FACT: IT WAS AN OVERWHELMING, BI-PARTISAN MAJORITY VOTE OF 406 TO 19!!!

Wednesday’s (2/24/10) Action in the House of Representatives

I am an advocate for effective, bi-partisan health reform that can be accomplished by breaking the large problem into smaller, manageable parts.  The viability of this approach was demonstrated by Wednesday’s vote to repeal the exemption from federal anti-trust laws.  Certain partisan obstructionists tried to stop it—for example, Republican House Minority Leader John Boehner (Ohio) opposed the measure.  Yet, there was constructive Republican leadership from Minority Whip Eric Cantor (Virginia) who encouraged Republicans to support the measure, which they did overwhelmingly.  It the end, it’s not about right vs. left; it’s about right vs. wrong.  In this case, doing what is “right” for the American people prevailed.

Thursday’s (2/25/10) Summit Meeting at Blair House

On the other hand, yesterday’s bi-partisan summit to discuss health reform, convened by President Obama, was mostly for show.  The President’s supposedly new, health reform proposal, which was announced on Monday, is more of the same.   The President’s plan mirrors the existing legislation with one addition: a new federal government agency to regulate health insurance premiums.  The President is not unaware of the role currently played by State Insurance Departments, but I guess he thinks the Federal Government will do it better.  Though the Summit was marked by partisan rancor, I believe that the Republicans demonstrated that they are not obstructionists and that they support viable steps to reform health care that do not spend the country into oblivion.

Where Do We Go From Here?

First, encourage your Senators to take action on the bill passed in the House this week.  The Senate should pass similar legislation to remove the health insurance industry’s anti-trust exemption and SEND A BILL TO THE PRESIDENT’S DESK FOR SIGNATURE.

From an overall policy perspective, bi-partisan action to reform healthcare is not impossible—we should focus on those aspects of health reform on which reasonable people agree (see After Massachusetts: NOW WHAT?)  From a political perspective, it’s much more difficult because so many of our elected representatives believe that partisanship is more important that serving the best interests of the American people.

Yet, the House of Representatives proved on Wednesday that bi-partisanship is possible, but it’s only a small first step.  I encourage you to send your Members of Congress, Democrat and Republican, the following message—start over and pass meaningful health reform NOW (as demonstrated in the House of Representatives) or pay the price at the polls in November.

Searching For Alternatives to Traditional Medicare

Around 1980, the Federal Government began a demonstration project where Medicare beneficiaries could join private health plans in order to receive their Medicare benefits.  It was called the “Medicare Capitation Demonstration Project”, involving 8 HMOs from around the country, including 4 in the Minneapolis/St. Paul region.

HMOs were paid a fixed monthly amount established by formula (95% of the area adjusted per capita costs or AAPCC) designed to save money for the government.  In exchange, the HMO provided an enrollee with their standard Medicare benefits plus ‘additional’ benefits (provided at the discretion of the participating HMO) designed to attract beneficiaries to voluntarily sign up,.

Beginning in 1981, I was working for a consulting firm based in Rockville, MD named Jurgovan and Blair, Inc. (JBI).  JBI had the evaluation contract, and I was part of a team of 8 or so people traveling the country to evaluate all aspects of the financial and operational effectiveness of this Demonstration program.

Demonstration Results

The government concluded that the concept of Medicare beneficiaries joining private plans was a success, a ‘win-win-win’ proposition.  The Federal Government saved money, the participating plans benefited from membership growth from a new source of patients, and the Medicare beneficiaries received great benefits (generally better that traditional Medicare) for little or no cost.  As a result of this demonstration, Congress passed a law in 1985 (part of the annual budget reconciliation) to allow qualified HMOs to contract with the government on this basis.

Two Plus Decades of Change (NOT for the Better)

The original Medicare Capitation Demonstration program has evolved into today’s Medicare Advantage (Part C) program.  However, the program has changed significantly since 1985, with over 11 million Medicare beneficiaries covered at the end of 2009.  But over the course of two decades and despite its popularity, the program has become costly and unwieldy in the following ways:

1. The government began allowing PPOs and later private fee-for-service (PFFS) plans to participate in the program.
2. The number of plan options has grown dramatically, making it very difficult for Medicare beneficiaries to understand and comparatively shop for coverage.
3. Payment formulas have been co-opted such that average payments to the plans are now 15% to 18% above average traditional Medicare costs (instead of 5% below).

Medicare Advantage should be fixed, but not eliminated as suggested by many Democrats.  Traditional Medicare is a financial mess and is decidedly NOT a better model for financing health care for the elderly.  The evidence—it costs 3X as much per capita for Medicare in Miami, FL compared to Honolulu, HI?  The major differences in costs and utilization reflect structural deficiencies in the government’s approach to paying for health services.

Solution To Runaway Medicare Costs

We need to go back to basics—the original principles for private plan participation in Medicare that worked in the 1980s.  The following changes should be made:

1. Allow only managed care plans (PPOs and HMOs) to participate in the program that meet specific standards for effectively managing utilization and cost.
2. Limit the number of benefit plan options—there should be 10 or so standard plan designs that any eligible insurer can offer to beneficiaries in its service area.
3. Continue using the current payment formula, but limited by a payment cap tied to average Medicare per capita costs in the country that is phased in over three years (e.g., 2011—the lesser of the current formula amount or 130% of the national average cost; 2012—cap reduced to 120%; 2013—110%; 2014—capped by the national average).

The above plan will force inefficient providers to model themselves after programs in other parts of the country that are delivering high quality care for less money.  This is managed competition—requiring insurance carriers to compete on the basis of cost and quality.  What do you think?