the great healthcare reform debates: understanding the causes, complexities, policy, politics and...

8/14/2019 The Great Healthcare Reform Debates: Understanding the Causes, Complexities, Policy, Politics and Consequences

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The Great Healthcare Reform Debates:

Key Elements, Complex Causes, Difficult Problems, Policy and Partisan Politics

By Dave Livingston. Dave is a management consultant with almost 30 years of experience with analyzingcomplex business problems and developing solutions and new businesses. He blogs on public affairs athis blog Parts to Wholes: the Socionomic Systems Nexus (http://llinlithgow.com/PtW/) where heattempts to apply that toolkit to current affairs and public policy. He also brings a background ineconomics, politics, current affairs, international relations, history and philosophy to the table. The workyou read here is the result of applying systems analysis (hence parts to wholes) to complex problemsin Political Economy and Public Policy.

Introduction

Healthcare is the fastest growing and, by some measures, largest single sector of the economy. Its the fastestgrowing because its the only sector where costs have been growing at an exponential rate for almost two

decades. The implications of that are enormous, for each individual, for every business and for the overall healthof society as well as the long-term viability of government. Despite all these serious challenges, which weve beengenerally aware of the issue of Healthcare Reform has been sadly neglected because of the size, complexity,interest group concerns and partisan politics that have swirled around it for decades. Yet, despite of all that weare closer to real and substantive changes than we have been since 1965.

Because Reform has been so contentious politically, because it touches so many parts of so many peoples livesand livelihoods and is such a major part of the economy theres been enormous anxiety and a lot of partisanposturing and positioning over the last several months. In the process very little has been said that has madeclear what is going on simply and clearly enough for either concerned citizens or interested stakeholders to havea clear understanding of all the many moving parts and complex machinery involved. This is our best attempt atsurveying the landscape, collecting reliable information and presenting conceptual and analytical frameworks thatmay help you understand whats going on and the potential impacts, whether you are a private citizen, a

participant in the Industry or involved in it as an investor or other interested party.

Healthcare is huge, now about 14-17% of the economy. When we first got introduced to these concerns in theearly 90s it was 6% and growing rapidly toward 10%, which worried everyone then. Now its likely to grow to 40-50% on current course and speed. Which is of course unsustainable. In fact healthcare premiums have risen sofast that theyve gone from about $8,000 to $15,000 per family and are headed shortly for $25,000. In the longerterm without deep structural changes out of control costs present a real danger of bankrupting the country.

At the same time the US spends 2-3X what the other major developed economies do, appears to get about asmuch value on a wide range of performance measures and is the ONLY developed economy that exposes itscitizenry to catastrophic risk of financial failure. Rising healthcare benefits have also been a primary cause ofstagnant wage growth and have seriously hampered the performance and competitiveness of American business.In short there is no single person or interest group who will not benefit in the long run from putting Healthcare on amore viable and sustainable basis.

There are however an enormous number of complex moving parts linked together in a great many relationships.That makes analyzing the challenge very difficult for its own sake. At the same time the debates over Healthcarehave been extremely rancorous and partisan, representing issues of political advantage and leading to majorfabrications and distortions and exaggerations if not outright mis-representation. At a level that is almostirresponsible and a failure of public fiduciary responsibilities. Normally with a major policy challenge of this scope,complexity and magnitude its critical to understand the interests and positions of the major stakeholders asidefrom the intrinsic issues. For Healthcare its also essential to understand the political issues and the inter-connections to the Economy. Accordingly you will find us starting with a careful consideration of the political and


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economic realities follow by three major essays analyzing the dynamics of healthcare provision and tying all thepieces together while also taking a look at interest group positioning. Finally youll also find a very large collectionof selected readings that are the best we could find to provide backup information and data on all the pointsdiscussed and analyzed.

Table of Contents

Essays

1. Sausage Eating Lizards: Sonia, Spooks, Death Panels and the Pope 3

2. A Teachable Moment? - Fear, Loathing, Renewal and Futures 8

3. A Taught/Taut/Taunt Moment: Healthcare Speech, Policy, Politics & Realities 10

4. Paths Toward Healthcare: Compromise, Consensus or Conflicts? 14

5. The State of the HC Debate: Rattling Toward Resolution 17

Readings

1. Level-setting: Quick Reads for De-mythologizing Realities 20

2. Political Positions and Cost vs. Impact vs. Benefit Realities 22

3. Healthcare Coalition Building: Sausage-making 26


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August 18, 2009

Sausage Eating Lizards: Sonia, Spooks, Death Panels and the Pope

http://llinlithgow.com/PtW/2009/08/sausage_eating_lizards_sonia_s.html

Welcome to "Reset World" where we're having to faceup to the last thirty nears of grasshopperian neglect ofvital issues and public policy. This is a post we'vebeen holding in the pending file for too long becauseit's just been one damn thing after another. The badnews is the delay and, perhaps, the amount ofreading materials in the excerpts section. The goodnews is that there's a bunch of stuff to point too. Theworse news is that we're going to be trying to weavetogether a bunch of different threads into a coherentfabric. The possible news is that if we do this beardance you may get something out of it. Justremember though the miracle of the Dancing Bear isthat it dances at all, not how well it dances.

Serendipitously this was the 40th Anniversary ofWoodstock, you know the celebration of peace andlove that set the tone for the next 40 years ! Yeah, right. Just not quite the way it was intended. That clip wasWoodstock then, for Woodstock now try this vidclip of the old surviving hippies(http://www.youtube.com/watch?v=eYKY2lpxMg8 ) who are now tour guides, and the museum, all selling thevision.

As David Clayton Thomas of Blood, Sweet and Tears reminds us in this BNN interview it wasn't quite like that. Forone thing Kent State had just happened and people were angry, for another none of the headliners got paid sothey aren't memorialized in the historical videos. For another there was sure a lot of violence in other places and a

lot of folks who didn't buy into the "it's all different now" message. In fact the Greatest Generation who hadsurvived the GD, fought WW2 and built modern America that Woodstock was so against were just in their forties.Woodstock is now twice as far behind us as their adventures were behind them.

BUT...and this is the point...the decisions and divisions wecreated then have been reverberating every since. Have we doneany better? That's not an easy answer btw - the Boomers foughtthe Cold War, 'Nam, dealt with the biggest social changes in ourhistory and changes in our society and economy that werephenomenal, to say the least. How we wrestle with theconsequences of those legacies going forward is going to defineAmerica for the next forty years. How will we deal with our mentalimps - rationally with a sense of decency, commonality and public

interest? Or pursuing private agendas that put partisan advantageahead of the public good?

One final clip, audio, this time from the historical archives of "This,I Believe": Our Noble, Essential Decency. Scifi Master Robert A.Heinlein. (http://thisibelieve.org/essay/16630/)


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Inessential Indecencies: Sotomayor, Spy Kicking, and Bashing Ben

Like we said it's been one damn thing after another this whole month (part of the reason for our delay) where thepublic discourse started out partisan and got shriller, louder and antagonistic. Start with Sonia Sotomayor's

confirmation hearings (which we listened to some and for which the PBS coverage is linked in below), thepossible threat to go back and charge members of the CIA with crimes for doing what they were asked to do toprotect the country, the partisan, bigoted and abysmally ignorant attacks on Ben Bernanke and the Fed bymembers of both parties and, the piece de resistance', the Death Panel Wars.

Sonia's Journey in the Inferno

These hearings and the public statements wereamazing, not least because instead of making adecision on qualifications and what's best for the

country the decisions appear to have been madeby what was best for the party. First off we have 17years of careful, reasoned, judicious, balanced andmainstream decision making by Judge Sotomayor.Plus a few speeches talking about a "wise Latinawomen" being better able to understand the factsin some cases.

All qualified observers and reasonable ones,including David Brooks of the NYT, concluded thatshe was eminently qualified, a good judge anddedicated to the law and moderation. In fact shehad been a prosecutor for years. Any time beforethe culture wars got out of hand she would havebeen a conservative candidate for the High Court.But perhaps the most important point is that theLaw is not some magisterial, magic set of machinery that guarantees absolute outcomes. It is a combination ofprecedent, cases, experience and judgment and a judge needs to understand and allow for their ownbackgrounds and biases. A point Sotomayor made. To argue otherwise, that she was to biased and empathetic isto argue that a panel of old white men have no biases. But to implicitly admit they do and don't control them.

On the other side, which we won't dive into deeply, we have the threat of legal actions against the staff of the CIA.Back in the mid'-70s the Church Commission passed legal reforms to control CIA abuses. Well intended butleading to perverse consequences, some of which include 911 and the intelligence failures in Iraq. Those so-called reforms put a premium on managing to the rules and not doing what was and is necessary to get goodintelligence. To some extent they emasculated the CIA. We got away with it then because technical intelligence(satellites, etc.) could fill in. But in this day and age we need feet on the ground and they have to be qualified feet.

A witch hunt against the agency doing what it was authorized to do in our name is going to re-emasculate ournational intelligence capabilities, put national security more at risk and when we can least afford it.


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Bashing Uncle Ben

Interestingly enough the case that was potentially themost damaging for the public safety, and still could be,

was the public bashing of Ben Bernanke, of theFederal Reserve. There was a recent survey askingwhat people thought of major public institutions andeven the IRS ranked well ahead of the Fed. But fordecades, mysterious, arcane, complex and opaque asit's been, the Fed has managed our moneysupply...which is the lifeblood of the economy.

Every time in history for almost ten millennia thatpolitical decisions have controlled the money supplythe result has been chaos and collapse. It's onlyrecently that we've learned that we need anindependent money manager. But the Fed really paid

its way over the last 18 months - in fact we wereliterally hours away last Fall from triggering Depression 2.0 and the Fed and the Tresuary saved us. Don't take myword for it - here's a recent interview (http://www.pbs.org/newshour/bb/business/july-dec09/fed_08-12.html )withDavid Wessel of the WSJ discussing the real world and not Congress's fantasies. His reward - to be called in frontof Congress, accused of every crime under the Sun and in the Spaceways by politicians on the Left and Right. Allof whom were wrong, all of whom were grandstanding, none of whom thanked him for his service or saving thecountry and, least of all, none of whom were prepared to defend him.

Healther Skelter: HC Reform vs. Death Panels

The one that really takes the case for out-of-controlpolemics is healthcare reform. My favorite quote that'snot hyperbolic is the little 'old lady who, literally, called to

yell at the President about socializing medicine andwanted to make sure here Medicare wasn't touched.Now if you don't find that funny, sad and scary probablynothing we're saying here is going to mean much foryou. Just in case you take the point, and for the record,there's no proposal for death panels. Healthcare issomething that's been on our agenda for series of majorposts for a long time now and hopefully we'll get to it. Inthe short-run here's what you need to know for now(taken from an e-mail response of mine to DavidAxelrod):

Actually it's time for a better communications strategy. A

couple of months ago I called the President'sGeorgetown speech the finest on economic policy I'dever heard and did so in public several times on myblog. That wasn't entirely an amateur opinion either (Re-building On A Rock: Policy, Economy & Values).Imention that to give some credibility to the following:your communications strategy on healthcare needswork, quite a bit of it.


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Here's the central problem - people don't know how the current system impacts them, what the changesare nor how they'll be impacted. You need to fix that. You also need to get yourselves back on a higherplane in the discourse....hard as it is if you can manage to continue turning the other check in the long-run it'll pay off.

Specifically:

1. Total per family healthcare costs are estimated at $15K/year/family and have grown from $8K in thelast few years; this has stopped wage growth and harmed the direct well being of all the insured. We thinkthat figure will double in the next 10-15 years. And coverage will get worse and worse..... BRING ITHOME to the average voter.

2. There are large-scale social consequences about which you've talked to much because it's top-downand inside Washington.

3. Everybody's unhappiness with the insurance industry is really a reflection of them trying to control costswhile everybody else tries to maximize benefits. Need to face up to that.

4. We think, on the whole, that about 1/3 of current healthcare expenditures are wasted because of

excess tests, treatments, etc. We also think admin costs absorb about a 1/3 of total expenditures inpractices. Finally the uninsured get treated they just aren't covered; it'll be cheaper to cover them thannot.

Those ARE your central arguments. KISS!

You can add:

a) the root cause is medical care provided on a piecework basis,

b) that moving toward paying for a job, i.e. I pay to have my house roofed not for each laborer's everyshingle,

c) that over time this moves us more toward preventative medicine,

d) that a public option in fact introduces local competition and

e) can be made into what the Brits call a quango, i.e. a semi-private enterprise, and finally

f) that a huge chunk of costs are incurred in heroic treatments at end of life. Which ought not to becovered by public monies. You can also mention that care is already rationed and that the governmentalready dictates healthcare rates thru the Medicare reimbursement rate settings.


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Charity in Truth: Civil Discourse and a Healthy Agora

Lost in all this sturm und drang was Pope Benedict's socialencyclical "Caritas en Veritate", or "Charity in Truth" inwhich he called for a humane capitalism with respect forhuman dignity and social justice. If you go back and look at

the previous four posts in this series on values andcitizenship and the preceding five posts on a health publicsquare (the Agora series) you'll find our position is nearlyidentical to the Pope's.(http://www.youtube.com/watch?v=Ji8zEe9MkNY )

Free markets are the most efficient and effective methodfor organizing a prosperous, productive and progressivesociety. But they do NOT work by themselves but require aset of rules to govern their operations and protect theirparticipants, a set of civic institutions to support and protectthem and a certain level of support and civil responsibilityby the citizenry.

We all do better when we each do better and we each do better when we all prosper, at least ideally .

Now of the cases we review which satisfies any of those tests? Certainly Judge Sotomayor, the spooks at theCIA, the Fed and even the Administration are doing the best they know how, doing it well and acting in what theythink is the public interest. And, on the whole, being balanced and recognizing it's an imperfect world, they mustbe judged to be doing well. From the headlines, talking heads, pandering politicians, and demagogic buffoons andoutraged gatecrashers you'd never know that of course.

Good intentions are NOT a substitute for knowing how to operate the saw when you working in a lumber mill andideology is NOT a substitute for understanding how the world works. A proposition we ran the largest field test inhistory on in the 20thC at the cost of hundreds of millions of lives and trillions in resources and the near death ofWestern Civilization.

But, in the spirit of charity and compassion, the last two years have under-mined, even destroyed, the certaintiesof the last forty. The ones where progress and prosperity were our natural right. So we come full circle back to theNew Woodstock. We will choose to do what's right and workable or will make our choices blindly out of fear, lackof understanding and demagogic leadership. On the record to date one would have to say we've nothing on theIranian leadership putting their own personal gain ahead of the welfare of society.

Of course the lumber mill is actually the political sausage factory and if you don't know that youprobably shouldn't be trying to make sausage. But a few less mouse droppings and feline innards wouldsure help us all out as we face these major decisions.


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September 8, 2009

A Teachable Moment? - Fear, Loathing, Renewal and Futures

http://llinlithgow.com/PtW/2009/09/a_teachable_momenet_fear_loath.html

Is this a teachable moment, for us and thecountry? Out of what seemed to benowhere a brushfire of protest over thePresident's opening day speech toAmerican school children was being billedas communist propaganda. It's worth whileto read the text and more so to listen to thespeech. It sounds to us more as if it couldhave come from 'ol Abe than from UncleJoe.

Tomorrow night the President will addressCongress on the subject of HealthcareReform, which is a lot more complicated,difficult and shot full of special intereststhan "work hard, do your homework, findsomething you're passionate about andlearn from your mistakes because you'llsurely make a few".

Now there have been angry and mis-informed voices raised on both sides of every issue, always and forever. And bitter political partisanship thruoutour history (Jefferson paid a propagandist to attack Adams) but we've sure heard high decibel outrage, appeals tothe hindbrain and little constructive criticism in the last eight months. In fact what we think we've seen is acontinuous attempt to label every single initiative that comes out of the Administration with the worst possible

description and oppose every one of them on ideological grounds. We're all for passion and opposition butshouldn't it be grounded in some basis in fact?

Reality Checks

The labeling started with calling the stimulus, rescueand budget plans as "Socialism" and went on fromthere. So before we go on with the values andphilosophy let's segue to a bit of a reality check. Therescue of Detroit was eventually acknowledged byhard-headed industry and business observers asdoing for Detroit what it should have been able to do

for itself anytime in the last three decades.

The heavily criticized Bank Stress Tests managed torestore confidence in the Financial system at amoment when it appeared like the markets weregoing to collapse. The continuing support of Financialbailouts, hated, complex and mis-understood as theyare, was a major contributor. (Which is not to saywe're thrilled about how Wall St. manipulated a publicemergency they created to their own advantage; if


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ever there was prima facie evidence of opportunisticspecial interests calling for regulatory reform Wall St. isthe poster child.).

And the much maligned stimulus bill literally saved theeconomy, along with Fed monetary intervention, from aGreat Depression 2.0. Responsible estimates are that atleast 4% was added to Q2 GDP and without instead of a -1% we'd have had a -5% or worse downturn. Even the jobmarkets are repairing themselves. We've been discussingeconomic policy for a long time and the readings have asmall collection that might be worth your while. The chartshows OMB's long-term outlook thru 2019 which tells usthe worst is likely over but we've got a ways to go andface a severely hobbled future.

One of the high-decibel attacks has been on the long-termdeficit outlook. Well OMB also took a look at that as well.Not only do deficits as a % of GDP show reasonablelevels in the long-term, the drop precipitously as a result

of a growing economy that can pay off its debts faster; infact between Jan and now the estimates have improved.Not to mention the fact that deficit spending saved us, isgoing to be necessary for some time to avoid anotherdownturn (the dreaded W) but it matters how you spendyour money.

As we should all know - if you borrow for a Vegas splurgeit's one thing but if you borrow to put equipment into yourbusiness, buy a house or send your kid to college it'sanother. Right now those deficits are planned to both save

our bacon and lay the groundwork for re-basing the economy. Not an easy but a necessary task.

So on the track record to date, where we have the evidence, the critics have been flat wrong. Where we have toproject into the future with our cloudy crystal balls that future is nowhere near as alarming as the shrillers wouldhave you believe. But to get back to the prosperous economy we think we had we have to reverse nearly threedecades of neglect and spendthrift behavior. In the Navy they call it an all hands on deck exercise.

It's Teachable Only If We Learn

Part of the real problem here is that people are scared and uncertainwith no clear idea of where things are going nor how we're going toget there. And dealing with vast changes in a world that's beenradically altered in a few months, or a couple of years, from thecertainties that have been in place for almost forty years. Fear is anatural result. The challenge is to turn your fear into your advantage,

not to make the situation worse by stoking the hindbrain with mis-presentations.

Now that's not to say any of these challenges are simple, easy, easyto explain and the world won't keep changing on us. Wed. thePresident is going to make another attempt to move to the nextstage with Healthcare Reform, something apparently everybodyagrees needs to be fixed before it brings down the economy. In factin the long-run three strategic things need to be re-factored:


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Healthcare, Education and Energy because the paths they're on are unsustainable and the country we'd like tolive in requires changes.

It's a "teachable moment" only if we not only listen but we truly hear and agree to take collective action to makethe best improvements we can agree on. Asking everybody to contribute to that effort and having them respondwould make it teachable moment.

The Administration will survive Wed. night of course and it's not a "Hail Mary" do or die challenge. In fact we willget some form of Healthcare Reform - if not as much as we need more than the interest groups and politicalopposition would like. The thing that people are really struggling with is that the world they knew is gone foreverand a new world is going to require more discipline, frugality, hard work and self-responsibility than we've had todisplay in a longtime.

The problem with being romantic about the Greatest Generation is that we forget the prices they paid fordecades. Now, in a small way, we have our own opportunity to meet some serious challenges. It'll beinteresting to see how we do, one way or another, won't it?

September 10, 2009

A Taught/Taut/Taunt Moment: Healthcare Speech, Policy, Politics & Realitieshttp://llinlithgow.com/PtW/2009/09/a_taughttauttaunt_moment_healt.html

Well last night the President gave his speech onHC Reform and, as he said, we've never beencloser to serious reform in 63 years and now weneed to bring it home. Was it a teachablemoment and were we taught? It was certainly ataut moment with everything allegedly riding onit and, as it turned out, a taunt moment given theemotions that ran out of control on the part of

certain partisans. A quick take on somereactions is the online WSJ poll where thereactions are abysmal...usually Journal readersare a bit more balanced but this is one indicatorwith lots more to follow. There were severalaudiences and agendas that had to beeffectively addressed.

First was Congress - where supporters andpossible supporters needed to be energized, organized and disciplined as well as opposers who needed to betold it was time to lead, follow or get out of the way. Second are the various interest groups and stakeholders likethe insurance companies, service providers, drug companies, etc. In fact the White House started working to gettheir concerns on the table back in February. Third, and most importantly, were the people who are scared,apprehensive and don't understand.

As a speech it was one of the great speeches IOHO - calm, judicious, deeply felt, inspirational, very heavy onsubstance and workable & innovative substance at that and it also threw sufficient sharp elbows to warnopponents that the time for pattycake was over. But, again IOHO, it still failed of two major reachouts: it onlybriefly spoke to the larger set of fears people have that have been stoked by partisan opposition and it didn't reallytranslate the big picture issues to the personal level - the "what does this mean for you" level. That may notmatter.


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Unfixed Healthcare is

Dangerous

Let's start with understanding wherewe're at and what's going on, whatthe trends are and where we're likelyto end up without changes in currentcourse and speed. Costs have grownover 300% in the last three decades,3X the growth in the economy. Whichmeans those resources have loweredpay, hampered the economy,impacted every citizen and everybusiness and not given us much forour money. The US spends multiplesof what other major countries do onHC but has worse outcomes.

If we keep on this course HCspending is going to be 40% of theGDP - which is clearly unsustainable.That means $8000/yr/person, or$14K/yr/family and soon to be $25K.Wages growth has been flat ordeclining for two decades because ofit. Uwe Reinhardt offers up aninteresting shopping list of thingsrequired to fix the system by expanding coverage, improving cost control thru better visibility, changing theincentives so we pay for treatment (results) and not services (piecemeal activities) and bending the infamous costcurve. Without these changes the system is unaffordable, unsustainable and, in crashing, will take us all with it

though it's already badly hurting the majority of the population. Boiled Frog Syndrome again.

The Dysfunctional Feedback Loop of

Cost Growth

To understand why that's true, what all theprice/piece parts are, how they are linkedand why it's the structural feedbacks thatare creating this mess we've drawn up thislittle interpretative graphic. It doesn't dojustice to all the links but a fair job atcapturing the key ones.

As costs escalate out of control that makesinsurance more and more unaffordable formore folks and exposes more people tocatastrophic risk (the only system that doesso). Aside from the existing uninsured, thatmeans that many are under-insured, at riskof loosing their coverage or being thrownout of the system. It also raises business


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costs and/or forces many small businesses to not cover employees.

Rising costs also lead to insurance companies cherry-picking the healthy while rescinding coverage for the at-risk,worsening the overall problems. Meanwhile because the un/under-insured are treated that drives up costs as well.Rumors to the contrary HC Insurance is not competitive but is controlled in each state by a few companies whoare the bureaucrats between you and treatment which they ration in the pursuit of profits. At the same time tortsuits, liabilities, etc. force providers to add on tests and treatments beyond the necessary and carry excessinsurance. Finally, the central driving engine, is that providers are compensated for services which causes they tocharge for every little kleenex, see to many patients, "sell" too many kleenexes and keeps on driving up costs.

Fix the System: Reverse the Feedback

Amidst many other things lastnight the President put a lot ofsubstance on the table that'sworkable, innovative in majorparts, builds out very nicely as anincremental enhancement to the

existing system but also lays thegroundwork for creating a"forcing function", that is a drivingchange engine, that over timecould/should reverse thefeedback spiral and cause it tostart working in the otherdirection. It's also pragmatic, non-radical and based on competitivemarket solutions with built-inincentives to work together.

He started by pointing out that

single payor was already off thetable, which took the Left'sshibboleth from it, as wasrescinding employer-basedinsurance, which took away theRight's. So, right off the bat we'realready centrist and pragmatic. Then he outlined the three major goals of providing security and stability forexisting insurees, providing insurance for the uninsured and controlling costs. He then offered the major planks ofhis proposal.

First, 1) no existing coverage will be forced to change but (and this is a critically important, substantive butincremental fix that addresses the security and stability problems)

2) said that insurance couldn't be rescinded for existing conditions, that arbitrary caps for out-of-pocket expenses

were forbidden and routine preventative exams would be included. Right there that fixes the major problems forcurrent policy holders. Then he said we'll provide insurance for the uninsured but specifically focused on thosewho've lost their jobs, are changing jobs, in small businesses or are independents. That's a real game-changerand what makes it work is

3) a public health insurance exchange where all those folks can pool themselves into a new group, or risk pool,and all the insurers can participate. What makes insurance work is when the risks are spread across a pool ofpeople and this creates pools of millions who were previously inaccessible. That creates huge incentives andpotential profits for the insurors. He further added that 3a) tax credits would be provided for small businesses and


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work with the results that a lot of good ideas and strong objections were uncovered. There are not secrets here,now.

Finally, during August, Phase III let as yet ill-defined proposals be flight-tested and uncovered all the possibleattacks, barring some new craziness. The opposition should be supporting these proposals on the merits becauseit helps their constituents, addresses urgent national problems AND aligns with their purported philosophies. Bychoosing to only say NO and do it with the not-so-clandestine support of the nutjobs (when a major Senatorspeaks up in favor of the death panel attack or a Congressman accuses a President of lying it's impossible topretend otherwise).

Now it's time to get 'er done and that's going to take a lot of work, a lot of politiking and a lot of selling,especially the later. But we're never going to see another chance this good and forty years from now itcould be a disaster. This is about as good as it gets....let's go for it.

September 18, 2009

Paths Toward Healthcare: Compromise, Consensus or Conflicts?

http://llinlithgow.com/PtW/2009/09/paths_toward_healthcare_compro.html

Hopefully the last post on Healthcare Reform ( Taught/Taut/Taunt Moment: Healthcare Speech, Policy, Politics &Realities) laid out the current dysfunctional dynamics (the vicious cycle) and the potential evolutionaryimprovements embedded in the President's speech (the virtuous cycle). Moving to a better state of things is aboutextending coverage in the short-run and getting costs under control in the long-run, and the key to the latter iscreating an incentive system that causes all the interested parties to make more sensible choices. In that post onething we talked about was the macro implications for the health of the economy, now we're going to shift theground and talk some about the micro-consequences and the sausage-grinding that's been going on since theInaugural. But our driving mantra is to try and see things as they are, not as the fantasists, ideologists andpartisans pretend they are:

"You can't make radical changes in the pattern of your life until you see yourself exactly

as you are now."- Bhante Gunaratana, Mindfulness in Plain English

And on that note, seeing things as they are and finding a way to work with them clear-eyed, clear-headed anddispassionately we'd refer you to an addition to the readings explaining some of the key workings of the BaucusPlan:The Baucus Plan: A Winners Curse for Insurance Companies In the context of the prior post'smachinery this thing is potentially brilliant. Incremental change that will drive deep structural evolution!


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Consequences for the Individual: Unaffordable Insurance

We tried to make clear that the cost trendsare going to put the Meditwins out of

business with a few years and essentiallybankrupt the economy. What many peoplestill don't really grasp is the personalimplications. It's not just the country whocan't afford insurance but even thesupposedly insured. In the last decadefamily coverage has skyrocketed from$6K/yr to $13K/yr, individual contributionshave gone up, as have deductibles and co-pays.

At the same time wages and other benefitshave been stagnant or worse. As a

consequence more firms, large and small,have been dropping, not just modifying,coverage. In other words even folks whothink they're insured, at least before aninsurance bureaucrat rescinds theircoverage, aren't in fact. Or won't beshortly. Without controls in another 10years costs will double or triple!!! If youthink it's unaffordable now or it's going tolead to more people being dropped...wellno kidding. And the crisis is here, rightnow! On top of which fewer and fewer retirees are going to be covered as well; in fact we'd guess none.

Grinding Out the Sausage:Lining up the Interest Groups

People and interest groups don'talways make all decisions purelyfor their own partisan and narrowadvantage but that's where thebetting opens. Any time you wantto get major policy changes thru arequisite is that the major powerplayers have to be brought onboard, often on the basis oftradeoffs, a quid pro quo. In this

case the major interest groupswho killed reform in the early '90shave been remarkablycooperative, supportive andrelatively quiet after the speech.The insurance companies, forexample, have bought in becausethe new coverage mandates willcreate a major new market for


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them. When you try and figure out what's going on you need to understand the 4P's of political decision making.Who are the Players? What are their Positions and interests? What is the Power of each interest group? What arethe specific Policies being proposed and how do they impact the Players?

This graphic starts with the ideal to-be set of policies we think, based on our work synthesizing best ideas andpractices together, would be an ideal outcome. The proposals in the speech are close but miss some keyelements. A critical one would be bringing employer-based insurance out from behind the tax shelter byeliminating the tax deduction. That would be readily offset by providing roughly equivalent deductions to individualtax-payers. It would also make insurance portable and, likely, more affordable in the long-run. Particularly incombination with an exchange that was open to any qualified insuror. If you'll skim the readings you'll find anenormous effort was made to line up all these Players; a real tribute to the consensus building and political skillsof the administration. It turns out that the key players who weren't on our original chart are Political Opponents.Who by resolutely and nearly absolutely refusing to collaborate have hamstrung the proceedings and made thevoters, here known as Beneficiaries (Yellow), dazed, confused and scared.

Healthcare is Non-Competitive

The multiple great ironies here are that anexchange would introduce competition,

something the Republicans claim to support. Atruly Conservative position, and entirely logicallyconsistent with free-market principles, would be toeliminate the employer tax exemptions.

Just in case you wondering Healthcare is NOT acompetitive market. There is no state that's notdominated by a very few insurance providers.Some, e.g. Alabama, have a single insurorcontrolling 90% of the business. We repeat -Healthcare Insurance is NOT a competitivemarket.

To bring that home it means that the politicalpartisans who are so vehemently and virulentlyopposing reform are not only violating their ownsupposed principles and supporting non-free markets. They are also directly harming their own constituencies.We wonder if they have a clue? Somehow, we suspect not. In fact we think that instead of analysis it's acombination of no analysis or knowledge, substituting ideological shibboleths and sheer anger at having beentromped so badly in the last several elections. When you put that together with a voting public which is confused,dazed by all the monumental changes, feeling ignored and disrespected and scared you have a politicallyexploitable opportunity and people willing and able to do the exploiting.

Political Partisanship vs. Interest-group Sausage-Making

We went on long enough in other posts about lizard-brain appeals to the hindbrain (Suck, Sausage) but, in the

readings and for the record, you'll find several interesting tidbits worth perusing. Some are fascinating vidclips ofthe 912 protests, a cynically exploitative maneuver in its own right IOHO! One of the more interesting tidbits is anexcerpt and URL locator from Newt Gingrich's 1996 GOPAC memo on how to use language designed to appealto the hindbrain. Sadly the politics of politicking to the hindbrain are metastasizing.

The really sad part about all this is that it needs to be done, done as proposed or as we'd recommend it'd help allthe key players, and the necessary interest groups were lined up very carefully and skillfully. What seems to bestanding in the way is political maneuvering for short-term advantage at the expense of long-term benefit. And tothe harm of the people and the country and in violation of principles!


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Will contradictions in the interest of self-service never cease? Sadder yet, a recent poll showsoverwhelming support for reform and a pronounced lack of confidence in success, for just these reasons.

November 30, 2009

The State of the HC Debate: Rattling Toward Resolutionhttp://llinlithgow.com/PtW/2009/11/the_state_of_the_hc_debate_rat.html

Well, somehow or another we continueto make sausage in the Healthcarepolitical factory. And, despite thecommentaries it's substantial progressthat, over time, will do the country and agreat deal of good. At the same time itperfectly illustrates the problems withtackling substantive change we've beentalking about.

The problem with getting interest groupsto surrender some of their immediateadvantages for the broader benefit tosociety and in their own longer-termself-interest since they need a viableindustry that's funded. The problemswith getting partisan politics to take aback seat to the public interest, thesheer size, scope and complexities ofthis topic and the combination ofconfusion, hostility and fear among thevoters. Not to mention the punditry's

thinking this was going to be a slamdunk and looking for the latest headline.

Despite all that we've had the Housepass out a reasonable bill while theSenate not only is out of committee but has gotten its bill to the floor. This farther, with more substantive progress,than we've gotten since Medicare was passed in 1965.

Let's refresh our memories about where we want to got with the accompanying graphic. The chart portions areone set of data telling us why doing something constructive is a vital national interest - briefly put, otherwise we'lldrive everyone bankrupt. The lower-right text chart is borrowed from Uwe Reinhardt in the NYT and sosummarizes the strategic requirements in terms of provision, operations and incentive management, with thebottom capturing the essence of the charts. Setting aside the partisan bickering and a lot of the interest groupposturing the better commenters still applauded the existing bills for expanding coverage and avoiding some ofthe worst problems while not directly attacking the longer term structure of cost growth. Actually we think they'rewrong about that last for reasons we've discussed, but let's come back to that.


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Another Little Cost Tidbit

One "minor" problem - aside fromemotional appeals and fear-mongerings of

course - is that people are still struggling tobe KISSed with a kept it simpleexplanation of why they care and howthey'll be impacted. We've been taking ourbest shots at trying to help out with all that,to some limited avail we hope. Let's addone more immediate argument. Aside fromimpacting business competitiveness,raising costs thru the roof and now headedfor the moon, exposing people to financialcatastrophe, spending more and gettingrelatively less than any other developedcountry health cost directly impact

everyone on a day-to-day basis.

This chart (courtesy of out buddy Jakeover at EconPic) is so clean, clear andstraight-forward it speaks for itself. But let's put it in the bigger context. Since 1980 more and more of the gainsfrom growth have gone to fewer and fewer of our society. There are a lot of reasons for that, a primary one beingthe lack of new jobs beyond just keeping up with labor force growth. But another being is that total wages andbenefits have been rising, as employers see them. By huge amounts too. It's just that all the increases have beengoing to benefits and not wages. So in addition to all the other reasons for needing desperately to get HC$ undercontrol there's the minor matter of wanting to return to some sort of prosperity for most of us!

Refresh on the Dynamics

A major problem with the punditscritiques is that they don't see howthe rate of increases in costs comesunder control because they don'tsee direct rules and regulations inthe existing bills that are specificallytargeted at that problem. Actuallythey're there in ways that create along-term virtuous cycle of structuralchanges. And they have two keycomponents.

One is the Health Exchanges where

folks without insurance can go. Overtime do you really think, assumingthey work reasonably well, thateverybody who thinks they're over-paying won't want to go there? Orthat businesses will eventually? Theother deep change is the notion ofbundled payments wherereimbursement rates are set, or atleast suggested, by national


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standards groups based on the best available practice data, otherwise known as evidence-based medicine. Ineffect that moves us in two directions at once. It grounds future compensation in evidence-based strategies,which is the most promising approach to re-engineering healthcare. It also introduces what amount to fee fortreatment as opposed to fee for service and upends the biggest flaw in the current system - the built in incentivesto pump more patients thru more treatments. Start a slow evolution away from that and toward total carecompensation and you'll eventually break the cost curve, not just bend it.

Cases in Point: Cancer Screening

Just before the holidays major changes in certaincancer screening techniques were recommended foradoption, based on the accumulation of a lot of newinformation over several years. There were a lot ofobjections for this and that but by and large when youheard arguments from both sides they were prettymuch in agreement, just discussing (Note - notarguing) different subtleties and nuances.

But judge for yourselves - please. PBS had a very

good set of interviews just before the holidayweekend that had some very qualified and sensiblesounding folks on.http://www.pbs.org/newshour/bb/health/july-dec09/cancerdiscuss_11-20.html

Aside from the intrinsic merits though what we really find interesting is that there really isn't a better example ofevidence-based healthcare in action. Nor of all the issues people are going to have to face up to. Cutting quicklyto the chase - this sort of thing will be our future, lots of folks will object but in the long-run it'll be good for themand good for all of us. Certainly far better than the alternatives of going broke, individually or collectively.

After the break you'll find a whole bunch of readings that touch on most of these issues, from costs to policies topolitics to partisans. We strongly suggest you at least skim them. The ebbs and flows of interest group politics

(especially the Insurance industry's last minute attempts to derail things) as well as the very long history ofbehind-the-scenes coalition building by the Administration that got us here are textbook. Welcome to the SausageFactory!


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READINGS

Level-setting: Quick Reads for De-mythologizing Realities

Costs of Employment Up... Just Not in Wage FormThis American Life's most recent podcast, More is Less,discusses one of the many implications of higher healthcare costs; the fact that less of the increase in costsassociated with staffing is actually passed through to the worker in the form of wages (think broken system,greed, and the demand for procedures that may not be necessary from the patients themselves).As can be seenbelow, while income has been stagnant in real terms, costs to employers has risen steadily due to the increase inthe cost of benefits (i.e. healthcare). Wages vs Benefits Graphic

The Perils of Inaction and the Promise of Effective Action With health care expenses at an all-time high, andsome of the proposed congressional health care reform bills threatening to add hundreds of billions togovernment spending, many are debating the cost of health care reform. In this paper, Business Roundtableturned that idea around and asked: What is the cost of doing nothing? To answer this question, BusinessRoundtable commissioned a report from Hewitt Associates to explore the cost of inaction and to identify ways tobuild an improved, more efficient structure. Without significant marketplace reforms, if current trends continue,annual health care costs for employers will rise 166 percent over the next decade, from $10,743 per employee

today to $28,530 by 2019[1]. These runaway costs, combined with a $56 billion cost shift to payors fromuncompensated care, would cripple the employer-based system that currently provides coverage for the majorityof Americans and their families. If nothing changes, by 2019, total health care spending will reach $4.4 trillion,consuming more than 20 percent of the U.S. Gross Domestic Product. Business Roundtable Hewitt CompleteReport

Poll: Most Americans support public option A new Washington Post-ABC News poll shows that support for agovernment-run health-care plan to compete with private insurers has rebounded from its summertime lows andwins clear majority support from the public. Americans remain sharply divided about the overall packages movingcloser to votes in Congress and President Obama's leadership on the issue, reflecting the partisan battle that hasraged for months over the administration's top legislative priority. But sizable majorities back two key andcontroversial provisions: both the so-called public option and a new mandate that would require all Americans tocarry health insurance.Overall, 45 percent of Americans favor the broad outlines of the proposals now moving in

Congress, while 48 percent are opposed, about the same division that existed in August, at the height of angrytown hall meetings over health-care reform. Seven in 10 Democrats back the plan, while almost nine in 10Republicans oppose it. Independents divide 52 percent against, 42 percent in favor of the legislation. There arealso deep splits in the new poll over whether the proposed changes would go too far or not far enough inexpanding coverage and controlling costs. Twice as many see the plan as leaning toward too much governmentinvolvement, but since last month there has been a nine-point increase in the number who say governmentshould be more involved.On the issue that has been perhaps the most pronounced flash point in the nationaldebate, 57 percent of all Americans now favor a public insurance option, while 40 percent oppose it. Support hasrisen since mid-August, when a bare majority, 52 percent, said they favored it. (In a June Post-ABC poll, supportwas 62 percent.)If a public plan were run by the states and available only to those who lack affordable privateoptions, support for it jumps to 76 percent. Under those circumstances, even a majority of Republicans, 56percent, would be in favor of it, about double their level of support without such a limitation.

Post-ABC News Poll Data

States health system popular Public support for Massachusetts closely watched health insurance overhaul hasslipped over the past year, a new poll indicates, but residents still support the path-breaking 2006 law by a 2-to-1ratio.Amid a severe recession that has led to cuts in state programs and unrelenting job losses, 59 percent ofthose surveyed said they favored the states multimillion-dollar insurance initiative, down from 69 percent a yearago. The poll, by the Harvard School of Public Health and The Boston Globe, found that opposition to the lawstands at 28 percent, up slightly from 22 percent in a June 2008 survey. Percolating throughout the poll findings isa gnawing concern over rising health care costs, suggesting that support could erode further if the state fails to


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slow the growth of medical spending. With key features of the state law at the heart of the blistering nationalhealth care debate in Congress, architects and observers of the Massachusetts plan say the poll findings indicatethat a national overhaul is not only possible, but politically viable. Three years in operation, and with 97 percentof people covered, you have a majority of support, and that is a lesson for Washington, said Robert J. Blendon, ahealth policy professor at the Harvard School of Public Health and the polls co-director. The poll found that 79percent of those surveyed wanted the law to continue, though a majority said there should be some changes, withcost reductions cited as the single most important change that needs to be made. Only 11 percent of stateresidents favored repealing the law, similar to last years finding.Drew Altman, president of the Kaiser FamilyFoundation, a nonprofit health care think tank, said Washington is paying more attention to cost control up front,but ultimately Massachusetts may get there faster. He said that although the various proposals in Washingtoncontain measures to slow costs, much of the national savings wont be realized for years to come. The fact thatMassachusetts led with coverage and then turned aggressively to cost control will do more for costs in the nextfive years than national legislation will do in ten, Altman said, because in Massachusetts, you are staring a realaffordability issue in the face.

FACT CHECK: Health insurer profits not so fat Quick quiz: What do these enterprises have in common? Farmand construction machinery, Tupperware, the railroads, Hershey sweets, Yum food brands and Yahoo? Answer:They're all more profitable than the health insurance industry. In the health care debate, Democrats and theirallies have gone after insurance companies as rapacious profiteers making "immoral" and "obscene" returns while"the bodies pile up."Ledgers tell a different reality. Health insurance profit margins typically run about 6 percent,

give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries,even some beleaguered ones.Profits barely exceeded 2 percent of revenues in the latest annual measure. Thispartly explains why the credit ratings of some of the largest insurers were downgraded to negative from stableheading into this year, as investors were warned of a stagnant if not shrinking market for private plans.Insurersare an expedient target for leaders who want a government-run plan in the marketplace. Such a public optionwould force private insurers to trim profits and restrain premiums to compete, the argument goes. This would"keep insurance companies honest," says President Barack Obama.The debate is loaded with intimations thatinsurers are less than straight, when they are not flatly accused of malfeasance.They may not have helped theircase by commissioning a report that looked primarily at the elements of health care legislation that might driveconsumer costs up while ignoring elements aimed at bringing costs down. Few in the debate seem interested in atrue balance sheet.But in pillorying insurers over profits, the critics are on shaky ground. A look at some claims,and the numbers:

What Role Should Private Health Insurance Play? Private Health Plans: Where Is the Value? What Is the Point?


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Political Positions and Cost vs. Impact vs. Benefit Realities

Senate Pressing Insurers on the Amount of Premiums They Spend on Care The health insurance industrylikes to cite figures showing that 87 cents of every dollar in premiums is spent on medical claims. But anew Senate analysis suggests that for-profit insurance companies are spending much less than that,

especially for policies sold to individuals and small businesses. Instead, as little as 66 cents of eachdollar paid in premiums goes toward doctor and hospital bills, while the rest covers administrativeexpenses, marketing and company profits, according to the analysis. The percentage of premiums spenton medical claims is known in industry jargon as the medical loss ratio. According to the Senateanalysis, the for-profit insurers average ratio in 2008 was 84 percent in policies offered to largeemployers, and 80 percent for small employers those businesses with 50 or fewer workers.Individuals and small businesses have long complained they get less value for their money. Butinsurance companies generally do not disclose how much they spend in different segments of themarket. The Senate analysis of the figures does not include information from California, because thatstates filings are not available through the National Association of Insurance Commissioners.

The Defining Moment O.K., folks, this is it. Its the defining moment for health care reform.Past efforts to giveAmericans what citizens of every other advanced nation already have guaranteed access to essential care have ended not with a bang, but with a whimper, usually dying in committee without ever making it to a vote.Butthis time, broadly similar health-care bills have made it through multiple committees in both houses of Congress.And on Thursday, Nancy Pelosi, the speaker of the House, unveiled the legislation that she will send to the Housefloor, where it will almost surely pass. Its not a perfect bill, by a long shot, but its a much stronger bill than almostanyone expected to emerge even a few weeks ago. And it would lead to near-universal coverage.As a result,everyone in the political class by which I mean politicians, people in the news media, and so on, basicallywhoever is in a position to influence the final stage of this legislative marathon now has to make a choice. Theseemingly impossible dream of fundamental health reform is just a few steps away from becoming reality, andeach player has to decide whether he or she is going to help it across the finish line or stand in its way.

Healthcare Coalition Building: Cost Control vs Interest Groups

The 5 Big Health Care Dilemmas And yet there are signals coming from Capitol Hill back rooms andcorporate boardrooms that suggest things could be different this time. In recent weeks, health-care-industry leaders have pledged to cut their own costs by $2 trillion over the next 10 years (though theyhave yet to fill in the specifics). The insurance industry now says it is willing to make concessions itnever would have considered before - like agreeing to set prices on policies without regard to anindividual's health history - in exchange for the access to the vast new market that would come withuniversal coverage. "Nobody here in our industry is defending or wants the status quo," says KarenIgnagni, who heads the leading insurance lobby group. Perhaps most important, there is more agreementthan ever before that for any health-care system to work, everyone - or nearly everyone - has to becovered.It is now possible to glimpse the outlines of a Grand Deal among insurers, providers, business,labor and patients that would put most of its focus on lowering costs and establish a foundation for

expanding coverage in years to come. But even amid signs of a new consensus, there are at least fivequestions that must be settled before there can be meaningful reform: The problem with Americanhealth care, those who have studied the system will tell you, is not that we get too little care but that weuse too much. By some estimates, as much as 30 of every health-care dollar is spent on medicaltreatment that is unnecessary, ineffective, duplicative or even harmful. Changing all that is going torequire revamping health care from top to bottom, starting with the way health-care providers arereimbursed. While the current system pays them for the amount of care they provide, real reform wouldput more emphasis on the quality of that care and the outcomes it achieves. If there is an ideal out there,


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Baucus says, it can be seen in the kind of medicine already being practiced by Kaiser Permanente, theMayo Clinic, Intermountain Healthcare and Geisinger Health System, which manage to hold down costsand get better results. Their operations have fostered closer teamwork among care providers. Alsoimportant will be electronic record-keeping that saves time and avoids errors, and comparative-effectiveness research that gives doctors and patients a better sense of which treatments work best. And

a reformed health-care system would put more emphasis on preventive care and managing such chronicconditions as asthma, heart disease and diabetes that now account for 75 out of every medical dollarspent. All these things would force a cultural and economic revolution on the health industry - and thepatients who depend on it. Can this country really afford to reform health care? What everyone seems tohave concluded in the past five years is that we can't afford not to. When Washington punts on healthcare, it only becomes more difficult to fix the system the next time it tries. "The reason why we're goingto pass it," Baucus says, "is we're not going to have this opportunity again."

Getting Real About Healthcare The central health care problem is not improving coverage. It's controlling costs. In1960, health care accounted for $1 of every $20 spent in the U.S. economy; now that's $1 of every $6, and theCongressional Budget Office projects that it could be $1 of every $4 by 2025. Ponder that: a quarter of the U.S.economy devoted to health care. Would we be better off? Probably not. Countless studies have shown that many

tests, surgeries and medical devices are either ineffective or unneeded.Greater health-care spending forfeits anysuperior moral claim on our wealth by slowly crowding out other national needs. For government, higher healthcosts threaten other programs -- schools, roads, defense, scientific research -- and put upward pressure on taxes.For workers, increasingly expensive insurance depresses take-home pay, as employers funnel morecompensation dollars into coverage. There's also a massive and undesirable income transfer from the young tothe old, accomplished through taxes and the cross-subsidies of private insurance, because the old are the biggestusers of medical care. It is widely assumed that health care, like most aspects of American life, shamefullyshortchanges the poor. This is less true than it seems. Economist Gary Burtless of the Brookings Institutionrecently discovered this astonishing data: on average, annual health spending per person -- from all private andgovernment sources -- is equal for the poorest and the richest Americans. In 2003, it was $4,477 for the poorestfifth and $4,451 for the richest. Probably in no other area, notes Burtless, is spending so equal -- not in housing,clothes, transportation or anything. Why? One reason: government already insures more than a quarter of thepopulation, including many poor. Medicare covers the elderly;

The Health-Care Crisis Hits Home When you've been strong and fit your whole life, it can be easy todiscount your body's first whispers of sickness as merely the side effects of daily living. Looking backover the past three years, my older brother Patrick now understands the meaning of his increasinglyfrequent bouts of fatigue, his fluctuating appetite and the fact that his blood pressure had crept up to150/90. Finally, last July my brother's doctor insisted that he see a specialist, who quickly ordered abiopsy. That's when Pat, who is now 54, learned that his kidneys were failing. The diagnosis was onlythe first shock. Kidney failure would seem to be one of those disastrous "unexpected illnesses" that Patthought he was insuring himself against. But apparently he was wrong. When my mother, panicked,called to tell me that the insurance company was refusing to pay Pat's claims, I told her not to worry;bureaucratic mix-up, I assumed. I said I'd take care of it, bringing to bear my 15 years of experience

covering health policy, sitting through endless congressional hearings on the subject and evenmoderating a presidential candidates' forum on the issue. Confident of my abilities to sort this out or atleast find the right person to fix the problem, I made some calls to the company. I got nowhere. That'swhen I realized that the national crisis I'd written so much about had just hit home. The previous fourweeks had left my brother with more than $14,000 in bills from hospitals, doctors and labs. And thatwas just to figure out what was wrong with him. Actually treating his disease was going to beunimaginably more expensive. Patrick needed help quickly, and we didn't have a clue where or how tostart looking for it. When we talk about health-care reform, we usually start with the problem of the


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roughly 45 million (and rising) uninsured Americans who have no health coverage at all. But Patrepresents the shadow problem facing an additional 25 million people who spend more than 10% of theirincome on out-of-pocket medical costs. They are the underinsured, who may be all the more vulnerablebecause, until a health catastrophe hits, they're often blind to the danger they're in. In a 2005 HarvardUniversity study of more than 1,700 bankruptcies across the country, researchers found that medical

problems were behind half of them - and three-quarters of those bankrupt people actually had healthinsurance.

Medical bills underlie 60 percent of U.S. bankruptcies: study

Microcosm of Health-Care Fears The people who live around the pretty courtyard and well-kept lawns of LindenHall Lane in Gaithersburg are like much of America. They have glaucoma and asthma. They've had footsurgeries, aneurysms and heart attacks. They've become disabled or never been sick a day in their lives. Theirchildren have potentially life-threatening breathing problems and run-of-the-mill ear infections, colds and brokenarms. Their health issues have been covered by gold-plated insurance plans, capricious for-profit firms, HMOs,Medicare and nothing. When it comes to their health care, no one is completely happy. Everyone has a complaint.And nobody understands the way the current system works, only that it doesn't work very well. These are thepeople President Obama counted on to give his signature health-care reform effort the grass-roots oomph it

needs to get through Congress. But no one on this cul-de-sac in Montgomery County has taken his or her privatefrustrations to a public meeting; no one has lobbied a lawmaker. The lawyers, architects, doctors, teachers,retirees and federal government employees living in the $300,000, light-filled homes of Linden Hall Lane agree onthe moral imperative of providing health-care coverage to all Americans, including the 46 million currentlyuninsured. But beyond that, the wonky chatter about "bending the curve" of health-care expenses and the noiseof "You lie!" outbursts have left them cold. The messy and complex debate in Washington, though only 29.4 milessouth of their quiet courtyard, might as well be taking place on a distant planet for all it seems to have to do withthe needs of their own lives. All they know is, something's got to give.

Insurers mount attack against health reform After working for months behind the scenes to help shape health carereform, the insurance industry is now sharply attacking the emerging plan with a report that maintains Senatelegislation would increase the cost of a typical policy by hundreds, or even thousands, of dollars a year.Aspokesman for Sen. Max Baucus, D-Mont., whose 10-year, $829 billion overhaul plan faces a final Finance

Committee vote Tuesday, was quick to react Sunday, questioning the credibility of the industry's late-in-comingcost estimate."It's a health insurance company hatchet job, plain and simple," said the spokesman, ScottMulhauser.The health insurance industry has been working until recently to help draft legislation, while publiclyendorsing President Barack Obama's goal of affordable coverage for all Americans. The alliance has grownstrained as legislation advances toward votes in Congress.Late Sunday, the industry trade group America'sHealth Insurance Plans sent its member companies a new accounting firm study that projects the legislationwould add $1,700 a year to the cost of family coverage in 2013, when most of the major provisions in the billwould be in effect.Premiums for a single person would go up by $600 more than would be the case without thelegislation, the PricewaterhouseCoopers analysis concluded in the study commissioned by the insurance group.

The Insurance Industry's Deceptive Report In the hallowed tradition of the tobacco and energy industries, thehealth insurance industry has commissioned a report (pdf) projecting doom and despair for those who seek toreform its business practices. The report was farmed out to the consultancy PricewaterhouseCoopers, which has

something of a history with this sort of thing: In the early-'90s, the tobacco industry commissioned PWC toestimate the economic devastation that would result from a tax on tobacco. The report was later analyzed by theArthur Andersen Economic Consulting group, which concluded that "the cumulative effect of PWs methods isto produce patently unreliable results." It's perhaps no surprise that the patently unreliable results were all in thetobacco industry's favor. He who pays the piper names the tune, and all that.All that makes it a bit hard to respondto this analysis. Seriously engaging with its methodology probably gives it more credit than it deserves, makingthis seem like an argument between two opposing sides as opposed to a predictable industry hit job. But totallyignoring its claims means some of them might live unchallenged. So rather than a full tour through the "analysis,"here are a couple of its more representative moments.


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Is the Insurance Industry Declaring War? Updated: AHIP Claim on Benefits Tax "Implausible" Lobbyist Mouthpieces And The Credulous Newspapers Who Love Them HEALTH REFORM: The Gloves Are Off HEALTH REFORM: AHIP Got What It Paid For

Insurers Face Blowback Health insurers cherry-picked facts with industry report

Lobbyists Fight Efforts to Save on Health Care As the health care debate moves to the floor of Congress, most ofthe serious proposals to fulfill President Obamas original vow to curb costs have fallen victim to organizedinterests and parochial politics.And now the last two initiatives with real bite that are still in contention a scaled-back Cadillac tax on high-cost health plans and a nonpartisan Medicare budget-cutting commission are underfurious assault.Most economists favorite idea for slowing the growth of health care spending was ending theincome tax exemption for employer-paid health insurance to make lower-cost plans more attractive. But thatwould hurt workers with big benefit plans, and a labor-union lobbying blitz helped kill that idea by the Fourth ofJuly.Lobbying by doctors, hospitals and other health care providers, meanwhile, dimmed the prospects of variousproposals to cut into their incomes, including allowing government negotiation of Medicare drug prices andcreating a government insurer with the muscle to lower fee payments. The lobbyists are winning, said

Representative Jim Cooper, a conservative Tennessee Democrat who teaches health policy.Total health carecosts in the last 20 years have doubled to about 16 percent of the economy, with no signs of tapering. Along withuniversal coverage, Mr. Obama has made controlling those costs a central pillar of his health care overhaul,calling the current course unsustainable. The effort is a pivotal test of his campaign promise to break thestranglehold of special interests.In an interview, Peter R. Orszag, the White House budget director and the officialmost associated with the drive to cut costs, singled out the proposed Medicare commission and the Cadillac taxas evidence of progress. A key priority now, Mr. Orszag said, is to make sure cost containment holds up as wemove through the legislative process."Neither element appears in any of the other four health care bills on CapitolHill, and both face dug-in resistance in the House.

The Lobbyists in the Health Care Fray (5 Letters)

New Database to Help Set Payouts by Health InsurersAndrew M. Cuomo, the New York attorney general, on Tuesday announced the details of a new nationaldatabase that would help determine how much insurance companies should reimburse patients who go out ofnetwork to see a doctor.Consumers would also be able to check a new Web site to see what an insurer was likelyto pay before they went to an out-of-network doctor.The announcement is part of a settlement reached over thelast year with more than a dozen insurance companies concerning one of the industrys most controversialpractices: the payment of out-of-network claims.Using a database run by the UnitedHealth Group, the insurancegiant, the industry was accused of systematically understating the doctors fees for more than a decade andshortchanging consumers by hundreds of millions of dollars.Consumers reimbursements will actually go up nowbecause the reimbursements were artificially deflated, said Mr. Cuomo, whose office conducted an investigationinto these practices. At issue is a reimbursement system that potentially affects about 70 percent of the nationsinsured families ones enrolled in health plans that let them see doctors who are not part of the plans network.When patients go out of network, insurers typically reimburse patients for only a portion of the medical bill, basedon what is called the reasonable and customary cost of the services in that city or region.

AARP, AMA Endorse Health Bill House Democrats' health bill got a boost Thursday with endorsements by AARPand the American Medical Association, which President Barack Obama seized on to push for support with hoursticking down before a scheduled vote Saturday evening on the House floor.House Speaker Nancy Pelosi (D.,Calif.) battled to gather the 218 votes she needs to ensure passage. Asked if she has the necessary votes, Ms.Pelosi told reporters, "We will."Democrats hailed the backing of the AMA, the nation's largest doctors' group, asespecially significant, since its position had been in doubt. But the group's statement of support was lukewarm,saying the measure is "not the perfect bill." AARP, the largest senior citizens' organization, officially endorsed thebill, citing the fact that it would help lower drug costs for seniors and make it easier for older Americans who don't


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yet qualify for Medicare to buy insurance policies. Although seniors have been vocal critics of the health-careoverhaul, AARP's backing didn't come as a surprise since the group has been publicly promoting the House billfor months. AARP Chief Executive Barry Rand praised the legislation Thursday for strictly limiting how much moreinsurance companies can charge seniors based on age and closing a gap in Medicare prescription-drug coveragethat forces seniors to pay thousands of dollars for medicines. Democrats have put a high priority on getting thebacking of big-name lobbies. But several major groups have opposed the House bill or remained silent on it.Insurers, for example, strongly oppose the bill because they say the new government health-insurance programwould drive them out of business. Despite the AMA's support, doctors remain fragmented over the bill. Severalspecialist groups as well as state medical associations say they can't support the public insurance plan becausethey believe it would drive down government payment rates.

Democrats Pose Health Bill Hurdle Democrats Eye Saturday Health Vote

Healthcare Coalition Building: Sausage-making

In Poll, Wide Support for Government-Run Health Americans overwhelmingly support substantial changes to thehealth care system and are strongly behind one of the most contentious proposals Congress is considering, agovernment-run insurance plan to compete with private insurers, according to the latest New York Times/CBSNews poll. The poll found that most Americans would be willing to pay higher taxes so everyone could havehealth insurance and that they said the government could do a better job of holding down health-care costs thanthe private sector.Yet the survey also revealed considerable unease about the impact of heightened governmentinvolvement, on both the economy and the quality of the respondents own medical care. While 85 percent ofrespondents said the health care system needed to be fundamentally changed or completely rebuilt, 77 percentsaid they were very or somewhat satisfied with the quality of their own care. That paradox was skillfully exploitedby opponents of the last failed attempt at overhauling the health system, during former President Bill Clintons firstterm. Sixteen years later, it underscores the tricky task facing lawmakers and President Obama as they try toaddress the health systems substantial problems without igniting fears that people could lose what they like.Across a number of questions, the poll detected substantial support for a greater government role in health care,a position generally identified with the Democratic Party. Republicans in Congress have fiercely criticized theproposal as an unneeded expansion of government that might evolve into a system of nationalized healthcoverage and lead to the rationing of care. But in the poll, the proposal received broad bipartisan backing, with

half of those who call themselves Republicans saying they would support a public plan, along with nearly three-fourths of independents and almost nine in 10 Democrats.

Document Reader: Complete Poll Results

Whitehouse Forum on HC Reform: Stakeholders Ideas (CSpan) Nancy-Ann DeParle, the WhiteHouse Director of the Office of Health Reform, met with representatives of healthcarecompanies & community organizations. They discussed health care issues as part of the ObamaAdministration's ongoing effort towards health care reform.

Presidents Speech Allays Some Fears in the Health Insurance Industry During the summers heated discussions

over health care, when Democrats seemed quick to portray the health insurance companies as the systems mainvillains, the industry seemed to be in policy makers cross hairs. But as the specifics of Washingtons proposedoverhaul have emerged in recent days some industry analysts say insurers may not have much to fear. Theoutlook is moving away from the worst case, said Les Funtleyder, who follows the industry for the investment firmMiller Tabak & Company in New York. Even Mr. Obama, who had recently stepped up his criticism of the industry,seemed to soften his stance on Wednesday. He recounted a few insurance horror stories as might bepolitically necessary when arguing the need for a system makeover. But as he outlined his plans for health care,which focused mainly on a revamping of the nations insurance system, he was careful to point out that theexecutives who run those companies were not bad people. Mr. Obama also made clear that the industrysbiggest worry the specter of a government-run health plan competing with commercial insurance plans was


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not a necessary ingredient to the legislation he seeks. Additionally, he emphasized that he did not want a drasticmove away from the current system, under which private companies provide coverage to the bulk of workingAmericans who are insured. Under my plan, said Mr. Obama in a departure from his position during thecampaign, individuals will be required to carry basic health insurance just as most states require you to carryauto insurance. The requirement, which would be coupled with subsidies to help those who could not otherwiseafford coverage, is likely to result in tens of millions of new customers for the industry. The insurers have alsoargued that they need to have everyone covered if the industry is going to stop controversial practices likedenying policies to people with pre-existing medical conditions or charging sick people much more in premiumsthan the healthy.From the insurers standpoint, that was a very positive turn of events, said Rick Weissenstein, ahealth care policy analyst in the Washington Research Group at Concept Capital, which follows developments forinvestors. Many of the changes to the insurance system now under discussion are the ones that have beenadvocated this year by the insurance companies themselves, said Karen M. Ignagni, the chief executive ofAmericas Health Insurance Plans, the industry trade group.

Seducing Olympia Snowe: The Key to Health Reform

'A Lot to Like,' Indeed The strangest aspect of the debate over a public option for health coverage is that thecentrists who oppose it should love it. It doesn't involve a government takeover of the health-care system. Theidea is that only consumers who want to enroll in a government-run health plan would do so. Anyone whopreferred private insurance could get it. The public option also uses government exactly as advocates of marketeconomics say it should be deployed: not as a controlling entity but as a nudge toward greater competition. Fans

of the market rightly oppose monopolies. But in many places, a small number of insurance companies --sometimes only one -- dominates the market. The public option is a monopoly-buster. Centrists tell us they wantto hold down spending and fight deficits. Strong versions of the public option, as the Congressional Budget Officeshowed in its scoring of Sen. Jay Rockefeller's proposal, cut the costs of insuring everyone. Unfortunately, thedebate over the public option has rarely concentrated on the substance of the idea. Instead, it has been almostentirely ideological. Because opponents know from polling that the public wants the chance to choose agovernment plan, they move the discourse to abstract and often demagogic ground. The most revealing"argument" during the Senate Finance Committee's public-option debate on Tuesday came from Sen. ChuckGrassley."The government is not a fair competitor," Grassley said. "It's a predator." Grassley was then forced toexplain how he felt about Medicare. Is it predatory for government to pay health bills for the elderly? Is SocialSecurity, which lives side by side with private pension and savings plans, predatory? Is it predatory forgovernment to regulate, well, predatory lenders or stock swindlers or bank boodlers?

Can Obama and Orszag Deliver on Health-Care Reform's Promised Savings? Way back in January, BarackObama asked his health-care advisers for a simple number. "I want to know how clearly and how unequivocally Ican tell the American people their costs are going down when this is done," he said, according to someone at themeeting. During the campaign, Obama had promised to "lower health-care costs by $2,500 for the typical family,"helping him make the sale on Election Day; the question, he knew, was going to be whether he could deliver onthat specific number. It has not been easy. His advisers told him the number, based on unproven assumptions,was too wobbly to survive a legislative debate. The truth was, they said, nobody knows exactly how much moneycould be saved by reforming health-care-delivery systems, as Obama and both houses of Congress haveproposed. All they knew was that such reforms, which aim to restructure payment systems, decrease costs andincrease the quality of care, are the only promising path forward to save the country from fiscal Armageddon."You have never done it before, so how are you going to quantify it?" says Peter Orszag, a health-care wonk whoruns the Office of Management and Budget. "The irony is that things that are more challenging to quantifyprecisely may well turn out to be much more important." And so as Obama has barnstormed the country this year,

he has been forced to talk more about the problem a health-care inflation that could bankrupt the nation than how much Americans would save if the broken system were fixed. From the Sunday news shows to DavidLetterman's overstuffed chair, Obama has warned about the rocketing increase in health-care insurance 5.5%last year, according to one study and promised to bend the cost curve down in the future. He has describedchanges to the health-care system that could bring down costs for families and long-term government deficits. Buthis numbers are hypothetical. "If we are able to slow the growth of health-care costs by just one-tenth of 1% eachyear," he announced in a recent address to Congress, "it will actually reduce deficits by $4 trillion over the longterm." But are such savings ever likely to be realized? The answer, according to a wide range of experts, isfrustratingly vague: Maybe. Hopefully. Probably. "Three-quarters of all the experts believe it is possible," saysHarvard's David Cutler, a health-reform expert who has advised Obama. "What guarantees do we have? We


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don't." The reason for this ambiguity can be found in the nature of what Orszag calls the "transformational"changes. Policies in both the House and Senate versions of health reform seek nothing less than a remaking ofthe entire health-care industry tying payments to outcomes, encouraging providers to work together, investingheavily in research to uncover which treatments work better than others and building a network to track theperformance of individual doctors and regional health networks. Most of these changes cannot be "scored" byaccountants as yieldin

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