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Economic Incentives Motivate!

June 22, 2011
inConsumer Driven Health Care, Health Savings Accounts vs Medical Savings Accounts, Medicine: Healthcare System, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP,MACE

The use of economic incentives to motivate behavior is neither a Democratic or Republican idea. It is human nature to be motivated by economic incentives. The concept of individual responsibility is an American idea. It has been tarnished in recent years.

There is no question in my mind that government has the responsibility to be compassionate and help the needy. It is my view that government should help individuals help themselves.

The costs associated with Medicare and traditional healthcare insurance are rising. Every stakeholder points a finger at the other stakeholders as the cause.

President Obama’s Healthcare Reform Act is raising costs higher in anticipation of cuts in the future. He is in the process of forcing individuals to be more dependent on the government rather than promoting individual responsibility.

Obamacare will fail to control costs.

All anyone has to do is look at a Rand Corp. study of 29 years ago to see what works and what doesn’t work. After all that is said what matters are results in decreasing costs, not your political ideology.

The Rand Corp’s political leanings are more left of center than right of center. The Rand Corp tries not to be biased by these leanings in its scientific studies. Its conclusions from its own data are sometimes skewed to the left ignoring its own evidence.

The Rand Health Insurance Experiment looked at consumers’ healthcare consumption in healthcare plans with different deductibles as well as an HMO. It monitored the results and reported its findings in 1982.

The findings were:

  1. Patients are responsive to out-of-pocket costs (the more they have to pay, the less health care they buy).
  2. Changes in the amount of spending have no apparent impact on health care outcomes in most cases.
  3. Judging from the difference in behavior between HMO doctors and fee-for-service doctors, physicians are also very responsive to economic incentives.
  4. Consumers with high deductibles were as likely to cut back on useful health services, as they were to cut back on unnecessary care.
  5. The critics of the consumer driven model have used this last point as proof that consumer driven healthcare doesn’t work. They claim that these consumers will not get appropriate care if they have a high deductible and try to save money.

If health care was free, spending soared with no improvement in health status. In the government controlled model government has to limit individual choice of care and access to care in order to keep consumption of care down.

The 1982 RAND study proved to me that consumer driven healthcare can work. Healthcare consumption is driven by the economic incentives the healthcare system offers consumers, physicians, hospital systems, pharmaceutical companies and healthcare insurers. Consumer driven healthcare patients used services they felt were essential to them and did not spend money on services they felt were not essential.

A consumer driven healthcare system would stimulate the growth of full-service diabetes centers that would force physicians into competing for diabetic patients because patients would be managing their own healthcare dollars. CDHC could energize the chronic disease healthcare market. It would create specialized centers competing for the care of patients with chronic diseases. Preventing the complications of chronic disease with education about self-management is in the interest of patients with the disease as well as society. The medical care of the complications of chronic diseases consume 80% of all healthcare dollars. Consumers and physicians respond to economic incentives. The healthcare social contract is really between consumers and physicians not government and hospital systems.  

A 2011 Rand study of more than 800,000 families from across the United States found when people shifted into health insurance plans with high deductibles their healthcare spending dropped an average of 14 percent compared to families in health plans with lower deductibles.

In October 2010 Cigna released a report covering 5 years of real-world experience with 897,000 plan members, about half in “traditional” coverage plan and the rest in consumer-driven plans. 

All of the results show that CDHPs are working beyond anyone’s expectations.

  1. CDHPs save 15 percent in the first year, 18 percent in year two, 21 percent in year three, 24 percent in year four, and 26 percent in year five.
  2. All this while individual out-of-pocket exposure is about the same (17 percent) in both types of plans.
  3. Using Cigna’s quality measurements (which are wrong), there is 8 percent to 10 percent higher use of preventive services in the CDHPs.
  4. CDHP enrollees are 9 percent more likely to get evidence-based treatment in the first year and 14 percent more likely in the second year of enrollment.
  5. CDHP enrollees are five times more likely to complete a health risk assessment.
  6.  CDHP enrollees are19 percent more likely to work with a health advocate.
  7. CDHP enrollees are 40 percent more likely to use on-line cost and quality tools when making decisions.
  8. CDHP enrollees have a 13 percent decrease in the use of emergency rooms.
  9. CDHP enrollees are 9 percent more likely to switch to generic drugs.
  10. CDHP enrollees have a 14 percent lower prescription costs.
  11. CDHP enrollees are 21 percent more likely to participate in a disease management program.
  12.  CDHP reduce their costs by 21 percent for joint disease, 8 percent for diabetes, and 7 percent for hypertension.
  13.  CDHP enrollees are slightly more satisfied with their plans than people in traditional approaches (83 percent versus 82 percent).

Finally according to the Employee Benefit Research Institute(EBRI), 22 million people are enrolled in consumer-driven and high-deductible health plans.

In 2010 EBRI conducted “Consumer Engagement in Health Care Survey” (CEHCS) analyzing the behavior and attitudes of 4,509 adults ages 21–64 with private health insurance coverage.

The findings were;

  1. People who enroll in these plans are more cost-conscious than those who have traditional health insurance policies.
  2. 53 percent routinely check to see whether their plan would cover specific care, compared with 47 percent of traditional policyholders.
  3. More than 50 percent check if a generic drug is available, compared with 44 percent in traditional plans.
  4. CDHP enrollees were more likely than traditional plan enrollees to choose doctors based on their use of health information technology.
  5. CDHPs enrollees also were more likely to exercise and less likely to be obese compared with traditional health plan enrollees.

President Obama’s Healthcare Reform Act will eliminate consumer driven health care plans.  I believe this is ill advised. CDHPs have decreased the cost of healthcare by motivating consumers to drive their healthcare decisions. A government directed system will not achieve this goal.

The results above were gotten with Health Savings Accounts. The use of my Ideal Medical Savings Account increases the economic incentives for consumers.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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Health Care and Federal and State Deficits

February 13, 2011
inMedicaid, Medicare, Medicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP

Published: December 11, 2010

The basic truth is Federal and State deficits cannot be fixed unless spending for Medicare and Medicaid is decreased. President Obama’s Healthcare Reform Act‘s bureaucratic complexity of will increase the cost of the healthcare system without increasing the quality of healthcare.

New schemes such as Accountable Care Organizations will fail as did the Health Maintenance Organizations of the 1980’s and 1990’s.

None of our political leaders are interested in facing the real reasons for the escalating healthcare costs.

This year Medicare, Medicaid and SCHIP will account for more than 20 percent of all federal spending. These entitlements cost more than Social Security or National Defense.

The entitlements are being expanded inefficiently by President Obama’s healthcare reform act.

By 2035 federal health care spending is projected to account for almost 40 percent of the federal budget. At the current rate of increase in Medicare eligible aging population, a rising Medicaid population and the rising healthcare costs the federal government will collapse under its own weight.

“Two bipartisan commissions have issued recommendations to sharply reduce annual deficits, in part through bold changes — some sound, others dubious — in the way health care is paid for.”

The White House commission, headed by Erskine Bowles and Alan Simpson, proposes ways to decrease entitlement spending for Medicare and Medicaid by nearly $400 billion dollars between 2012 and 2020.

A second commission, an independent panel headed by Pete Domenici and Alice Rivlin, has suggested savings of $137 billion dollars by 2020 by Medicare cost-sharing.

Both commissions have some good suggestions. Many of the ideas of both commissions are wrong.

The real reasons for escalating healthcare costs are;

  1. The grotesque profits of the healthcare insurance industry as a result of the federal government outsourcing the administrative services for Medicare and Medicaid. (See 40 billion dollar per year growth)
  2. The lack of states limiting premium rate increases for the healthcare insurance industry.
  3. The absence of promoting rate competition among healthcare insurance companies.
  4. The extremely high cost (estimated 300 billion to 750 billion dollars a year) for defensive medicine as a result of President Obama’s refusal to deal with effective tort reform.
  5. The lack of incentives for consumers to maintain their health. The obesity epidemic represents one example where incentives are lacking.
  6. The lack of effective public education that would teach people the principles of health maintenance.
  7. Discourage confusing media coverage of clinical research studies. The media is interested in the sensational contradictions inherent in serious clinical research.
  8. These contradictions are supported by the publication of shabby clinical research in medical journals and other publications.
  9. The lack of effective public service announcements about health.
  10. The lack of consumer incentives for maintaining good health and utilizing medical services wisely.
  11. The ideal Medical Savings Account would solve many of these problems instantly.
  12. Few healthcare policy makers think consumers are smart enough to understand how to use the ideal Medical Saving Account effectively. Therefore health policy “experts” dismiss Medical Saving Accounts.
  13. Medical Savings Accounts are different than President Obama’s restricted health savings account.

Both commissions are promoting the same ideas of redistribution of wealth and cost shifting. Both increase the cost to those that can afford it. Neither commission deals with consumer incentives.

President Obama’s healthcare reform act does not deal with consumer incentives. It deals with government control and consumer dependence on regulations.

All of the ideas of the commissions are cost containment ideas, not health promoting ideas.

Both commissions shift much of the burden of insurance coverage from the federal budget to individuals or to the states.

The commissions’ recommendations are the typical political shell game. They produce no real reduction in the cost of health care. They are a political ploy because they make the federal deficit look better while not doing a thing to repair the healthcare system..

One suggestion is to require wealthier older people to pay more for Medicare coverage and more of the cost for their own health care. Medicare already uses means testing to set the Medicare premium. The means testing is calculated using IRS tax returns. The distributions of IRA funds are taxed twice. Medicare costs more in after-tax dollars than ordinary group insurance for many seniors.

The problem is that means testing doesn’t work to reduce the deficit. Half of all Medicare beneficiaries live on low incomes and pay minimal premiums. Cost-shifting will undermine the health or financial security of senior Americans of modest means. Beneficiaries might have to pay hundreds or even thousands of dollars in additional out of pocket expenses.

The Domenici-Rivlin commission is advocating ending employer pre-tax exemption for healthcare coverage. This will increase federal revenue and lower the deficit. It will also increase taxes and decrease discretionary income. The result will be a decrease in consumer spending. A decrease in consumer spending will hurt the economy. Ultimately it will increase the federal deficit and decrease our standard of living.

It is time for common senses and sound economic thinking to Repair the Healthcare System.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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Where Have President Obama and Dr. Berwick Gone Wrong?

September 12, 2010
inMedicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP,MACE

Director of CMS, Dr. Don Berwick, has the same central government control philosophy as President Obama. They have different reasons for central control.

Dr. Berwick is going to feel disappointed and deceived when he fails to effect meaningful change or reduce medical costs. President Obama’s healthcare reform law is going to increase the cost of Medicare and Medicaid, restrict access to care and result in rationing of care.

President Obama wants to increase quality and decrease cost of healthcare with more efficiency. Everyone has the same goal. President Obama is going about it the wrong way

Dr. Berwick has stated that he loves the British National Healthcare System. He was hired as a consultant to that system by Tony Blair. The goal was to modernize Britian’s centralized system. He failed to reduce their costs. Britain is now decentralizing its healthcare system.

Dr. Berwick thinks in systems terms using the concepts of Fredrick Taylor. In a 2009 speech Dr. Berwick said,

“The idea of a system is neither a frill nor a fine point if we are to get reform right,” “System of healthcare lies at the very center of the scientific and political challenges that stand between us and the care we seek. With a proper understanding of systems, authentic health care redesign is feasible and socially productive. Without that understanding, ‘reform’ will likely do more harm than good.”

Our healthcare system does not coordinate care using teams. If they did the patient must be at the center of the team not the government.

All the stakeholders must be members of the team. They all must be accountable to each other. Members include patients, physicians, hospitals, healthcare insurers, and the government. Dr. Berwick is only considering physicians and other healthcare providers. He is giving the healthcare insurance industry a pass. The healthcare insurance industry is the biggest villain in our dysfunctional healthcare system..

Patients and physicians are the most important members of the team. Physicians are the managers, patient are the workers.

In order for a system to work, team members first have to know the elements of the system. The team members should then be provided with incentives so they are motivated to make the system work.

Dr. Berwick is not considering incentives for patients and physicians. He does not believe in the value of the free market. I believe his attitude will be a huge problem in his attempt to convert medical care to Taylor’s principles of scientific management..

I do not doubt his ability to create systems of care. I disagree with his punitive system of fulfilling systems of care. It will not work.

“Health care reform without attention to the nature and nurture of health care as a system is doomed,” Berwick said. “It will at best simply feed the beast, pouring precious resources into the overdevelopment of parts and never attending to the whole — that is care as our patients, their families and their communities .”

Dr. Berwick has criticized physicians care. He does not criticize patients lack of adherence to recommended care or their lack of compliance to healthy lifestyles. There has been little discussion on where money is wasted in the healthcare system. The healthcare insurance industry, hospitals’ or government’s role in the dysfunction of the healthcare system is not being discussed.

His has focused on waste created by the deficiencies in safety, effectiveness, patient-centeredness, timeliness, efficiency, and equity. There is no doubt the healthcare system’s needs the scientific management approach in each area. However, this is not where the bulk of the waste is.

“The improvement of health and health care depends on systems thinking and systems redesign,” Berwick said. “ ‘Reform’ without systems thinking isn’t reform at all.”

I agree we need systems of care. This philosophy is expressed in AACE’s System of Intensive Self-Management for Type 2 Diabetes Mellitus. I was the chairman of the task force for these guidelines. I ask develop of system of care for the diagnosis and treatment of osteoporosis.

President Obama favors a single-payer system with central control. Central control does not increase efficiency.

Dr. Don Berwick believes that the only efficient way to develop a process of scientific management in healthcare is central control with a single-payer system.

There are multiple defects in his notion.

1. Medical care should not be a set of algorithms that are centrally dictated. Algorithms should be a guide to care. Physicians must use clinical judgment.

2. The patient physician relationship must be nurtured. A large part of the therapeutic effect is that relationship. Medical care is not a commodity.

3. Clinical judgment is vital to successful patient outcomes.

4. Systems of care, with an interdisciplinary team approach, should be taught in medical schools and post graduate courses.. Presently, all disciplines are taught in isolation. When physicians go into practice, they realize the importance of interdisciplinary relationships. Models for interdisciplinary treatment approaches must be promoted and incentivized.

5. Dr. Berwick’s approach assumes that politicians and politics do not play a role in forming healthcare policy. Few believe this notion. Politics plays a big role in dictating agency policies.

6. In 1945, Friedrich Hayek pointed out that the command approach to dictating work flow is doomed to failure. Commanders do not receive accurate information about what is happening on the ground. This results in faulty central decisions.

7. Technocrats, like Dr. Berwick, may believe they can marshal statistics to optimize the health-care system. Statistics on outcomes and treatment plans have been misleading..

8. Statistical analyses rely on too many assumptions and too much unreliable data. These are the reasons government programs often result in colossal amounts of waste, fraud, and abuse.

9. The interaction of all the stakeholders must be considered. If the abuses of all the stakeholders are not considered and eliminated, the decision reached by the technocrats could be incorrect.

President Obama believes technocrats (Dr. Berwick) can solve the problems in the healthcare system. Dr. Berwick sees the problems in the healthcare system from 30,000 feet.

Our healthcare problems will only be solved by consumers at ground level along with disintermediation of the middlemen in favor of consumers.

Repair of the healthcare system can be achieved with consumer driven healthcare and ideal medical saving accounts. Consumers must be empowered by the government to take care of their health and their medical care individually with the appropriate incentive.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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President Obama’s Healthcare Reform Will Fail. What Should We Be Doing Next?

September 1, 2010
inMedicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP,MACE

Dr. Don Berwick, Director of CMS, has stated that the Healthcare System is too complex for people to manage their own medical care. It must be left up to the experts in government. I believe 160 new government agencies will not succeed in managing individuals’ medical care very efficiently. The resulting system will be less efficient. It will also limit access to care.

The Massachusetts Healthcare Reform experiment has failed for reasons I have outlined previously.

President Obama’s Healthcare Reform Plan will also fail at a very high cost to the American taxpayer. His healthcare reform law follows the basic principles of the Massachusetts Healthcare Reform Plan.

Some readers misunderstand the two models I have proposed to Repair the Healthcare System. Those models are Consumer Driven Healthcare and the Ideal Medical Saving Accounts.

Regina Herzlinger the Nancy R. McPherson Professor of Business Administration Chair at Harvard Business School has been called the “godmother” of Consumer Driven Healthcare.

For those readers who skim blogs, I think it would be a excellent exercise for the reader to settle down and watch an entertaining “You Tube” by Dr. Regina Herzlinger describing the power of Consumer Driven Healthcare.

McKinsey consultants have claimed that administrative inefficiency of the healthcare system accounts for $500 billion dollars of excess cost per year to the healthcare system. I think it is closer to $250 billion dollars a year.

Eliminating inefficiency will not be achieved by adding 160 new bureaucratic agencies and over 800 new regulations.

The solution to the problem is easy. The social contract for medical care should be between patients and physicians. Consumers should owned their healthcare dollars. They should be given incentives to be responsible for their medical care and maintaining their health. Chronic disease complication rates would fall, obesity would be decrease and the cost of healthcare would decrease.

The role of government should be to empower consumers to control their medical expenditures and maintain their health. The government should level the playing field between stakeholders. It should provide education and subsidies to those who need it. The government should teach them how to control their healthcare dollars and maintain their health. Then government should get out of the way.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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President Obama. You Are Losing Your Workforce.

August 18, 2010
inMedicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP,MACE

http://www.ama-assn.org/ama/pub/news/news/medicare-consultation-codes.shtml  Somehow, President Obama must attack raising cost of medical care. Physicians are the easiest stakeholders to attack. They are the least organized.

A sneaky reduction in specialist reimbursement occurred on April 1st. Medicare eliminated consultation codes. Most specialty organizations fought hard for Medicare to recognize their physicians’ additional training and experience. Specialists are well deserving of their consultation codes and its increase in reimbursement.

Elimination of the consultation codes is a back door way of reducing specialists’ Medicare reimbursement. This sneaky reimbursement reduction is going to result in many unintended consequences. President Obama will to be very upset by the result of this action.

The AMA constructed and published a survey, along with many subspecialty organizations, about the potential effects on medical care by the elimination of the consultation codes.

The survey proves to me that physicians can get upset when they are taken advantage of once too often. I have been saying all along that the AMA has been cooperating with President Obama and his healthcare reform bill as if the AMA was President Obama’s indentured servant. I think President Obama has finally gotten under the skin of the “house of medicine” (AMA). It took a long time.

“The elimination of Medicare’s consultation codes has had a negative impact on physician efforts to improve care coordination and reduced the treatment options available to Medicare patients, according to a new survey released today by medical specialty societies and the American Medical Association (AMA).”

Physicians who see Medicare patients have taken a number of cost cutting steps to offset the losses in revenues caused by the elimination of consultation codes. The cost cutting steps have resulted in seniors experiencing limited access to medical care. They have also experienced rationing of care. Unfortunately, these unintended consequences were predictable.

Highlights from the surveyclip_image001 include:

  • Three out of every ten (30%) have already reduced their services to Medicare patients or are contemplating cost-cutting steps that will impact care.
  • One-fifth (20%) have already eliminated or reduced appointments for new Medicare patients.
  • Nearly two-fifths (39%) will defer the purchase of new equipment and/or information technology.
  • More than one-third (34%) are eliminating staff, including physicians in some cases.
  • Following CMS’s suggestions that they no longer need to provide primary care physicians with a written report, about 6% have stopped providing these reports, while nearly another one-fifth (19%) plan to stop providing them.

On December 1st when there will be a further 23% reduction in reimbursement. Seniors’ access to care will get worse. All this even before any of the major changes in President Obama’s healthcare reform act starts having its greatest effect on seniors’ care.

The Centers for Medicare and Medicaid Services (CMS) predicted, in its final physician payment rule for 2010, that no specialty would see Medicare revenues decline by more than 3%.

It turns out the minimum decline in revenue is 5%. Thirty percent of practicing specialists have experienced losses of more than 15%. This level of decrease was predictable. Most specialty practices cannot sustain cuts of this size. Specialists are reducing their services to Medicare patients.

CMS has also asserted that there is no longer any significant difference between a consultation and a routine office visit. CMS has to be kidding. Whoever believes this has no idea of the role of a consultant.

CMS has stated that consultants can send referring physicians the medical record rather than a written report. CMS recognized this dictum might discourage care coordination. Coordination of care is supposedly a priority for President Obama. CMS promised to make adjustments if there was evidence of deterioration in “effective coordination of care.”

Following CMS’s suggestion that specialists no longer need to provide primary care physicians with a written report about 6% have stopped providing these reports. Nineteen percent of specialists (19%) plan to stop providing reports and a number of others in the survey commented that they will continue providing reports but only very brief ones.

This regulation is destructive to coordinating care with the patients’ primary care physicians. The government is going in the wrong direction. There are other unintended consequences resulting from the elimination of the consultation codes. They are technical. The regulation limits payment for many services provided by the specialist.

President Obama promised the American people that he was going to reward cognitive services. Elimination of the consultation codes has the opposite effect.

One example is prolonged services for hospitalized patients. At issue is whether physicians can count time spent on any duties other than their face to face visit with the patient. Other duties include studying the patients past and present records for clues to diagnosis and treatment or discussing the case with the patient’s primary care physician or their family.

“CMS only recognizes face to face time and not other services such as establishing and reviewing charts and communicating with families and other health care professionals. In effect, Medicare is denying payment for these services and further discouraging coordination of care between professionals.”

There are other issues such as payment for a patient being seen by two specialists in one day and payment for new Medicare patients.

It is clear to me that whoever wrote these regulations has no idea of the mechanics of the practice of medicine. I doubt that anyone asked for physician inputs.

CMS is focused on changing the payment system for medical care. They are not focused on the retention of their workforce or improving the care of the American people.

President Obama believes that he will ultimately be able to force all physicians to become salaried workers of the government. I believe he will be unsuccessful.

There are many areas in the healthcare system that can be fixed to reduce the cost of medical care to affordable levels without losing the workforce.

Three important areas to improve to reduce medical costs would be effective malpractice reform, effective rules regulating the healthcare insurance industry and effective team management of chronic disease with the patient
being in the center of the healthcare team under the leadership of physicians.

All this can be accomplished by consumer driven healthcare in combination with the ideal medical savings account.

I hope President Obama is listening. Somehow, I doubt it.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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President Obama’s Legislative Strategy

May 5, 2010
inMedicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP,MACE

President Obama’s healthcare reform bill was rammed through congress over a month ago. He has been first to point out that the world has not fallen apart yet. He is being disingenuous since he healthcare reform plan does not influence medical care until 2014.

The strategy is to not do anything drastic until after he wins the November 2010 elections for the Democratic Party and the Presidential election in November 2012.

He is disregarding American’s anger toward him for ignoring their wishes. He is hoping they forget their anger.

The traditional media is helping America forget the tactics used to pass the healthcare reform bill. They are not evaluating the long term consequences on medical care and the budget deficit. It is not economically feasible to enlarge failed entitlement programs.

The public opposes the healthcare bill yet Wellpoint, who has been making billions of dollars a year, raises insurance premiums by 39%.

Immediately, President Obama, Harry Reid and Nancy Pelosi demonized the healthcare insurance industry. The choice given the public was to keep the present system along with healthcare insurance company abuse or adopt President Obama’s healthcare reform plan. The Republican Party did not present an alternative loud enough.

President Obama’s healthcare reform plan won the day by a partisan vote and a frustrated electorate. It led to Nancy Pelosi’s comment that Americans will understand the bill after it is passed.

The reality is the healthcare reform bill will lead to a single party payer system with increasing deficits, increased taxes and decreased access to care.

The healthcare insurance industry and Big Pharma are supporting President Obama’s healthcare reform plan because they will continue to control the healthcare dollars. Now the government will subsidize their business.

After passage of the healthcare reform plan, President Obama went on to his financial reform bill. There was much opposition to his plan. The plan does not go far enough to repair structural defects in the financial system. It also increases government control of the financial system without preventing abuse. Fannie Mae and Freddie Mac are not restructured.

In the midst of the financial system reform debate the Democrats started a congressional hearing on alleged abuses by Goldman Sachs. Congress has demonized Goldman Sachs. The public has another choice. America can either support President Obama’s financial reform or the old structure.

President Obama’s environment and energy bill was going nowhere. Cap and trade looked dead. President Obama agreed to permit offshore drilling for oil as a compromise.

The catastrophic oil spill occurred. The traditional media obsessed over the leak. In order to be a “good guy” President Obama announced that off shore drilling is too risky and discontinues his plan to let federal leases for off shore drilling.

We now have an environment and energy bill without off shore drilling. There is no consideration about this decision’s effect on a fragile economy.

The immigration bill is going nowhere also. It has large structural defects. The federal government is not enforcing laws that already exist. Arizona passed a law duplicating the federal laws. Arizona gets demonized by the White House and the traditional media.

President Obama has condemned Arizona. Arizona is only doing what the federal government should be doing. There is now public sympathy for President Obama’s defective immigration bill.

I suspect President Obama will use this opportunity to push through his immigration bill rather than do it right. Where are the Republicans?

President Obama wants illegal immigrants to be legalized citizens. He wants them to have the right to vote. His plan is to get enough new voters to neutralize the independent voter who have defected since he was elected President.

The pattern is clear. You demonize the opposition and then pass your alternative as if it is the only alternative. President Obama’s method has legs with the traditional media. Experts in each area will tell you most of this legislation will not solve any of our problems. It will be ineffective legislation. It will increase the federal deficit and lead to more taxation. It will decrease economic growth by decreasing incentives. It will increase government power over States and suppress individual freedoms. Many unintended negative consequences will occur after government has operational control.

I am afraid the public is growing weary of protest. They will forget the tricks used to produce terrible legislation. We will have many costly unintended consequences for many years to come.

The most frightening consequence is government control over our lives and freedom and a never ending need to raise taxes. It will suppress America innovative spirit.

President Obama is moving ahead with his healthcare pilot studies. In my view all of the approved pilot studies have little chance of success.

A potential pilot study with the biggest chance of success is not being considered. The five models to be studied are Accountable Care Organizations, Primary Care Medical Homes, Bundled Payments, Partial Capitation, and Full Capitation.

All five have problems. The chance of succeeding to reduce cost is marginal. The Ideal Medical Savings Account is ignored as an option. The MSA should be compared to each model tested. The Ideal Medical Savings Account model is the only model with a chance for success. The MSA is a consumer driven model. It puts patients in control of their healthcare dollars. It rewards consumer when they use their healthcare dollars wisely and maintain their health. It promotes self responsibility and self respect.

I will evaluate each model and point out the problems in each model.

 

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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Will Obamacare Fail?

April 18, 2010
inMedicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP,MACE

Unfortunately, the answer is yes.

President Obama’s healthcare reform plan will fail because of its poor construction.

The majority of Americans agree with President Obama’s goals. Americans want affordable universal high quality healthcare. President Obama’s healthcare reform bill will not accomplish these goals.

President Obama’s healthcare reform bill will waste 2 trillion dollars, restrict access to care, raise taxes, ration care and destroy infrastructure of a healthcare system that provides excellent medical care to the sick.

Our healthcare system is broken because prices are out of control. President Obama’s healthcare reform bill with a mushrooming government bureaucracy will not control prices by competition. It will try to control prices by regulations and force. Price controls never work.

Previous behavior is a predictor of future behavior. It follows that previous healthcare system reform failures are a predictor of future healthcare reform failure.

President Obama’s healthcare reform plan is similar to the failed Massachusetts healthcare reform plan (Romneycare). Romneycare was destined to fail from the onset.

 

The similarities between Obamacare and Romneycare are glaring;

  1. Both the Massachusetts healthcare reform plan and Obamacare mandate individual healthcare insurance.
  2. If individuals do not have insurance they must pay a penalty.
  3. Most businesses are required to participate or pay a fine.
  4. Both healthcare reform plans rely on government-designed purchasing exchanges (healthcare insurance exchanges)
  5. The healthcare insurance exchanges are supposed to provide a vehicle to control private health insurance.
  6. The uninsured are covered by the expansion of Medicaid and with Obamacare the expansion of Medicare.
  7. Qualified citizens receive healthcare insurance subsidies to help pay for their mandated healthcare insurance policies.
  8. The state of Massachusetts has set up many new boards and committees to oversee and administer the healthcare reform plan. The added bureaucracy has failed to control costs.

I predicted the Massachusetts plan would fail at its onset. It has been plagued with cost overruns from the start. I cannot image President Obama’s plan can be budget neutral after ten years. I suspect many Americans can’t image it either. I think the Scott Brown election has given America the notion that the citizens of Massachusetts don’t think Obamacare can be successful.

Why did the Massachusetts Healthcare Reform Plan fail?

  1. The healthcare reform plan is administered by the healthcare insurance industry. It controls the healthcare dollar and determines the premiums based on defective accounting rules. These rules permit the healthcare insurance industry to overestimate expenses and underestimate reserves. The result is increased premiums.
  2. No one has the political will to challenge or change these rules. The rules permit the healthcare insurance industry to declare a loss while it is removing sixty five cents out of every healthcare dollar from the healthcare dollar pool.
  3. There are 410,000 people who are newly insured in Massachusetts. Of those 200,000 are fully subsidized by Massachusetts state insurance exchange.

Policy makers underestimated the number of people that would qualify for subsidy.

  1. 3% of the population remains uninsured. The total 140,000 uninsured are required to pay a penalty. Half (70,000) uninsured cannot afford the premiums or penalty and receive a waiver.
  2. The state’s premiums have increased every year since the onset of healthcare reform. A typical family of four’s annual premium costs almost $13,788, the highest in the country. This is twice the cost of premiums in Texas. The premiums are 27% higher than the national average.
  3. This cost does not include out of pocket expenses.
  4. Massachusetts regulations serve to eliminate competition in the healthcare insurance market.
  5. Mandates dictate the services needed to be covered.
  6. Healthcare insurance vendors are required to sell "just-in-time" policies even if people wait until they are sick to buy coverage.
  7. Patients game the system by purchasing health insurance when they need it. Patients then drop insurance a few months later and pay the less expensive penalty. The same will apply to President Obama’s plan.
  8. Massachusetts’ safety-net hospitals are treating a disproportionate number of lower-income and uninsured patients. State compensation of these safety-net hospitals has been reduced under the new healthcare plan. It is only a matter of time before the safety net hospitals will declare bankruptcy. The alternative is to increase state taxes further. The result is people will move out of Massachusetts lowering the tax base
  9. There is a "critical shortage" of primary-care physicians as a result of increasing the number of people covered and an increase in demand for medical services.
  10. Physician compensation is decreasing. Physicians are fleeing the state. Patients cannot get doctor appointments.
  11. New patients wait 44 days to get an appointment with a primary-care doctor. A secondary market for primary-care doctor appointments is developing. People are selling their appointment times to patients.
  12. Appointment time shortages have led to an increasingly expensive emergency room visit for basic medical services. Emergency room visits increased 7%. More than half need emergency room attention. ER visits are very costly.
  13. President Obama gave the state of Massachusetts an 8 billion dollar bailout to help cover healthcare reform expenses. The healthcare insurance industry benefited by the stimulus bailout.

The state has refused to permit the insurance industry to raise rates. The insurance industry will leave the state or decrease reimbursement for services. The results are obvious.

If you do not fix the defects in the healthcare system you will not fix the financial difficulties. People must own their healthcare dollar, be responsible for their own care and have the freedom to choose. All this adds up to consumer driven healthcare using the ideal medical saving accounts.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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Who Doesn’t Get It?

April 14, 2010
inMedicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System
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Stanley Feld M.D., FACP, MACE

California Senator Diane Feinstein speaking on health care on Monday April 12, 2010 said;

“I’ve gotten 90,000 emails and faxes on the health care bill and over 85,000 of them are against it. After all the debate we’ve had, I can’t believe so many people still don’t get it!"

What debate?

President Obama’s healthcare reform debate was one sided and not bipartisan.

Didn’t Nancy Pelosi say; “Americans will understand the bill once it is passed.”

Maybe Diane Feinstein doesn’t get it?

If 94.4% of her constituents are against the bill, maybe 94.4% of her constituents will vote against her in the upcoming election.

The will of the people is being ignored by President Obama and the Democrats.

Why?

The Democrats believe:

  1. Americans need to be guided by big government in order to survive in our complex society.
  2. Big government is superior to free enterprise.
  3. Bureaucrats are more important than entrepreneurs.
  4. Planning is more effective than innovation.
  5. Redistribution of wealth and services are more important and much fairer than individual success.

Americans know that big government does not work. The government’s role should be to make the rules and then get out of the way. If the rules do not provide a level playing field the rules should be modified.

There are many examples of big government failure. One notable example is the U.S. Postal Service. It is going bankrupt while Fed Ex and UPS are successful.

I am sure President Obama wants to do the right thing.

However, he is going about it in wrong way. He is piling new healthcare reform on top of a failed healthcare system. (Medicare and Medicaid). His healthcare reform law cannot work. It can only waste more money

President Obama’s advisors have not been in the pits practicing medicine. If he really wanted to do something effective he should try to understand the real problems in the healthcare system and repair them.

Republicans have done no better. They have expressed their opinions within a framework established by President Obama and the Democrats rather than presenting a bold and new approach to healthcare reform.

The American people know President Obama’s healthcare reform law will fail at a high cost to the economy and the nation’s welfare. The Tea Party might represent the peoples’ rebellion. The movement is frightening both the Democrats and Republicans. Republican like to think the Tea Party is an arm of the Republican Party. I think both parties will be in for a surprise.

President Obama cannot throw money after a failed system and expect the system to improve. The healthcare system will not improve until the primary stakeholders (consumers and physicians) are provided with incentives and the ability to be innovative.

The primary stakeholders are the engine of the healthcare system. Bureaucrats and “non partisan experts” cannot make the healthcare reform system more efficient and operate at decreased cost.

The incentives should be directed to the patients and not the healthcare insurance industry or hospital systems. In a healthcare system Patients are First. In President Obama’s healthcare law big government and the secondary stakeholders are first.

Government should not require people to buy insurance. People must be responsible for themselves even if government gives them the money. I believe it is fine to provide for people who cannot afford healthcare insurance. However, the incentive must be financial. Healthcare reform will work only if it is consumer driven.

The healthcare insurance industry must be reformed. President Obama’s healthcare bill does not reform the healthcare insurance industry. The law does not revise the healthcare industry’s accounting rules. The healthcare industry will continue to take sixty five cents out of every healthcare dollar.

President Obama must provide incentives for to buy healthcare insurance. Instead the law imposes penalties if consumers do not buy healthcare insurance.

The ideal medical saving accounts provide consumers with the control of the first dollar coverage. It encourages consumers to use their money wisely. What they do not spend they keep for retirement. If a consumer has a chronic disease and uses his money wisely he receives a bonus.

President Obama must change American’s eating habits using public service announcements. He must change the way the farm industry is subsidized. The obesity epidemic is devastating the healthcare system.

President Obama must deal with the expense of defensive medicine. The only way to decrease defensive medicine is through effective malpractice reform.

Forcing Americans to be dependent on big government does not work. It creates all sorts of unintended consequences. President Obama should encourage an environment of self-reliance, innovation and independence.

None of the important issues needed to have effect a positive impact on the healthcare system are addressed in President Obama’s healthcare reform bill.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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Unintended Consequences Are Rolling In

March 31, 2010
inMedicine: Healthcare System, Politicians,Healthcare and Vested Interests, Stakeholder Abuse of the Healthcare System, Stakeholder Mistrust
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Stanley Feld M.D.,FACP,MACE

 

Over the years congress has made many deals with the secondary stakeholders. The new rules were made to correct previous rules. They did not work and made the healthcare system worse.

Americans are information junkies. Information is important to decision making. The wrong information leads to making wrong decisions

The traditional media is usually fed the wrong information by vested interests. It, in turn, feeds the public a short version of the wrong information. The result is faulty decisions.

President Obama’s healthcare bill was finalized last Thursday. On Friday AT&T and several other corporations took required tax write downs as a result of the bill’s passage

“The returns for the healthcare reform bill are already rolling in. AT&T announced that it will be forced to make a $1 billion tax write down due solely to the health bill, in what has become a wave of such corporate losses.”

The tax write downs have been announced by Deere & Co., $150 million; Caterpillar, $100 million; AK Steel, $31 million; 3M, $90 million; and Valero Energy, $20 million.

Other write downs have not been announced in the media. Corporations must declare the increase in healthcare related tax liabilities to the SEC immediately.

President Obama has used every tax trick in the book to make the new healthcare entitlement look affordable and deficit neutral.

An Increased tax liability to these corporations occurred when congress placed the new rule on top of the rule providing a tax subsidy.

The government provides a 28% subsidy to corporate America for continuing the drug benefit for their retirees as incentive to continue retirees’ drug coverage plans.

The twist of the tax law permitted these companies to deduct 100% of its drug benefit expense. In effect corporations were getting 28% free money while retaining the ability to deduct the 28% as an expense.

This is called double counting. It is difficult to follow the tax accounting. It represents a large tax benefit. The tax rule saved AT&T $100 billion dollars a year. It also saved most corporations large amounts of money. The savings went directly to its bottom line.

With the passage of the healthcare reform bill, corporations will not be allowed to deduct the subsidy.

“Black-letter financial accounting rules require that corporations immediately restate their earnings to reflect the present value of their long-term health liabilities, including a higher tax burden. Should these companies have played chicken with the Securities and Exchange Commission to avoid this politically inconvenient reality?”

It appears Henry Waxman and other House Democrats were unaware of this unintended consequence. If they were, the healthcare reform bill is more sinister than it looks.

“ Mr .Waxman announced his committee will call for a hearing demanding these companies explain their action because their judgment "appears to conflict with independent analyses, which show that the new law will expand coverage and bring down costs."

Media coverage and analysis of these write downs have been minimal. Why?

I do not think the media understands the consequences.

President Obama has said repeatedly, “if you like your insurance you can keep it. If you like your doctor you can stay with him.”

Nancy Pelosi said; “After the bill is passed we will understand it.”

You bet we will.

This rule will precipitate several consequences. Corporations have been trying to eliminate healthcare benefits for employees and retirees for years.

The new rule provides an excuse to drop the healthcare insurance benefits. The government will also eliminate the pretax benefit of private healthcare insurance.

If corporations eliminate the healthcare insurance benefit for employees, employees will be forced to buy individual insurance policies. The individual healthcare insurance plans will be unaffordable.

The government public option will be affordable because the government will subsidize the premiums. The healthcare insurance mandate will increase an entitlement burden to the states who presently have deficits. It means increased state taxes.

Corporations will be happy to pay the penalty for not insuring employees. The penalty is less than the insurance premium.

If a corporation chooses not to eliminate the healthcare benefit it will increase prices. The result is inflation. Corporations will also decrease its work force resulting in increased unemployment.

The public option as a sole source of healthcare insurance is only a matter of time. Then the government will fully control the healthcare system.

Regulations such as these will be President Obama’s back door approach to government control of the healthcare system.

However, President Obama overlooked the increase in unemployment and a decrease in people insured. Few people would be able to keep their own doctor, individual insurance premiums will be unaffordable and the deficit will escalate.

A prominent physician, who understands all this, sent me a copy of a letter he wrote to the President of the AMA opposing the AMA’s position on President Obama’s healthcare reform bill. He said;

“Surely, you didn’t arrive on a load of turnips yesterday.

Doc, the congress is the same wonderful group that gave us Medicare and Medicaid in the first place and then endlessly tinkered with it for nearly 50 years, and also gave us the SGF, and a host of other ill-considered acronyms that did our patients and the physicians (not the providers) of our country no good at all.”

He then wrote;

“It is a sad situation, not just for the docs but for their patients.

So, now what?  Until cast of characters in the congress, assorted criminals, tax dodgers, and others of ill repute, is changed, I am afraid we are all screwed.  That includes the patients, more is the pity.

My own suggestion is that the AMA seize the moral high ground and take on the role of being the advocate for the patient (not the consumer) and view any effort to reform the reform  through the lens of what is best for all of our patients.

If the AMA were to do that, physicians would find that they will come out well, I am certain. While we are it, it would be a good thing to advocate for a reasonable and sane system of pricing so that what is done for people is simply costed at acquisition plus a reasonable margin of profit and the retail price is then the same for all patients.” 

This physician has said it all. Consumers owning their healthcare dollar and driving the healthcare system is the only way to accomplish affordable universal care with the government subsidizing or paying for the uninsured with the ideal medical savings account.  It will be less costly and give consumer incentive to be responsible for their health and healthcare dollars.

Both physicians and patients must wake up
and protest this folly at the polls and to their congresspersons immediately during the Easter recess.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.