Tax the Rich{Doctors} to Lower the cost of Healthcare [VIDEO ADDED]

In the ongoing drum beat against the doctor in terms of income earned, Massachusetts lawmakers are trying to lower the cost of healthcare and have decided that doctors simply charge too much.  I spoke about this perception of the richdoctor previously as more of an attitude, but Massachusetts has taken it to a practical level with monetary penalties for the richdoctor.

“Massachusetts House leaders released amajor proposal to curb health care costs Friday, calling for new limits on thefees charged by hospitals and doctors and for creation of an independent agencyto monitor medical spending….Providers that charge prices deemed excessive andthat they cannot prove are linked to above-average quality would pay a tax,similar to the luxury tax Major League Baseball imposes on the big-spending NewYork Yankees and Boston Red Sox”

Of course the doctors and hospital groups are fighting this:

“Lynn Nicholas, president of the state hospital group, said, “To expect the health care industry to perform at less than the economy overall is unreasonable and will impinge on our ability to deliver care at the level people expect. . . . That may damage the economy more than it helps it, and, because of that, jobs may be lost.’’

The bill will not only lower what a physician can charge for an appointment or procedure, but a tax will be levied on the provider if he/she cannot prove that the care was more exceptional than the care down the street.  Medicine is a service and we all have different definitions of quality service.  Thus, an immeasurable item cannot be proved or disproved.  The only measurable component in healthcare is if you are still alive after the appointment or procedure.  If you are, then the quality was excellent.

Physicians today are being squeezed financially, with increasing overhead and stagnant reimbursement due to a frozen Medicare fee schedule for approximately 10 years, now Massachusetts not only wants to lower reimbursement rates, but tax providers for simply trying to stay viable in business.  Ms. Nichols states this rather well, one cannot expect a business person to perform their skill or sell a product at less than is needed to keep one’s business profitable.

“The bill also encourages providers to form so-called accountable care organizations to care for patients in a more efficient coordinated fashion, and pushes insurers to shift toward global payments, which pay providers a lump sum to care for a group of patients, and away from paying separate fees for every service.”

If this bill passes and implemented, then doctors will have to consider if they are willing to take pay cuts, live at a lower standard of living than doctors a generation ago, and continue to work the same number of hours they work now, in Massachusetts at least.

UPDATE: This video, from the Pioneer Institute, offers five ways that payment reform legislation on Beacon Hill misses the mark on true health care reform:

John Kerry on How to Kill Medicare

Medicare has always been a failure measured by what it was supposed to accomplish: protect Grandma from losing the shirt off her back, and cost. But it was a very popular failure. Conservatives have wondered for years how to rid the nation of this albatross. Thankfully John Kerry has struck the first blow for freedom:

"Meanwhile, John Kerry found another way to raid the health care system. The Senator from Massachusetts did what diligent Senators do; he added a provision to the Affordable Care Act to allow his state’s hospitals to increase their Medicare reimbursements by a factor of ten:

Here’s how Massachusetts gets extra money: Hospitals in urban areas have to be paid at least the same amount as rural hospitals. Massachusetts only has one rural hospital—a 19-bed facility on Nantucket island. So, the Nantucket Cottage Hospital sets the floor for every hospital in the state.
But because Nantucket is so wealthy, its cost of living is high—and thus so are its Medicare payments. That drives up the payments for every other hospital in the state. And under Kerry’s provision in the Affordable Care Act, hospital payments come from a nationwide pool.

If the provision remains in place, Massachusetts’s payments will rise over the next decade from $367 million to about $3.5 billion. The pool operates on a zero-sum basis, so all the money the Bay State gets will be funded by cutbacks from other states."

MA is a small State, it took some chutzpah to pull this off. Other states and hospitals are obviously not going to stand for this. Luckily for the taxpayers we are broke, so they can't just give every hospital a 10-fold pay raise. The more states fight over the small pot of blood money and more games like this the politicians play the sooner the public will see this for the failure it is and get rid of it.

Health Care Reform or Something - Massachusetts Style

Bob's already commented on this developing story; here are some more details as reported by The Boston Globe on March 5th:

"Governor Deval Patrick yesterday unveiled significantly lower prices." How much lower? Look in the 10th paragraph “average monthly premium for residents of Eastern Massachusetts of $305. That indicates a decrease of nearly 20 percent in premiums from the earlier bids” (why is the good news always buried in the 10th paragraph?)

But averages can cover up a lotta things. For example:

1. The plans are age-rated. The least-expensive plan is offered by Neighborhood Health Plan (a Boston-area Medicaid insurer) and costs $175 a month - provided you are age 35-39. If you are over 56, the premium is $347 a month. Who will actually pay the "average" premium? Anyone?

2. The plans are geographically-rated. "coverage will be less expensive in Central Massachusetts compared with the eastern and western parts of the state."

3. The benefits are bare-bones at the lowest price points, even for the Boston Medicaid insurer. The plan "covers preventive care, office visits, hospitalization, and prescription drugs". Mandates? what mandates? More: "The annual deductible for the basic plan would be steep: $2,000 for an individual and $4,000 for a family" and "Similar plans from the three major health plans". Stripping the benefits sure does lower the premium, but isn’t that a tactic that only the greedy private insurance companies use? Yikes.

The Massachusetts plan is widely called "health care reform" but it looks and sounds to me like plain-old insurance, subsidized by the State. In other words, true to a grand Boston tradition, Gov. Romney "stuck a feather in his cap and called it macaroni". And now Gov Patrick is doing the same.

Another Winger Disses MassCare and Obamacare

President Present has cut a new commercial, ostensibly to help Martha Coakley retain the vacant "Massachusettes" (sorry, but that's how she spells it) senate seat for her party. One of the issues he addresses is, of course, ObamaCare, and how Ms Coakley represents a key vote for its enactment.

Oh, that "winger?" I meant "lifelong Democrat." Posted in the comments section of that Politico story is this little gem:

"I am a lifelong Democrat that will vote for Brown on Tuesday. My main reason is the universal health care plan that is said to be similar to the Massachusetts plan. Under Massachusetts universal health care, I have seen my care and that of my adult children decline during the past year. My daugher has a serious chronic condition and must wait 6 months to see a specialist - she never had to wait more than 4 weeks before the universal health care plan. I have seen my own insurance premiums go up nearly 50%. My son has been assigned a primary care physician who is located three towns away from where he lives and who has a backlog of several weeks. I don't like the plan working through the Congress because there are too many mandates and I believe the cost will be prohibitive. I also believe it analogous to the Mass plan that has given my family poor and deteriorating service. I believe that the federal plan should go back to the drawing board. There should be no denial of coverage because of pre-existing conditions, but there should be fewer other mandates and no one should be mandated to have health insurance. I also think that there is much too much new spending by the federal government. New initiatives used to cost millions, then billions, and now trillions. I don't believe these initiatives are well planned nor efficient. I voted for President Obama -- I thought he was more centrist than he seems to be now. I will be voting for Brown precisely for the reasons that the President outlines as the reasons to vote for Coakley. I am not alone among Democrats in Massachusetts who will vote for Brown -- that is why the polls are so close in this election. - Ben from Boston"

Now, can we guarantee with 100% credibility that "Ben" really is a "lifelong Democrat," or that he even really exists? Nope.

But he's certainly more credible than, say, Jonathan Gruber.

Democrats Channeling Bob...

Over the past few years, Bob has written extensively on the miserable failure that is MassHealth. As he's documented time and again, mandating both coverage and community rating lead directly to outrageous premium levels.

But of course, Bob has an axe to grind, so his message must be meaningless, right?

Turns out, not so much:

"I paid attention to the health care debate as a speechwriter who prepared speeches, talking points, op-eds, and debate prep material on the topic at different times for John Edwards, Barack Obama, Hillary Clinton and others. Now, I'm paying attention because I'm a citizen up the creek without a paddle."

Wendy Button is a Democrat activist who has, it seems, "seen the light." She echoes the clarion call for reform, but with a decidedly different twist:

"If Congress and the president want to fix health care, then it is time to start over. They need to look at what's worked and what has failed in Massachusetts. They are going to have to actually take former Gov. Sarah Palin's advice and "look north to the future."

"Start over." Not a bad idea - in fact, that's one with which we'd agree - but hardly what one would expect from someone so close to the campaigns of Obama and Edwards (not to mention the authoress of HillaryCare).

She continues:

"A rushed bill will have consequences. Reforms will not be cheap and some people may be priced out."

A point we've been making here for a number of years. Now, just because something "doesn't come cheap" doesn't automatically mean that it's not worth doing. But in the calculus of that undertaking, one would be wise to draw, and learn, from others' similar experiences and efforts. We've maintained all along that experimenting at the state level was a viable and desirable strategy: learning what works - and what doesn't - in 50 smaller labs is preferable to the potentially disastrous consequences that could come from one encompassing the entire nation.

But Ms Button isn't through:

"How could all of these weeks and months go by and no one is examining and talking about what has worked and what hasn't worked in Massachusetts?"

Well, as we've noted, some of us have been jumping up and down, pointing at MassHealth as the failed experiment that it is. Sadly, Ms Button doesn't appear to be an IB reader.

Or is she, perhaps, a closet one?

"I'm a critic because what Washington is talking about doing has made health insurance unaffordable in Massachusetts."

Amen, sister, amen.

[Hat Tip: Hugh Hewitt]

Will Obamacare figure in the debates that start this week?

I think not much. Why not? 

Obama may not want to bring up this law because, despite the Supreme Court decision, it remains widely unpopular.

Romney may not want to bring it up either.  That’s because the Obama campaign would very likely not respond on the issue, but instead would respond by claiming "Romneycare" in Massachusetts was the model for Obamacare.  That’s false; Romney’s actual proposal was less intrusive and less expensive than the law that was ultimately enacted in Massachusetts.  But, nevertheless:

(1) the explanation is complicated, and would not sway many votes.  That’s because most voters would ignore it just because it’s complex.

(2) Worse, it would be a diversion, taking limited debate time away from focusing on Obama’s main governing failures – his wretched economy and his wretched foreign policy.

For these reasons, neither candidate may see much use in bringing up Obamacare; in fact both candidates may see potential harm in doing so. That’s why I think Obamacare will not figure importantly in the debates.

Additional info is here and here.

Among other things, the first linked article reports

The Romney proposal included an employer mandate that required only catastrophic coverage, not the comprehensive and expensive "Cadillac plan" coverage that was ultimately included in the Massachusetts law, and in ObamaCare. 

So, clearly, the Obama plan did not follow the Romney “model” in this feature – a feature important enough that it was disputed all the way to the Supreme Court.  There's more:

Romney's successor, Governor Deval Patrick, greatly increased the mandated level of coverage while implementing the law

Deval's tinkering resulted in much higher costs not contemplated in the original law, and those costs still adversely affect the state’s finances.  Yet the whole thing is tagged as “Romneycare”.  Go figure.

A further insight, which both the linked articles report:  On the day that Romneycare was signed into law, Romney line-item-vetoed eight elements changed in or added into the final draft of the bill . . .  After the signing ceremony, though, the Democrat legislature returned to the State House and overrode all eight vetoes. (in fact, during 2006 alone, Romney's last year as Governor, Romney issued 250 vetoes, every single one of which was overridden.)

. . .  see how easily an Obamacare discussion leads away from the economy and foreign policy?  My bet -  Romney won't go there - and neither will Obama.

Is there a future for private insurance exchanges?

The collapse of most Obamacare exchanges has captured the attention of the media in recent months.  This may explain the lack of news about private exchanges.  Private exchanges have not exactly caught fire, but they have not disappeared either.  The failure of Obamacare exchanges may increase calls for a national medical welfare program.  Ironically that same failure increases the future potential for private exchanges.  So even as Obamacare exchanges continue to collapse, work to develop and market private exchanges continues and the future of those private exchanges remains hazy.  Some factors:

(1)  The Massachusetts insurance reform enacted in 2006 is widely considered the model for Obamacare.  This legislation established a state-run insurance exchange called “the Connector”.  Just this August, The Society of Actuaries released an extensive report on the impact of the Massachusetts legislation on insurance markets, pricing and profitability.  This report finds in part that:

“Despite its success in the subsidized market, the Connector, managed by the Massachusetts Health Insurance Connector Authority, enrolled few insureds in the unsubsidized nongroup and small group markets and was unable to exercise much influence on the merged market.”

https://www.soa.org/.../research-2016-ma-health-insurance-reform.pdf  (Copy & past the link to your browser)

 Apparently a different, more effective tactic is needed to reach the “unsubsidized markets”.  That is consistent with the experience of the failed Obamacare exchanges.  Do privately-run exchanges offer a more effective tactic for the unsubsidized markets?  Perhaps – provided the federales will allow a private-sector solution.    

(2)  National consulting firms such as Mercer, AonHewitt, and Willis Towers Watson are investing in their own private exchanges.

This move appears a good fit with their existing business strategy of expanding admin support to employers – e.g., member service functions, 401(k) administration, annual enrollments, etc.  These firms clearly see a future in private exchanges.

(3) Large insurance companies, e.g., Aetna, United, and Anthem, that initially expressed interest in building their own private exchanges, seem to have become less enthusiastic.   I’m guessing they’ve lost appetite for gearing up to administer multiple other companies’ coverage.  Isn’t it much simpler for the insurer to participate in one or more third-party private exchanges and sell its own individual policies there?  I wonder if they aren’t asking themselves, what’s the point of building a proprietary private exchange?

So questions remain following the Obamacare failures – which, don’t forget, go beyond financial.  Their implementation and operational failures have been painfully documented.  Most states declined to set up their own tax-eating, money-losing, hard-to-run, over-regulated, politicized Obamacare exchanges.  The federales have proved they don’t have the resources to operate exchanges even as they proved ignorant of insurance management and eager to over-regulate.  Can private exchanges ever overcome the Obamacare record, and become attractive for the majority of middle-income Americans? More specifically 

        (a)  Will large employers gravitate toward private exchanges?

        (b)  Will employers that subsidize their employees’ group coverage today, continue to do so in private exchanges?   

            (c)  Will insurers decide to participate in private exchanges?

         (d)  Provided employer subsidies continue, will middle-income employees prefer coverage available thru a private exchange, vs. the choices available to them now?      

         (e)  Will the federales expand Obamacare subsidies to include private exchanges, not just Obamacare exchanges (if any)?

I think the best answer for now is “Reply hazy, ask again later.”

 

Mass Health: Update

A while back, Bob reported on the new Massachusetts health insurance program. Well, some new details have come out, and (as usual) we're on the case:

■ Mass businesses can avoid the $295 fine...er, uh, "fee" if at least 25% of their full-time workers are enrolled in their health plan, or if the company contributes at least 33% of the premium cost. That's actually a lower percentage than what most employers pay now [ed: oops!].

■ On the other hand, employers won't be allowed to count employees receiving health insurance from other sources (e.g. through their spouse's employer or government programs).

■ And, the "fee" requirement applies to businesses with more than 10 full-time workers.

■ Massachusetts' Division of Health Care Finance and Policy is projecting that the "fee" will affect about 8% of the state's 35,000 eligible companies (which represents less than 2% of all Massachusetts' employers). They're hoping to raise about $26 million, which they plan to use to subsidize health insurance for low-income individuals.

Under this new proposal, employers would have to inform the state about whether their workers were offered employer-sponsored health insurance and whether each employee accepted or declined. Workers who decline the employer's offer and don't have alternative coverage will be required to file a form acknowledging responsibility for medical care. It's not clear whether this will relieve the employer of the $295 "fee."

Ezra K finally finds a nut!

As we've repeatedly knocked Ezra Klein's less-than-stellar grasp of insurance issues, it seems only fair to point out when he actually gets it right. An on-going IB meme has been consumer-centric health care, the goal of which is to educate and empower insureds to make more efficient health care choices.

Ezra reports that Blue Cross of Massachusetts (BXM) is attempting to do just that. He may actually be a closet IB reader, acknowledging early on that "Massachusetts has had, for years now  ... some of the highest health insurance premiums in the country."

BXM has introduced a new "tiered" co-pay system to incent its insureds to choose less expensive, but equally effective providers. It's not really new - Golden Rule flirted with this a few years ago, as did other carriers - but it's notable for the particular market, and its scope.

And it seems to be working. CEO Andrew Dreyfus reports that:

"[We] haven’t heard much in the way of complaints from the employers ... however, heard from one of Boston’s more expensive hospitals.

They were starting to lose referrals because of the new payment model... ‘can I lower my prices?’ I said, ‘absolutely.’”

Qualified kudos to Klein.

[Hat Tip: FoIB Holly R]

Bay State Irony

From the home of RomneyCare (which begat the ObamaTax), we see the effects of the train wreck:

"New ACA Medicare Payroll Tax Hits Massachusetts, $1.7 Billion Over 10 Years"

According to a new report from the folks at the Pioneer Institute, some Bay Staters will see their annual Medicare payroll tax burden jump over 60%. They've even figured out how the new taxes will affect famous (and not-so-famous) Massachusetts sports figures. For example, Tom Brady will pay an additional half-a-million dollars in new taxes, while David Ortiz can anticipate an increase of almost $130,000.

Talk about a foul ball.

Oh, the folks at the PIU also point out that, starting this year, "the federal government will require all employers to withhold an additional 0.9 percent in Medicare payroll tax (increasing the tax rate from the current 1.45 percent to a permanent 2.35 percent). Unlike "basic" Medicare taxes, this additional tax is paid solely by the employee."

But I'm sure we'll get our money's worth, right?

Right?!

Have Gun, Will Insure?

I've been engaged in an interesting email conversation with a gentleman who believes that we can - and should - require some sort of liability insurance for legal gun owners. Aside from the Constitutional issues, there are a number of problems with this idea.

Mr Harvey has had an op-ed piece published in the online Insurance Journal (Mazel Tov!) which will be the subject of this post.

Mr Harvey begins by bemoaning that  "the level of death and injuries [caused by guns] is unbearable"

Based on...what, exactly? How many is "unbearable?" It would be nice to have some statistics which compare, say, gun deaths and automobile deaths in a given year. But Mr Harvey provides no such objective evidence.

So we will:

According to the CDC, there were 33,687 automobile-related deaths in 2010 (latest available), vs 31,672 firearm-related deaths (which includes firearm-related suicides, by the way). Why aren't the former just as (let alone more) unbearable? And believe it or not, there are folks who drive without insurance.

Who knew?

He goes on to say that "[p]roviding compensation for victims is important."

No argument there. That's why states have victims' compensation funds, which cover not only violence by guns, but knives, ropes and hammers, as well.

Why are the victims of the latter three less worthy?

He then opines that "[i]nsurance companies help reduce hazards from people’s actions."

Thereby displaying a brilliant lack of understanding. Insurance does no such thing. It simply mitigates the cost of those risks (or hazards).

"Required gun insurance will provide similar protection and safety."

Yes, because Chicago gang-bangers are all calling Flo and Mr Mayhem about buying coverage. The reality is that there's really no way to enforce this without registration (which takes it out of the realm of insurance).

"Insurers will demand safe practices and secure storage of guns as a condition of giving favorable rates."

Most legal gun-owners already do this. How many gun-related homicides or injuries are caused each year by legal gun-owners? Perhaps that information is available, but for now we must take Mr Harvey's word for it. Call me skeptical.

He then informs us that "proposed bills ... would require liability insurance with high limits for guns. This would be painful to gun owners without providing much relief for shooting victims, because ordinary liability insurance doesn’t cover intentional acts or what happens after a gun falls into the hands of a “bad guy.”

Ah, finally got something correct. So what do you propose to do about it?

"Gun insurance needs to be no-fault in nature and be applicable to situations where shootings often happen. Many shootings are not done by the legal owner of the gun involved"

That last bit is also correct. And so....?

"Studies by insurance providers and regulators are needed."

Ah, studies are needed.

No doubt.

Still waiting on what they're supposed to find, and how one develops "no-fault gun insurance."

One supposes that this will be the panacea we need to deal with the "unbearable" burden of gun-related violence.

Or maybe not. For some reason, Mr Harvey meanders off into the world of home and auto insurance, looking for answers.

Unfortunately, they seem to elude him. Here, he avers that homeowners insurance can indemnify innocent bystanders (aka lenders):

"Fire insurance with an “open mortgage clause” pays a lender when owners commit arson."

It does no such thing. If you burn down your house, the insurance company is not going to pay a dime, to you or the lender. The "open mortgage clause" simply means that, if/when there's a legitimate claim, the lender is indemnified to the extent of its loan. But burning down your own house isn't a "legitimate claim."

Sheesh.

Having struck out there, he turns to auto insurance (with equal success):

"Motor vehicle insurance applies to “road rage” incidents in Massachusetts and some other states"

Now he's just making stuff up - there is no legal definition of road rage in Massachusetts, so any liability that might arise does so from some other predicate cause.

His 2nd Amendment "analysis" is equally spurious, but since it's irrelevant in this context we'll let it go.

The basic problem with the whole idea is that there are really (at least) two issues here: legal and practical.

From the legal standpoint, you can't insure against a liability you don't have. For example, your umbrella policy protects you when you get sued for someone slipping on your icy sidewalk. But you have no liability if it's out in the street in front of your home, so there's no coverage for that.

Now if you shoot the neighbor while he's down, that's a deliberate criminal act, and your insurance isn't going to help you. So we'd have to re-define liability insurance  to include deliberate criminal acts. That'd help with the road-rage, too, one supposes.

Good luck with that.

The second, more practical challenge is that this applies only to law abiding citizens, who by definition cause far fewer gun-related deaths and injuries. Mr Harvey may be a successful retired businessman, but he has a very poor grasp of basic insurance principles.

MassCare OK

Bob tipped me to a new transparency tool available to Massachusetts' health care consumers. It's called My Health Care Options, and it's an online resource to help folks find health care providers based on location, cost and outcomes.

Pretty cool:

You input your zip code (or city, etc), and then choose to search for hospitals, physicians, or a number of other providers. Once selected, you can also specify what kind of service to research: an operation, baby delivery, MRI or whatever. Based on preference, the results can be sorted by price, or how many ICU beds are available, or a host of other criteria.

There's even consumer ratings (how well they were treated, etc); kind of like "user reviews" at Amazon and the like.

It seems pretty user-friendly, too: you don't have to know CPT codes or other medical jargon, just the service or procedure's name (e.g. "angioplasty" or "Cesarean Section").

And the site will "bottom line" it for you, as well: while there are no actual dollar figures (which seems to me to be a requirement sadly missing here), there are comparative ratings to give you an idea of who's more expensive, and who's less. It may be that, since this seems to be a relatively new service, the actual costs haven't been included yet, but will be down the road. Let's hope so, and soon.

The service itself is provided by the Massachusetts Health Care Quality and Cost Council, which was set up as part of the original Mass Care program. Frankly, this may the best thing to come out of that endeavor.