualified employer may select to provide support for coverage of employees under a qualified health plan at any tier of cost sharing described 2 in section 3111(a)(1).”

Reading and re-reading the bill may have caused McCaughey’s eyes to also glaze over page 55 of the HELP bill, which explicitly protects Americans’ right to choose their own coverage:

On June 26th, Today, Media Matters for America wrote an open letter to cable news networks pointing out that “as the debate over health care reform proceeds, it is crucial that discussions and reports on the subject are accurate and fair. If the networks insist on hosting Ms. McCaughey to discuss health care, they have an obligation to their viewers to challenge and debunk her falsehoods.” Read the full letter here.

Why Wal-Mart Is Now Supporting An Employer Mandate

Today, Wal-Mart, the largest private employer in the country wrote a letter (along with the Center for American Progress and SEIU) to the Obama administration expressing its support for the employer mandate: [Read the full letter HERE]

We are for an employer mandate which is fair and broad in its coverage, but any alternative to an employer mandate should not create barriers to hiring entry level employees….Support for a mandate also requires the strongest possible commitment to rein in health care costs. Guaranteeing cost containment is essential. One way to ensure savings was recently advanced by former Senate Majority Leaders Howard Baker, Tom Daschle and Bob Dole, “Implement pre-specified targets for spending growth and enact a “trigger” mechanism that automatically enforces reductions,” (Crossing Our Lines, Bipartisan Policy Center) President Obama suggested strengthening the role of Med Pac to help enforce spending discipline.

Wal-Mart’s support for an employer mandate is highly significant, but so is its rejection the ‘free rider provision’ — a likely component of the Senate Finance Committee’s bill — and request for a trigger to ensure the reduction of health care costs. By embracing an employer mandate now, Wal-Mart raises its profile on the issue — not to mention cleanses its tarnished reputation — and helps mold a likely component of health care reform: a requirement that every large employer provide adequate coverage or pay a certain percentage of its payroll towards financing health care for its workers.

As the nation’s largest employer of a predominately low-wage, low-skilled work force, Wal-Mart sees the free rider provision — requiring businesses to help finance coverage for workers who receive coverage through Medicaid or subsidized coverage in the soon-to-be-established Health Insurance Exchange — as a competitive disadvantage that raises costs. (The provision also discourages the hiring of lower income workers or workers with disabilities.)

The business argument for supporting reform that lowers the growth of health care costs, even with a mandate (especially when most of the large employers who would be effected by the mandate already provide coverage) is obvious. After all, progressives have long argued that all firms would benefit from the reduction in unpaid medical bills incurred by the uninsured, increased productivity through improved worker health and labor force participation, and the savings due to a reduced rate of health-care cost growth. But Wal-Mart is holding us to it. That is, if the savings from reform don’t materialize, or as David Cutler and Judy Feder argue in their new paper, “if experience falls short of expectations,” the legislation, Walmart argues, should include certain “triggers” that “automatically enforces reductions.” [Read more about the triggers HERE].

On the whole, this is a win-win for reformers. The nation’s largest employer has embraced a mechanism that enhances the existing system of employer-based coverage, levels the playing field between employers and preserves the employer contribution — an important source of funding for health care reform. In turn, it has requested that we guarantee cost reductions and steer clear of a policy that undermines low-wage workers. Let’s hope the Senate Finance Committee is listening.

HELP Releases Public Plan Outline

The Senate Health, Education, Labor, Pensions (HELP) committee has released its much anticipated outline of the public health insurance option. Earlier this month, in an effort to find common ground with Republicans and iron out some of the most contentious issues, the committee’s ‘“Affordable Health Choices Act,” omitted language on the employer mandate and the new public option.

At the time, the New York Times had reported that the committee was considering a public plan that would reimburse providers 10 percent above Medicare rates. The outline released today doesn’t preclude that possibility, but it makes it less likely.

The new HELP framework allows the public plan to “reimburse health care providers at rates which will be no more than the average reimbursement rate paid by private plans offered through Gateways.” Under this arrangement, the new public plan would have to negotiate its own rates and play by the same rules as other private insurers within the Gateway (i.e. Exchange) — it “would follow the same rules as private plans for defining benefits, protecting consumers, and setting premiums.” What’s more, the public option would be responsible for attracting providers and would thus have to rely on competitive rates (instead of Medicare-like rates) to retain enough participants.

During its first few years of operation, the public plan would be protected from becoming a dumping ground for sicker and costlier patients. Under the outline, it would qualify for “risk corridor protections” to “offset or reclaim excessive losses and gains which could result during the start-up period (identical to those in Medicare Part D). Subsequently, its premiums would be set to make it self sufficient.”

On the whole, then, the plan follows Sen. Chuck Schumer’s (D-NY) level playing arrangement. Some of the public plan’s inherent advantages — i.e. its ability to use Medicare rates and Medicare leverage — are intentionally dulled. Still, the national option would be able, in due time, to build a strong market presence and use its size and market presence to inject competition in the insurance markets and drive down costs.

Tom Daschle: ‘I Can’t Think Of A Tool That More Effectively Controls Costs Than A Public Option’ »

Over at ThinkProgress, Faiz Shakir reports that “in an emailed statement to Bloomberg News, Health and Human Services Secretary Kathleen Sebelius said she’s open to the idea of dropping a public health insurance option in favor of a medical-insurance cooperative,” even if the proposed co-operative is a mosaic of state-based programs.

Sebelius explained that the administration was open to any proposal that would “have a comprehensive approach that lowers costs” and provides “coverage for everyone.” “The administration remains open to all serious ideas including national and state co-ops as well, public plans modeled on Medicare, as long as such plans achieve the president’s goals of reducing cost, improving quality and giving Americans real health-care choice,” Sebelius said.

But it’s a unclear that a national cooperative — much less state-based cooperatives — would be able to lower costs. A single health insurance plan has limited scope to influence the practices of providers and other insurers. It lacks the clout of Medicare — which can drive system innovations and payment reforms — Medicare-like administrative efficiencies, or the ability to use Medicare leverage to ensure a large provider network that accepts Medicare prices. A new cooperative health care plan won’t be able to lower costs and drive private insurers to aggressively bargain with providers (and pass the saving on to its beneficiaries in the form of lower premiums). Multiple cooperatives — operating as non-profit health insurance plans — would have even less market leverage to bargain for lower prices.

In fact today, during a press briefing with reporters, former Sen. Tom Daschle — who has been criticized for failing to strongly advocate on behalf of the public plan — argued, “I can’t think of a tool that more effectively controls costs than a public option. I mean every study that has been done on a public option shows what remarkable cost savings you can derive”:

Actually as I said at the beginning, the degree to which Republicans make themselves less and less relevant is the degree to which a public option is more and more likely, because we are negotiating with the Democrats rather than the Republicans who oppose it. So I would say that a reconciliation vehicle would probably have a pure public option just because most likely it will only involve Democrats deciding what that reconciliation package will be.

Watch it:

Health care reform isn’t all about a public option, but a public option may be essential to sustaining the effort. Progressives certainly shouldn’t allow the perfect to be the enemy of the good — a health care bill that provides coverage to more Americans but lacks a public option is better than no reform at all. But Democratic lawmakers should be careful not to sacrifice good policy for the sake of winning one or two Republican votes. As the New York Times reports this morning, there is “Little Hope for G.O.P. to Support Health Bill.” Republican opposition is rooted in ideological stubbornness and a political unwillingness to allow Democrats to win on the issue, not sound policy rebuttals. As GOP word-smith Frank Luntz has conceded, Republicans will label Obama’s reform effort a “government takeover” of health care regardless of the actual proposal and they continue to misrepresent and lie about the consequences of a public option.

But as Daschle points out, if Republicans continue to lie and obstruct reform, they may push Democrats into reconciliation and, ironically, contribute to the creation of a robust public option. Unfortunately, it’s not yet clear that everyone in the administration agrees that this is good policy.

Transcript: More »« Less

Making Sure Health Care Reform Is Sustainable

Today, the Center for American Progress hosted a breakfast with former Sen. Tom Daschle and John Podesta to discuss the prospects of health care reform. “July will be the most historic and consequential in all of history,” Daschle explained, arguing that it will be “extraordinarily critical when it comes to health reform.”

Indeed, after the July 4th recess the Senate Finance Committee and the three House committees with jursidiction over health care will begin marking up legislation. All four are expected to focus on the great elephant in the room: how do we finance reform that could cost north of $1 trillion?

Most progressives propose a mix of different revenue streams. 1) Eliminating or reducing excessive or wasteful spending in Medicare and Medicaid could seed approximately $400 billion. 2) Modernizing the system by implementing electronic health records and instituting payment reform could yield costs savings of 1.5 percentage points annually (or over $500 billion). 3) Additional revenue from the employer mandate, limiting tax preferences for medical spending and sin taxes (taxes on alcohol and soda) would generate more than $400 billion.

This basket of pay-fors provides Congress with a menu of options, making fully financed health care reform more probable. As Podesta pointed out during the briefing:

One of the reasons I think this is important, is if you settle in on 400, 400, 400 then the cuts are sustainable. If you are imagining all of the costs coming from the revenue side, or all of the costs coming from traditional cuts in public program, it is very very hard to get the package put together right. But if you can take 400 out of over payments, 400 out of modernization, 400 out revenues, that’s a doable deal. None of it is easy. If it was easy, it would already have been done.

But what “if experience falls short of expectations?” What happens if productivity improvements, investments in health information technology and payment system reforms fail to slow the growth of health care spending and lower costs? How then do we ensure that health care reform is budget neutral? Well today, Harvard economist David Cutler and CAP Senior Fellow Judy Feder released a new report in which they argue that should reform fail to produce savings, Congress could rely on a series of so-called ‘failsafe’ proposals:

A commission would monitor health care spending and, after some time would have the authority to implement a series of measures to address the problematic areas. “The first piece is the trigger,” Feder explained. “You would have some combination of a mechanism to ensure adequate funding for health care reform and the other is a target for the rate of growth of health care spending. That’s the kind of trigger that we would see…A commission would at a point, say 5 years out, would evaluate experience and if we were somewhat short, if all of the modernization hasn’t happened or the savings hadn’t gone where we needed them to go, then that commission would make the decision as to what actual measures would be taken to get growth under control.”

GE CEO Jeff Immelt: Businesses Spending Money To Preserve The Status Quo Is ‘Just Lunacy’

Earlier this month, the Chamber of Commerce announced the $100 million Campaign for Free Enterprise, which Chamber President Tom Donohue called the “most important project the Chamber has embraced in its nearly 100-year history.” With the campaign, the Chamber is attempting to influence and obstruct a slew of upcoming legislation, including cap-and-trade, health care reform, and financial regulatory reform. On Wednesday, in fact, the Chamber condemned the House Democrats’ health care bill, calling it “broken beyond repair” and advocating that Congress “take this legislation back to the drawing board.”

Previously, no one had rebuked the Chamber’s approach. But last night, Jeffrey Immelt, Chairman and CEO of General Electric, appeared on Charlie Rose and said that businesses spending money to obstruct legislation like this is “just lunacy“:

From a business standpoint, the notion that businesses are going to put a bunch of money in ads to protect the status quo is just lunacy. It’s just not what we should be doing right now. Like I said, when I think about health care in a GE context, we’re going to win some, we’re going to lose some on health care. But I think it would be totally inappropriate for GE to be saying we don’t need health care reform right now. We do.

Watch it:

It’s in the interest of big business to get health care costs down, a notion that Immelt seems to grasp. As Igor Volsky pointed out, our health care system — by leaving so many uninsured and not embracing new technologies or comparative effectiveness research — “inflates health care costs and expects businesses to pick-up the tab.” General Motors CEO Rick Wagoner has admitted that a national health care program could have helped the auto industry avert financial disaster.

So are there any other corporation’s out there that also think the Chamber’s campaign is lunacy? Or do the likes of Nike, UPS, and Duke Energy all believe that the Chamber is really doing what’s best for business?

Cross-posted on ThinkProgress.

CD-ROM Converter Service Center HSI Doubles As The GOP’s Favorite ‘Academic Think Tank’

This morning on MSNBC, Rep. Eric Cantor (R-VA) ripped into health reform, calling legislation to introduce the a public option “crazy talk.” “You’ve seen the cost,” Cantor said, “the latest estimate being discussed here on the House plan is three trillion dollars.”

Republicans are seizing upon a study produced by HSI Network LLC to claim reform will cost $3-3.5 trillion over the next ten years. They are taking to the floor, firing off press releases, and making nonstop television appearances, using the HSI figure to demonize health reform. But we’ve seen this dog-and-pony show before, when HSI played exactly the same role in 2008. They armed John McCain with friendly numbers for his health plan, while tearing into Barack Obama’s plan.

This is how it worked: Stephen Parente, one of the owners of HSI, was tapped by McCain policy adviser Doug Holtz-Eakin to formulate the McCain health plan. Then over the course of the summer, Parente and his colleague at HSI Roger Feldman, who is a former Bush economist, were quoted in various friendly media outlets praising the McCain plan without noting that they had authored the plan they were analyzing:

– “Roger Feldman, a professor at the University of Minnesota who focuses on health insurance, said the Minnesota program shows that high-risk pools can work. He added that Sen. McCain ‘will have the same question — how much does he want to subsidize these plans?’” [WSJ, 6/2/08]

– “Steve Parente, a professor of finance at the University of Minnesota, estimated the effects of an earlier version of McCain’s plan, with a $4,000 tax credit. He found that even that less generous plan would increase the number of people with insurance by 23 to 27 million.” [National Review, 3/3/08]

Indeed, the McCain campaign paid $50,000 to HSI, the same firm that wrote their health plan, to produce “independent” comparisons between the McCain health plan versus Obama’s. Trying to conceal the payment, the McCain campaign reported the $50,000 as “legal consulting.” Strangely enough, the McCain campaign also paid HSI $10,000 in the final weeks of the campaign for “get out the vote consulting.”

Unsurprisingly, the HSI study found that McCain’s plan would cover “more than half of the nation’s 47 million uninsured — and two million more than the plan put forward by Senator Obama.” But as NPR has noted, the HSI study of the McCain and Obama plans was an extreme “outlier” compared to almost every major academic think tank that had surveyed the two candidates’ health plans. HSI’s model of the Obama campaign plan predicted a Federal cost more than 4 times than that predicted by the independent Tax Policy Center.

Reprising their role during the Presidential campaign, HSI is now spreading misinformation about the House health bill. The Ways and Means Committee has noted:

– The HSI analysis assumes substantial erosion of private coverage that rests on two likely false assumptions: (1) that private plans sit idly by and fail to offer products at lower prices to compete with the public option for business; and (2) that an employer shared responsibility requirement is ineffective and leads to massive dropping of ESI, despite contrary experience in Massachusetts and in today’s market where the majority of employers already offer coverage on a voluntary basis.

– The analysis says there are no offsets in the discussion draft, yet the bulk of the text consists of payment and delivery system reforms in Medicare and Medicaid that will yield hundreds of billions of dollars in savings.

In addition to serving as the GOP’s favorite health care think tank, HSI doubles as a data service conversion center. The latest “Data Conversion Special!” advertises that for $100, HSI will convert mainframe cartridges into CDs or DVDs.

Though HSI has yet to produce their actual methodology for analyzing the the House health reform bill, they certainly have a unique revenue model.

Rep. Paul Ryan Claims The Public Plan Won’t Pay Its Employees

As new polls show increasing support for a new health insurance option, Republicans are inventing new reasons to oppose what has quickly become the centerpiece of the health care reform debate. Here is Rep. Paul Ryan (R-WI) on CNBC’s Squawk Box explaining that a public health insurance option won’t be able to compete with private insurers because it will not pay its staffers. Presumably, Ryan thinks the employees who administer the public plan will have to work for free:

It’s impossible to have a level playing field with a public plan. Like I always say, it’s like my seven year old’s daughter lemonade stand competing against McDonalds. There is no way it’s a level playing field. The public plan doesn’t pay taxes, the public plan doesn’t have to account for payroll or benefits for its employees. The public plan gets to pay Medicare rates, which for hospitals is 30% below average and for doctors is 20% below average. So it’s a stacked deck and what ends up happening is that the public plan eventually crowds out the private plans and everybody goes on the public plan and you, voila, eventually have a government takeover of our health care system.

Watch it:

Presumably a public health care plan will have to pay and manage its employees’ benefit plans, just like Medicare does today. Moreover, private plans will play an important role within any framework of public/private competition, they just won’t maintain their present monopoly on coverage — something Ryan’s health care bill cheerfully extends. And while Democrats have detailed the various ways in which a public plan can, in fact, compete fairly with private plans; they have not denied it the right to use its inherent advantages — i.e. lower administrative rates, ability to use Medicare-like prices — to charge lower premiums to its consumers. After all that’s how McDonalds — which uses its fast food market power and other efficiencies to secure cheaper prices with providers and then passes on those rates to customers — is able to out compete his daughter’s lemonade stand.

If we’re outlawing the public plan, should we also ban McDonalds?

Can Republicans Scare The Public Away From The Public Option?

Ezra Klein points out that the public, in two successive polls now, strongly supports a public health insurance option and over at ThinkProgress, Matt Corley debunks the conservative myth that bipartisan health care reform must protect the private insurer’s monopoly for covering Americans under 65:

By claiming that a public option would destroy bipartisanship, Grassley is ignoring the preferences of a strong majority of Americans. Earlier this week, a New York Times/CBS News poll found that a public health insurance option (which would lower costs and improve quality) is supported by 72 percent of Americans, including 50 percent of Republicans. Additionally, Grassley’s antipathy to a public plan flies in the face of his own constituents. In May, the Des Moines Register Iowa Poll found that 56 percent of Iowans support a public plan.

Republicans have staked their entire opposition to health care reform on attacking and mischaracterizing one of the most popular aspects of health care reform. Sounds odd until you consider that the same NYT-CBS News poll that found that 72 percent supported a public option, also concluded that” two thirds are concerned their own health care will get worse if the government creates a system to provide health care to all Americans.”

So their argument goes something like this: pass a public option, employers will drop coverage, and Americans will be stuck with an inferior public plan. Their latest claim that President Obama has reneged on his pledge to allow Americans to keep their existing health coverage, strikes at this very vulnerability.

It’s worth pointing out, however, that the public plan, along with all of the other private plans in the Exchange, would have to offer comprehensive benefit packages that provided quality care at affordable rates. Secondly, progressives are not interested in dismantling the employer system. From a logistical point of view and to those concerned about continuity of care, moving the 160 million Americans who receive employer-sponsored benefits into new plans would be a costly nightmare. The idea is to build on the employer sponsored system and achieve coverage through shared responsibility. That way, you preserve the employer contribution, an important source of funding health care reform, and allow Americans to say in their current plans.

The goal is to reduce immediate shifts but still preserve choice. For this reason, the House Tri Committee health care bill phases in participation in the Exchange when it goes into operation in 2013:

- Individuals and employers with 10 or fewer employees in 2013
- Individuals and employers with 20 or fewer employees in 2014
- Individuals and employers with more than 20 employees in 2015

The Role Of Private Insurers In Public-Private Competition

Today, the House Energy and Commerce Committee and Health Subcommittee and the House Education and Labor Committee convened hearings on the Tri Committee’s draft proposal for health care reform. The plan, which was released on Friday, contains a fairly robust public insurance option that will compete with private insurers and abide by the same marketing, operations, and rating rules. As the New York Times details, under the bill, “the public plan would be run by the Department of Health and Human Services and would offer three or four policies, with different levels of benefits. The plan would initially use Medicare fee schedules, paying most doctors and hospitals at Medicare rates, plus about 5 percent. After three years, the health secretary could negotiate with doctors and hospitals.”

In anticipation of the hearings, House Republicans released “top 10 facts” about the House health care plan, suggesting that a public health insurance option would result in a government take over of the health care system and lead many Americans to lose their existing coverage. “The House Democrats’ plan could force more than 100 million Americans out of their current health care plan and onto the government rolls,” one “fact” states, citing a Lewin study “published earlier this year.”

But during today’s House Energy and Commerce hearing, Health Care For American Now (HCAN!) National Coordinator Richard Kirsch explained that a public plan can in fact fairly compete with a private option without crowding out private insurers:

If I could, and this is this level playing field thing drives me crazy. Private insurance companies have a 158-170 million customers…. The choice of a level playing field, the public health insurance option is going to start at an enormous disadvantage because it doesn’t have all those things in place. When the private insurance companies whine that they can’t compete with the government, I have to begin to wonder, do they really believe the polls that 93% of Americans don’t trust them and that’s why they can’t compete.

Listen:

Indeed, as public plan architect Jacob Hacker — who also thoroughly debunks the Lewin study analysis here — has explained, “I think the private insurers certainly will be have a great role in providing more integrated coverage options than the public plan would provide. So any types of network plans that involve the restricted network of providers, ranging from very tightly integrated staff-model HMOs to more loosely integrated practices, it strikes me as an area where private plans would have an enormous advantage,” Hacker explained.

Private plans would also have a “brand advantage” (in the same way that a lot of people rather have the branded drug than the generic) and “could play an important role” as fee-for-service alternatives that look like the public model but provide “better customer service, nicer marketing and better brochures, but they might also be doing other things in terms of quality improvement or care management that the public plan wasn’t.”

The Public Insurance Plan Is Not Responsible For High CBO Scores

Since the Congressional Budget Office (CBO) issued very preliminary cost estimates of the Health, Education, Labor and Pensions (HELP) committee’s health bill and the Senate Finance Committee’s draft legislation, Republicans and some in the media have argued that the somewhat higher-than expected price tags undermine the President’s contention that a new public heath insurance plan would lower health care spending:

- Rep. John Bohner (R-OH): The Congressional Budget Office came out with a score on Senator Kennedy’s bill, just part of the score — of the — of his bill, that says that the public option would cost over $1 trillion, and would cause 23 million Americans to lose their private health care coverage, and only 16 million of which would — would be covered under the — the government plan. [CNN, 6/16/2009]

- ABC News: The President’s chances for an optional health care plan that would be run by the government may be fading after a Congressional Budget Office report found a Democratic plan in the Senate would cost at least a trillion dollars over the ten years and cover just 1/3 of the uninsured. [ABC News, 6/16/2009]

- Sen. Lindsey Graham (R-SC): The CBO estimates were a death blow to a government run health care plan. The finance committee has abandoned that. [This Week, 6/21/2009]

- Fortune Magazine’s Nina Easton: And I think the, the big speed bump this week, of course, was that CBO, Congressional Budget Office study that said that the costs of a public plan are going to be well beyond what they expected. [MTP, 6/21/2009]

Watch it:

But both estimates never scored the public option. The HELP Committee’s bill omitted any language about the public plan and, according to reporting by the Health Beat’s Maggie Mahar, the CBO couldn’t “mark up the Senate Finance Committee plan because the Senate Finance Committee plan doesn’t yet exist.” “Yesterday, I spoke to Peter Orszag’s Office of Management and Budget and they confirmed that there are many blank lines in the draft CBO is looking at. What was missing included a public-sector insurance option,” Mahar wrote.

In fact, rather than add to the costs of reform, a robust public option could produce savings that could actually be scored and identified by the CBO as a money-saver. As the New York Times editorialized on Sunday, “A public plan would have lower administrative expenses than private plans, no need to generate big profits, and stronger bargaining power to obtain discounts from providers. That should enable it to charge lower premiums than many private plans.” “It would also shave hundreds of billions of dollars from the amount needed to cover the uninsured — a crucial advantage as Congress scrambles to finance the reform effort,” the NYT concluded.

PhRMA Announces ‘Voluntary Effort’ To Cut Rx Costs By $80 Billion In 10 Years

On Friday, drug manufacturers “tentatively agreed to provide as much as $80 billion worth of discounts” over 10 years to seniors who are “subjected to crushing out-of-pocket expenses when the yearly amounts they pay for medication fall within” the ‘donut hole’ not covered by Medicare.

The Medicare Part D drug benefit contains a gap in coverage that “leaves beneficiaries on the hook for the cost of prescription drugs when the cost of their prescription drugs passes $2,700 in a year. Coverage kicks back in when a beneficiary’s annual drug cost passes $6,154 in a year.”

The agreement, which was made in negotiations with the Senate Finance Committee, could arguably provide savings for millions of Medicare beneficiaries but is contingent “upon enactment of a sweeping health-system overhaul“:

If health-reform legislation is enacted, the agreement would bring financial relief to about 3.4 million elderly and disabled Americans who currently fall into a coverage gap known as the “doughnut hole.”… Under the proposal, U.S. drug companies would provide half-price discounts to Medicare recipients in the “doughnut hole” and provide other unspecified discounts and rebates for a total of $80 billion in savings to the government.

Like the health industry’s voluntary commitment to slow the growth of health care spending by 1.5 percentage points a year over 10 years, this move by drugmakers “may have been intended to forestall more severe cuts.” It’s more of a public relations victory than a sustainable policy difference. Drug manufacturers may issue coupons or rebates to seniors but it’s unclear how much of the “unspacified discounts” “would benefit Medicare beneficiaries directly and what portion would accrue to the federal treasury.”

As Merrill Goozner notes, “not much of the money will be available for health care reform. The donut hole is by definition out-of-pocket costs for seniors. Cutting those expenses will not free up money in government budgets for helping the uninsured. That means the Congressional Budget Office will score the offer at much less than the $80 billion.” Economist Dean Baker points out that “the projected $80 billion in savings in context” would “equal to a bit more than 2 percent of the $3.8 trillion that the Centers for Medicare and Medicaid Services project the country will spend on drugs over the next decade.”

This isn’t to say that the commitment is worthless. It’s just more political than real, voluntary rather than mandatory. Americans already pay some of the highest drug prices in the world (according to a 2001 report by the House Committee on Government Reform, as a result of price controls in other countries, some drugs cost 31 percent to 48 percent less in Canada, France, Italy, Britain, Germany and Japan than in the United States), and so the industry’s foggy voluntary effort is only inspiring in the sense that it suggests that the industry still believes that health care reform is a very real possibility.

House Releases Health Care Reform Legislation »

Today, three separate House committees — Ways and Means Committee, Energy and Commerce Committee, Education and Labor Committee — released a single health care reform bill, the Tri Committee Proposal. In a press release announcing the legislation, the three panels with jurisdiction over health policy in the House announced that they had developed “a single bill that fulfills President Obama’s goals of reducing health care costs, protecting and increasing consumers’ choices, and guaranteeing access to quality, affordable health care for all Americans.”

Unlike the HELP bill and the draft (leaked) language of the Senate Finance Committee, the Tri-Committee proposal seems to contain a fairly robust public insurance option. While details are still being worked out, the proposal establishes a public plan in 2013 that will compete with private insurers, within the Exchange, on a level playing field. The public option will be required to abide by all marketing, operations, and rating rules and would initially be allowed to use Medicare plus rates. After some time, the plan would have to independently negotiate fees with providers.

On the whole, the bill’s affordability measures are impressive. Full details are after the jump but the plan offers subsidies on a sliding scale (up to 400 percent of poverty) and opens up Medicaid to Americans at or below 133% of the federal poverty level. While I haven’t seen the cost-sharing details, the robust public plan that could use Medicare plus rates would be able to force private insurers to aggressively negotiate with providers and pass on savings to consumers.

Below is a comparison table of all three bills, full details of the Tri Committee’s proposal are after the jump:

Next week, all three committees will hold hearings on the legislation. Mark-up (each committee will hold three markups on the same bill) will begin in mid-July and the bill will likely go to the floor of the House before the August recess.

Details on the Tri-Committee bill: More »« Less

Why Comparative Effectiveness Research Will Not Ration Care

During yesterday’s mark-up of the HELP Committee’s ‘Affordable Health Choices Act,’ Sens. Tom Coburn (R-OK), Pat Roberts (R-KS), Mike Enzi (R-WY) and Orrin Hatch (R-UT) introduced multiple amendments preventing the government from using the results of comparative effectiveness research (CER). Responding to the Republican charges, Sen. Barbara Mikulski (D-MD) pointed out that existing language already prevented the new comparative effectiveness council from using the research to make coverage decisions:

We get into this cost. We get into this repetitive word, “rationing”, “rationing.” It goes over very well with focus groups, but it has no rational here. If you go to page 323 of the actual bill, where it says ‘Incorporation.’ We absolutely prohibit that this, anything related to the Center For Health Outcomes, otherwise known as comparative effectiveness, that there “shall not be construed as mandates for payment, coverage, or treatment.” It is in the bill. Page 323, lines 5 through 7.

Watch a compilation:

Republicans relied on a three-part attack. One, ignore the existing language and offer redundant amendments prohibiting the comparative effectiveness center from mandating that doctors prescribe ‘the best’ treatments. Two — this is a somewhat more coherent strategy — argue that the Center for Medicare and Medicaid Services (CMS) could use the information to make coverage decisions for Medicare. And three, if the government uses the comparative research results to establish best practice guidelines, then doctors who don’t follow the guidelines but rather consider the individual needs of their patients, could be liable for malpractice claims.

But even the last two arguments fall apart on close scrutiny. The government isn’t mandating that doctors adopt the results of CER and it is not rationing care. Each patient has his or her unique needs and the ultimate decision for how to proceed should be left to the doctor and the patient. Currently, approximately one-third of all treatments have never been proven to produce better outcomes; CER would provide doctors with unbiased information about the most effective treatments, help doctors and patients make better informed decisions, and improve the quality of care.

Moreover, far from establishing one-size-fits all medicine or dictating treatments, properly conducted CER will actually promote faster adoption of personalized care. As Alan Garber of Stanford and Sean Tunis of the Center for Medical Technology Policy point out, “far from impeding personalized medicine, CER offers a way to hasten the discovery of the best approaches to personalization, providing more and better information with which to craft a management strategy for each individual patient.” The new CER council and CMS seek to preserve a personalized approach — that is, allow doctors to make decisions based on a patient’s history and individual needs — while eliminating truly ineffective treatments.

CER results are rarely black and white and no one study should serve as a final word on a coverage decision. But given the amount of unnecessary, redundant and ultimately harmful treatments, the government has an interest in informing health care providers about best practices– and this is what the legislation does and our doctors want. More efficient medicine is better medicine, and anyone who wants to prevent the system from wasting money is in the pockets of the medical industrial complex that is getting rich while we get sick.

After all, the “art of medicine,” as Coburn calls it, already relies on certain standards and practice guidelines and physicians often incorporate their knowledge of the patient and clinical experience to offer a patient-centered approach, as such only about half of the recommended guidelines are followed. Ultimately, however, doctors are not superheroes; they should not be ignoring “standard protocols” or attempting to re-enact the heroics of Fox’s HOUSE. They are currently driven by a set of professional standards and procedures, and as patients, it is in our interest to encourage providers to incorporate certain guidelines (derived from CER) into routine practice. After all, “the last thing most Americans want from this wise use of taxpayer funds is more published research gathering dust on library shelves.”

The Senate Finance Committee’s Nothing Burger Proposal

I think Ezra Klein is right to argue that the leaked version of the Senate Finance Committee’s health reform legislation is somewhat of a nothing-burger. It’s not well done, it’s not rare, it’s just medium well (which, incidentally, is just how Obama likes it):

But this is what I’d term “comprehensive incrementalism.” It makes everything a bit better. It is not radical. It is not root-and-branch reform. For all the concerns about cost, there is no strong public plan able to negotiate low rates and implement aggressive reforms.

Indeed, as Klein points out, the plan institutes some important market reforms (guarantee issue, no exclusion based on preexisting conditions), but its adjusted community rating variation rate is capped at 7.5:1, which means that an insurance company can charge an older person 7.5 times the rates it charges a younger applicant. Individuals and families up to 300% of Federal Poverty Level (FPL) would receive tax credits to cover the cost of coverage and small businesses would be eligible for a temporary small business tax credit. Again, the subsidies aren’t great, but they’re better than nothing.

On the public option, the committee went with the Conrad co-op compromise and offered the new corporation some start-up seed money. Children and pregnant women below 133% of the poverty level ($28,200 for a family of four) and parents and childless adults at or below 100% of the poverty level ($10,800 per year) are eligible for Medicaid. Everyone is required to purchase coverage, but the employer role is somewhat undefined.

In fact, the “placeholder” section about employer mandate is the murkiest part of the proposal. Employers are not required to provide coverage, but employers whose workers receive Medicaid (so they are below 133% of FPL) or a tax credit in the Exchange (those at or below 300% FPL) have to pay 50% of the national average Medicaid costs on behalf of their Medicaid workers and/or 100% of the tax credit for workers in the Exchange. So employers don’t have to provide insurance if they don’t want to, but employers with a preponderance of poor workers will have to help finance their workers’ coverage. This approach preserves the employer contribution, but it doesn’t exactly preserve the system:

1) If employers are paying 50% of the national average Medicaid costs, then employers in low cost areas would be subsidizing workers in high cost areas. Employers in low-cost areas would be over-paying to provide coverage workers in high cost areas. Given this dynamic, I don’t imagine that Senators from low-cost states will find the proposal too appealing.

2) This provides employers with an incentive to not provide coverage or offer workers expensive plans, basically forcing them into the Exchange. Health reform should align the incentives so that employers and employees are all better off when the employee is insured.

The “alternatives for employer responsibility” on the last slide of the draft are no better. Option 4 is no mandate at all and the first three seem to lack an adequate penalty to encourage firms to continue providing coverage.

Defining Affordability In Health Care Reform

A higher than expected preliminary Congressional Budget Office estimate of the Senate Finance Committee’s health care reform bill — and the trouble surrounding the HELP bill — has led Chairman Max Baucus (D-MT) to postpone action on the bill until after the July 4 recess:

Committee Chairman Max Baucus said yesterday lawmakers need more time to work on bringing the bill’s cost to below $1 trillion and to reach a bipartisan compromise on it….[Sen. Kent] Conrad said the finance committee is considering a variety of ways to reduce the cost of its plan to below $1 trillion. He said the costs could drop dramatically if members limit subsidies to lower-income Americans seeking insurance.

The Washington Post’s Ezra Klein reports, “Right now, I’m told Finance is going down the road of less reform. They’re cutting the subsidies, cutting the generosity of the basic benefit package and cutting the number of people who will ultimately be insured by their proposal.” Of course, affordability and adequacy are the tents of health care reform. Progressives have rightly argued that a new public health insurance option would lower costs and insert competition into the health insurance marketplace, but hyper focus on the public option may lead reformers to miss the forest for the trees.

Health reform that fails to make insurance more affordable is at best an incremental improvement. The great irony, of course, is that a robust public option that uses Medicare-like rates would actually lower premiums and health care costs. But Democratic legislators seem unwilling or unable to stand behind a strong public option. Should they also sacrifice affordability of care in an effort to please conservatives concerned about the budget deficits, they would be placing themselves in between you and any kind of doctor.

The problem of unaffordability is most apparent for the nearly 47 million Americans who lack health insurance. The Agency for Healthcare Research and Quality found that while “15.8 percent of adults spent more than 10 percent of their family income on health care services in 1996, by 2003 the proportion of adults bearing what has historically been considered catastrophic financial burdens had increased to 19.2 percent of the population, or 48.8 million individuals.” According to the Center for Studying Health System Change, one in five Americans had trouble paying their health care bills in 2007. In fact, even moderate levels of out-of-pocket spending — spending that is well below the 5 or 10 percent of family income —created medical bill problems.

Thus, health care reform must expand safety net programs like Medicaid and SCHIP for low income families and provide help with premiums for families with incomes above approximately 400 percent of the federal poverty line. Also:

- Families pay minimum cost sharing and out of pockets expenses.

- All families should be protected from excessive premiums. The government should provide subsidies on a sliding scale. Everyone must pay their fare share and the system should gradually phase out assistance so that slightly-wealthier families don’t face a cost-cliff

- Subsidies should vary by geographical location and adjust for cost of living

Tom Coburn: ‘I Think Health Care In This Country Is Pretty Good,’ Only ‘Some Fall Through The Cracks’

During yesterday’s mark-up of the HELP committee’s ‘Affordable Health Care Act,’ Sen. Tom Coburn (R-OK) questioned the need for reform. “I think this health care is pretty damn good, I think it’s pretty dang good,” Coburn said:

I’ll tell you the other reason I think health care in this country is pretty good and good for my Medicaid patients and good for patients with no health insurance. Because when somebody gets cancer, most of the time we get them well. Most of the time we get them well. Some fall through the cracks, that’s true. But as a two-time cancer survivor, I think this health care is pretty damn good, I think it’s pretty dang good.

Watch it:

But just last month, the senator unveiled ‘The Patients’ Choice Act,’ a GOP alternative to the President’s plan, which recognized the health care crisis. “It is time to publicly admit that the health care system in America is broken…And 47 million Americans worry what will happen to them or their children if they get sick,” a summary of the bill read. Now, just a month later, Coburn, who is clearly satisfied with his own government-sponsored health care plan, has lost interest in helping Americans secure access to affordable.

In his four years in the Senate, Coburn has earned the reputation of “a fly in the soup,” abusing the senate’s hold privilege — a technique which allows senators to “object to bringing a bill or nomination to the floor for consideration” — to prevent “the Senate leadership” from bringing matters to a vote. Remarkably, Coburn’s obstructionism has even led “senate aides to now take legislation directly to Coburn’s office” to ensure “he has no objections.” Last summer, Sen. Harry Reid (D-NV) wrapped most of the non-controversial bills held by Coburn into one large measure — called the Tomnibus — in an effort to pass the mostly bipartisan legislation.

In an effort to delay the committee’s reform efforts, Coburn plans to offer numerous nuance amendments (read them all here):

- Doctor on doctor spying: To establish a demonstration project that uses practicing health care professionals to conduct undercover investigations of other health care providers in order to determine the quality of health care provided by such other providers. [Coburn, 11 & 87]

- Protecting unborn children: To provide for the establishment of an Office of Unborn Children’s Health (O.U.C.H.) [Coburn, 13]

- Toying with legislation: To clarify the intent of the prevention and public health investment fund [Coburn, 17]; Coburn To clarify the intent of the prevention and public health investment fund [Coburn, 18]; To restate the purpose of the Prevention and Public health Investment Fund [Coburn, 19]; To reduce funding and provide for a termination date for the Prevention and Public Health Investment Fund. [Coburn, 20]

Reform may be a joke to the well-insured Coburn, but for the Americans struggling with cancer, access to affordable health coverage is a very serious concern. As the American Cancer Society points out, people who are uninsured are more likely to be diagnosed with advanced cancer and too many insured Americans have a hard time affording their treatments. In Oklahoma, an average family pays $1,900 more in premiums because of the broken health care system and some 50 families “fall through the cracks” every day when they lose their health insurance.