Health Care Reform - Proclaim Victory and Go Home

Call it a victory, and move on. They couldn’t do it in Vietnam, can’t do it in Afganistan, but they’re doing it in health care.

Not that nothing has been done. I don’t agree with the crowing politicos that this is the change of the millennium, but getting 30 million people into the health insurance system is clearly important. I wouldn’t call it a progressive move so much as an anti-regressive move. How America has tolerated this for so long shows the innate pathology of the system and of our politics, the weakness of government and the strength of the corporations with no consciences. Since this is the heart of the health reform legislation, I’d call this not health reform, but inclusion reform. It will be important.

But it’s a lot like the financial bailout. We’ll change some current conditions, but we need to remember, it was the system that got us into this, our set of institutions and practices. We will get more inclusion, but the high-cost low-efficiency high-profit low-fairness system that got us into this will remain. Them that has is them what will get more. More meat on the bones, but the bones still hopelessly misaligned.

What I’m talking about is not the failure of the public option. I thought the public option could have been very helpful, but the main event was always the Health Insurance Exchange. If there had been a good and viable and extensive HIE, one of the pillars of the current system -- the health insurance companies-- would have had to do their business in a different way. They would have had to compete, with their competitive drives redounding to the benefit of the public. (For more details on this, see http://buddshenkin.blogspot.com/2009/09/understanding-health-insurance-exchange.html.)

The key is this. There are two ways of running a system responsibly, competition and regulation. Most American industries have a combination of both, some more regulated and some more competitive, but most a mixture of both. How do corporations operate within these systems? What it wants to do, what it fights to do, plots to do, is to escape both and either. Any self-respecting corporation will espouse the holy cause of competition and try to escape it to become a monopoly. What any self-respecting industry wants to do is to capture the regulators and make rules that favor business rather than the public. That’s what they are born to do. The role of the government is to prevent both from happening. Capturing the regulators and crushing and excluding the competition is the strategic function of the corporation.

The health insurance companies have not been heavily regulated, despite their claims that they have been, and 90% of the population have had a choice of health insurance companies so sparse that they qualify as either oligopolies or monopolies. That has been part of the tragedy of the health insurance industry. How much will this be changed now? In the service of increased coverage, some important regulation will be introduced – excluding prior conditions, excluding rescissions, etc. That’s not nothing. But the essential conditions of competition will not be introduced, because HIE will apply to so few applicants for insurance, maybe a couple of million. There will be some increased regulation as mentioned, but only a couple of provisions, really. In the end the system will not be essentially changed.

As an employer of about 150 people, I was hoping to cut some exorbitant health insurance costs, and to be able to offer my employees a better insurance plan than we have now, with more choice and value. Now, we’re frozen for the foreseeable future, and the present sucks. Our people would like to choose, but I can’t offer them a choice, because there are very few insurance companies I can contract with, and all of them insist that I make them exclusive to Bayside, so I have to choose one only. I can't choose Kaiser and others, it's either/or. It’s not if you like your present insurance you get to keep it; rather, you’re stuck with your present insurance like it or not. Thanks a lot.

How would anyone be violated if we could just choose freely in a market, where the prices and services were clear to see? Ah, but then the monopoly would be violated, the companies would not be in control. The health insurance industry beat that back, little by little, until nothing was left. They have the money, they have the influence, and the goddamn Senate sucks.

In addition, as a company that is still small but not very small, I think we will be required not only to cover our employees, but also to offer to pay for 65% of our employees’ families’ insurance. Probably the cost of each individual policy will increase, and our corporate responsibility to provide health insurance will massively increase. To me, it’s very discouraging.

Other Notes on the Legislation

The new legislation will establish some pilot projects on Accountable Care Organizations, and boards for assessing comparative effectiveness of treatments. These are bureaucratic arrangements designed by the health policy intellectuals that I am very pessimistic about. They will lead to regulation rather than competition. Not worth the big fight that health reform entailed. Minor.

The nurses have signed on to reform because they got what they wanted, support for more training (jobs and power!) and independent nurse clinics without the need for their nemeses, doctors. Nurses are on the move!

Other big winners are Community Health Centers. They will get $6.5 billion – billion – over five years for increased operations, trying to go from serving 15 million people to over 30 million. They will get $1.5 billion – billion – just for construction. Plus they will be getting over $800 million from stimulus funds to introduce IT.

Many of a liberal persuasion will be tempted to applaud the new money for the CHC’s. Not me. The alternative ways of funding care for the poor are (1) to establish and support various clinics, such as CHC’s, and (2) to give the poor funding to obtain care in the mainstream system. Notice that we are dealing with “separate but equal” arguments here. We at Bayside are providers for Medicaid and every private insurance company you can shake a stick at. Where would our patients and potential patients rather go? Now, that’s good competition.

I say, give me a level playing field. But what the legislation does is give gobs of money to the CHC’s and starve us in the private sector. Not only do the CHC’s get all that money, they get paid two or three times what we get per visit, as they always have (outrageous!) But also, Medicaid eligibility is expanded, and the dreadfully low payments to doctors will not be raised, according to the Senate bill. (The House bill actually raises payment to the level of Medicare – that’s right, even though Medicare rates are quite low, Medicaid is considerably lower! But I doubt the House Medicaid levels will survive the conference committee.)

Thus, the private sector will continue to be excluded from serving the poor, simply because they won’t be able to afford to do so. The CHC’s, on the other hand, will be funded separately and thus relied upon. The die is thus further cast – there will be separate systems for the poor, clinic care. Forget the vision of Medicaid, to serve everyone with the same system. Gone. Two classes of care, more than ever. Those of us who try to serve all with one class of care, adios!

Well, these last are just my personal observations of some of the less noticed aspects of the legislation. There are others I won’t mention, all tending in the same direction.

This is what the systems now allows to be done. So what can the Democratic Party do? Proclaim success and move on. It’s pathetic, really.

Budd Shenkin

United Health Care and Telehealth

What does a corporation do when it is wildly successful financially and has lots of cash?

We in the medical field have looked on bemused at the plans of United Health for “telehealth.” I understand that United even set up demonstrations in the halls of Congress during the recent health care reform activities, wowing the Congress people.

What is telehealth? The use of communication and other technology to have a virtual visit with a patient. The patient is seen at a distance, miles or hundreds of miles away. It’s a pretty glitzy prospect, and who knows, maybe useful in some instances. Rural and remote areas, perhaps, if they can’t be manned by real people. Specialist visits, perhaps. We already have interpretation of imaging studies on line, so that doesn’t count as a new phenomenon.

Naturally my primary care colleagues are upset. It attacks our business, and it demeans what we do, in a way. People who think telehealth substitutes for a real caring person are unclear on the concept – but that’s so typical these days, techno-types think they can deconstruct and understand, when they can’t.

I understand this from a corporate point of view. United is an ultra-successful health insurance company, and has amassed billions. No wonder they didn’t want to be reformed, and the prospect is for even more billions under the health care non-reform legislation. When this happens to a company, they look for the next "disruptive technology," or they find a way to buy other companies in their field and make themselves bigger and even more predominant and successful.

Apple was good as far as it got, but what does it do for an encore? Ipod. Iphone.

Microsoft and Google were excellent, what do they do for an encore? Buy other adjacent companies, compete in adjacent markets like the iphone, for instance.

So what will United do to maintain its dynamism? It's hard to go around buying hospitals, medical groups, other insurance companies, etc. So instead it looks for a disruptive technology, and it thinks telehealth might be it. Gotta do something.

Personally, I think it will be a big failure. I think an insurance company cannot be the linchpin of medical services. Seems to me that it will be very hard for what is essentially a fiscal intermediary to make real substantial improvements in the medical care system, and if they were to do so, it wouldn’t be through technology. I think that transformation and disruption need to come from real providers of care, docs and hospitals, not financial intermediaries. But of course, first they have to get the money.

Budd Shenkin

The Moral Pain of Health Reform

First, a caveat about this post. I’m 36 hours post left knee arthroscopy with partial meniscal removal, and just took my first oxycodone and it’s about 2 AM. The first 24 hours were pretty good pain-wise, but now I’ve got some ache, enough to drive me to the pills. So here I am awake and a little alert, enough to drive me to blog. So, we’ll just have to see how it turns out.

I’m so mad I can’t see straight or think straight. The subject – health care reform, which, as you know, I’ve been paying a fair amount of attention to. I’m just so mad at the industry payoffs that the Senate bill has in it. Pharma, hospitals, and health insurance companies, such an unholy trio. The first two do some good, the last one not so much, but all three then become what they call “stake-holders.” My god, what a term. Stakeholders. As in, I’ve got my claim to possession of a territory that yields money. Why does that offend me? Is it my mother’s and father’s voices from their Commie past in the 30’s that eroded to realism, but an idealism of “should’s” that never did really recede? I try to think, “That’s the way people are” and not use the term “should,” because I see how that moves quickly to anger. But I guess this is the operative process as I get so mad I agree with Howard Dean, and I say “Pull the bill – don’t pay the ransom.”

Realistically, I know it has to be passed. It’s more than deeply flawed, it’s morally offensive, and offensive in a practical way as well, because we know from history that any angle that can be played, any trick that can be conjured, any grand hypocritical avenue that can be traveled, these industries will do it. “Public good” never passes their lips that it is betrayed before hitting the listener’s ear.

Still, it needs to be passed, because people need the coverage, some of the insurance tricks are done away with, and the logjam of health care organizational stasis is broken. OK, I know that. But it is so outrageous to see the players, preening, representing so few thinking people, paid off in so many ways. What a system.

Maybe in the end this is what it takes. We know the Churchill quote that it’s a terrible system, but there is no better. Plato called for wise men, and anywhere that something like that has been tried it hasn’t worked. Maybe moving millions of people in a direction takes this. Maybe watching sausage or legislation be made is not for the weak of stomach.

But it’s hard, it’s just so hard.

Budd Shenkin

Financial populism

I've been predicting that the big election cycle push by the Democrats will probably have to be over financial reform, faut de meilleur issues. The fact that Wall Street has lacked remorse is just so tempting. The problem has been that they have been watering down and watering down what they are prescribing. But it appears that the Republicans are falling into the trap. From the Washington Monthly blog:

"Not one Republican voted for the financial regulatory reform and consumer protection bill in the House. Not one," Woodhouse said. "One year after nearly the worst financial collapse in our nation's history -- a collapse brought on by the excessive greed and risk taking of Wall Street and by the anything goes regulatory environment put in place by Republicans -- not one Republican in the House thinks that consumers deserve additional protections or that the practices of Wall Street should be curbed. Do the Republicans not get that one of the reasons they lost so badly in 2006 and 2008 is because the public believed that the GOP had just become shills for oil companies, Wall Street financiers and insurance companies? Apparently not -- because here they go again."

The goal, apparently, is for Republicans to actually suffer some electoral consequences for this one. DCCC Chairman Chris Van Hollen (D-Md.) told reporters that GOP opponents of reforming the way Wall Street does business "are going to pay a very heavy price."

And in his weekly White House address this morning, President Obama reminded Americans, "Just last week, Republican leaders in the House summoned more than 100 key lobbyists for the financial industry to a 'pep rally', and urged them to redouble their efforts to block meaningful financial reform."

Is this the issue on which Democrats take the offensive?

I'll stick with my prediction and analysis. At least for now.

Budd Shenkin

Obama Nobel

It's never quite clear what the Nobel Peace Prize means. Remember that Arafat got one? When I lived in Sweden, my friends there explained it by pointing to the awarders: "They're Norwegians, don't forget!"

Unlike the science prizes, the Norrmen use their prize as a way to influence events, not just recognize past achievement. I'm sure this is part of what the Norrmen tried to do here, that and as others have said, to compliment America in finding someone who is not George Bush.

But more profoundly, this year I think the Norrmen have made another error - they have forgotten that they are the MVP committee, and instead found the Rookie of the Year.

Budd Shenkin

Nutrition is the way to good health

First a quick note on the ongoing health reform debate. Can you believe that a plus for the Senate bill is that premiums will not go up??? The mind boggles. After the unthinkable rises in health insurance costs, we're supposed to feel good that the exorbitant current costs for employer provided health insurance will not rise?

OK, it brings in the uninsured; OK, it gives needed support to many of what we used to call the "medically indigent," too much money to get Medicaid, not enough to buy insurance. OK, that's good, very good and very important, well worth doing. But "no rise" in health insurance costs is supposed to be good? Our group got hit by 20% rises two years running, and "only" 4% this year for Kaiser HMO insurance, or really lousy Kaiser sponsored POS insurance -- where is our relief, Mr. Man? Stinko, guys, just stinko.

OK - now the meat of this post. Nutrition - that's really the road to lower costs! If we ate right (and exercised right, and took our statins and blood pressure meds right), we'd really lower costs. See the Safeway plan, commented on many months ago here as I undertook the serious job of health reform analysis probably last spring.

But for nutrition, it's not just eating at home. Americans like to eat out - just look around the city, and if you're looking for it, you can't help but be struck by how society has built itself around the biological imperative that we need to eat. We have found a way to make it a social glue, and an economic boon.

So, how do we domesticate this proliferation of places to eat? How do we turn it to our advantage? How do we make these places Mecca's of good nutrition and good health, yet not abstemious?

Here, in lowly Fremont, California, is the modern answer to our nutritional and social needs.

http://www.yelp.com/biz/the-deep-fried-twinkie-and-pastrami-shop-fremont

I rest my case.

Budd Shenkin

ObamaNeeds to Move on the Financial World

Politically, the Obama Administration is in trouble, although they probably think they’re not. People are getting impatient; I’m getting impatient. Yes, there is change, and this isn’t the Bush Administration – that is what has given the Administration so much slack, we still remember the WAH (Worst Administration in History). We now have some people who have some brains and some basic humanity.

But we’re not really going to see too much positive for quite a while, the way we’re going. Let me count the deficiencies.

Guantanamo – maybe not as grim as it was, we don’t really know. It’s just taking a while to wrap it up.

Torture. He did well at first saying we won’t torture, but we’re still going to do special renditions.

Justice Department. Still incompetent, and still double-dealing with Spiegleman. Still taking some Bush positions.

Greg Craig. All pundits agree, a good man wronged by bureaucratic infighting and failure of Obama himself to stand up.

Health care. Not going to go so well. Some things will be better, but not clear how soon, and not really clear if it will be a lot better in the end. Meanwhile, the perhaps necessary strategy of letting the Congress lead has not been pretty.

Afganistan. Will not a pull out, will readjust objectives and management, it will look competent, but it will take time.

Pakistan. A very most improvement, but the area itself is so difficult, who can expect much? If it doesn’t blow up, we will be well served.

Iraq. Certainly much better, but Obama can’t take credit for this; most people think that by our staying in there, it finally will be somewhat better, although it was done in the least effective way imaginable.

Middle East. No particular competence shown here.

All the public appearances. Regular guy, OK, but too many appearances. Watching basketball games, the turkey, enough, give me a break. It would be different if things were going well.

Which leaves the big boy, the economy, joblessness, low growth, the specter of more and more loss of homes, more financial upsets. The stimulus package was necessary, of course, but it’s controversial and since it’s just cushioning a fall, there is no one there to shout “whoopee!”

Which leads us to Wall Street. If there is one leaking sore, this is it. The other items above may not be solved, but many are somewhat better, and none demonstrably worse. Wall Street, the major miscreant in the most major problem we have, is awash in money and notably devoid of contrition. Quite the opposite. And their facilitators, their enablers, Geithner and Summers, are insiders.

So, here’s what I have been thinking for the past month or so. Get health care out of the way, one way or another. Just get it done, call it a victory, and move on. Say the results will take some time to see, although there will be a special near-term fund from the government for the uninsurable to buy insurance.

Get Afganistan set, say it will take time, we are not bugging out, but our strategy will be intelligent, and hope it recedes some in prominence.

Then, attack the financial problem head on. First, say that the system has been rescued. We had to prop it up so there wouldn’t be a liquidity crisis and there wouldn’t be a meltdown. Unfortunately, in the process of doing this, we have found out that the denizens of the Street are profoundly unconscious people. They have revealed themselves as who they are, and it’s not a pretty picture. It’s time for the extortion to end.

So, here’s what we’re going to do. We’re going to push for really big regulations on the Street. We’re going to reintroduce Glass-Steagall, which never should have been repealed – thanks, Clintons and thanks, Phil Gramm et al. We’re going to take measures to break up the big banks so that nothing will be too big to fail.

And we’re going to take the money from the banks and make them start lending to small business. We will start with gentle persuasion. If that doesn’t work, we’re going to take them over one by one. And we’re going to make the mortgages go back to the original interest rates of the ARM and not let them vary upward. Too bad, lenders; you’ll survive.

Now, a lot of what I suggest is untutored – I don’t know 5% as much about this as I know about health care. I’ll follow this up in a while with something more accurate. But I’m trying to indicate what I think is the tone they need to strike -- we’re kicking ass and taking names.

OK, it’s populist. But politically, this is what they have to do. Let the Republicans start to defend Wall Street. Isn’t that what the Administration needs?

Budd Shenkin

Health Reform (for a change)

OK, this is very repetitive, but I'm now restating my position on health care reform, as I wrote to my old mentor, Phil Lee:

Hi, Phil:

Hope you're having a good Thanksgiving and are hale and hearty.

A couple of decades ago you said to me that it seemed to you that there is so much money in the game that it's hard to change. I didn't have the wisdom to reply at the time. But it is just so obvious you were right then, and would be even more right now if you made the statement again.

It's pretty clear to me that should health care reform pass in its current state, and for Obama's and the Democrats' sake it had better do so, who would be sitting pretty? The same ones who are sitting pretty now. Pharma, no problem. Hospitals? All those newly insured patients and minor inconveniences of making their services non-infective, no new prohibitions on local and regional monopolies, no problem. Insurance companies? No more underwriting, continue to write up policies with big premiums, few if any assurances of breaking their oligopolies (I assume the retraction of insurance company immunity from antitrust will not go through), no problem. Training programs, with more money for nurses and more places for trainees? No problem. Nurses, now able to head medical home installations without physician direction or participation? No problem. FQHC's, with $1B growing to $4B increased funding over 5 years? No problem. Everyone with a strong lobby, no problem.

Primary care? Only a possible promise of a MedPac in the executive that might or might not dodge the specialty interests and help redress the RBRVS inequities. A policy to lure people in with debt forgiveness and more training slots, not to make the ultimate destination more palatable. No strong lobby, no place at the table.

And have you seen the plans for the Primary Care Extension Program? Pure public health, no involvement of the professional primary care givers at all! The Feds through AHRQ will dish out grants to states who will set up "Hubs" of the state health departments who will send out who, RN's and MPH's, to tell us in practice how to practice medicine in a medical home, with no money promised to fund it all, just another unfunded mandate? That'll sure be well received!

And patients, what kind of health insurance are they getting? The terrible kind of insurance that the insurance companies have come up with over the years, high deductible and high out of pocket costs up front, with no restraints on insurance payments at the back end, where the consults and the hospitals sock it to them, and will be fully funded. Reminds me of Goldmine Sachs and AIG - 100% on the dollar, while Main Street (Primary Care Street), takes it on the chin. I didn't know Larry Summers and Tim Geithner designed health insurance also.

There is so little about cost control, really. I don't know about funding the ACO's, but I would hope it could help. The biggest fights will be political -- who controls these babies, I guess. It would be great if they worked, just a muscled up version of the old DRG's.

Why is all this happening? Why is the government so weak? One, Senate representation of two Senators per state, no matter what the population. Two, election finances, with so much money necessary and corporate interests thus foremost except for the Obama national campaign. Three, the difficulty of fixing election finances, because of the First Amendment, and because of the long-standing confusion of treating corporations as persons with the same First Amendment rights as real persons. We can pin it on individuals, and on the weaknesses of the political class, but it's really structural.

What forces can be mustered for real reform? It's got to be the profession itself. Professional ethics really do exist, goodwill toward man really does exist in so many ways throughout the profession, if the professional societies and organizations could be mobilized. To me, that's our best hope.

I'm still for health reform on the basis that ethically, Americans need to be able to insured, and on the basis that at least the logjam will be broken. Breaking the logjam will be only the first step, but a necessary one.

Anyway, that's my hit on things.

Again, Phil, I hope this Thanksgiving greeting finds you well, and I would love to come down to Palo Alto and take you out to lunch.

Best as always,

Budd

Budd Shenkin

The Reid bill in the Senate

It's true, dear Blog, I have been neglecting you. I think of it as a fallow period. After all, before just signing in and blogging away, it's good to think first. So I guess I have been.

I have read most of the Reid bill in the Senate, and earlier this year I read the two house bills, especially HR 3962. All I can say is, deficient as I think the bills are, and I think they are grossly deficient, at least they will break the logjam in health and get change moving. I'm trying to be optimistic. My essential pessimism comes from realizing that the powers that be, are the powers that will be. It's not only the rules of the Senate, it's the makeup of the Senate with over-representation of the West, the South, and the rural, and the lack of electoral reform that makes money talk. None of this is going to be fixed in my lifetime, and perhaps in yours. And this situation conditions events strongly.

But, given that, here are some observations on the Reid bill.

The problem of primary care, that there are a diminishing number of primary care physicians and the field is economically uninviting, remains unaddressed. The House bill had a 5% primary care bonus, and it had more people on Medicaid (150% of the poverty line), but increases of Medicaid payments over 3 years to 100% of Medicare. That's all gone in the Reid bill. What remains is nothing to make primary care a more attractive destination, but to make entry more attractive by loan forgiveness and more residency places - not an ideal solution to my mind. In fact, pretty poor.

There is a chance that the changes envisioned for MEDPAC, the body that recommends payment levels in Medicare, would change that. I do think that separating MEDPAC from the special interests, which is what insulation from Congress means, is very good. But I still doubt that they will go ahead and pull compensation for primary care up. So, I think the primary care issue, grounding the system in primary care, is very poorly addressed.

I think the hospitals are going to make out like bandits, because their uncompensated care will now be compensated and they will have given up nothing. The quality measures under Medicare (not getting paid for patients who are readmitted, not paying for hospitalizations for infections acquired in the hospital, etc.) is something they should do anyway, and can do, and in the end it will cost little. Most of them, for all their complaining, do very well with local monopolies, pay SEIU very well (for all their complaining), pay nurses far too much (for all their complaining), pay the administrators phenomenally well, and don't do basic management well (clearing OR's so the next case can follow, etc.) Instead of being efficient and kicking some butt they just raise their rates. Can't see that changing. Hospital rates are so unbelievable, it is surprising there is not more focus on that. This is such a core problem, and it is very poorly addressed.

Pharma will do just fine, thank you, as has been well documented. They will sell more than ever and not much competition will ensue. This issue, festering since the Kefauver investigations, remains poorly addressed.

Insurance companies still will have little oligopolies and no ceiling on rates. Yes, they will get rid of exclusion and rescissions, but they will reduce their underwriting expenses, have many more people enrolled, government money, and yes they will have to report their medical loss ratio, but what games will they play? They will still torture us, the doctors with their contracted rates and quibbling over bills we send in, etc. This problem is better addressed than hospitals and pharma, but where will the competition come from? The Public Option has withered on the legislative vine. They will all still probably retain their monopolies.

So, where will the savings occur? Can't really see it, despite the optimism of the economists. Some will come from us (physicians, especially primary care), where we don't need it. There are the beginnings of ACO's (Accountable Care Organizations), of course, but they will take a while to work if they do. Of course care has to be organized and coordinated, it's a scandal that it isn't. But the major story with ACO's will be political control. Will this further the corporatization of medicine? Almost inevitably. Who will be in control, hospitals? Dunno. This will be the story to follow, I guess.

Some tidbits from the bill: nurses do well, as they will now be empowered to run medical home practices with them in charge, no doctors, just a back up institution like a medical center or FQHC. Nurses are getting their autonomy! Plus the academics get more training money. What they should do is resurrect the hospital nurse schools, get more LVN's, and break the RN strangle hold on the hospitals. Not going to happen.

I think there is further movement to separate and unequal health systems, as the FQHC's get billions, from $1B to $4B over 5 years, I think, while their colleagues in private practice get squeezed instead, and FQHC's already get 2-3 times as much payment per visit. An inevitably high cost and low customer service solution.

There's also $50 million for school health centers - great jobs! No nights, no weekends, just hang out around the school without anyone checking your productivity - a county job! Sorry I can't be enthusiastic, because on paper it's a good idea. In practice? Not so much. Without productivity measures, people just don't work so hard, they just don't.

Then there's this: "The Primary Care Extension Program shall provide support and assistance to primary care providers to educate providers about pre-ventive medicine, health promotion, chronic disease management, mental and behavioral health services including substance abuse prevention and treatment services), and evidence-based and evidence-informed therapies and techniques, in order to enable providers to incorporate such matters into their practice and to improve community health by working with community-based health connectors (referred to in this section as ‘Health Extension Agents’)."

I can't wait until I meet the little MPH graduate who comes around to my office telling me how to practice medicine!! On the positive side, maybe we could capture this program and become the "hub" and the "agents," but I've been around long enough to be able to spot a disaster in the making. "What are you doing now, Barbara?" "I'm a Health Extension Agent. I get to tell stupid doctors what they should be doing." "Oh, that must be fun! Are any of them cute?"

Well, take away my misogyny, and you get the picture.

Budd Shenkin

The Joy of Sex

Readers of a certain age will remember Alex Comfort's classic, the Joy of Sex. Appearing in the 1970's, Comfort presented a humanistic rendering of what was approached as a very natural process that should be viewed as a pleasure for humankind. The commentary was vivid and loving, the illustrations illustrative.

It turns out that Comfort produced this book with the help of his long time mistress, and that the embarrassment caused to his wife led to divorce, which is a sad story. But the book lives on. I understand it has been updated for a new generation and reissued.

This is a good thing. But what of the old generation that started with his book? We have progressed in age and we have our own new perspective. Can the publishers refocus their concerns on this loyal, now older generation?

I would suggest that new book be prepared. The title would be, The Joy of Regularity. I'm still struggling with the illustrations.

Budd Shenkin

Health Reform Endgame? or Foreplay?

Crunch time in health care reform. Public option or not, we'll just have to see. The Catholics, with the same wonderful sense of timing that started the Inquisition, try to retard abortion by extortion - waddya want, health care reform or not? Terrific.

Pharma does great selling more brand named drugs and patents on biotech go up to 12 years, hospitals get all those paying patients and hardly any nonpayers, and health insurance? Some costs go down, actually, because they don't have to underwrite, they keep administering the big time ERISA accounts, and look at all those new policies! With no limits on prices. Wow.

The nurses get a lot! They don't need to be beholden to doctors (their dream!) to head a Medical Home project, and they have some other kind of project they can head that I forget right now. Plus educational money for the academic nurses. The Public Health people get billions, and Community Health centers get $1 billion now and up to $4 billion in four years. Not a bad haul.

The academics always get something - money for training in primary care, a pursuit that they continue not to make more attractive by simply raising the take.

OK - that's the facts, pending the Senate. But we just have to look at it this way -- the logjam is being broken. Health care has been so impacted that nothing has moved for years as the pressure has built up from behind. So, this is the beginning. Who knows how it will come out? But the clear need for reform just from the standpoint of cost, forget quality, will make sure that stuff happens. What is happening now will be enough to set the forces free. I'll try to figure out where a little later.

Figured I had to write something. Been too long.

Budd Shenkin

Health costs? Nothing right now, something maybe

Health Care Reform - Primary Care view

I recently dealt with the governmental affairs leadership and staff at the American Academy of Pediatrics national meeting in Washington. I have found them timid in general. So I have tried, repeatedly and unsuccessfully, to put a burr under their saddles, and words in their mouths. Here is what I wrote up for them for storage in their circular files.

Proposal: Rationalizing Insurance Payments to Practitioners

The weaknesses of the way health insurance companies deal with the public are well known: exclusions for prior conditions, rescissions, exclusions from care, exorbitant costs for individuals, etc. These are being addressed by the current health reform legislation proposals.

Less prominent in discussions have been the difficulties that practitioners have had with health insurance companies. It is well known that insurance companies are very concentrated, while most practitioners, especially in primary care, are diffuse. The power of the insurance companies has thus inhibited negotiations between them and practitioners from being rather equal. Most observers regard many insurance company practices vis-à-vis practitioners as unfair.

One of the most important ways that insurance companies have restricted their payments is by not observing the CPT codes. On the one hand, practitioners are required to obey the strictures of CPT coding to the letter. On the other, insurance companies are not so constrained. In the past they have down-coded payments; private lawsuits have largely stopped this practice. But the insurance companies still maintain the practice of simply not recognizing some of the official codes.

An example would be: for well child exams, the CPT coding manual instructs the practitioner to bill separately for the visit, vision testing, hearing testing, and developmental testing. Many insurance companies, however, refuse to pay for the latter three tests, claiming that these tests are “included under the well child code.” This is directly in violation of the CPT coding instructions.

Another example would be coding for after hours or weekend visits. These codes are well established in the CPT manual. Many insurance companies simply say, “We do not recognize these codes.” Individual practices have sometimes been able to induce the companies to change this practice by pointing out how much money is saved for the company by seeing the patient out of hours, rather than referring the patient to the emergency department at a hospital. But most practices cannot make this negotiation work.

This problem with CPT coding is one component of the elevation of medical care costs. The insurance companies have an army of workers to deal with the practices as they protest non-observation of the CPT coding rules. Another army of clerks is employed by the practices, trying to collect on these claims. This collision of interests winds up being in no one’s interest.

The solution for this problem could be a simple stricture in federal law that insurance companies are required to observe the CPT coding manual and abide by it. As legislation is being prepared to change the ground rules for insurance companies dealing with patients, a parallel change could be effected in how the insurance companies deal with practitioners. While there are no doubt other issues to be addressed in this unequal relationship, surely the CPT coding imbalance should be resolved.

One way might be to insert language into the Health Insurance Exchange portion of the health insurance reform bill. In any case, this problem needs to be addressed, and the time would appear to be now.

Budd Shenkin

HEALTH CARE REFORM, HOW ATTENUATED ART THOU

I guess it’s pretty clear that the big players in health care haven’t been touched yet by health care reform. I don’t think they will be. I think I have to retract my triumphant “I told you so” about how the stars were aligned to take down the big players. Not so fast.

• Pharma – they will make more money than ever, substituting brand name for generics in Medicare Part D, under the guise of giving up $85B.
• Health insurance companies will get millions of new subscribers and even as they have to take all comers and cannot use rescission of policies as a profit weapon, their competition with each other will be quite muted, and their policy charges unregulated. They will make money, let’s not worry about that.
• And most of all, hospitals. No changes at all. You don’t even hear anything about them. All the patients who come in who were previously “uncovered,” are now “covered.” They pay. Whatever the hospital wants to charge. The only difference from the past is they will get paid. They will get paid. They will not change their rates, they will not change their behavior, they will be in an improved negotiating position vis-à-vis the health insurance companies, because there might be more of the insurance companies to negotiate with – advantage, hospitals, because they will now be able to threaten not to contract, and make it stick. If there is a public option? Probably even then.
• Medicaid. Slightly increased number of patients “covered.” But we know that “coverage” doesn’t equal “access.” In other words, there is a provision in HR 3200 to raise the payments under Medicaid to 100% Medicare in three years. The Senate Finance bill has nothing in it for raising Medicaid payments. Nothing. How are patients going to find someone to serve them at those rates? Not going to work. The old legislative trick – claim “coverage,” but don’t pay for it, so the poor will get screwed and so will those who serve them.
• Cost control. Hard to find it.
• Help for me, a primary care doc negotiating contracts with the insurance companies and trying to get paid as they do the same things to me that they have done to patients for so long. No change in this situation.

So, should we be negative? I don’t know. There are positives. Coverage will certainly be increased, the logjam will be broken for health reform, and progress will be made by fits and starts. I don’t believe in the eventual efficacy of the technology assessment institutions, etc. Maybe something, but not major. The academics will win; they will get their money for “research.”

Doctors? Not much in it for us. The big so-called win in HR 3200 is abolition of the supposed decrease of payment that is threatened every year by the formula, but which never sticks. The Senate Finance bill keeps the provision in to meet financial standards of budget neutrality, but it’s a fraudulent ploy by the Democrats, because it never can stick – 29% reduction in fees that already repels many from accepting Medicare? No one believes that.

And as for rebalancing primary care and specialties? Don’t bet on it, even if the MedPAC becomes an organ of the executive with diminished congressional input. The same forces will rule, hearts and bones and procedures will rule, and primary care will continue as before.

The major needs of health reform involve reorganization of institutions, maybe as has been suggested with accountable organizations, maybe not. It’s true that the insurance companies play lots of games and are very profitable, but where is the origin of it all? It’s the hospitals, where 35% of the heath care dollar goes. Something needs to be done in restructuring. If this is a step in that direction, it sure seems like a baby step.

One thing that could really make a difference, however, that would be simple technically, although difficult politically, since money owns so much of the political system. That would simply be – no not the public option, although I do think that would be good – but the Wyden Amendment. The Wyden Amendment says that the HIE is open to everyone. That includes if patients are employed by corporations, midsize companies, big companies, etc. This would bring competition, real competition, to the field. In my little practice with 120 employees, these employees would be able to choose plans freely, instead of being trapped into whatever plan I can muster for them, with restricted choices, more money than they and we ought to pay, etc. Just give them the same break that some guy off the street with no corporate plan gets, give the field some competition with some rules, and things would be a lot better.

Then we can get going on the hospitals.

Budd Shenkin

So, I'm a Jew

We get so much from our parents, don’t we? My mother taught me a lot of things. I remember walking on 52nd street with her and it was maybe a shoe store that was being picketed. We walked around and she said – not being one to avoid a forthright opinion – “Never cross a picket line.” After all, my parents started out being Lefties, although at least my father became much more middle of the road in later years, since he could learn from experience.

And then there was Leon, who was a tall very light skinned African-American as we now say, who would be a bartender – a bartender! – at some of my parents parties. They were modest affairs, and really hardly warranted a bartender, but people drank more then and I think it was far cheaper to get help, and I guess it was classy. We kids loved Leon. What a nice man! We asked my mother if Leon was white or black. She explained that Leon would probably be “passing over.” “Passing over” was leaving the black world and entering the white world. As I understood it from my mother, this was just a process that would bring on a kind of we’re all equal world. What a great way out of discrimination! The blacks would just become white. I didn’t quite know how that would work, but since my mother said it, I had to take it seriously.

Then there was the fact that we were Jewish, but from as secular a background as you could possibly have, befitting political Lefties. My father wasn’t Bar Mitzvahed, his father hadn’t been Bar Mitzvahed, and sure enough neither was I, much to the consternation of my maternal grandfather. The legend is that my father’s grandfather said that all religion brought in the world was strife, so he wasn’t having any of it. A doubtful story that I heard only later on.

We should have some religious training, though. I remember my parents talking about it. “How about RS (Rodolph Sholem)?” asked my mother. So we were trotted off to reformed Sunday School at RS in North Philadelphia somewhere for two years, unwillingly but obediently, where there were kids we didn’t know, and they didn’t seem very manly to me, and a teacher who tried to get people to go to Saturday services by saying, “Who went yesterday?” What dorks, I thought, without knowing the word “dork”. Later on it would be Sunday and we were no longer going to Sunday School and Bobby and I would be out beside our house playing Kicking Goals with a football, and I would look around at the sun and this big beautiful 12 foot hedge that divided us from the street, and I would think, those poor people who have to be inside on a day like today! It’s so beautiful and this is so much fun! And then I’d kick.

Later on, on some Friday afternoons we would go to the home of Itzhak Sankowski and together with about seven or eight other boys, Bobby and I would listen to old Jewish stories. It was something that we couldn’t really get into, tell you the truth, but we did it. It didn’t make us any more Jewish. We had gone to a Quaker school, Friends’ Central, for four years and learned some about Christianity, and later on at Harvard I studied philosophy and history and learned a lot about Christianity, and you pick up that stuff in all sorts of places in America, so in the end I think I know as much or more about Christianity as about Judaism.

I spent one year at Ardmore Junior High in 9th grade, after we moved to the suburbs, and there weren’t many Jews there, maybe a few. But I went out for all sports and probably shattered the stereotype for some of my classmates. In basketball I got the nickname “The Nose,” although my nose isn’t all that prominent. I made a self-deprecating remark at some point, and Charlie Newsome, as Catholic as they come, said to me, “Your nose isn’t any bigger than anyone else’s.” Charlie invited me to come with him to some local church dance where there were no Jews at all. I felt out of place because I didn’t know anyone, but that was OK, at least I wasn’t left out. You just don’t know where you’ll find the righteous gentiles.

At Lower Merion High Jews from Bala-Cynwyd Junior High merged with the gentiles from Ardmore and we had an integrated group of friends, some Jewish and some not, and it didn’t seem to make a whole lot of difference. Sports and intelligence were the issues. I think that age is very central to a certain kind of identity, and I really liked our group and its lack of religious identity. I never have gotten over feeling like a Lower Merion guy. I didn’t want to ever be part of the RS type of crowd, and I didn’t want to go back to the Ardmore kind of crowd. I was very happy where I was, and I was reluctant go to away from high school to college; we had a great class and that is where I felt I belonged, playing sports and playing poker and drinking and trying to get a start with girls. God, it was a great time!

In freshman year at Harvard I remember telling Sandy Stidham, from Episcopal Academy in Philadelpia, that I didn’t identify that much as a Jew. Well, said Sandy, since other people looked on me as Jewish, maybe that was a pretty strong sense of identification. I protested that I didn’t feel it that much, and he just told me the same thing again. Sandy was reputed to be really smart.

One evening in college I was walking with my roommate Kenny Nahigian and by that time I had my first real girlfriend, Carol King from Reading, PA. Kenny said, “Doesn’t it feel good to have a Jewish girlfriend?” I said, “What do you mean.” He said, “Well, doesn’t it just feel good?” I said, “No, not really.” I loved Carol, but I really didn’t like the fact that she was Jewish so much. I never did marry Carol, thank god, it would have been a disaster. Small town Jews? Not for me. For me it’s smart Jews, funny Jews, Jews with good ethics, urban Jews, I guess.

I wound up marrying an Irish-French girl from Gloucester, Mass. That didn’t work well at all, I’m sorry to say. Then I married an Irish (Irish-American, of course) from Southern California, also very secular, and we live in Berkeley where people are both Jewish and not, and I belong to the Claremont Hotel gym and pool club, where there is the typical Jewish and non-Jewish mixture, pretty much like in Lower Merion or at Harvard. It feels very comfortable to me. I play poker with other pediatricians, and you have to be either Jewish or Asian to play, with one exception, and under 5’10”, mostly, which is what pediatricians usually are. And we have a house in Maui (where I am as I write this), where there just aren’t many Jews. I’d like a few more, but I don’t think about it much, really.

Then the other night Ann and I went out to eat and afterwards I took her to Lappert’s Ice Cream, a Hawaii institution, where the buttermilk percentage is 16-17%, as compared to 10% at Bascom-Robbins, which they advertise proudly. Two scoops of chocolate for Ann to be in heaven. An older lady with a middle-aged couple was ahead of us, and since she was having trouble both hearing and tasting and choosing, the guy of the couple very nicely said, “Why don’t you go ahead of us?” I thanked him and Ann got her chocolate, and we started to amble out to wander and go to the car. Thy guy then looked at me and said, “Shana Tovah!” Surprised, I said the same back to him – as a kid I didn’t know this was what you said at Rosh Hashonna for “Happy New Year,” since it’s Hebrew and not Yiddish, but I learned it later. I had to laugh. Shana Tovah, for Christ’s sake.

Earlier this week Ann and I had found it necessary to get a local lawyer here on Maui, so we hired Joel Richman, an ex-hippie lawyer from Massachusetts. It felt good to have a Jew as a lawyer, I have to say. I told him the Shana Tovah story and he, dumbfounded, said, “Did you have a sign around your neck?”

No, just hadn’t crossed over yet. It’s a good thing I enjoy being Jewish.

Oaths, Ethics, and Professionalism

Does an oath mean anything? Sometimes it does. Maybe even more than sometimes. Maybe even usually.

The oldest oath that we know of is the Hippocratic Oath. When I stood up and took the oath at medical school graduation, it seemed kind of corny, tell you the truth. What was probably more important was growing up in a medical household where you could see our father's devotion to duty, his pursuing research objectives, his wanting to do things right, his wrestling with the problem of his patient's wanting an operation, his knowing that it probably wouldn't do any good, and his knowing that if he said no, the patient would just go down the street and get it done by somebody else. I think he generally did the operation, figuring that since he was such a good surgeon, at least he wouldn't screw it up. He was in business, after all.

In med school the oath was talked about and as far as we could see, it was practiced. The most important precept then and now was: Do no harm. Primum non nocere. That's a pretty important one. Whatever you do, don't make things worse. Don't take chances when the stake is your patient's welfare. Don't let your own welfare get in the way.

Does it work in practice? I don't really know for sure, but I think so. Doctors seem to be cynical about many things, but not about this. They may talk about business and money and managed care a lot, and about trips and golf and houses and things, and about how stupid some patients can be and what a pain in the ass, and litigious, but I have never heard any joking about how a doctor screwed his or her patient in retaliation or by not caring. I think that aspect of professionalism and ethics remains pretty strong.

The law has oaths also. My friend Bob Levin joked that he wanted to put out a Yellow Pages ad that advertised him as "Graduated Law School Before Mandatory Ethics Course." Pretty funny. There are more unscrupulous lawyers than there are doctors probably, the oath isn't so strong there, but there are judges, there are courts, there are DA's and there are Federal Attorneys, and I have to think that the code of ethics is active.

Then there is the world of business. I remember sitting at a Goldman School of Public Policy Board of Advisors meeting next to a Board member who works at the Haas School of Business. I said to him about some business practice, "That isn't right." Now, this is a very good guy, but he said to me kind of incredulously, "But it isn't illegal!" He didn't even want to engage on right or wrong, his only standard was legality. That retort is so foreign from what a medical response would be, I was incredulous myself.

This was after Enron. What amazed me so much about Enron was how many of the participants came from Harvard Business School. Yet they were pulling all this crap. I thought, what those guys need is a Hippocratic Oath. Sure enough, pretty soon there were calls for mandatory ethics classes in business schools. I think that kind of died on the vine.

The world of business is so bad, ethically speaking, that it's not only people conducting business that's so bad, it's the regulators. Yesterday's paper had an article about the ongoing failure to reform the financial world. There were new accounting standards that had been proposed by the accounting world itself, with transparency a prime objective, and some marking to market. These are failing under political pressure, and arguments that if you don't intend to sell an asset, you can value it at what it used to be worth, or what you think it might be worth in the future. I can see how day to day marking to market can lead to disaster, essentially margin calls that accelerate a downturn, but after a period of time, reality is realitiy. Behind this political pressure is business money.

Now today the redoubtable Gretchen Morgenson in the NYT, in "Who is Watching the Regulators," tells of the ongoing regulatory failures, and how the failed bodies want more power. Shades of Bush awarding the Medal of Freedom to those who failed us most! She cites suggestions from Edward J. Kane, of the Boston College Business School, in a paper called "Unmet Duties in Managing Financial Safety Nets." He says that the public needs protection from bureaucratic self-interest, and the power of large institutions the regulators are supposed to police. He suggests -- an Oath of Office! Yes, an oath of office for regulators!

I think it might have an influence, especially if there were to be anything resembling ethics imbued in business school students in class after class. He sees four parts to the oath. One - Duty of Vision. See what is going on in the creative minds of business institutions. Two - Take Prompt Corrective Action. Not like with Bernie Madoff, I guess, nor with mortgages that the Fed knew or should have known were a problem - everybody else seemed to. Three - Perform Regulatory Work Efficiently. It's a business issue, so they should understand that. And Four - Put the Interest of the Community Ahead of Your Own. Bureaucratic self-interest is indeed a scourge.

It is this last part, Kane says, that is going on now. The regulatory bodies are taking advantage of the crisis to try to enlarge their power, and working with the institutions so that nothing will really change. Cynicism. Kane suggests Inspectors General for all the regulatory institutions, so the watchers would be watched.

Personally, I'm pessimistic that anything important will really change. I think these institutions are the heart of our current system, that this is where the high priests are. This could all be changed by a real depression or an atomic attack instead of symbolic airplanes into towers, that really killed them all. But I hope neither of these things will happen,

The closest we can get to really getting to the point where business people experience a real fiduciary responsibility for Other People's Money would come from electoral reform. If political elections were funded by public money, the financial clout of these institutions would be somewhat blunted. Not completely, because they would still be the refuge that the Tony Coelho's and Tom Daschel's and Phil Gramm's and Larry Summers' would repair to after a political career to "make their money." That's not going to change. But at least at the start, if someone wanted to be idealistic in politics, it would be more possible than it is now. It's still possible - Wellstone and Feingold proved that, among many others. But it's pretty hard.

And my friend Larry at the UCB Business School? He and others like him, the good guys in business, should take a page from the medical tradition, and think about it seriously. If the Great Age of Capitalism is to do better, ethics needs to be on the table.

Budd Shenkin

Understanding the Health Insurance Exchange

OK, I'm getting repetitive, but I can't resist posting this short item focused just on the issue of the HIE. I've made all these points before, but here it is shorter and sweeter:

As a practicing pediatrician and long-time health policy analyst, it has been very painful for me to see how little my very intelligent and engaged friends understand what is being proposed for health care reform. True, some of it is complex – mostly the funding, which I grant you is not straight-forward, and I, too, worry about cost and the deficit. But to me the most important part of the reform is the Health Insurance Exchange (HIE). Even if the Public Option were not adopted, even if the funding for the lower middle class were not generous, the HIE would be extremely important just in and of itself.

Why does our current health insurance system not work? It’s because competition in capitalism is supposed to result in better and better deals for the consumer, as with cell phones, for instance, yet it doesn’t in health care. Health insurance competition works against the customer rather than for him or her. How do health insurance companies make their money? By excluding those likely to be costly from purchasing a policy, by driving policy costs higher for those with little choice, by rescinding policies from those who get sick, andby confusing buyers with policy details that are nearly impossible for the ordinary customer to fathom.

This is a situation tailor-made for government intervention. If the rules of play work against the customer, it is the role of government to reset the rules, so that the game works differently.

The HIE would do just that. The government would set the minimum standards for offering policies at three or four different levels. Rules for all levels would be: all applicants would be accepted, premiums would vary by age within limits, no policies would be canceled retrospectively, there would be no lifetime money limits to coverage, conditions covered would be standard, mental health coverage would be equal to physical health coverage, etc. The major difference among the levels would be how much out of pocket the policy-holder would be at risk for.

So, the problem of policy availability would be solved. The problem of understanding details and being hit with large bills that the consumer thought would be covered would be solved.

How, then, would the health insurance companies compete and make profits? They would have to be efficient and they would have to be creative. Efficiency in claims processing speaks for itself. Creativity – maybe some companies would create networks of only the best and most efficient physicians and split the savings with them, so that a customer would pay less yet get more efficient service. Maybe companies would partner with hospitals and see them run with increased efficiency. Maybe companies would contract with primary care physicians to pay special attention to their patients (with higher payments) and avoid costly referrals. There would be innumerable ways to compete – and in this competition, consumers would reap better care and cheaper prices, just as we have with cell phones.

It might be, on the other hand, that these hide-bound companies might not be able to transform themselves to innovators. Some might die. Others might be able to conform to the efficient claims-processing model, and miss the creativity, but they would at least lower the cost.

Because technical health care quality is harder for consumers to detect than cell phone quality, government would have to arrange for professional quality assessment, so consumers could have that knowledge in choosing health plans. Or maybe Consumer Reports, the Institute of Medicine, and US News and World Report could compete in assessing quality.

As this competition among health insurance companies continued, what would be the role of the Public Option? I think the PO would offer plain vanilla care, and would become a safety net of health insurance – if a competing company went belly-up, the PO would be there to pick up the customers immediately so that coverage would not be interrupted. (Actually, I believe that it would be better if we had at least two PO companies per region, one Federal and one state, to compete with each other and the private companies.)

One of the biggest problems with the health insurance market is that, over 90% of markets in the United States are oligopolistic. To perfect this competitive market, beside providing its own sponsored entity, government might have to do one more thing - ensure easier access to the marketplace for other private companies. I don't quite know how to do it now, but it needs to be done. Truth to be told, that's really the essence of the PO at this point, killing oligopoly.

Of course, as in all capitalistic competition, there will be corner-shavers. Companies will try other angles that I can’t now predict to attract customers that are not really in their interest – who knows where the tailfins of health insurance policies will arise? But I would think these problems would be minor and transient.

The only problem I see with the HIE is that it is too slow to come – 2013 would be the target date - and too limited in scope – open only to the uninsured or the very smallest groups. It should come earlier, and be open to everyone – why not?

Kaiser's fantastic innovation

Clearly, one of the greatest assets of large groups is the ability to innovate. I take as a case in point the Kaiser system, as detailed in the current Wired Magazine, in an article on low tech disruptive innovation. Check out pages 117-118:

"...Kaiser has long relied on a simple strategy of building complete, self-sustaining hospitals - employing 50 doctors or more - in each region it serves. 'It's an efficient model,' says Michele Flanagin, Kaiser's vice president of delivery systems strategy. 'It offers one-stop shopping: pharmacy and radiology and everything you want from health care in one building.' But that approach forces patients who don't live near a hospital to drive a long way for even the most routine doctor's appointment.

"As it happens, though, Kaiser has become one of the most technologically advanced health care providers in the country, digitizing everything from patient records and doctors' notes to lab data and prescriptions and putting it all online. The system is networked, so patients can email their doctor, check lab results, and make appointments from their PC or mobile web device. Getting a referral doesn't mean carrying medical records from one doctor to another, as it does at many hospitals.

"In 2007, Flanagin and her colleagues wondered what would happen if, instead of building a hospital in a new area, Kaiser just leased space in a strip mall, set up a high tech office, and hired two doctors to staff it. Thanks to the digitalization of records, patients could do to this 'microclinic' for most of their needs and seamlessly transition to a hospital farther away when necessary. So Flanagin and her team began a series of trials to see what such an office could do. The cut everything they could out of the clinics: no pharmacy, no radiology. They even explored cutting the receptionist in favor of an ATM-like kiosk where patients would check in with their Kaiser card.

"What they found is that the system performed very well. Two doctors working out of a microclinic could meet 80 percent of a typical patient's needs. With a hi-def video conferencing add-on, members could even link to a nearby hospital for a quick consult with a specialist. Patients would still need to travel to a full-size facility for major trauma, surgery, or access to expensive diagnostic equipment, but those are situations that arise infrequently."

My God, what an innovation!! Only Kaiser could do it! It looks like they have invented, wait, let me name it myself -- a doctor's office! It just goes to show you what good old American know-how can do. I am so proud to live in an area serviced by Kaiser. This Dr. Flanagin must be a genius.

Next up - the receptionist who smiles at you! (Oh, wait, they are eliminating that. Forgot.)

(Thanks to my friend Bob Levin, who gave me this issue of the magazine, actually for the article that follows on placebos, but I got sidetracked. I was telling Bob how much fun I was having with the blog. He said, "I wonder who suggested to you that you so it." Oh, yeah, it was him - forgot that for the moment.)

Budd Shenkin

Government: Volume purchaser or monopsonist?

You just have to wonder at the Lefties in health care reform who, in calling for a Public Option (a version of which I think would be a good idea), say, “Let’s take advantage of volume purchasing.”

Volume purchasing? I can understand if you call a computer seller and say, “Hey, instead of just sending me one computer for $1,000, how about sending me 20 for $925?” It’s cheaper for them to write up one bill and send out twenty than to take 20 separate orders, so let’s share the savings.

But it’s a lot different if you say, “Hey, there is one big buyer in this market, and it’s me. So I’m offering you a 20% discount on your services. You won’t save any money, because you will still see, treat, and bill each patient individually. But since I’m the only buyer, if you don’t sign up, you are SOL.” That’s monopsony in action.

Now, it is very true that health care is rife with inefficiencies and, basically, overcharging. So if pressure and guidance are properly applied, the system should deliver better care more cheaply. But is just taking a forced discount the best way to do it? Maybe not.

There is a difference between competition that brings savings, and market power that extorts advantage. Maybe there are more sophisticated arguments and understandings that could be brought to bear, but as I see it now, the Lefties are just looking for market power, and talking about the “power for volume discounts” is disingenuous.

Budd Shenkin

My Wife's Brush With Greatness

It was the summer of 1960 and my wife Ann was 14 years old. Her family lived in San Marino, close to Pasadena, and the Democratic Convention was in Los Angeles. Ann’s family was Irish; her father had risen from being a newsboy in Hell’s Kitchen in New York, had been awarded a Pulitzer Scholarship to Columbia, and had become president of his own successful chemical company. It was another Irish Catholic family, the Kennedy’s, that was contending for a larger Presidential nomination at the Democratic convention in Los Angeles. So John Morrisroe decided to take some of his five kids down to Los Angeles to experience that convention.

Who knew that this would be the day that Ann would have a brush with greatness? As I understand it, the family Morrisroe was milling around the convention headquarters hotel. There was a little stir, and coming toward them was a young man, in a hurry, resembling the candidate, but younger. It was Ted Kennedy. He came closer. He approached Ann. Ann, it must be said, was a gangly teenager who had not yet claimed her ultimate great beauty, but her intelligence must have shown through. Ted then uttered to her his immortal words: “Outta my way, kid!”

From such greatness, these words could only be metaphorical. The future was beckoning, surely. Ann must have represented the great future unknown, the horde of future admirers who would benefit from his untiring pursuits of goodness for all. Let the future beware!

Or perhaps it was the entire weight of the Kennedy future that would torture him again and again, unbearable burdens that he would have to fight through and throw off. Outta my way, indeed.

Or could it have been the Democratic orthodoxy that denied him to crown that would have enabled him finally to realize the goals of a generation, thwarted by Carter, and then by the Republican reaction of thirty years?

“Outta my way.” And to think it was my future wife, Ann, who received those words of foreshadowing and, dare I say it, inspiration. Outta my way, indeed.

Health care reform - Will anyone hear my suggestions?

How I wish I had access to someone involved in the health reform process in Washington!!

I would slip them a memo with just a few provisions suggested, they would take the memo, take the suggestions, and just slip them in as provisions to the health insurance reform bill that comes out. It wouldn't be hard, they are just a few things that would make life a lot easier for doctors, if only I knew someone.

On a much smaller scale, I did it once before. Here's my War Story. (Then after the War Story is the memo I wish I had someone to deliver it to.)

After my internship I worked in D.C. with the Public Health Service, as a so-called "two year doctor." It turned out I stayed in the USPHS for six years because I liked it and got a great deal, but still, I was a two year doc. In the second year I became head of the Migrant Health Program for a year. What a mega-experience! Especially since halfway through the year we got a surprise additional appropriation that we had to spend in just a few months, and I was in charge. Not only did we get the money spent, but we changed the whole concept of the program, away from giving small grants to county health departments all along the so-called migrant stream, and instead establishing significant health centers that would cater to the migrant workers, rather than simply working them in as another duty of the health departments. To do this we had to get all our regional offices activated to find grantees, and I myself went out to the field and wrote a grant in Orange Cove, CA, then flew back to DC, received the grant I had written, and approved it. A lot of fun.

By that time I really knew a lot about health care policy and probably as much about migrant health care as anyone. My father said, Budd, you ought to write a book. My Dad. He found me downstairs at his house reading "Ball Four" by Jim Bouton instead of doing the book and said, "You should be ashamed." My father.

But, actually, while he wasn't right about my being ashamed, he was right that I ought to write a book. So I actually did. First I got my Masters degree at the Graduate School of Public Policy at Berkeley. I wrote the first chapter as my Masters thesis, promising more to come. The next year I spent at the Stockholm School of Economics, and in between learning Swedish and doing research on Swedish health care, I finished the first draft of the book that was eventually published in 1975 as "Health Care for Migrant Workers - Policy and Politics."

But before it was published, I thought that to really finish the job, I ought to see if we can get the Migrant Health Law changed so that the policies of large health centers would be mandated, and couldn't be reversed by the next denizens of the Public Health Service Migrant Health Division, with their long standing ties to county health departments. It happened that I could co it, because I had one more year in the USPHS, and I was going back to Washington. I wasn't supposed to be lobbying for anything, of course, that wasn't my job. But I was in Washington, I was young, it was the 70's, and that's just me, anyway.

I think it was my friend Jim Mongan, who was then a staffer on the Senate Finance Committee, who got me in touch with Brian Biles, who was a staffer for Bill Roy, MD, Congressman from Kansas, who was on the House Commerce Committee, with jurisdiction over Migrant Health. I showed the manuscript, which was hefty, to him and to Steve Nelson, I think his name was, staff aide to Paul Rogers, Chairman of the Committee. They heard my rap, they weighed the manuscript, Mongan had probably told them I was a smart, good guy, and they thought it made sense. So they ran with it. They wrote the bill with my help, and got the adherence of Bill Roy and Paul Rogers.

Ah, the good old days! The bill was about to be passed and there were final hearings. I wasn't supposed to be there, of course, but I went to the final hearings where Paul Rogers presided. I was there in the audience trying to keep a low profile. I'm not sure who else was there, but the old guard of the Migrant Health Program who had worked all those years with county health departments and shipped them money, to whom I was of course anathema, had to be there, too. I kept a low profile.

So, naturally, at the end, with the new legislation going to be passed, what does Paul Rogers do? He looks out in the audience and says, "Now, where is Budd Shenkin?"

I am aghast, I'm not supposed to be there, I wasn't supposed to do this, and I'm saying to him silently and with my hands, "No! Don't call me out!" But he mistakes my reticence to modesty, and says, "No, come on, stand up there! This young man has done a real service in ... ." Actually, I'm not sure what he said. I just reluctantly stood up and took a small bow to scattered applause and sat down and hoped no one really noticed.

I needn't have worried - after all, what were they going to do to me? I was leaving the next year anyway, and besides, no one pisses of Congress if they can help it, and I was their guy. Even today, by the way, the law prevails, and the health centers that we established still exist.

The whole thing, and especially that day at the hearings, sticks in my memory as one of those things we remember to the end, a mile marker. (Like the time I came in to the first JV basketball game of the season with two minutes to go and the score tied, and scored five points and had an assist and we won and finished the season 23-0 -- but that's another story.)

Anyway, we could do that in migrant health. It was a very low profile program, no press whatsoever, no powerful interest groups, virtually nobody watching, something you can kind of slip by. Brian and Steve and I did high fives and they said, it just goes to show what one squirrly guy can do if he sets his mind to it, and I thought they were great. We gloried in our accomplishment. In their world of Washington congressional aides, doing good was the equivalent of making money on Wall Street - or probably Main Street.

Health Reform couldn't be any more different from Migrant Health, of course. Everyone's watching. Still, I wish I had friends like Steve and Brian now. I bet we could just slip some stuff in! I'm no longer with the USPHS, and what I know now is different, since I have been a practicing pediatrician for thirty years (where did they go, one asks.) I've been dealing with health insurance for a long time. So, if I could, here are the little changes I would make. It is in a memo I wish I could slip to someone who trusted and respected me, as Brian and Steve did, with just a couple of provisions to control what the health insurance companies do. I so wish.

Here is the memo:

Health insurance reform is sorely needed. The first consideration has been the interest of the American people at large, many of whom are priced out of the market, or are subject to untoward restrictions on policies, or are subject to rescissions. The proposed Health Insurance Exchange, which entails many requirements on insurance companies to repair these problems, will remedy many of these problems.

Less prominent in the discussions, however, has been the fact that physicians face some of the same problems in dealing with the insurance companies as the public does. Physicians frustrated by these insurance practices, and they contribute to the notorious lack of efficiency of the entire system. Physicians and insurance companies alike have small army of employees who spend their time determining eligibility, determining co-pays and deductibles, coverage for specific services, submitting claims, rejecting claims, appealing claims, etc. These opposing armies fight over money and rack up overhead dollars to the ultimate advantage of neither, and to the disadvantage of the public.

The Health Reform legislation should and could address many of these problems of insurance company/physician relations at the same time as they address the insurance company/patient difficulties. Here is a small set of measures that could be easily entered into the current legislative proposals that would increase simplicity and decrease overhead on all sides.

• Eligibility determination. When a patient makes an appointment, the physician’s office needs to know if the insurance coverage is current in order to know how to deal with the patient. At present, the insurance companies maintain websites with lists of eligible patients that the offices can access, but which is sometimes out of date, and which often does not detail all the specifics of each policy. A physician office thus has to access the site for each patient appointment and guess at some coverage issues. If the website indicates incorre tly that the patient is eligible, the physician’s claims are rejected because the website data was not accurate. Solution – legislation should mandate that insurance companies maintain eligibility data in a standard format, and that software be supplied to physicians’ offices so that all the offices need do is submit name and birth date, and all relevant data will appear instantly. The insurance companies should be required to honor physician’s claims if their website data was inaccurate. This provision could be called instant verification of patient eligibility.

• Payment standardization. Physicians are required to submit bills according to strict rules of CPT coding. Yet insurance companies are free to ignore some billings, saying that they regard these services as “covered” by other codes perhaps, or just saying that they simply choose not to pay those codes. Insurance companies should be required to respect all official CPT codes and policies that an office bills.

• Prevention of false billing. Physician offices are not pristine; over-billing does occur, and it can be difficult for an insurance company to detect. Currently, the insurance companies frequently demand to see copies of encounter notes before paying bills, and frequently down-code visits presumptively. The result is a never-ending exchange of data, denial and defense, delay and consequent overhead escalation. As a remedy, insurance companies should be allowed to request encounter data on 2% of an office’s billings per year, and to pursue cases of over-billing only if this sample provides evidence of persistent errors.

• Standardization of code submission. Much of CPT coding regulations are straight-forward, but some are not. For instance, if an office does a screening test for postpartum depression, there is a standard CPT code to use, 96110. Some companies will accept the code as is, others require a modifier, and yet others require a different modifier. The physician’s office then has to remember which code goes to which payer, and when small errors are made, resubmit claims after a denial is made. Standard industry-wide policies for code submission should be established.

• Extension of timely filing. It is easy and common for insurance claims to be sent to the wrong address, because patients frequently change insurances, and many insurance companies have various addresses to submit claims to. Rectifying an incorrect address can take time, and when the bill finally arrives at the proper address, it is sometimes rejected for untimely filing. The insurance company should be required to pay the claim if proof can be produced that the claim was filed timely somewhere. In addition, the same requirement should hold if the original claim was somehow defective, even if sent to the proper address. A service properly rendered by the physician should be honored.

• Establishment of an administrative ombudsman. Disputes and misunderstandings are inevitable in the relationship between insurance companies and physicians. In addition, improvements will always be possible. Just as some proposed legislation will establish an ombudsman for the public, legislation should also establish an ombudsman for insurance company/provider relations. In addition to fielding complaints, the ombudsman could be a watchdog for this area, and recommend progressive steps to increase efficiency and fairness.

• Establishment of fair vaccine payments. One of the most important aspects of prevention is the administration of vaccines. Yet, insurance companies frequently pay for the vaccines barely at cost, leaving the physician to eat the cost of overhead. Similarly, the Vaccine for Children program (VFC) provides the physician offices with the vaccine but does not pay for overhead. Insurance companies should be compelled to pay for vaccines at a fair rate, which has been calculated to be about 125% of Average Wholesale Price of vaccines, plus the administration fee. Practices providing VFC vaccines to patients should be paid the same overhead rate as they are paid for commercial vaccines, since the overhead for commercial and VFC vaccines is about equal.

• Establishment of competing Public Options. The provider community has objected to a Federal Public Option because of the disproportionate power to price and contract on the side of the Public Option. If, however, each area were to have at least two alternative Public Options – Federal, state, and/or coop – the competition among public entities for provider network members would decrease the imbalance of power. This approach has been advocated by Mark Pauly of the Wharton School.

Of course there are many other provisions to health insurance reform that would help to streamline the system and make the insurance company/physician playing field more level, but I would submit that these incremental adjustments (except the Public Option provision, which is not incremental) would be rather easy steps forward.


Oh, how I wish.

Budd Shenkin

A Tree Grows in Berkeley

It’s amazing what a city boy like me can do, just amazing. I spent my early years until ninth grade in West Philadelphia, about a mile west of the University of Pennsylvania, at 47th and Osage. There was a lot of concrete, I have to say. It was great to have a back alley to play ball in, and we did have a small back yard, but I’m not sure anything grew there.

Then we moved to the suburbs and my mother did start to plant things in the yard, flowers and maybe even tomatoes against a white picket fence, I think. Not quite bucolic, but some trees and grass and flowers, especially trees out on the Main Line where we lived. It was just great to drive under the trees in Merion and Gladwyn, and hear birds and everything.

But now I live in California, and even though we are in Berkeley, which is pretty urban, hey, it’s still California, and lots of things grow here! We have a big redwood in our small back yard, I’d say 9 foot circumference, so things get pretty shady, but still, things grow. And I have planted things and arranged things and gotten into bulbs and planted impatiens and lots of things, and it’s just amazing what a city boy can do.

So, I just noticed maybe three years ago that over by the fence, just beside where I had planted some of those little living Christmas trees about ten years ago that actually grew into little Douglas firs, that a little stalk had grown up and was growing some fruit! I looked closely and I realized that some years ago I had eaten a really good plum, and then I had planted the pit there. Amazing, now it was growing fruit!

So I watched it and plucked off a couple of plums and ate them. They were so good! I watched for the flowers to come out the next year, and they did, and then the plums, and then I ate them again!

This year, we got about 15 plums growing! Tasty! I wasn’t sure, I thought they had been the deep purple plums when I ate them originally, but now I realized they were the more yellow colored and reddish plums. Still, very good! Juicy!

But since we were going away for a week and there were about ten plums ready to eat, I thought I’d pick them and take them out for our staff to share at our Bayside managers meeting. So I did.

I just put them on the table when we were eating lunch, and people said what are they? I said, they’re plums from our tree. I planted the pit myself, and the tree just grew.

“Wow,” they said. “You know,” they said, “are you sure these are plums?”

“Sure,” I said, “I picked them myself.”

But somebody said, “Are you sure? Are you sure they aren’t nectarines?”

“Nah,” I said, “they’re plums!”

“Are you sure?” said Alan from down the other end of the table. “Isn’t the skin a little furry for plums?”

“Well,” I said, “I think they’re plums.”

Then a few people tasted them, and everyone said, “These are nectarines!”

So, isn’t it amazing? Here I am, a city boy, and I planted a plum pit, and now I have the only plum tree I know of that grows nectarines!

Health Insurance Exchange and Public Option

OK, here's how far I have come in understanding health insurance reform:

The era of health care reform is here. The first big step will be health insurance reform. Health insurance is only part of the problem, so health insurance reform can only be part of the answer. Nonetheless, health reform will lift a significant burden for the nation, and if done correctly, will enable further reforms to happen in the rest of the health care system.

Understanding the Health Insurance Business

If the health insurance system were a true free market, we would expect the pubic to benefit as competition proceeded, courtesy of the “hidden hand.” But that is not how the health insurance business works. Instead, the market is structured so that as companies prosper the public suffers. The trick of reform will be to reshape the market so that as companies compete the public benefits. I think this can be done by the current proposal, the Health Insurance Exchange (HIE). I also think that adding a Public Option (PO), health plans sponsored by government in competition with private plans, would help positive competition even further. Let me explain why.

The Current System

In the current system, there is no fixed price for a given policy. Instead, the price of each insurance policy, whether group or individual, is set by negotiation. This is called “experience rating.” If there were a single price for all comers, it would be called “community rating.” Decades ago Blue Cross/Blue Shield had community rating. When private companies entered the field they used experience rating. The Blues then had to also do experience rating, or they would have gotten all the bad risks (“adverse selection”).

In the current system, health insurance is a highly concentrated industry, with only a handful of major players nationwide and few local competitors. In any local area or even a state, one company can have 80% of the business. Competition is thus very muted.

In a perfect market no one company or individual has power; that is a prerequisite for the market to work. In health insurance, the insurance companies frequently have very significant power, and so do the hospitals. Occasionally, so do other providers such as doctors, but not usually. Large buyers of insurance sometimes have power as well; individuals, of course, never do. Given this playing field, it is clear that the theoretical advantages of market competition don’t have a chance of being realized.

How Health Insurance Companies Make Their Money

So, how do the companies make money?

Vis-à-vis Patients

Most importantly, insurance companies seek to identify the best risks and insure them, and to reject the worst risks – this is called “cherry-picking.” The companies spend a great deal of money underwriting policies to identify who is a good and bad risk so they can price the policies differentially, and they can not offer policies at all to some. The companies can also frequently be “price givers” rather than “price takers,” because groups and individuals in an area often have little choice of company. So, prices rise, profits rise, and groups and individuals can find themselves without a choice at all.

The companies also make money by rejecting policies retroactively (this is called “dumping,” or “rescissions”). When a patient gets sick the insurance company withdraws the policy on the grounds of an unrevealed preexisting condition. Thus, an insured patient becomes uninsured and the insurance company is not liable for the medical expenses.

The companies also write policies cleverly, exploiting their superior knowledge of policy details. Policy purchasers are confused not only by the “small print,” but even by the basic terms of deductibles, coinsurance, and exclusions from coverage. When illness strikes, patients frequently discover that they are under-insured.

The companies reject specific procedures and treatments for patients. There is as yet no independent and authoritative authority to determine which treatments and procedures are valuable. Thus, practitioners make their decisions and the insurance companies get to authorize or reject. Insurance companies probably feel more defensive than offensive in trying to curtail the proliferation of tests and procedures, but the battle for authorization piles up overhead and patients are caught in the middle.

They neglect customer service. Concentrated industries offer few consumer alternatives and can get away with this.

They pay less when a patient chooses an out-of-network provider. This contract provision is rather straight-forward, but recent lawsuits have clarified that the companies have compounded their gain by illegally overestimating the amount the patient is compelled to pay by using faulty cost data.

They market their products either through brokers or directly themselves, using the usual marketing techniques. There is no reputable central source of information and evaluation of these policies for buyers to turn to, only salespeople. Again, overhead is significant.

Vis-à-vis Providers

The great majority of policies are now either HMO’s or PPO’s, both of which require the insurance company to assemble a roster of physicians, hospitals, laboratories, etc., that “accept” that insurance. The companies assemble their networks by contracts that specify payment rates.

In negotiating with physicians, there are usually only a few insurance companies in any single area. The physicians, however, are many, and are forbidden by anti-trust law from negotiating as a group. The insurance companies make their money here by tough negotiating against the atomized physicians.

After the contracts are established and services rendered, physicians try to maximize their billings but must adhere to detailed rules of coding their services. The insurance companies make money by delaying, denying, and down-coding (estimating a service complexity at less than the claim) payments. The physician/insurance battles are legendary; the overhead of personnel salaries on both sides funding this war is also legendary.

Some hospitals have local monopolies or oligopolies and can do very well in negotiating with the insurance companies. In other areas where there are many small hospitals, the insurance companies again make their money by being more concentrated than the providers. In either case, with small numbers of negotiators, efficiencies rarely result, and it is more common for both entities to take their advantage and simply boost the price to the public.

Administration-only Services

Large employers frequently self-insure and use insurance companies for their provider networks, policy benefit structures, and claims payments. In contrast to the above situations, this function appears to be more typical of the general business world.


In sum, then, we can see how little the health insurance market resembles the ideal of “perfect competition.” No hidden hand works to serve the public as the industry strives for profit, accumulates overhead, and doesn’t serve the public interest much at all.

Serving The Public Interest Better – The Health Insurance Exchange (HIE)

The whole point of a “Health Insurance Exchange” (HIE) would be to change competition into a system that actually worked for the benefit of the public. The HIE would present a menu of insurance choices to buyers, both individuals and groups. There would be Level I, Level II, Level III, and Level IV benefits, with each company offering complying with the benefit requirements at each level. There would be no “cleverness” allowed.

The costs would vary, and some offerings might have extra features above the specified level – add-ons, if you will. So at Level I you could choose company A with its network of providers, or Company B with its network, etc. The companies would be required to accept all comers at a common price (“community rating.”) Riskier groups and individuals would be subsidized (several techniques are available, from private and public sources), so no company would suffer adverse selection. Lower income individuals would be subsidized – in essence, they would have a modified voucher. The HIE would be available to individuals and small groups at first, and later to larger groups.

Just establishing this new exchange system would solve several of the health insurance problems. It would:

• Increase insurance accessibility, and thus greatly reduce the numbers of uninsured.
• Eliminate the problem of portability.
• Reduce under-insurance.
• Increase transparency of policy provisions, and thus protect patients from exploitation.
• Eliminate patient dumping.
• Reduce costs in the insurance system by:
o Eliminating the overhead of underwriting.
o Reducing the overhead of marketing.

Attracting patients would now center on price, additional coverage offered, patient service, and choice of provider networks. Profitability would center on efficiency of operations, both internal to the insurance company, and in the efficiency of care delivered by the company’s network.

On the other hand, the HIE would not fix some of the existing insurance problems:

• Conditions of negotiation with doctors and hospitals.
• Payment wars between providers and insurance companies.
• Insurance company\patient wars over coverage for procedures.
• Excessive concentration in the health insurance industry.

Still, even if there were still problems, one can see that having a HIE would be a great deal better than the current system. The HIE would not solve the problems of cost and quality – but changing the health insurance system cannot fix everything.

The Public Option

Now the question arises: given a HIE, would the public and the system of health care be even better served if one of the options were to be a government sponsored non-for-profit plan (the Public Option, or PO) that competed with the other offerings?

What do we mean by a PO? It is not yet decided what form Congress has decided the PO will take, but the most probable form would be a non-profit governmental entity governed by the same rules as the private companies. That is, the PO would have entries at each level of the HIE at a price decided on by the entity, but the price could not be so low as to cause a deficit in its budget.

What would be the virtue of a PO bound by the same rules as the private plans? The common explanation is that the public plan would “keep the private plans honest.” This must mean that the government plan would be honest, cut no special deals with any party, nor overpay its executives. Others have said the government could get “volume discounts.” It is hard to understand what this means, since commodities form very little part of health care. If it means that a large governmental plan could coerce favorable contracts with physicians because of size, that would be possible but not desirable, since short-lived profits from lower prices, as opposed to real efficiencies, would sooner or later cut into quality. With hospitals on the other hand, it may be that by combining payment systems with Medicare and Medicaid actual efficiencies in billings could be effected with resultant decreases in costs.

So let us assume that a government plan would differ from the private plans only in sponsorship. What is the virtue in that? First of all, it would lessen the degree of concentration of health insurance. Competition would thus be improved.

Second, private companies negotiate differently with providers than do governmental entities. The PO would probably offer a single price for services rendered to all providers, and accept all providers who wanted to sign up under those terms. The private companies might want to play the game differently – they might want to sign up only certain providers, as they would be freer to do so than would the PO. Thus, the private companies might have innovative plans with networks that would attract consumers, perhaps even at a higher price – there should be no law against paying for luxury. Some might pay primary care physicians more; others might pay specialists more. They might have different practice restrictions. Private companies could experiment with the Medical Home, with Accountable Care Organizations, etc. In this scenario, the HIE would allow for differentiation of product while at the same time ensuring a good quality lowest denominator. If the private plans were to go bankrupt and fail, the PO would always be there for the consumers who were with the failed plan.

Third, the PO might be more typically bureaucratic than some other private companies, who might be more innovative in their administrative functions. Thus, this private company could charge the same as the PO but still make a profit, and the public would be better served.

Fourth, before it sunk into traditional governmental mediocrity, the spirit of the PO might at first engender some innovations that the somnolent private companies were not capable of coming up with. If they could not match the PO, they would deserve to fade from the scene. If they felt themselves challenged to compete, counter-innovations might result.

Fifth, the PO might be better able to respond to national priorities than the private plans. For instance, there is a national shortage of primary care practitioners. The PO might be more likely than the private plans to respond to this priority by boosting the pay of primaries.

Conclusion

In sum, if pains were taken not to unduly advantage the PO, it might well be that including it in the HIE would result in a more vibrant competitive field that would wind up actually benefiting the public. In fact, the PO is such a good idea, it might be good to have multiple PO’s competing in one arena – one perhaps Federally sponsored, one state sponsored, and others cooperatives as have been mentioned in the Senate Finance Committee.

It is hard to see that too much competition at first among both private and public entities would be a problem. Everyone realizes that health insurance reform is only the beginning of health care delivery reform. Using the HIE and including a PO might well set the stage for further reform and evolution using free competition that actually works for, instead of against, the public interest.