Death's Door Bandit; A Sad Tale about the US Health Care System

An elderly gentleman walked into a bank and indicated to the teller that he had a weapon. The teller was convinced enough about the danger or nauseated enough by his ear hair that they considered the threat to be serious. Before anyone handed him the money, the gentleman collapsed into a chair and had a heart attack.

This turned out to be an actual lucky turn of events for our ear haired protagonist because he had robbed the bank to get money to pay for health care. Due to a 1976 US Supreme Court decision, it is considered cruel and unusual punishment for a prison not to provide health care. Since the elderly gentleman was now in the prison system, he got the medical care that he needed.

However, there is a plot twist for the Death's Door bandit (This is a better term than the Ear Haired Bandit. I don't know if he had ear hair or not but if he is over 65, it's safe to assume that he did. The Bleeding Heart bandit is also an option). Readers may be wondering if the Death's Door bandit (DDB) was old enough to qualify for Medicare, the health insurance scheme for senior citizens. Not only was he eligible for Medicare but also Medicaid, the health insurance scheme for the low income! In case anyone is wondering, why I am calling Medicare and Medicaid a scheme, it is because I am imitating the Economist who uses that terminology. If you read it with a British accent, it sounds much more regal.

DDB is getting his health care paid for by the prison system but could also get his health care paid for by Medicare and Medicaid. He will no longer need to rob banks for health care so this story appears to have a happy ending. But wait, this scheme has a plot twist!

Heart attacks and medical care for senior citizens whose physical and mental status has decompensated to the point that they don't even realize that they qualify for basic government programs is not cheap. It's costly enough that administrators for the prison health system and Medicare and Medicaid started to pay attention. Both administrators took the high road and began to maneuver to try and stick the other one with DDB's medical bill. Medicare and Medicaid administrators want DDB to stay in jail so the prison will pay for his health care while the prison administrators wants to release DDB so Medicare and Medicaid will pay for his health care. The justice system is caught in the middle.

Only in America. Our health system must rank number one in something for this scenario.

Full disclosure: This is a true story. Names and details would have been changed to protect the innocent, except there are no innocent in this story.
Full disclaimer: I don't know the difference between disclosure or disclaimer.

So you want to be a Product Manager?

No, you still want to be a rock star? Me, too but I'm tone deaf. Let's face it, if we didn't become astronauts, fire fighters, princesses, or vampire slayers, we all sold out our 8 year old selves. That's okay as long as you felt that you got a fair value for your soul. One relatively new career that provides fair value is product manager.

Product Manager has become a popular short-term career goal for MBA graduates to write about in their essays. I have recommended it to a few folks who are struggling with their career goals and they all seemed to like it. However, when you are struggling with the MBA career goal essays, if someone suggests being Colonel Mustard in the library with a candle stick, you consider it.

Digressions aside, product manager is a more savvy way of saying that you want to work in general management. Another option to the general management career track (which does not involve actually managing generals or even colonels) is management consulting. However, unless something in your background indicates that you can tolerate the rigor and demands of the lifestyle associated with a consulting career, it's not likely to make your essay look believable. In this example, managing even private first classes would be a rigorous enough background.

In the last five to ten years, product management departments have been created at companies, like health insurance, that did not previous have this functional area. Tech companies have used product managements since the industry was first created way back in 1991. Geek MBA 360 covers product management at tech companies very well while my knowledge is product management in health insurance. The product management position has become popular since it provides a clear accountable person or "one throat to choke" for a line of business. The fact that it's becoming a more common post-MBA destination shows how widespread it's become and how it may have peaked.

I hope that it won't go the direction of project management which is often confused with product management not only because the names sound very similar especially if you say them quickly. The demise of project management is the endless certificate options like PMP or PgMP. These certificates or license have proven to be very good predictors of tolerance for standardized tests and adult education classes and a very poor predictor of the level of quality of a project manager. They are also very good at creating an easy way for recruiters to screen out applications for positions that could attract a lot of candidates with every diverse backgrounds and many applicable skills. This type of certificate program is a significant risk for the demise of the product management position.

My tirade against project management served as an opportunity for me to both vent and juxtapose it with product management. At some companies, a product manager is very similar to a project manager as they tend to focus on implementation. These implementation product managers are more internally focused and implement new strategies, products, or decisions that someone else, usually the Sales department, made. In the case, they don't usually conduct market analysis except to validate specific decisions or build business cases since that work was already done.

What an implementation product manager will do is:

• Use bullet points because product managers know that their implementation teams won't read anything they write unless they use bullet points
• Work closely with IT or IS or Computer people Product Managers to define requirements and get sign off from business owners
• Develop and maintain documentation on decisions
• Resolve interpretations of different decisions or different documentations that may vary across departments or systems
• Product training
• Ensure that any annual processes are completed
• Work closely with internal departments on new process development
• Lots of project management
  

The work is very tangible, specific, and it's a great way to learn about how an industry works. This is a good way to enter a new industry or get training to become a strategy product manager.

A strategy product manager is definitely sexier. However, to put that in perspective, that's like saying one member of the Hell's Angels has better flossing habits than another one. The strategy product manager can generally get project managers to do the implementation work and is the one involved in the decisions for new products, geographies, or other strategies. The work includes:

• Still has to use bullet points but communications are shorter and more like "We decided to do launch a new product that will appear to niche X. The project manager will actually implement it and I will pretend that I am the project manager's boss."
• More external facing with lots of market assessment, developing market segments, forecasting market growth, and talking with customers
• Presenting to customers. The Sales folks will generally trust you in front of clients to not talk about the difficulties that the latest request will create with the billing department's invoice batch process
• Develop 3 year product plans called road maps
  
• Assess new business opportunities.
• Be the product expert and know how it should work but you will get to buy a vowel or use a lifeline with another functional area that knows the actual answer. The strategy product manager just has to know who to ask
  
• Develop very good judgment on what projects really require the strategy product manager to manage in order to be successful but won't absolutely suck away too much time

Since the grass is always greener, strategy product managers strive to be budget product managers or work at a company where the product manages their budget and is responsible for profit. That is typically called "P and L" responsibilities which stands for Profit and Loss. However, I don't know why anyone would want to be responsible for the loss. Try to find someone else to take that on so I would describe it as being responsible for just the profit.

The main difference with strategy product managers is that budget product managers don't have to beg other functional areas to free up FTE time or hours to support their products. They already have an allocated FTE time that they can spend how they choose. In the corporate world, control of budget trumps all. Whenever someone tries to assign me a new responsibility, I demand the budget and resources to cover it. No one has called my bluff and given me both which shows how much people value their budget. Therefore, I am still a strategy product manager.

We need a Single Payer System like a Fish needs an XBox

I used to wear T-shirt that I got from a thrift store that said "It's time for Peace, Jerry Brown '92" while I drank from a water bottle with a Dennis Kucinich sticker. Yet, I don't see how a single payer system can be viable.

Here are the reasons that I hear from proponents of a single payer system:

1. It will provide health insurance for everyone and cover all services.
2. Insurance companies will no longer make huge profits and the money saved will cover health insurance for everyone, the national debt, and an Xbox for every fish.
3. It will make the health care system simpler and more efficient and the money saved will provide Guitar Hero III for every non-vertebrae.
4. It's easy to do, just expand Medicare to cover everyone.

Here are the problems:
1. Health Reform has been working towards preventing the denial of health insurance which is necessary to have a humane society. However, access to health insurance won't solve health care costs that exceed inflation. It won't create more primary care physicians or more care providers. It also won't address the approximstely 33% of the uninsured who make more than $50,000/year and refuse to buy auto insurance, wear motorcycle helmets, and still probably try to smoke on airplanes.

2. With a little extrapolation from this data of the large publicly traded health insurance companies, I see about $12-$15 billion in profits that can be seized. That would cover about 50,000 hip replacements which will probably be needed by the 50 million Baby Boomers or 12,500 very premature babies. In today's health care dollars, that's actually not a lot of money. Health insurance plans have an average profit margin of 3%. Some might argue that we should include money spent on marketing and CEO salaries. However, a single payer system will have to market to explain its system and have expenses developing a large enough system to cover the whole US. If I was feeling really snarky, I would counter that the likely rich benefit packages from unionized government workers would be about the same as large CEO salaries. If I was feeling less snarky, I would point out that $10 million in salaries is 1% of a billion dollar in revenue company so that savings opportunities is closer to 40 more hip replacements.

While ending the existance of evil health plans creates the same delight that one gets when their favorite team beats the New England Patriots, the money would cover the cost increases for the next few years at the most.

3. One claims system, one billing system, one benefit package, and one coverage system is very appealing. I have heard that it would eliminate provider administrative costs by 30%. Oregon had made movements towards consolidating its Medicaid carriers into one carrier per geographic region with this same argument. However, they pulled away because there were not necessarily carriers that could serve all the Medicaid beneficiaries in that region. Some carriers and provider groups that did service a particular county would be eliminated. That approach would award a monopoly to one group. That's the danger of the Highlander (In the end, there can only be one) approach. If one company controls an entire market with no competitors, how do we expect them to behave?

Health care is also very local and segmented both geographically and demographically. The east coast features large academic medical centers while the west coast features the integrated delivery systems while the south has entrants as new as most of its latest round of carpet baggers. In Oregon, you have to cover naturopathic medicine to be competitive while in Boston, you have to include the Partners Health Group.

Some individuals want alternative care covered, some can't afford their diabetic medications unless there is no cost share, and some want the cheapest plan possible and would rather pay 50% when they have to use services. It's not possible to create one universal benefit plan that would meet the needs of everyone and be affordable. Segmentation is a hallmark of successful business ventures. Trying to be all things to all people is a recipe for failure. The banking system and telephone lines lends itself towards a national model. Most other services lend themselves to a state wide model at best.

Creating this simplicity would entail a lot of sacrifice of personal choice. We're not good at sacrificing choice in cell phone plans, let alone health care coverage. Part of growing up as a health care system is figuring out what we really want to be. One universal model is not something that appeals to any characteristic of our nation.

4. The biggest problem is that the only group that is really equipped to offer a universal health plan is Unitedhealth Group. They are the only ones who have the size and scale.

The Medicare program has no experience with any level of sophisticated claims processing, network management, or negotiating for medical services. Network management and even a rudimentery claims processing is necessary for any type of system that pays providers for offering the right level of services and not just lots of services. Their price negotiations involves setting a price and telling people to take it or leave it. The idea that they can negotiate with prescription drug companies on pricing will be undermined by the fact that they have no department that can do it. Currently, they rely on the same companies that private insuracne companies use for prescription drug negotiation. Medicare can barely prevent fraud and abuse let alone managing costs. It has driven disease management programs into bankruptcy.

Someone who provides universal coverage would also need to staff up on customer service and basic communications which are not Medicare's area of expertise. I would offer the image of the DMV running your health plan except that I don't like to drag in the poor DMV. They get picked on enough.

Since Medicare doesn't have the basic expertise, the other option is to contract with private health plans to offer universal coverage. This is called the Medicare Advantage program which has its critics, including President Obama.

The solution: Since I haven't come up with a colonoscopy joke, by my new rule, I have to come up with a solution. Personally, I like Germany's approach. A basic level of services is covered by the government and people can buy private insurance for more coverage. This is basically like our eduction system.

Are ACO's DOA?

A lot of people have been staking the future of health care on the idea of Accountable Care Organizations (ACO's). President Obama thinks they will reduce health care costs, providers have been reorganizing to take advantage of the opportunity, and bloggers have praised them. Even the event planning industry loves them as it has spawned a whole new line of conference opportunities.

To those who have not been following the ACO's like fantasy league baseball owners follow spring training, an ACO is an old idea that aligns the financial incentives of providers and payers. It provides a global budget for managing the care for Medicare beneficiaries. This rewards providers for efficient health care or keeping patients healthy rather than lots of invasive procedures. Medicare projects that it will save $510 million over a 2 year period. However, the release of the proposed ACO rules by Center for Medicare and Medicaid (CMS) at the end of the March had the same effect on the party as urine in the punch bowl. Or as my blog title foreshadows, it's like Weekend at Bernie's 2 where providers realize that participating in an ACO is like partying with a dead guy. It's a lot of work, not a lot of fun, and starts to smell after a while. In summary:

Lots of work: To participate in an ACO, providers will need more reporting, IT systems, have to develop some insurance functions, and build up the infrastructure to better track patients health. This is not unexpected and was part of the ROI analysis. What pushes the amount of work over the edge is the governance requirement. There must be a separate Board of Directors that runs the ACO that includes patient representation. This is a common aspect of Federally Qualified Health Centers and also the most challenging requirement to meet. Creating a separate governance board with complete control removes a lot of control from the providers who are launching a new venture. It's not easy to give up control of something that requires this much investment.

Not a lot of fun: The fun in ACO's was the opportunity to get paid more treating Medicare beneficiaries through shared savings compared to a benchmark. However, CMS took away the fun or opportunity to make more money by doing the following:

• The benchmark or cost target that providers have to beat to make additional money is the current Medicare benchmark for the geographic area. For providers in the Northwest where benchmarks are very low because they are historically low cost areas, that means limited opportunity. For providers in Texas and Florida, where the benchmarks are very high because these are expensive areas, there is opportunity. However, these providers get paid enough by Medicare already so there is not the incentive. In other words, providers that are well-organized and poised to form an ACO have little room to get additional money. The wide variation in geographic payment for Medicare has been a continual problem and removes a lot of incentive from the ACO.
  
• CMS also keeps the first 2% of any savings. Therefore, providers have to lower costs by greater than 2% in order to get additional payment. Or yet another barrier to participation. That's like having to watch Weekend at Bernie's 2 before you get to watch the first one or just turn off the TV.

Smelling like a corpse: Given the current structure, there is a risk that no provider group will apply to the ACO's. The current rules went over like a fart in a spacesuit to the 10 provider groups that participated in the original Physician Group Practice demo. If those provider groups who are the most likely to be successful aka make additional money in this model don't participate, who will? This would be a large blow to the Obama administration's vision of designing a more efficient health care system.

Hope or Yes we Can: It's too easy to write a critical blog post about how a new idea in health care might not work. Any blogger who writes such a critical post should either balance it out with a solution or some really good colonoscopy or animal husbandry jokes. Since I don't have any new jokes, I'll pick the solution option.

Despite the fact that CMS has made participation in an ACO as appealing as a colonoscopy, this model represents the best solution to the US health care system. The fee for service model has proven to be unsustainable. Others besides CMS, like large employers or unions will start to demand this type of model from insurance companies and provider groups. While the revenue opportunities in an ACO are not good, there are not any better revenue opportunities elsewhere. Provider groups can no longer compare opportunities to today's payment but should compare it to the future payment opportunities. Provider groups who can organize under an ACO structure and lower health care costs will be more viable in the future. Those who cannot and expect to continue to be paid at today's levels will become just like the main character/corpse in Weekend at Bernie's.

Provider groups best option is still the ACO model. If CMS can't develop a good structure, that presents the opportunity for the health care industry to develop its own.

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.