Rational Arguments

Get a load of this:

Heathways SilverSneakers Fitness Program promotes fitness, fun and friends!
Blue Shield of California announced today that it will expand its contract with Healthways, Inc. to offer the SilverSneakers Fitness Program to Blue Shield Medicare Advantage members in San Bernardino County. SilverSneakers, which Blue Shield already offers in Los Angeles and Orange counties, is the nation’s leading exercise program for older adults. Blue Shield members in San Bernardino can join the program at no additional cost as of January 1.

Where to start?

OK, first of all, what you’re seeing here is a Medicare Advantage program offering its subscribers free membership in a fitness/program.  This isn’t something that people in regular old Medicare can get.  It’s a perk for people who choose to go with this Medicare Advantage option.  They don’t pay anything extra.  We do.  Through taxes.  Remember, we are paying a 14% premium to Blue Shield of California for them to provide insurance services to the elderly.

Now I suppose you could make the argument that it’s a good thing for people to go exercise.  I agree.  But should taxpayers pay for it?  Is this what Medicare is for?  Gym memberships?

First of all, it’s not worth the money.  We’re paying 14% more to Medicare Advantage programs so seniors can join the gym?  That’s not worth the money.  Gyms don’t cost that much.  Moreover, it’s not what Medicare is for.  As we complain about deficits, how can we justify these types of expenses?  We can’t.  Medicare Advantage is a waste.

Second, it’s not fair.  If we believe gym memberships are something that taxes should pay for, then all seniors should get them.  Why just those who choose Medicare Advantage?  Why do they get more robust plans just because we “chose” to give private insurance companies more money?

Third, it’s a perfect example of how insurance companies shift the risk pool.  Which seniors would be attracted to gym memberships?  Health ones.  You can be sure bedridden and truly ill seniors won’t care about SilverSneakers.  So by offering something like this (on our dime), Blue Shield preferentially attracts a better risk pool for themselves.

They get more healthy people.  It costs them less money to insure them.  And they get extra money from us to do it.

Is this something we really want to avoid cutting?

Ezra Klein has a great post up about others now introducing Massachusetts into the debate to show why health care reform should fail:

Markos Moulitsas takes a look at Massachusetts and concludes that the individual mandate isn’t working well, because Massachusetts’s costs have merely improved from “the worst in the nation to merely one of the worst in the nation.”

The Massachusetts bill (as I’ve argued often about this bill) is not about cost.  It was meant to improve coverage.  And it did.  It’s not how I would have done it, it wasn’t the most efficient way to do it, but it did increase coverage.  Not only that, but Massachusetts seems to have improved its standing in terms of cost, even if it’s a small amount:

But they are, in their own way, working. The prudential purchasing has brought costs down in the individual and small group markets where it exists. The individual mandate has forced a focus on cost control far beyond anything operating in any other state. A commission created to control costs recently recommended that the state begin to end fee-for-service medicine — which is far beyond anything that any other state, or the country, has explicitly begun doing. As most in Massachusetts agreed, there would never have been the impetus to do cost control if the universal plan and the mandate hadn’t deposited the problem squarely in the legislature’s lap.

Massachusetts is now in crisis and will likely have to introduce much more comprehensive reform (such as ending fee-for-service) in order to lower costs.  It’s worth watching what happens.

Ezra also believes that the bill currently under debate has cost controls that Massachusetts lacks:

If you go back to my post on the five cost controls in health-care reform, you’ll see that Massachusetts didn’t have three of them. There was no bundling, no excise tax, no Medicare Commission. And of the dozens of small cost projects, from the Payment Innovation experiments to the creation of a comparative effectiveness process, Massachusetts had none of them. Most of the pages of the health-care reform bill are dedicated to experiments and mechanisms trying to change things that happen in hospitals. Massachusetts was about changing the workings of the insurance market. And though those reforms were effective at creating a better insurance market and cutting the number of uninsured, they were not sufficient.

If you’ve been reading this blog, you know I’m less impressed by these than Ezra.  The Medicare Commission applies only to Medicare and not to private insurance.  Same with many other projects.  I don’t disagree with the implications of the excise tax, but I don’t know how much impact it will have on overall costs.

If many of these work, they will work on Medicare only.  And – here’s where I will acknowledge politics – I don’t think the government will be able to squeeze Medicare if private insurance doesn’t come along for the ride.  I can just imagine the headlines about preferentially killing the elderly.  I think those screams will come from whichever party is in the minority at the time, so it’s not partisan based.

I think we need cost controls for the entire system.  It’s one of the reasons I think a single payer (at least a basic one) would have more power to try and lower costs.  It asks for shared sacrifice.

But people like me who thought more radical reform was necessary were told it just wasn’t possible.  Only incremental reform could be accomplished.  And incremental reform required a mandate, it required less potential for cost control, it meant keeping private insurance around, and it necessitated accepting less than 100% coverage as “universal”.

If you were OK with that, then so be it.  You weren’t alone.

But here’s the deal – that meant you were OK with a mandate, you were OK with less cost control, you were OK with private insurance, and you were OK with less than 100% covered.  In other words, you were OK with Massachusetts.

I’m frustrated this week because many of the same people who shrugged off my concerns about the downsides of Massachusetts-style incremental reform when we started this process are now using those same arguments to “kill the bill”.  That strikes me as a bit… political.

Everyone knows drugs cost too much in the United States.  Many people also know tat in other countries – like Canada – those same drugs cost much less.

Over the last week, there’s been a surprising amount of debate in the Senate over an amendment to allow us to import cheaper drugs from Canada.  Although many oppose it, there are a fair number of Republicans who don’t.

One of the reasons drugs cost so much in the US is that we can’t collectively bargain to reduce prices.  In Canada, the country can negotiate as one huge purchaser, and can therefore get a good deal.  In the US, on the other hand, Medicare is expressly forbidden by law from doing so.  That was part of the deal when Medicare Part D was passed.  So no bargaining.

That was a pretty bad deal as agreements go.  We committed massive federal funds to purchase drugs from pharmaceutical companies and then also barred the government from trying to get a good rate.  Not only has that significantly increased the deficit, but it seems bizarre from an economic standpoint.  Are there other industries where it’s illegal for the government to try and negotiate for a good deal?

It’s crazy, though, to support those same bans and then support importing from countries with no such bans.  Huh?  Either you like collective bargaining or you don’t.  It seems very inefficient not to bargain with our very large Medicare system and then pay Canada overhead to allow them to do lesser bargaining for us.  Why not just let our government get better prices?  Why go to other countries instead?  Why is that logically consistent?

I’m not kidding.  Someone please explain it to me!

For some reason, it doesn’t seem to be getting a lot of play in the press, but the information is pretty interesting.

On Wednesday, The Energy and Commerce Subcommittee released a report on Medicare Advantage.  Let’s just get right into the findings:

From 2005 through 2008, the average Medicare Advantage insurer spent over 15% of premium revenue on profits, marketing, and other corporate expenses. Two-thirds of the Medicare Advantage insurers surveyed by the Committee had a medical loss ratio below 85% during at least one of the four years examined. Six of the insurers had medical loss ratios below 75% in one or more years. In comparison, traditional Medicare spends less than 1.5% on administrative expenses and over 98% on health care. In the aggregate, the Medicare Advantage insurers spent $1,450 per beneficiary in 2008 on profits, marketing, and other corporate expenses, nearly ten times as much as traditional Medicare spent on administrative expenses per beneficiary.

Saying that you have a medical loss ratio of 85% means that only about $0.85 of each dollar goes to actual care.  Compare that to traditional Medicare, where more than $0.98 of each dollar went to care.  Remember that the next time someone tells you how much more efficient private insurance companies are than government run insurance.

Requiring all Medicare Advantage insurers to have a medical loss ratio of 85% would provide billions of dollars in additional medical services to seniors. The total amount spent on profits, marketing, and other expenses by Medicare Advantage insurers over the last four years was $27 billion. The House health care reform bill requires Medicare Advantage plans to spend at least 85% of their total premium revenues on medical claims. If this threshold had been in effect from 2005 through 2008, the Medicare Advantage insurers would have spent an additional $3 billion on their beneficiaries’ medical care, enough to eliminate all copays for preventive care for all Medicare beneficiaries for ten years.

Some Medicare Advantage were so “inefficient” that merely requiring them to raise their ratio to 85% (still way below traditional Medicare) would raise enough money to eliminate any copays for preventive care for everyone in Medicare for a decade?  Imagine if they were all as efficient as government run traditional Medicare.

In 2007 and 2008, Medicare Advantage insurers with medical loss ratios lower than 85% paid their executives over $1.2 billion. In 2007, a company that had a medical loss ratio of 79% paid an executive over $35 million. The same company paid 16 more executives salaries and bonuses worth $1 million or more. Another company with a medical loss ratio of 79% paid more than $210 million in compensation to 260 executives.

No comment.  None needed.

Remember, the proposed cuts to Medicare are just to Medicare Advantage.  Not only has Medicare Advantage been spending much, much more on non-medical costs, they have also been taking about 114% of what we pay per traditional Medicare enrollee just to function.  If the government were requiring 114% of what private companies were to provide a service, and then had nearly ten times the overhead to do it, we would all be losing our minds.  It’s not good economic sense.

Read the whole report if you like.

A reader asks:

I am 55, and disabled. Although I am eligible for Medicare (disabled for 24+ mth.), I chose to stay on my wife’s medical plan until I could take enough time to understand my options and costs. Today I received the information that although we pay >$7000 / year – JUST FOR MY PORTION OF HER PLAN! – it will still cost more than that amount for me to switch over to either a) Part”B” + Medigap + Part”D”, or b) Part”B” + Medicare Advantage.

Why? Primarily, it is because of the quantity, and types, of medication that I take for my condition, (Diffuse Systemic Scleroderma). When my local senior assistance program plugged my info into thee Medicare calculator, it spit out that I will required to pay more than the $7000 – primarily because of the “doughnut hole”.

My question is this – do any of the plans being discussed, by The House and/or Senate, address this issue?

I wish everyone who says that a public plan or Medicare is “free” would read your question.

First of all, let’s explain to everyone what the doughnut hole is:

Medicare mavens and readers of a certain age will already be familiar with the hole — the gap in coverage that leaves beneficiaries on the hook for the cost of prescription drugs when the cost of their prescription drugs passes $2,700 in a year. Coverage kicks back in when a beneficiary’s annual drug cost passes $6,154 in a year, according to the WSJ’s story on the deal.

So once you go over a certain amount (which isn’t hard) you have to shell out thousands of dollars before any coverage kicks back in.

The good news is that reform (so far) does have provisions to close this up, at least a bit.  It was part of the big deal the White House made with pharma.  Until the bill is passed, we won’t know for sure, but I suspect things will get better in terms of your out-of-pocket costs for drugs.

A reader asks:

The new Senate compromise must have freaked a lot of you out.  I’m getting slammed with emails.  I’m going to try and get through a few here.

A reader asks:

So I have a 26 year old daughter, poor college student with no insurance, no money to buy insurance and 3 pre-existing conditions.  I had to drop herfrom Federal employees plan when she turned 23.  I always feel I am on the verge of bankruptcy if one of her conditions requires a major hospital event. I can’t believe they sucked up to AARP and gave the over 55 crowd a walk into health insurance while as always they have left the rest of America who is not elderly, cobra eligible, or schip out in the cold. Whats in the new bill that might help my kid or is she looking at nothing for 3 to 4 years and then an expensive insurance possibility in the non-profit exchange?  Blue Cross is non-profit and its premiums are about as high as anyones in the FEHB excahnge. I have FEHB as a fed retireee Mail Handlers Insurance administered by Coventry and my premiums are increasing 27% come January 1, So much for cost control.

Well, things are pretty much just as they were before the deal.  What’s in the new bill for your daughter is (1) the fact that they will not be able to deny her insurance because of her conditions, (2) they won’t be able to charge her more than a healthy person because of her conditions, and (3) if she makes less than 300% (or 400%) of the poverty line she’s going to get subsidies to help her buy insurance.  This bill will likely help her.

I don’t disagree with you assessment that both the FEHBP and the reforms as proposed will do much for cost control, but of the many people writing me today, your daughter is likely to be one of the most helped with health care reform.

A few days ago, I said to a friend that I thought the newest proposal to open up Medicare to those less than 65 was a shrewd political move.  After positioning themselves as the “protectors of Medicare”, I thought that the Republican party would have a hard time now demonizing it.  My friend disagreed.  Turns out he was right:

A December 6th press release from Senate Minority Leader Mitch McConnell read:

One day later, the next day, he put out another press release:

I just can’t stomach hypocrisy – from anyone.  This is just too important.  If you oppose health care reform as prescribed, if you are willing to talk about what you think is wrong with it and how you would improve it, if you are willing to do so open and honestly – they you and I will get along just fine.

This, however, is just politics without convictions.  It’s dangerous.

The viability of the public option is looking less and less likely as negotiations continue.  Senators Lieberman, and, well, pretty much every Republican said they won’t vote for it.  No way you can get to 60 votes then.  So what can Democrats get in exchange for letting it go?

Senate Democrats are discussing the idea of expanding Medicare by lowering the age at which the elderly could enter the government-run insurance program, Democratic sources on the Hill tell the Huffington Post.

The proposal would lower the age of eligibility for Medicare from 65 to 55, though an age limit of 60 has also been suggested. Crucial details — such as the timing of the implementation of such a reform — were not provided due to the sensitivity and ongoing nature of the deliberations. A high-ranking Democratic source off the Hill confirmed that such discussions are taking place.

This is an interesting idea.  Health insurance on the individual market for someone over 55 is not cheap.  So even if they had to pay Medicare rates, it might be cheaper than private insurance.  And Medicare is a huge “public option” with negotiating power and leverage. People know what Medicare is; they like it.

Moreover, this would have many of the side effects that progressives want and conservatives fear.  It would start a slippery slope of increasing Medicare eligibility.  If they lower it to 55, what’s to stop later lowering to 50?  And further?  And – as more and more people are on Medicare – it will seem inevitable that we will go to “Medicare for all”.

If this passes, it’s ironic that by stonewalling a weak, limited public option (that would never have gotten us to single payer), Republicans and conservative Democrats might have hastened the development of true national health insurance.

While everyone is screaming about the public option – nominally because it will reduce the costs of health care – I’ve seen much less discussion of MedPac.  What is MedPac?

The Medicare Payment Advisory Commission (MedPAC) is an independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. The Commission’s statutory mandate is quite broad: In addition to advising the Congress on payments to private health plans participating in Medicare and providers in Medicare’s traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare.

Basically, MedPac is supposed to make recommendations on Medicare.  In the past, Congress has done a good job of ignoring its recommendations.  But under reform, MedPac was supposed to get some teeth.  This is important, not just for reform.  As I’ve said before, Medicare costs WAY more than reform and regardless of whatever reform does, we need to start curbing the increases of Medicare.  Anyone who is serious about the budget, about costs, has to be concerned with the increasing costs of Medicare.  And yet:

Unfortunately, the bill currently being debated in the Senate has effectively neutered the commission’s powers (and the House didn’t even have a commission in their bill). As pointed out by David Leonhardt in the New York Times, the Senate directs that the commission leave doctors and hospitals untouched by its recommendations for the first four years of its existence (2015-2018). Then, in an even more insidious direction, the permanent commission will likely be prohibited from submitting a proposal beyond 2019. These restrictions are layered on top of the initial restrictions Congress placed on the White House’s commission proposal (benefits can’t be “restricted,” cost sharing can’t be increased, eligibility can’t be modified, and health care can’t be “rationed”).

The legislative language with the post-2019 limitation popped up some time after the bill left the Senate Finance Committee. In that bill, the 2015-1018 restriction was there, but the assumption was after the first five years of fully phased-in health care reform and its delivery system experiments, trials and pilot projects, the commission would be able to take that information and begin to enact system-wide reforms that could transform American health care from a “pay-for-quantity” wasteful, fee-for-service system, to a more cost-effective “pay-for-quality” system.

However, in the bill released for debate after the Finance and Health, Education, Labor and Pensions Committee legislation were merged, the new restriction was added. The legislative language is obtuse (page 1,009-1,010):

‘‘(ii) EXCEPTION.—The Board shall not submit a proposal…(III) for proposal year 2019 and subsequent proposal years, a year in which the Chief Actuary of the Centers for Medicare & Medicaid Services makes a determination in the determination year that the growth rate described in paragraph (8) exceeds the growth rate described in paragraph (6)(A)(i).

But, what it basically says is that no proposal can be submitted in any year after 2019 if the five-year average of national health care expenditures grows more rapidly than five-year average Medicare expenditures. This makes it unlikely the commission will get many opportunities to submit a proposal. As our Series on Health Care and Medicare points out, expenditures in Medicare tend to rise at slightly lower rates than overall health care expenditures (from 1970-2007 annual per- capita Medicare inflation averaged 9.2% while the private health care average was 10.4%).

Basically since Medicare does a better job at cost control than the private sector (contrary to what you hear), it’s unlikely that MedPac will get to do much at all.

Why does this seem good to people worried about costs?

(h/t Ezra Klein)