The Wonk Room

Is The ‘Repeal’ Health Care Message No Longer Resonating?

Ben Smith observes that the GOP strategy of running against the health care bill (you know, suing the federal government or trying to pass nullification measures on the states) isn’t reaping in the kind of dividends that Minority Leader John Boehner (R-OH) had predicted:

This March, two attorneys general took the lead in lawsuits challenging the constitutionality of the health care overhaul: South Carolina’s Henry McMaster and Florida’s Bill McCollum. Another, Michigan’s Mike Cox, soon signed on.

The lawsuits made them national leaders on the central national issue, and seemed tailor-made for Republican primaries. But all three lost those primaries, as CNN’s Peter Hamby noted of the first two last night.

McMaster lost to Nikki Haley, whose reform message trumped his series of ads touting his health care fight. Cox, who also put his health care suit on air, lost to a wealthy businessman who ran on a non-ideological platform under the slogan, “one tough nerd.” McCollum lost to Rick Scott, and there the message may not be as clear — Scott was also a leading national foe of the health care bill.

Indeed, it’s hard to argue that opposition to the health care law sank the ship, but it is likely that a heavy repeal message — one that focused on the dangers of reform sometime after 2014 — moved the conversation away from more immediate economic concerns and on to some ill defined, yet to be determined, cost increases down the road. In this sense, the anti-health reform AGs would have probably been better off following the national party’s advise to Democrats throughout the last year and a half: stop and focus on jobs and the economy.

We’re also seeing some indication that the repeal message just isn’t selling right now. State lawmakers are having a great deal of difficulty in passing legislation to invalidate different parts of the measure, Republicans can’t convince their entire caucus to sign the various repeal petitions, and public support for the law is growing as the early reforms come out.

Republican Gubernatorial Candidate Rick Scott And The ‘McDonalds’ Model Of Health Care

Republican Gubernatorial Candidate Rick Scott

In his victory speech last night, Rick Scott, the 57 year old former health care executive and founder of the health care attack group Conservatives For Patients Rights, assured Republicans that the “party will come together” after a particularly bruising primary challenge against Florida Attorney General Bill McCollum. Scott entered the race in April and proceeded to spend approximately $50 million of his estimated $218 million fortune on a negative campaign that sought to deflect attention from his past business controversies and smear McCollum as a product of the establishment.

That outlandish sum, however, is not nearly as shocking as how Scott came to acquire it, as the chief executive of one of the largest and most controversial for-profit hospital chains in the country, Columbia/HCA.

In 1987, Scott, a mergers and acquisitions lawyer who “had cut his teen on deals involving radio stations, fast food businesses, and oil and gas companies before focusing in on the money to be made by acquiring hospitals,” didn’t enter the health care business for the sake of improving the quality of care, but rather wanted to “do for hospitals … what McDonald’s has done in the food business” and “what Wal-Mart has done in the retailing business.” The goal, as Maggie Mahar explains in Money Driven Medicine, “was to combine volume with low cost.” This quote is demonstrative: “Do we have an obligation to provide health care for everybody? Where do we draw the line? Is any fast-food restaurant obligated to feed everyone who shows up?” he asked.

Indeed, through an aggressive strategy of rapid acquisitions and consolidation, Scott turned Columbia/HCA into one of the largest health care companies in the world. Forbes magazine noted Scott ruthlessly bought “hospitals by the bucketful and promised to squeeze blood from each one.” HCA/Columbia executives saw health care as any other commodity. “This industry’s not any different than an airline industry or a ball bearing industry,” said David T. Vandewater, Columbia’s chief operating officer. “You run at 40 percent of capacity or at 60 percent of capacity you’re not getting the maximum value out of your assets.”

Under Scott’s leadership, Columbia/HCA plead guilty to a massive array of fraud charges – which resulted in a fraud settlement of $1.7 billion dollars, the largest in U.S history. Columbia/HCA systematically defrauded taxpayers, charging Medicare $15,000 for Tiffany pitchers and other luxury goods, “exaggerating the seriousness of the illnesses they were treating,” and engineering a program where doctors were granted partnerships in hospitals as a kickback for referring patients. In 1997, “disaster struck in the form of an FBI raid.” In July of that year, “federal agents swarmed Columbia/HCA hospitlas and offices in five states. Within weeks, three executives were indicted on charges of Medicare fraud, and the board had ousted Scott.” Scott left in disgrace, but not before walking away with “a $9.88 million severance package, along with 10 million shares of stock worth up to $300 million at the time.”

During Scott’s tenure at Columbia/HCA, his cost cutting methods threatened patient care and safety:

- Susan Marks, a technician at one of Scott’s hospitals, was forced to monitor 72 heart monitors by herself. Marks explained, “I have to. I’ve been told you either do it, or there’s the door.” [ABC News, 9/26/97]

- Scott downsized nursing staffs, created conditions where “babies were attended as infrequently as every three hours. Once, the only nurse caring for seven ill infants was so busy she failed to hear an alarm when a baby stopped breathing. A parent dashed to the baby and stimulated breathing, the state report said.” [New York Times, 5/11/97]

- Hospital workers in Florida complained, “gloves come in only one size, and rip easily.” In addition, California employees protested “filthy conditions,” and being “stretched to the limit” as Scott’s company slashed “the ratio of nurses to patients.” [Money Driven Medicine, pg. 119]

In 2001, Scott would return to health care and the ‘McDonalds model,’ with a chain of urgent care clinics all over Florida. And as Tristam Korten explained in this two part series for Salon, it quickly replicated many of Columbia/HCA’s favorite business practices.

What States Have To Do To Fix The Exchanges

CBPP’s Sarah Lueck has put out a paper detailing how the weak regulations surrounding the state-based exchanges could allow insurers to potentially game the system and undermine the effectiveness of reform. The fear is that insurers will lure younger and healthier people into less regulated policies outside of the exchange structure. This would result in the same kind of “death spirals” that occurred “in the small-business health insurance purchasing alliances of the 1990s. If healthy people tend to buy low-cost insurance outside of the exchanges, the increasing proportion of sick people in the exchanges could force rates up and induce carriers to withdraw from them.”

Now, the law does create incentives for people to purchase coverage within the exchanges (i.e. premium credits are only valid in the exchanges) but it’s up to the states to ensure that healthier applicants are not going elsewhere. Lueck explains what states can do:

- States can ensure that the rules for markets outside the exchange and rules for the exchange are consistent.

- States can simply apply the same standards that HHS sets for qualified health plans offered in an exchange to plans offered in competing markets outside the exchange.

- States should also ensure that rules that affect plan pricing are the same inside and outside the exchange so individuals and small businesses looking for coverage will not pay more to enroll through an exchange.

- It will also be important for states to ensure that insurers do not pay insurance-broker commissions in ways that provide incentives for brokers to steer healthier, lower-cost enrollees into plans offered outside the exchanges, such as by furnishing higher fees or bonuses to brokers who direct healthy individuals in that way.

- At the very least, states (including those using a selective or competitive process to pick plans for an exchange) can require insurers outside the exchange to offer products in at least the Silver and Gold coverage levels, as they must do inside the exchange.

- In addition, states should bar insurers from offering only Bronze plans or only catastrophic plans (as defined by the Affordable Care Act) outside of the exchange.

Naturally, some states — like California — will adopt these changes, and many others won’t. The paper foresees a patchwork system akin to Medicaid where states have different quality, eligibility, and program sizes. The federal government can certainly improve the risk adjustment mechanisms or create incentives for states to adopt some of these rules, but at the end of the day, the success of the exchanges, like much else in the law, will rest with the states and their ability to fend off the insurance lobbyists.

Former McCain Aide Holtz-Eakin Stands Up For Insurers In MLR Debate

Former McCain campaign aide, CBO Director, and current GOP policy intellectual Douglas Holtz-Eakin has a provocative editorial in Kaiser Health News in which he completely dismisses the notion that health insurers should be prohibited from deducting taxes that have nothing to do with providing health care services before calculating their medical loss ratios. To step back, the ‘federal tax’ issue has become what some consumer advocates have described to me as the defining battle in the MLR debate. Under the new health care law, insurers are required to spend 80% to 85% of premiums on health care and issue rebates to consumers if they fail to meet this threshold.

Insurers have seized on a single mention of “federal taxes” in Section 2718 of the health law — the section that deals with MLR — to argue that they should be allowed to exclude all federal taxes from their revenue (the denominator in the MLR ratio), a move that would save issuers millions of dollars and allow them to meet the MLR requirements without necessarily spending more on care. Democrats are disputing their claim and insisting that they did not intend for issuers to exclude all federal taxes — only those that pertain to health care. Judging by the tone of his op-ed, Holtz-Eakin believes that this is simply untenable:

To begin, there is no defense for including taxes in any measure of available resources as part of an MLR. Whether used to measure dollars available for payments for medical expenses or devoted to administrative costs, taxes are simply not available for those purposes and must be excluded – six chairmen notwithstanding.

Worse, including taxes raises the threat of damaging and inappropriately double taxation. Most health plans are required to pay federal income taxes as well as payroll taxes. If these taxes paid to the federal government are not excluded from the premium revenue, the health plans’ MLR will be paying a potential double tax or rebate on the same net income: first paying taxes to the federal government and then a rebate to consumers using the same dollars. Double taxation is wrong in principle and in practice may be the death knell for smaller insurers.

During the election, Pat and I closely monitored Holtz-Eakin’s television appearances and joked that, judging by the veracity of his answers, the man was about to implode and was in desperate need of a vacation. I think, regrettably, that the same may be true now.

First of all, broad taxes were not part of the MLR prior to the health law and using investment taxes as a subtraction from premium revenue is just a way to circumvent the intent of the law — which is to keep insurer profits in check until 2014 — without improving efficiency. Secondly, an MLR rebate Is not a tax. It is the act of returning money to the consumer that was not spend on providing health care services — the opposite of a tax.

Further in his piece, DHE complains that the law “federalizes the MLR and employs a blunt one-size-fits-all approach that does not permit review and fine-tuning of its impacts.” But this too completely ignores the fact that the National Association of Insurance Commissioners (NAIC) — the organization tasked with defining the MLR — has gone out of its way to fine tune the MLRs to deal with smaller plans and different plans and has allowed a wide variety of quality improvement expenses and a procedure for adding more!

Finally, DHE argues that in order to satisfy the new MLR requirements, insurers would have to take steps that “may disqualify policies’ grandfathered status and violate the Obama administration’s promise” of keeping what you have if you like it. But again, this too demonstrates a complete misunderstanding of the MLR. The easiest way to meet the new standards is by lowering cost-sharing, which actually increases the likelihood of retaining grandfathered status.

Why Some In The GOP Do Want To Repeal The Independent Payment Advisory Board

Yesterday, I argued that given the pressure Medicare spending places on the federal budget, Republicans would be crazy to repeal the cost controls in the health care law and would probably maintain some version of the IPAB board if they actually regain power. But the Minnesota Start Tribune reminds me that the sponsors of the kill-IPAB bill are two Republican lawmakers — Sen. John Cornyn (R-TX) and Rep. Phil Roe (R-TN) — whose constituents would probably face the highest cuts:

No surprise that Texas is where many of these higher-cost providers are clustered. A high concentration is also in Tennessee, home of Republican Rep. Phil Roe, author of the House companion bill to Cornyn’s legislation. Both politicians disingenuously pitch their bills as getting bureaucrats out of health care. In reality, the bills are all about protecting special interests back home. In doing so, these bills would obliterate one of the most promising proposals to date to get the deficit under control.

This is a good point that’s worth reiterating. The IPAB was designed to free lawmakers from having to make the kind of decisions that could reduce health care costs by cutting someone’s paycheck back home. (As the old adage goes, the difficulty in controlling health care spending rests in the fact that one man’s waste is another man’s profit.)

Reforms that change the payment structure and encourage providers to deliver care in new, more integrated ways, may be the future of health care, but they’ll likely force providers in the highest spending areas to take the biggest cuts. Under the law, the board’s reports become law unless Congress enacts its own proposals to achieve the same level of cuts. With hospitals insulated from any reductions until 2018, doctors’ payments are likely to get hit. And that’s exactly why Cornyn and Roe are speaking out.

Are Democrats Really Running Away From The Health Law?

Several conservative commentators, including Byron York in this morning’s Examiner, have argued that Democrats are turning their back on their signature domestic accomplishment and running away from the health care law they worked so hard and staked so much to pass. Here is York:

It’s no mystery why the party is in retreat. The public’s disapproval of Obamacare hasn’t changed in the last five months. The RealClearPolitics average of recent polls shows 52 percent of Americans oppose the new law, while 39 percent support it. A variety of pollsters — Rasmussen, CNN, Pew, and CBS News — all find significantly more opposition than support. And there’s not just opposition but enthusiasm for outright repeal. “Overall support for repeal has ranged from 52 percent to 63 percent since the law was passed by Congress in March,” writes Rasmussen.

The story might be even worse than that for Democrats. Everyone knows the public’s top issue is the economy. It has been since before Obama took office. So when the president and Democratic congressional leadership devoted a year to passing national health care, Republicans charged they were ignoring the public’s wishes. Now, when Democrats admit that Obamacare won’t cut costs or reduce deficits, they open themselves up to a more serious charge: they spent a year working on something that will actually cost jobs and make things worse.

York has a small point — Democrats aren’t exactly tripping over themselves to defend the new health care law. But they’re not running away from it either. Obama’s HHS has maintained a fairly open and publicly visible implementation process and has often held news conferences with lawmakers to tout its success. Just yesterday, Kathleen Sebelius traveled to Montana to hold a town hall meeting with Sen. Max Baucus (D-MT), and the Obama administration called on doctors to rally behind the law and educate their patients about it. Speaker Pelosi has been lobbying Democrats to run on reform since at least July, “urging them to hold town hall-type meetings to highlight the law’s benefits, in the belief it could help Democrats avoid major losses in November.” Last month, Democratic leaders circulated a memo “pressing members to host meetings with constituents during this week’s recess to underscore the benefits of the reform law.”

And it’s partly because of these efforts that public opinion seems to be turning in favor of reform. “A late-July Kaiser Family Foundation survey found that 50% of the public views the new law favorably, up 9 points from May, while the proportion of Americans who view reform unfavorably has dropped from 44% to 35% in the same period. In late June, more Americans (49%) told Gallup that the law’s passage was ‘a good thing’ than those who disapproved — the first time the law showed a positive result in Gallup’s survey.”

Here We Go: Insurers Begin Blaming Health Law For Premiums Increases

On Friday, the News & Observer in North Carolina reported that Blue Cross Blue Shield of North Carolina — the largest insurer in the state — would be increasing premiums to keep up with medical inflation and the requirements of the new health care law:

“With everything that’s been added, you can’t really expect costs to go down,” he said.

The situation isn’t likely to improve any time soon. As more provisions of the health overhaul law take affect in 2014, Blue Cross officials said they expect rates to rise further.

“We do expect significant premium volatility in 2014 as the industry moves to an entirely new rating structure,” said Patrick Getzen, Blue Cross’ chief actuary.

But aside from allowing dependent coverage and eliminating annual limits, BCBSNC is also taking early steps to implement other provisions of the health law. The company is starting to move people into a single risk pool and is slowly eliminating the rating bands that many insurers are so infamous for. That sounds good, but it means that younger people who now pay relatively little for individual policies will pay substantially higher premiums, with some rates going up as much as 30%.

Adam Linker, a policy analyst with the N.C. Justice Center’s Health Access Coalition, doesn’t think that policy holders should have to bear the brunt of the issuer’s decision to adopt early changes, particularly since they’ll have to pay higher premiums without the added benefit of the law’s subsidies or Medicaid expansion (both of which don’t begin before 2014). He believes that if BCBSNC wants to institute a policy of early compliance, then it should pay for these changes itself. After all, the issuer does has an unusually high amount of money set away in its reserves and could certainly afford it.

“I’d like to see insurers take a small hit now and then figure out what adjustments they need to make in 2014,” when federal subsidies will help the uninsured afford coverage, Linker said. At that point, health insurers also will get a boost in business from new members.

But what’s really interesting about this approach is that BCBSNC is trying to get its policyholders to pay for its early compliance efforts and any “premium volatility in 2014″ — the very same kind of “volatility” that early compliance is presumably designed to reduce. The problem is that the health care law provides many insurers with an easy scapegoat, even if actuaries have estimated that the initial provisions (dependent coverage and eliminating annual limits) would increase costs by as little as 1%. They can raise premiums higher and blame all the increases on the taxes and coverage provisions of the new health law.