Ryan's Field of Dreams while Oregon is not just waiting for them to come after Building It

Last week, representative Paul Ryan released a budget proposal that was called everything from "interesting" by Ezra Klein to "bold" and "game-changing" by Fox news. The popular sports analogy was how Ryan changed the playing field on the health reform debate with his hail merry. My mixed sports analogy would be that Ryan punted to the Field of Dreams where he thinks that if he builds it, they will come.

Ryan's proposal specifically "would provide Medicare beneficiaries with lump-sum vouchers to buy private insurance and turn Medicaid into a block-grant system." States would get $11,00 per Medicaid beneficiary and the federal government could cap its exposure to health care costs. In other words, the federal government is turning its health care programs from a defined benefit to a defined contribution program and getting out of the health insurance business.

I used to think that block grants were a good thing because the word block has positive connotations. It makes me think of a block party or playing with blocks. The idea that the government gives you a block of money and a lot of freedom also sounds appealing. However, I have realized that block grants should really be called blockhead grants because they are generally used for programs that the granter doesn't like. That's why block grants won't cover the actual costs of the programs. Calling the programs, "Hey blockhead, how much money do I have to give you to go away? That's it? Great!" would be too honest and the acronym would be too long.

Ryan's idea of vouchers and block grants for Medicare and Medicaid is nothing new. Democratic and Republican politicians have proposed these ideas since 1981. What would make this proposal interesting is if Ryan attempted to design a market that would create an incentive to participate in these programs and provide care. That is the challenging part and why this is just another example of Republicans punting on actually coming up with a solution for the health care system. It will shift costs to employers who will become a main source of health insurance for older workers or beneficiaries who won't be able to cover their health care costs. It does nothing to change a fee for service system that will respond to lower payments with higher volume and more invasive treatments that get higher reimbursement.

The state of Oregon is seeking federal waivers for its Medicare and Medicaid funding in order to design a real system of health care. Waivers doesn't have the same warm and fuzzy feel as block grants. However, it's better because with waivers you actually get the same amount of money as before. Oregon is taking the ball and running with it by designing a care delivery system to support it called Coordinated Care Organizations (CCO's). They are similar to the federal governments Accountable Care Organizations (ACO) with 2 key differences. Patients select their CCO in advance and have a relationship with the providers while patients are assigned to an ACO retrospectively and don't have the same provider relationship. The other difference is that one starts with C and the other stars with A. I really wish Oregon could come up with a BCO acronym since they skipped that letter but the only one that I could think of was Boring Care Organization.

The relationship aspect of the CCO gives the organizations an opportunity to attract patients to join. The CCO's will start by serving the growing Medicaid population (which will become 30% of Oregon's under 65 insurance market in 2015) but will have business steadily funneled to it by the state government bodies like the Oregon Healthcare Authority. For example, the state has indicated that they may only contract with CCO's for the lucrative public employees insurance. That is how the system creates incentives to participate in providing care to difficult populations like Medicaid and Medicare. This is very different from Ryan's plan to have these beneficiaries fend for themselves with a 50% off coupon.

This Oregon proposal is something that I would call bold and game changing.

Comprehensively Do or Do Pass Health Reform; There is no Incrementally Trying

The previous Republican solutions to health care reform have been to change the definition of uninsured, talk about torte reform instead, talk about immigration instead, and produce torte reform bills that just happen to cover only 10% of the uninsured.

The latest Republican plan was announced at the Feb 25th bipartisan televised summit where everyone was carefully seated in a way that alternated boys and girls. Senator Lamar Alexander announced as folksily as he could that the Republicans favored an incremental approach because we "have proved we haven’t done comprehensive very well in Congress." The only thing missing was the "You betcha."

Congress hasn't done comprehensive well? By what standards? In health care alone, I recall the very comprehensive Medicare Provider Improvement Act of 2008 and Bush's 2003 Medicare Modernization Act. I recall some very comprehensive stimulus packages, credit card reform, and I don't even use my television set anymore. How incremental do Alexander's Republicans want to be? Do they want credit for showing up to work but don't want to strain themselves by being too comprehensive and turning on their computers? Can I tell my boss that I'll happily do an analysis of a problem but I won't actually solve the problem because it's hard to do comprehensive well?

The proposed incremental approach sounded good for about 15 seconds before I realized that it was just the latest version of the Republicans announcing that they are more concerned with their Facebook quizzes and figuring out which Lost character they would be than fixing health insurance.

Besides the abject disinterest that statement reflects, here's why incremental does not work in health insurance. There are 4 main markets or ways that people get insurance which are 1) through employers, 2) individually, 3) Medicare (you're at least 65), 4) Medicaid, (you make less than $14,000/year). Those markets are interrelated so if you make changes to one, the others are effected.

For example, if you do something to reduce the incentive for employers to offer health insurance, more people will enter the dysfunctional individual market with pre-existing conditions. The individual market would have to be changed at the same time to accommodate new entrants.

If insurance companies profitability in one line of business changes, they will have to raise prices in another line of business. For example, if Medicare cuts Medicare Advantage reimbursement by 2% like they did this year, insurance companies have to charge someone else, like employers or individuals, 2% more. And no, with profit margins of 3% and capitalistic and pillaging shareholders, insurance companies are still supposed to make money. Taking the loss is not really a viable alternative and cutting executive salaries would only cover a fraction of a percent.

Growing or reducing Medicaid can have an impact on individual and employer insurance. Bush opposed expanding the State Children's Health Insurance Program (SCHIP) because he felt that it would "crowd out" these private insurance markets. People would elect Medicaid instead of purchasing employer or individual insurance for their children. The "crowd out" effect is debatable but the bigger point is that even President Bush understands that health insurance markets are linked and incremental doesn't work! When President Bush needs to give you a lecture on how health insurance market, that should be an indication that your argument is starting to rank down there with the theory that polar bear farts are the primary cause of melting Arctic ice.

The two planks of the Republican health care reform also stink as bad as polar bear farts. They have held out 1) medical malpractice reform and 2) selling insurance across state lines as guaranteed ways to reduce the cost of health insurance without having to do all this complicated stuff. The CBO did an analysis of Senator Hatch's medical malpractice proposal and determined that it would save $54 billion over 10 years. That's about a 0.5% reduction in the growth of health care costs or what would be swallowed by medical inflation in about 2 months. In other words, this proposal would move health care costs from unsustainably unaffordable to unsustainably unaffordable. Notice any difference? Exactly.

I discussed the 2nd idea of selling insurance across state lines in this post where I called this idea Tweedledumber. At my place of work, I would be the one to analyze the decision to participate in this program and my recommendation would be a no, we do not want people in higher cost states buying my state's insurance plans because it will make my plans more expensive and less competitive.

With Republicans using their patented wide stance technique to piss away the chance to fix health insurance, it makes me yearn for a real conservative party. Since I spend more time reading the Economist than I do looking at my Grateful Dead bootlegs, I can now appreciate a good conservative fiscal policy. I'm still a big D Democrat due to my belief in spending to preserve a safety net and socially, I think that there should be national days of cross-dressing. However, I have stopped agreeing with everything Dennis Kucinich says. This Republican party does not provide a viable alternative and their dismissal of health care as a relevant issue is not something that I can easily forgive.

Obama's push to pass this bill through the reconciliation process regardless of the political fall out that he may face, both impresses me and makes me want to have a lighter ready the next time he goes out for a smoke. I now finally understand what he means about being a good one term president as opposed to a mediocre two term president. He would rather do the right thing with a comprehensive health care reform than just follow the polls incrementally.

A Musical Montage of the end of Health Reform

After reading about Scott Brown's Senate victory in Massachusetts, I riffed a Don Mclean American Pie cover on my Facebook status of "I can't remember if I cried/When I read what Mass voters decide(d)/Something punched me deep inside/The day that health reform died". Based on the empathetic comments that I got, my friends sensed my apparent deep inner pain. However, readers of this blog might have been confused by this rather poignant poetic lyrical display since my posts have always found something to criticize about health care reform. I compared Medicare Advantage cuts to the worst thing to happen to seniors since the end of Denny's early bird dinner special and the nicest thing that I said about the Public Option was that it was a marginally better idea than Death Panels.

To this confusion, I respond with Joni Mitchell's song Big Yellow Taxi (otherwise known as They paved over paradise and put up a Parking Lot) "Don't it always seem to go/ That you don't know what you've got/Till it's gone". Now that the possibility of reform is disappearing faster than Gilbert Arenas's basketball career, I now realize the amazing potential of what this country had.

For the first time in a long time, we were grappling with tough questions about our health care system. We became a nation of health policy wonks. Radio programs analyzed the true drivers of health care costs and how requiring everyone to buy insurance would impact costs. More importantly, people with conditions that would prevent them from ever being accepted to an individual health insurance plan sensed an end to their fear of losing access to health care if they ever lost their job. The fact that the bills ensured that everyone could be insured outweighed their weak cost controls and clumsy handling of the Medicare program. As Crosby Stills Nash and Young sang, "If you can't be with the one you love, love the one you're with."

Now as Slate's Timothy Noah pointed out, health reform will likely not happen. The Democrats will not ram their bills through and the Republicans will not offer any solutions or help. The Republicans solution to the uninsured is a reclassification of the definition of uninsured. The one bill that they offered was a torte reform bill that just happened to cover 7-8% of the uninsured. They blew off the health care reform debates. Iowa Senator Chuck Grassley used that time to learn how to use the Twitter. He even taught John McCain how to use the Google. Kentucky Senator Mitch McConnell used that time to discover what feelings were. I'm not saying that he has any feelings yet but now he knows what they are.

As I grow moderate with my years, I start to understand the appeal of conservatism, some of its merits, and thus the Republican party. However, I cannot forgive the GOP for its dismissal of health care reform as a relevant issue and their sheer laziness and unwillingness to understand it or put together a bill.

Health Reform has been declared dead before so I'll remind myself of Bruce Springsteen's Reason to Believe with the lyrics: "Struck me kinda funny/ seem kinda funny sir to me/How
at the end of every hard earned day people find some reason to believe."

I know more than the Financial Crisis Inquiry Commission

We had so much fun with the 9/11 Commission that the Obama administration offered a sequel entitled The Financial Crisis Inquiry Commission. Like a lot of sequels, it's looking disappointing compared to the original.

The mission statement of this Commission look promising:

The Financial Crisis Inquiry Commission is a bipartisan commission that has been given a critical non-partisan mission — to examine the causes of the financial crisis that has gripped the country and to report our findings to the Congress, the President, and the American people.

Hopefully, the Commission's work can help rebuild the American people's belief in a financial system that puts Americans to work, fulfills their goals and provides the foundation for a new era of broadly shared prosperity.

However, based on their line of questioning that I heard about on NPR, their performance is not promising.

The Financial Crisis Commission does not apparently know what hedges are. I'm not talking about gardening but rather "hedging your bets." In financial terms, this often entails buying a financial asset with the expectation that the price will increase while purchasing a short position or some kind of insurance in case it loses money. Or taking a long and a short position. It's about managing risk.

One of the Grand Inquisitors sputtered how a bank was selling securities and also taking short positions against that same securities was the equivalent of "selling a car with faulty breaks and then buying insurance."

I call that as fine an example of hedging that I have ever seen. If the securities do not sell well then the bank has protected itself from those losses. That's contrasted with an absolutely terrible analogy about the car with faulty breaks. What does he even mean by buying insurance? How about comparing it to placing a bet with 3:1 odds that the Yankees will win and a bet with 4:1 odds that the Red Sox will win? One could argue that only a soulless banker would not pick either the Red Sox or Yankees but bet on both just to make some money. Others would point out, it's a systematic way to gamble.

They don't understand hiring or compensation either: Another Grand Inquisitor suggestion was that banks pay risk management staff more in order to attract more talented individuals. Or in other words, they were asking if the banks ever studied compensation for this position and their own cost structure. Given that banks generally study the cost structure of every asset from Danish wind mills to Russian sky scrapers, they've probably figured out how much they need to pay their supporting staff. Given the support staff is a form of overhead, it's probably less than they pay revenue generators like traders.

With that question, the Grand Inquisitors ideas are right on par with what Human Resources was probably thinking in 1985.

They don't really understand bonuses: Lately, bonus has become a dirtier word than boner. Okay, I was going to call it a 4 letter word but bonus has 5 letters but it's kind of close to boner. Plus I want to see what kind of Google searches that I draw by saying boner.

Digressions aside, at least 50% of a bankers compensation comes from their bonus. Their base salaries are on par with industry positions. It's the compensation model that banks have chosen since they study this stuff (like how much they need to pay a competent risk manager) and have concluded that it results in behavior that they want to reward. The fact that bonuses are dramatically increased by financial engineering or providing services that don't really improve the value or efficiency of a company is not good. The fact that they reward creating asset bubbles that will later pop isn't good either.

However, nothing is inherently wrong with a compensation structure that is heavily weighted towards the bonus. Sales compensation is either heavily driven by commission or salaried depending on the results that the company wants to achieve. Focusing on the bonus is looking at the cart and ignoring the horse.

Personally, I think it would be kind of interesting if politician's salary and campaign contributions were tied to a bonus type level of performance. Suppose Congress had to reduce the unemployment rate by 1% in order to get half their salary or campaign contributions? Or pass 10 major pieces of legislation? That might result in a more bipartisan approach especially among Congressman who only own 1 house.

Summary: The 9/11 commission was probably viewed as successful since the members really understood the topic. The Pecora commission to the financial crash in the 1930's was very successful since it was both entertaining and produced lasting results. From what I have heard so far, I'm not impressed with the competency of the Financial Crisis Inquiry Commission nor their sense of humor (I still don't understand the car with the faulty brakes analogy). I don't think that Wall Street is so different from the rest of the economy to result in this level of misunderstanding. Wall Street bankers are not irrational and there is a logic behind their actions. The commission needs to understand that logic.

2010 Health Care Predictions

For those of who belong to religions where we think Jesus was just a really good carpenter, we have a lot of free time on Christmas Eve. Thus, this is a perfect time for my planned post on 2010 mostly health care predictions.

A year ago, I boldly predicted there would be a lot of talk about change but not much done. For the most part, I was right as we have not finalized the latest health care bills yet. However, I was wrong about no changes to the Medicare Advantage program. A reduction of payments resulted in benefit reductions, 25% average increase in premiums, and approximately 20% of plans exiting the market. Scrutiny increased significantly signaling that future insurance marketing will become even more highly regulated. When reform is fully implemented, it's likely all health plans will have the same templates for all documents explaining benefit plans. That's not a bad thing except for the fact that Medicare considers 33 pages to be a reasonable length for a benefit "summary". If that's a summary, you can imagine what the full book looks like. Health care reform may result in deforestation.

For 2010 predictions, I will continue to shoot down the middle:

1. Seniors finally realize what is happening to Medicare Advantage but don't riot: There will likely be additional cuts to revenue that Medicare Advantage pays health plans which will result in an average increase of $30 per month for seniors. The Republicans repeatedly raised this point to try and foment a senior rebellion but the Democrats countered by claiming that the only cuts would be to health plans' profits.

As Medicare beneficiaries realize the true impact, they will rise up and announce that they are still happy with the Medicare program. They don't need gold plated health plans and understand they are not immune to the health care increases.

2. No one else riots over the passage of health care reform either: Although opinion polls on the health care bills place it on the same satisfaction level as the latest straight to DVD version of American Pie (Does Eugene Levy need the money that badly?), Democrats will not be punished in the mid-term 2010 elections. As the incumbent party, they will lose some seats.

However, the public will better understand the benefits that they got from the health care bill and forgive its shortcomings. I also realized that the Republicans won't get punished for spending most of the debate playing Sudoku. Republicans always oppose new social benefit programs just like they did with Medicare in 1965. I think that it's part of the oath that they take when they join the party.

3. Health Insurance Reform Passes! In other bold predictions, we still don't resolve the question of whether people to drink Miller Lite because it tastes great or is less filling. Congress will produce one bill that passes. It's major provisions will start earlier, in 2013, to realize benefits sooner. There will be no Public Option plan.

4. The Health Care Construction Boom is over: Architects bemoan the loss of one of their more lucrative lines of business. The restrictions on health insurance will reduce the amount of money in health care. There is now only enough to money to pay for the Boomers hospital stays in the existing supply of beds. The next boom will be in technology that keeps patients out of hospitals and doctor's offices since space and supply won't increase.

5. State start working on their own health care reform: We saw the federal government's best effort with health care reform. While admirable, it's kind of like the best effort of whoever is playing quarterback for the Chicago Bears. It fell short. The states will stop waiting for the federal government for solutions and start designing their own. This will make health care even more local and regional which will hurt national plans. However, it will represent the best chance for true heath. care. reform.

6. We finally learn how to pronounce 2010: People who call it Oh-10 will be viewed in the same light as those who think global warming is caused by polar bear farts. Aught 10 is too awkward. Ten will work just fine.

Review of the House Health Care Bill, Affordable Health Care for America

My review of the Affordable Health Care for America Act, HR 3962, is based on 2 key aspects. First, it's a health insurance reform bill, not health care bill reform. The prevailing mood around reform has been that if we just get everyone insured, we'll win. Insurance reform is not time for a victory lap but rather a quick pit stop to prepare for the hard work of cost containment. I am making the big assumption that government will address health care costs after addressing coverage. This strategy worked for the creation of Medicare as Lyndon Johson knew that he could never show Medicare would pay for itself initially. Instead he focused on creating the need and for better or worse, let future governments work on the financial viability.

Second, our current health care system is a mostly clogged artery that's waiting to burst. Taking the stairs instead of the elevator would be an improvement. Doing nothing is rapidly disappearing as a choice. That's why I found the Republican's decision to work on their Sudoku or their profiles on the new GOP social networking site to be so counterproductive. Their lack of interest made the narrow House vote less significant.

With those two caveats (and these caveats border on assumptions like Lindsey Lohan has finally gotten herself straightened out), I'll say that the House bill is not bad. Just like NCIS Los Angeles, I first found it to be unwatchable due to the complete lack of chemistry between the main parts. However, some role players have emerged and the writing has improved. While the Senate bill will dictate the final outcome, here's how I see the House bill using my trusted framework of the Good, the Bad, and the Ugly:


The Good:

• The House was somewhat serious about the individual mandate: Everyone is starting to understand that in order for insurance to really be affordable, everyone has to participate. The young, healthy, and good-looking have to pay for the old, sick, and ugly. The House bill has a penalty that is 2.5% of income. Considering there should be available health plans for 8% of income, that penalty should be enough to make most participate. One of the biggest problems with the Massachusetts reform was that the penalty was not significant for people to care given the cost of insurance. While I'm going to congratulate Congress for growing a pair, I'll at least offer a fist bump.


• The fact the Florida seniors get twice as much for Medicare was discussed: According to the >Huffington Post, there is a provision to study the geographic variation in the costs of health care or why it costs twice as much in Florida or McAllen, TX. I think the fact that some seniors receive twice as many health care dollars or that their doctors are paid enough to accept Medicare while others do not and are not is one of the least talked about injustices of our health care system. While I know commissioning a study is like forming a committee to address a problem, at least, it's getting discussed.


• It's an insurance reform bill: There is no great secret to paying for universal health care. It's always been a matter of requiring the Haves to contribute to the Have Not in some way to prevent people from gaming the system. The wealthy, health care companies, and employers will be taxed more. Seniors will receive lower Medicare benefits and individuals will have to pay or play. Whether this is considered to be socialism, communism, or paganism, it's just the basic concept of how you pay for insurance.
  

The Bad:

• There are no cost containment plans: Health insurance for everyone is going to be expensive and the government has had little success reducing costs. Medicare has had little to no success with disease management programs. No one in government has ever negotiated with drug companies or providers. Their only ideas around value-based benefit (value-based involves covering evidence-based services at little to no cost while charging more for services with questionable value) designs involve lower copays for preventive services. Private insurance companies figured that out 10 years ago. The government has had success with requiring providers to manage all care, including complications, for a set price (called DRGs). However, that's it and that's why I really hope that there is still the political fortitude to get serious about cost when the bills come. The bills will be about as pretty as lipstick on a pig.


• Seniors are going to be pissed: This bill will cut funding for Medicare Advantage which includes health plans that have been providing Medicare coverage for decades. This year, we have seen that a 4.5% revenue cut resulted in higher prices for Medicare Advantage by 25%, reduced benefits, and had plans already leave the business. Seniors were told not to worry about benefit cuts and that the doughut hole in the drug plans will be filled with this bill. By the way, the doughnut hole (after a certain level of coverage, seniors whose drug spending is around the 75th percentile will have to pay $1500 on their own, and then only have to pay 5% of drug costs in the catastrophic category. The $1500 they they pay on their own is the doughnut hole), is an example of a value-based design to promote better utilization of drugs. However, the government is running away from it in an effort to show seniors something bright, shiny, and new with Medicare. Taking money away from Medicare to fund the uninsured is probably a good use of the health care dollars, but no one has been that honest with the seniors. No, I did not expect politicians to be upfront with a key voting block about bad news, but this is an impressive bait and switch considering the cuts will wipe out the prescription drug program and its newly filled doughnut hole.
  

The Ugly:

• With this Public Plan Option, the government is going to start a brand new insurance company: A government-run health plan or the Public Plan was included in this bill but it requires that they negotiate with providers for fees and act like a regular insurance plans. I have written ad nauseum about how I think the Public Plan is a bad idea and the majority of the cost savings would come from paying providers lower rates. This Public Plan in the bill does not pay providers a lower fixed rate and the Congressional Budget Office notes that price for the Public Plan will be higher than comparable private plans. I have am image of dominant hospitals telling the Public Plan administrators the astronomical fees that they will have to pay them to make up for the fact that Medicare and Medicaid pay them too little. Next, the dominant hospital would tell them that they don't accept Medicare, don't accept Medicare, and where they can shove the Pubic Plan. The Public Plan has been a bigger distraction from the real issues than abortion or immigration.
  

If you're looking for more information or think I'm an idiot and want to hear other opinions, This American Life did an excellent job of explaining the key issues of the health care system that this bill does not address. Here's the more pessimistic view from an objective (but grumpy) health care insider or a slightly wonkish but accessible view.

Republican Health Care Proposal: Tweedledumb and Tweedledumber

The Republicans and their Congressional leader, John Boehner, seemed to have just realize that health care reform has longer staying power than the Spice Girls. With the Democrats bringing bills to the floor, the Republicans announced their latest health care reform proposal. My response was a Groundhog Day-esque sensation of "Haven't they announced their health care proposals before?" Looking at their four key aspects, I realize, that yes, it's deja vu all over again as they have the same ideas which consist of two ideas that every reform policy has, the Tweedle Dumb idea, and Tweedle Dumber idea.

I have spent enough time writing about how the Democratic Public Plan Option is the health plan to nowhere that I feel truly bipartisan by spending an equal amount of posts about how the Republican health care reform ideas have just gone nowhere. They don't seem to think that there are any problems that changing the methodology for classifying the uninsured won't fix. It's like they are waiting for someone to announce that the health care debate was just a test of the American Democratic system and we can now return to our regularly scheduled programming.

Here are the 4 ideas in their proposal that they either copied from someone else or fall in the Tweedledumb category:

Allow individuals, small businesses, and trade associations to pool together and acquire health insurance at lower prices, the same way large corporations and labor unions do today. This is copied from everyone else who has thought about reform for the last 20 years. This is basically the concept of insurance or a risk pool or the Democrat's Health Care Exchange proposal where you bring a large group of people together and hope you have enough healthy folks to pay for the sick. The problem that no one has solved is how to get relatively healthy people excited about participating in these pools. Generally, the only people who are interested in participating are those who are sick enough to need insurance and they get really high rates or no insurance company wants to offer them a policy. I call this a great example of market failure.

Give states the tools to create their own innovative reforms that lower health care costs. This is the equivalent of an idea like "Let's paint the White House white" or copied from someone else. States have been creating their own innovative reforms with existing tools like Medicare and Medicaid waivers since those program were invented. The Oregon Health Plan made tough choices in 1993 about benefits in order to cover more people with the truly important services. Massachusetts launched universal coverage in 2006. Vermont and Hawaii have their own reform programs. What do the Republicans have in mind, giving these state back rubs while they continue to look at innovative reform proposals?

End junk lawsuits that contribute to higher health care costs by increasing the number of tests and procedures that physicians sometimes order not because they think it's good medicine, but because they are afraid of being sued. Texas enacted malpractice reform in 2003 and didn't even cause a dip in the medical cost trajectory. A 2006 Harvard study showed that most malpractice law suits aren't frivilous and their impact on medical costs is overstated. Malpractice reform will not solve the health care system. It will help with tort reform which is really a separate topic. I share the Republicans lack of interest in a litigious society. However, we're talking about health care reform right now, so let's stay on topic. I all thisTweedledumb.

Let families and businesses buy health insurance across state lines. This idea is Tweedledumber and it's the only remotely new idea that the Republican have offered. It rests on the premise that state mandates like requiring coverage of domestic partners, smoking cessation, or birth control is a significant driver behind medical costs. It ignores the Medicare data which shows how medical costs vary significantly from state to state or city to city in a universal benefit design (Medicare).

I help make decisions for the health plan that families purchase and I have no interest in letting families in other states purchase our plan. It would attract interest from those in high cost states like New Jersey which have higher medical costs based on the practice patterns. As a result, they would drive up the cost of my plan and I would become more expensive compared to competitors in Oregon which is a low cost state. I would also lose money on the New Jersey residents.

If this proposal was enacted, I would charge a higher rate to any out of state residents from high cost states or market my competitors plan in those states so they would have higher medical costs.

With proposals likes this, I view a bipartisan plan as one that moderate and more liberal Democrats agree upon. When I think of the Republican viewpoint, I am reminded of how passionate they were about the Terry Schavio, the woman who was going to be disconnected from life support. The Republicans considered that to be a very important issue while I personally spent most of my time wondering if Schavio was a Greek or Italian name and thought it was a bigger waste of network time than the OJ Simpson white Bronco car chase. The Republicans seem to reserve a similar amount of interest in health care reform.

Reinvigorated about Health Care Reform: The Good, the Bad, and the Ugly

I'll admit, I got tingly, hearing Obama say, "I still believe" and about his vow to be the last president to address health care reform. Kind of like I got during some of those good early Grey's Anatomy episodes when they would play a montage of the different patients and characters wrestling with tough emotional decision while playing music from the latest Emo folk singer.

What's gotten me even more excited is Senator Max Baucus's 18 page framework for his working group on the Senate Finance Committee. The proposal has real specific ideas that address serious issues in health care like a dysfunctional individual market and underpayment of primary care. This proposal is a working draft for his "Gang of Six". While I don't think that everything in it is a good idea, I think that Baucus can now spend more time thinking of a better nickname than "Gang of Six". What about the "The Sick Shooters" or "Maverick Baucus and the Top Gunners"?

We've got some solid ideas and some inspiration back on the health care reform table. It's enough for me to ignore the fact that the Republicans are not interested in health care reform. For me, the work will be between Obama, the Blue Dogs aka fiscally conservative Democrats who will have a tough re-election, and the California Democrats aka liberal wing who can spend more time worrying about their flossing schedule than their re-election chances.

For the purposes of this blog post, I can think of no better way to express myself than my favorite format, the good, the bad, and the ugly

The Good

• Help for those who need it the most, small groups and individuals: Groups with less than 50 employees and individuals have the worst options when purchasing health care. They get the least benefits, most limitations, and denied most often. Baucus's proposal of risk adjustment that will pay a plan more for insuring sicker members and guaranteed coverage gives consumers more options. Additionally, the proposal requires that plans offer 4 levels of benefits (bronze through platinum) and even a "young invincible" option. It cracks me that they even call it the "young invincible" option when they could call it "Doesn't give a crap about buying insurance option". This limits cherry picking by requiring plans to offer something for everyone and the prices of the different levels are at 1:7.5 ratio.
• Interesting definition of Affordability: It defines an affordable plan as costing 13% of someone's income. Maybe it's the health care policy geek in me, but it's a pretty clear expectation of how much someone is expected to pay for health care before the government helps. Overall, the specificity of the definition of affordability provides a specific direction on the opinion of how much health care should cost someone. It's not free and Baucus will get specific.
  
• Reward the right medical practice: Medicare will pay a 10% bonus to primary care physicians or surgeons who practice in an area with a health care shortage. This is funded by a 0.5% cut everywhere else. Primary care is considered to be underfunded and other areas of care (like imaging) are probably overfunded. It's a nice way to reward primary care for being considered the best value in health care.
• Rewards quality, prevention, wellness, good outcomes and gives ice cream and warm puppies to nice boys and girls: There are also a whole host of pilot projects and funds for new innovations in care, preventive services, and making quality data more readily available so you actually know if you are less likely to die in your local hospital. These are general provisions that we can all agree on like the fact that we like ice cream and kids like puppies.

The Bad

• Co-pting the word co-op to replace a public plan: I have blogged repeatedly on how the public plan option is a bad idea since the federal government has little experience with administering health plans and it would introduce a new mediocre government-sponsored plan. While Obama backed off the public plan, Baucus is now calling it a Health Care Cooperative. Only difference is the government would pay someone else to start multiple public plans. If they are really interested in a cooperative, have a real cooperative where members volunteer 2 hours per month and pay claims or answer phones. If members use less services than anticipated and costs are lower, everyone gets a dividend. Baucus's idea is not really a co-op. When everyone sees through the rebranding, I'm waiting for Health Care Cooperative to be replaced by Health Care Communes or Health Care Sewing Circles.
• Talk about Torte reform or talk health care costs, stop mixing them: Republicans and physicians have focused on malpractice reform as a key to reducing health care costs. However, there is little evidence that malpractice reform will significantly impact medical costs. Texas enacted malpractice reform in 2003 with no drop in medical costs and has some of the highest costs areas in the country. A Harvard study also finds few frivolous law suits or lower costs with malpractice reform. If we want to talk about torte reform in general to prevent law suits, that's fine as I have no interest in preserving a litigious environment. However, holding up torte reform as a solution to lower medical costs is like me claiming that switching to diet soda is the solution to my weight loss plan.
• Selling Insurance across state lines or a solution looking for a problem: This was in the Baucus proposal and it's an example of clean coal. Sounds good but doesn't really exist. In my current role, I make strategic decisions about individual insurance plans and I would have no interest in this opportunity. Insurance costs more in certain states because medical costs are high not because of state mandates (except maternity coverage). Mandated mental health benefits add $2/month and mandated acupuncture could add $1/month. If we tried to sell a $210 Oregon insurance plan for a 35 year old in New Jersey where it costs $320, we would probably have to charge closer to $300. That would be less than a 10% discount for a plan with a smaller network and no brand awareness. Medical costs in New Jersey are simply higher. We could subsidize our New Jersey business with our Oregon business but than our prices would rise in Oregon. The only opportunity that emerges from selling insurance across state lines and ignoring a state's legislation is that males could get cheaper plans in states that don't mandate maternity coverage. The main result of this legislation would give males a way to avoid contributing towards pregnancies (except by causing them).

The Ugly

• Potential loss of an industry: Many of the reform proposals feature health exchanges which facilitate the purchasing of insurance plans through a web site or government entity. The goal is to make it very easy to compare and research insurance plans. This would remove business from insurance brokers who currently are paid quite well. While not all brokers create the same level of value, I don't begrudge their profession or ability to make a living. The health exchanges would take a lot of business away from brokers and we won't know if they will provide the same level of service.
• Republican's best contributions to the health care debate was Joe Wilson's lack of ability to control his mouth: With the complexity of the health care system, it lends itself well towards a vigorous debate and solutions across the political spectrum. The Republicans have stopped taking the debate seriously. Their contributions have been to reclassify the number of uninsured from 46 million to 12-15 million by offering a new methodology. Or they would rather talk about torte reform instead (see my 2nd bad idea). They're even demonizing undocumented immigrants rather than talk about health care (as if the fact that some percent of 10 million undocumented immigrants receiving a health care service outweighs designing a system that can help 300 million Americans). Their only idea of selling insurance across states lines was my 3rd bad idea. As a result, I turn to the different factions of the Democratic party to forge a solution since the Republicans are probably more interested in finding Iphone fart applications than health care reform.
  

Sort of Playing the Game: Republican's Health Care Proposal

Three months ago, the Republican released their health care reform principles which pretty much amounted to disagreeing with the Democrats, a lack of understanding that government is pretty involved in the health care system right now, and how they also liked ice cream on hot summer days. I've realized more and more that Republicans truly don't think that anything is really wrong with the health care system. I've heard phrases like:

• Polls point out that 75%-85% of people rate their health insurance as good or excellent. Therefore, only 15%-25% of people are unhappy and this is not a big problem even though people will not start businesses in order to keep their employer health insurance.
  
• Everyone access to health care through the emergency room so this is really a health insurance issue. There's a reason we call it a health care system. Using the Emergency Rooms is not a very efficient approach and is kind of letting someone else worry about the problem.
• Their plan is "patient" focused. I would like health care to kick in before we become patients or sick. It kind of nicely symbolizes how they don't think about health care until it's really a problem

Their latest proposal which came three month late at least had numbers and at least they're paying attention. Here's my the good, the bad, and the ugly take on it.

The Good:

• The proposal spreads the employer tax break to those who purchase individual insurance. Rather than eliminate the tax break for employers who buy insurance, they widen the tax break. It does level the benefit playing field and is a fair idea to consider.
• There is also an idea for employers to take that same tax breaked or tax broken health insurance benefits and give it to employees as cash. Employees could decide if they want to buy health insurance or spend it on crystals and herbs. This could provide a real opportunity for health care providers and plans who can explain their value proposition well.

The Bad:

• While the plan will prohibit insurance carriers from denying individuals based on pre-existing conditions, the individual insurance market still has its dysfunctions. Given this proposal is making employer-based insurance less attractive, it needs to ensure a functional individual market.
• States are given grants to improve high risk pools for those cannot purchase private insurance. This further underscores that the individual market will not be expected to provide coverage for all but there will need to be a safety net that is not planned to be sufficiently funded.

The Ugly:

• It weakens the Council for Comparative Effectiveness Research by requiring approval from medical societies. This Council was part of Obama's first stimulus project and is inteded to promote evidence-based care and ideally allow cost-effectiveness to be a criteria for evaluating treatments. Why would the Republicans want to weaken this clinician-led Council? There is no apparent reason to me other than to be cynical and assume that it's helping pharmaceutical and medical device companies who are the most vocal opponents of comparative effectiveness research.
• The proposal does focus on medical malpractice reform by limiting jury awards which isn't a bad idea. However, it proposes setting up a new court system to evaluate medical cases. What's wrong with the exiting court system? It befuddles me why we would create a new judicial body unless it's so everyone can get free drugs during the trial.
• Some of the savings will come from reducing Disproportionate Share or DSH payments to hospitals that see a high number of uninsured. I hope that this cut is tied to a reduction in people without insurance rather than a theory that a hospitals should not see any benefits for seeing more patients without insurance. However, if a proposal was really serious about reducing the uninsured rate, why not assume that this payment will not be necessary?

I prefer to be political in my comments on other's posts rather than bring politics into this blog. I'm not that interested in debating for the sake of debating since we won't change each other's minds. The Republican's lack of effort on health care reform arouses my blogging ire because well, claiming they're ignorant, out of touch with reality, or nasty isn't really a better way of saying it. Actually, I'll go Sonia Sotomayer on them and accuse Republicans of a lack of empathy.

The bigger issue for me is that the goals of their proposal is tort reform and tax breaks as opposed to any vision of what a future health care system would look like. It's clear that they don't feel a need to reduce the uninsured rate, have no provisions to improve quality of care, or help make better decisions about how to use health care dollars. I can almost hear the yawn from the proposal writers as they write it.