Tuesday, June 30, 2009

Comments on health insurance exchanges in the US context

Massachusetts, as part of its health reform plan, constructed an exchange where health insurance plans could be relatively standardized and sold to consumers. Commonwealth Choice products sold on the exchange are placed into three tiers, Gold, Silver and Bronze; Gold plans have less cost sharing and Bronze plans have the most. The tier of a plan is determined by its actuarial value, which can be stated as the percentage of medical costs that a plan would cover if a nationally standardized population were run through the plan.

In some ways, the Massachusetts exchange is like Carmax, the used car retailer in the US. Carmax inspects all the cars it purchases. It offers fixed price sales - there's no negotiation on the price. Financing is done separately from the purchase, so the terms of each deal are more transparent to the consumer.

The US will likely have an insurance exchange, or multiple insurance exchanges, in health reform. There are two questions, whether or not insurers can sell products outside the exchange, and whether or not there can be competing exchanges - progressives would probably like one national exchange, whereas I've heard some Republicans say they want it to be so that each state can have one or more. For example, the Senate Finance Committee's policy options paper suggests that one option may be to allow several competing exchanges; I believe this is at the insistence of the Republicans.

Allowing competing exchanges would be idiocy. Consider the case of Countrywide Financial. In the US, financial institutions can choose their own regulator. Countrywide chose the Office of Thrift Supervision, which is supposed to oversee regular banks. However, Countrywide was involved in originating and securitizing subprime mortgages - a more complex business. I'll grant that more than one regulator dropped the ball, but OTS was home to several of the biggest blowups - AIG, IndyMac and Washington Mutual were also under their oversight.

In fact, a Washington Post article argues that OTS was known for being a lenient regulator, and may well have lobbied Countrywide to come under their umbrella.

Countrywide Financial's decision to reconstitute itself as a thrift and come under the OTS umbrella was a victory for Darryl W. Dochow, the OTS official in charge of new charters in the Western region, home to Washington Mutual, IndyMac and other large thrifts.

In the late 1980s, Dochow had been the chief career supervisor of the savings-and-loan industry, and federal investigators later concluded he played a key role in the collapse of Charles Keating's Lincoln Savings and Loan by delaying and impeding proper oversight of that thrift's operations.

Dochow was shunted aside in the aftermath and sent to the agency's Seattle office. Several of his former colleagues and superiors say he eventually reestablished himself as a credible regulator and again rose in the organization. Dochow did not return a phone call requesting an interview, and OTS said he declined to give one.

As early as 2005, Angelo R. Mozilo, then the chief executive of Countrywide, approached OTS about moving out from under the supervision of the Office of the Comptroller of the Currency, which regulates national commercial banks. In 2006, Dochow and his OTS colleagues met with Countrywide at its headquarters in Calabasas, Calif., in a room decorated with color photos of the company's float entries in the annual Tournament of Roses parade. One depicted a big bad wolf, with arms outstretched, huffing and puffing on a brick house.

Senior executives at Countrywide who participated in the meetings said OTS pitched itself as a more natural, less antagonistic regulator than OCC and that Mozilo preferred that. Government officials outside OTS who were familiar with the negotiations provided a similar description.

"The general attitude was they were going to be more lenient," one Countrywide executive said. For example, he said other regulators, specifically OCC and the Federal Reserve, were very demanding that large banks not allow loan officers to participate in the selection of property appraisers. "But the OTS sold themselves on having a more liberal interpretation of it," the executive said.

Winning Countrywide was important for OTS, which is funded by assessments on the roughly 750 banks it regulates, with the largest firms paying much of the freight. Washington Mutual paid 13 percent of the agency's budget in the fiscal year ended Sept. 30, according to OTS figures. Countrywide provided 5 percent. Individual firms tend to make a larger difference to OTS finances than other bank regulators because the agency oversees fewer companies with fewer assets.

Polakoff said in an interview that the main reason Countrywide sought a new charter was that OTS was a better fit because it regulated banks that focus on mortgage lending. He said he challenged Mozilo: "If you're looking for a weak regulator, and if you're calling us because you think we're a weak regulator, stop now. We will walk away."

Polakoff said Mozilo told him, "That is absolutely not the reason we're even talking to you about a charter." Mozilo declined to be interviewed for this article.

But critics in government and industry said Countrywide's shift from OCC oversight to that of OTS was evidence of a "competition in laxity" among regulators eager to attract business. "Institutions should not be able to find a safe haven in one regulator from the reasonable concerns of another regulator," said Karen Shaw Petrou of Federal Financial Analytics, referring to the Countrywide episode.

In September 2007, six months after helping orchestrate the arrival of Countrywide under OTS, Dochow was promoted to head the agency's Western region.

He had arrived just in time for the second savings-and-loan crisis.

Allowing several competing insurance exchanges in the same geographic area would invariably mean that one will weaken its standards to attract more business. This would be bad - poorly designed insurance products have left many people in debt. For example, a policy might offer poor coverage for cancer care or for diabetes. There is reason to believe that many of these products were intentionally designed poorly - so as to attract healthier people, which has so far been the main way the insurance companies have competed for business.

Allowing the sale of insurance products outside the exchange would actually be a bad idea as well. Aside from the insurance plans of large employers (who normally offer fair terms and generous subsidies), insurers might want to sell skimpy plans to healthy people. That will undermine the whole purpose of the exchange; it is likely that a method called risk adjustment will be used to redistribute funds among plans according to the health status of their members, so that plans with sicker enrollees will get more money (and their enrollees will continue to pay the same premium), but having a significant market outside the exchange will undermine the accuracy of risk adjustment. It would be acceptable to only allow people to receive income-related federal subsidies within the exchange, but then there's the question of what happens to people who work for a large employer but can't afford insurance even with the employer's subsidy. Those are questions someone else can work out.

NY Times: GM, Detroit and the Fall of the Black Middle Class

Many middle class African-American families have jobs connected to the manufacturing industry. The decline of the auto industry is having particularly pronounced effects on African-American middle class families in Michigan, as this particularly sad story chronicles.

Friday, June 26, 2009

AFSCME: Catholic Bishops releases principles on unionization in Catholic hospitals

The American Federation of State, County and Municipal Employees announced that the US Conference of Catholic Bishops released a statement, Respecting the Just Rights of Workers: Guidance and Options for Catholic Health Care and Unions, which provides important guidelines on unionization in Catholic hospitals. Many hospitals, including Catholic hospitals, have been hostile to unions. In contrast, at least one previous Pope (unfortunately, I don't recall who right now) made statements favorable to unions.

While I disagree with a number of Labor's stances, it is a fundamental human right for workers to be able to organize, if they choose. It is deeply wrong for any employers to interfere with their choices, and to the extent that religious hospitals were doing so, that would be doubly shameful.

Leadership 2: Quack pastor urges his flock to bring their guns to church

I've heard that you should never start with telling people how NOT to do something. Michelle Obama is doing the right thing. This second post on the topic of leadership features someone doing the wrong thing in a spectacular way: the New York Times has a story on Pastor Ken Pagano, who urged his congregation to bring their guns INTO THE CHURCH this Saturday night where they will hold a raffle, firearms safety lessons and a picnic.

LOUISVILLE, Ky. — Ken Pagano, the pastor of the New Bethel Church here, is passionate about gun rights. He shoots regularly at the local firing range, and his sermon two weeks ago was on “God, Guns, Gospel, and Geometry.” And on Saturday night, he is inviting his congregation of 150 and others to wear or carry their firearms into the sanctuary to “celebrate our rights as Americans!” as a promotional flier for the “open carry celebration” puts it.

“God and guns were part of the foundation of this country,” Mr. Pagano, 49, said Wednesday as he sat in the small brick Assembly of God house of worship, where a large wooden cross hung over the altar and two American flags jutted from the side walls. “I don’t see any contradiction in this. Not every Christian denomination is pacifist.”

The bring-your-gun-to-church day, which will include a $1-raffle of a handgun, firearms safety lessons and a picnic, is another sign that the gun culture in the United States is thriving despite, or perhaps because of, President Obama’s election in November.


The celebration will feature lessons in responsible gun ownership, Mr. Pagano said. Sheriff’s deputies will be at the doors to check that openly carried firearms are unloaded, but they will not check for concealed weapons.

“That’s the whole point of concealed,” Mr. Pagano said, adding that he was not worried because such owners require training.

It is true that not all Christians denominations are pacifist. But we worship Christ, not guns and not the flag. This idiot worships all three, which means that he worships guns and the flag more than Christ. Jesus said you can't serve more than one master. I disagree, frankly, but when your masters are nationalism and violence, you certainly can't serve God.

Arkansas and Georgia recently rejected efforts to allow people to carry concealed weapons in church. Watching the debate in Arkansas was John Phillips, pastor of the Central Church of Christ in Little Rock. In 1986, Mr. Phillips was preaching in a different church there when a gunman shot him and a parishioner. Both survived, but Mr. Phillips, 51, still has a bullet lodged in his spine.

In a telephone interview, he said he found the idea of “packing in the pew” abhorrent.

“There is a movement afoot across the nation, with the gun lobby pushing the envelope, trying to allow concealed weapons to be carried in places where they used to be prohibited — churches, schools, bars,” Mr. Phillips said.

“I don’t understand how any minister who is familiar with the teachings of the Bible can do this,” he added. “Jesus didn’t say, ‘Go ahead, make my day.’ ”

Mr. Pagano takes such comments as a challenge to his faith and says they make him more determined.

“When someone from within the church tells me that being a Christian and having firearms are contradictions, that they’re incompatible with the Gospel — baloney,” he said. “As soon as you start saying that it’s not something that Christians do, well, guns are just the foil. The issue now is the Gospel. So in a sense, it does become a crusade. Now the Gospel is at stake.”

Radicalism can be a good trait in a leader if it is directed at the right cause. In Pagano's case, it is clearly not - what he is doing should be abhorrent to most Christians whether or not they are advocates of strong gun controls. Additionally, instability is not a trait that we look for in leaders.

Series on leadership: A First Lady Who Demands Substance (Washington Post)

During the Clinton efforts to reform healthcare in the US, I remember being a little uncomfortable at how much authority Hillary Clinton was assuming. The US elected Bill, but not Hillary. I recognize that that feeling is an effect of gender roles in society. I also do remember thinking that perhaps Hillary should run for Senate if she wanted a leadership role - at the time I didn't know that there was no Senate seat for DC. In any case, Hillary later ran for Senator, got it, and was nominated to be Secretary of State.

Hillary Clinton and Michelle Obama were accomplished leaders in their own right before their husbands were elected as President. Clinton had several board positions, such as the Children's Defense Fund and Wal-Mart (urk). Obama held a VP of Community and External Affairs position at the University of Chicago Hospitals before her husband's campaign. She previously had several prominent government and non-profit positions.

Of course, now she's in DC. Her role as First Lady brings several expectations that conflict with her professional abilities. No doubt, after her husband leaves office, she will not have trouble finding leadership roles elsewhere. However, her present position constrains her.

What she makes of her office remains to be seen. It is a secondary office to the President's. I would say that she should seek leadership positions outside the White House, but I'm not sure that's really possible - any position she achieves might be seen as nepotism. However, the Washington Post does have a story on how she is aggressively moving to redefine her position.

For weeks, Michelle Obama had been telling her staff and closest confidantes that she wasn't having the impact she wanted. She is a woman of substance, with a background in law, public policy and management, who found herself relegated to role model in chief. The West Wing of the White House -- the fulcrum of power and policy -- had not fully integrated her into its agenda. She wanted more.

So, earlier this month, she changed her chief of staff, and now she's changing her role.

Her new chief of staff, Susan Sher, 61, is a close friend and former boss who the first lady thinks will be more forceful about getting her and her team on the West Wing's radar screen. The first thing Sher said she told senior adviser David Axelrod, whom she has known for years: When I call, "you need to get back to me right away."


In the past couple of weeks, Obama has been more vocal about the specifics of the president's health plan, and she will play a substantive role in promoting it. She will soon announce the creation of an advisory board to help military families. And she will be the face of the administration's United We Serve, a summer-long national service program, which she launched on Monday. Even her social events have a message: She let congressional families know that before the annual White House barbecue today, the 500 guests are expected to show up at Fort McNair to stuff camp backpacks with goodies for the children of military personnel.

Obama has also taken stock of her family life, which she has found to be more constrained than she expected. She has concluded that there's really only one road toward some semblance of a private life for them -- and it leads away from the White House.

Her role includes many elements of interacting with the community. The Post reports that she's recruited seasoned, driven professionals for her staff.

At work, Obama runs her office like a business in which she is chief executive. She doesn't want to micromanage, she has made clear; she wants to delegate. Up and down the hall are professional women with whom she has a longtime connection and whom she trusts to execute her vision. Rogers, another friend from Chicago, has an office just a few feet away. Also nearby is Jocelyn Frye, whom Obama met at Harvard Law School and who is the first lady's policy director. A family law advocate and expert on equal opportunity employment law, Frye is also a link to the D.C. community. She grew up in Washington and still lives a few blocks from her parents' house in the Michigan Park area of Northeast. She has pointed the first lady to homeless shelters, soup kitchens and schools.

She's also moving to support the President's agenda, and positioning herself within the Administration to do so.

Every morning, Rogers and Sher attend White House Chief of Staff Rahm Emanuel's 8:15 staff meeting. Johnston, a newcomer to Obama's circle but a White House veteran, and Katie McCormick Lelyveld, the first lady's press secretary, sit in on White House press secretary Robert Gibbs's daily message meeting. As part of the president's domestic policy team, Frye meets with its staff weekly. Senior aides David Medina and Trooper Sanders work on national service and international issues, and Norris remains close to the office in her new job at the Corporation for National and Community Service.

They're all focused on raising the stakes. "It isn't just about hugging," Sher said. "Whatever she talks about will bring press and interest, but it's important that she's not just talking [but] actually moving forward on those issues."

I want to see Michelle Obama assume a role that is commensurate with her skills. The US did not elect Michelle as President or to any other formal leadership position, and it will cause many people discomfort if she crosses a line by assuming authority she has not earned. However, it also does not serve society if we disenfranchise the spouses of our elected leaders.

Thursday, June 25, 2009

Structuring an employer mandate in US health insurance

In the US, health insurance has traditionally been the responsibility of the employer to provide. Since the 1980s, with a secular shift towards part time work, many employers stopped giving health benefits. Costs have risen so fast that small employers have found it particularly difficult to provide benefits - they face higher administrative costs than larger firms, and in small firms, having one or two sick employees can cause the firm's premiums to rise significantly. Low-margin employers - like Wal-Mart, which makes little money off the sale of each item and compensates by volume - have often been unwilling to provide benefits as well. In their defense, labor costs are a relatively high cost for them, and increasing labor costs will cut their margins by a large amount.

For reference, examples of high margin employers are software firms, pharmaceutical companies, and investment banks before the subprime fiasco. Examples of low margin employers include grocery stores, agriculture firms, and investment banks after the subprime crisis.

We want employer dollars on the table in health reform. We don't want them dumping their workers into the health insurance exchange(s) where the workers will get Medicaid or public subsidies - essentially passing off costs onto the taxpayer. However, we also don't want to burden smaller and less profitable firms, which are a large engine of economic growth. Large low-margin employers like Wal-Mart have less or no excuse - indeed, in response to criticisms, Wal-Mart has been extending benefits to workers.

The Center on Budget and Policy Priorities has a piece on how to properly structure an employer mandate so that it's fair to smaller firms and firms with lower margins. In short:

Protect small firms by exempting them from the requirement. Congress can, for example, subject to “play or pay” only those firms whose total payroll exceeds a certain amount. (That threshold amount should be kept at a relatively modest level, however, so that a sufficient share of firms must meet the requirement. Consideration also could be given to applying the requirement to firms whose payroll falls below the threshold but whose average wages for full-time-equivalent work are above some high level so that, for example, a 6-person law firm with high salaries does not escape the requirement.)

Base the size of employers’ required payment on the size of their payroll rather than the number or type of employees. A per-employee requirement would disadvantage firms with larger numbers of low-wage workers compared to firms with smaller numbers of highly paid workers.

Adjust the fee imposed on employers who do not meet the requirement according to the size of the employer’s payroll in order to lessen the burden on smaller employers. Different proposals would impose a fee of 3 percent to 8 percent of payroll. These fees could be graduated — for example, 1 to 3 percent on the first one or several million dollars of payroll beyond the initial exempt amount, rising gradually to higher percentages for the portion of a firm’s payroll that exceeds various multi-million-dollar threshold levels.

Phase in the employer responsibility requirement over a few years. The fee rate could be increased, and/or the exemption level for small payrolls decreased, as health care reform makes coverage more affordable for modest-size employers.

In defining the “play” requirement, base the employer’s contribution to the worker’s coverage on the cost of coverage that meets a minimum essential benefits standard.

Gov Mark Sanford (South Carolina) on issues of marriage

From On the Issues:

No civil unions; define one-man-one-woman marriage

Q Should South Carolina recognize civil unions between same-sex couples?
A: No.
Q: Should South Carolina restrict marriage to a union only between a man and a woman?
A: Yes.
Source: 2002 SC Gubernatorial National Political Awareness Test Nov 1, 2002

I rarely comment on politicians' extra-marital affairs. I do not condone the practice, but they're usually personal errors.

However, as most US readers know, Gov Sanford admitted yesterday to an affair with a woman in Argentina who was a close friend. He is free to continue to hold his present anti-LGBT stance, and advocates should not condemn him for that. However, he had best refrain from commenting on the issue in the future - people would laugh in his face.

Additionally, there are some indications that key staffers did not know where he was during his 5-day absence. He could well have asked staff to mislead the media if asked, but if he did not make proper provisions for a change of command while he was away, this would be very poor governance.

Tuesday, June 23, 2009

Personal travails with health insurance, and thoughts on health insurance

Kaiser accepted me for the high-deductible individual policy I applied for. During the application, they asked about all my health conditions stretching 10 years back. It was a bit of a relief to be accepted, since I had a bout of depression related to a head injury 5 years ago. The depression hasn't recurred. I haven't worked in the insurance industry, but I can see some of the more aggressive companies turning me down on those grounds alone.

The deductible is $8,000. This means I will pay full freight for every service until I spend $8,000. I have a $15 copay for generic drugs, meaning that I pay $15 every time the doctor prescribes me a generic - but that only applies after I hit the deductible. I believe the nasal spray I used may cost around $45 a pop.

Health policy people always refer to the RAND health insurance experiment. Basically, the experiment found that zero cost sharing (i.e. no deductibles, copays or coinsurance) promotes utilization, including unnecessary utilization. It also found that cost sharing is a blunt tool - it deters all types of utilization, including necessary utilization. In today's economy, we're already hearing about a lot of people skipping their medicine or taking less than they should because of cost.

Conservatives have been saying that people need to have 'skin in the game'. They've endorsed these high deductible health plans because they think they'll help reduce excess utilization. That is certainly true.

However, remember, cost sharing is a blunt instrument. Additionally, poor people who get catastrophically ill will find it very hard to afford the full deductible. They're likely to excessively control their spending until they're at the deductible, after which they're presumably covered. People up to as much as 200% of the official US poverty line have significantly worse health than others, so these plans are a bad idea for them. For people under the poverty line, cost sharing should be zero. For people up to 200% or so of poverty, I would like to see cost sharing be nominal.

ThinkProgress: Under Misspelled Banner, Buchanan And White Nationalist Brimelow Argue For English-Only Initiatives

ThinkProgress has a post on the nomination of Judge Sonia Sotomayor for the Supreme Court, and reactions among US nationalists.

On Saturday, Pat Buchanan hosted a conference to discuss how Republicans can regain a majority in America. During one discussion, panelists suggested supporting English-only initiatives as a prime way of attracting “working class white Democrats.” The discussion ridiculed Judge Sotomayor for the fact that she studied children’s classics to improve her grammar while attending college. The panelists also suggested that, without English as the official language, President Obama would force Americans to speak Spanish.

One salient feature of the event was the banner hanging over the English-only advocates. The word conference was spelled “Conferenece.” View it here.

The panelists pressed on with their anti-bilingualism diatribe without noting the irony of the obvious misspelling on the banner:

PAT BUCHANAN: Judge Sotomayor is up there at school in New York, she gets a scholarship to Princeton, she’s graduated with all these big honors and awards they said she never won. What’s she doing there in the summer? They said her adviser told her to read children’s classics so she can learn English better. How do you graduate number one in Princeton if you’re in the summer and you’re reading Rumpelstiltskin and Snow White? [laughter] [...]

PETER BRIMELOW: I really do recommend the language issue because you know that polls better than immigration and affirmative action. Eighty-five percent of Americans say they would favor official language policy. The wonderful thing about this issue if you look at what’s going to actually happen here is you’re going to find that the Obama administration is going to gradually institute institutional bilingualism in the country. It’s going to be required to speak Spanish in key positions, the police force and so on. This is a direct attack on the American working class because they are not going to be bilingual.

ThinkProgress attended the event and obtained audio of the panel. Listen here:

Mocking Sotomayor’s struggle to learn English has become a habit for Buchanan. On CSPAN a few weeks ago, Buchanan tried to undermine Sotomayor’s qualifications by saying she had read Pinocchio as a part of her “college work.” Buchanan was referencing a New York Times article, which talked about how hard Sotomayor had to work to graduate at the top of her class from Princeton. The article stated that she “spent summers reading children’s classics she had missed in a Spanish-speaking home and ‘re-teaching’ herself to write ‘proper English’ by reading elementary grammar books.” Sotomayor never read children’s books as part of her “college work” and the books consisted of classics such as “Huckleberry Finn” and “Pride and Prejudice” — not Snow White, as Buchanan contends.

Peter Brimelow, one of the panelists to the event, is the editor of Vdare.com. He has written extensively against immigration and has long advocated that the GOP must “appeal to its base: white Americans.” Brimelow has defended accusations that he writes and publishes white supremacist material by declaring his content to be merely “white nationalist.”

UPDATEBrimelow also urged the attendees of the Buchanan conference to attack affirmative action in an effort to attract the votes of "young whites" and "yellow people." After claiming it would be "suicidal" for any "white man" to vote for Obama, Brimelow contended that immigrants should not be eligible for affirmative action because "they weren’t slaves to this country, they’ve never been discriminated against":
Listen here:

Friday, June 19, 2009

WSJ: White House Looks to Include Same-Sex Unions in Census Count

Bad news for the institution of marriage: the White House is looking to count same sex couples in the next Census. That would be bad, very bad. The institution of marriage would certainly disintegrate if we knew how many homosexual 'marriages' there were, oh yes.

Wednesday, June 17, 2009

Why I don't trust the US health insurance industry

The Los Angeles Times has a horrifying story about how several large insurers in California revoked policies based on the applicants' inadvertent omissions or honest mistakes. Insurance companies have the right to cancel policies, a process known as recission, in response to intentional fraud. Not doing so would drive premiums up for everyone. However, the insurers went a step further: they targeted certain diseases and rewarded employees for cancelling policies.

A Texas nurse said she lost her coverage, after she was diagnosed with aggressive breast cancer, for failing to disclose a visit to a dermatologist for acne.

The sister of an Illinois man who died of lymphoma said his policy was rescinded for the failure to report a possible aneurysm and gallstones that his physician noted in his chart but did not discuss with him.

The committee's investigation found that WellPoint's Blue Cross targeted individuals with more than 1,400 conditions, including breast cancer, lymphoma, pregnancy and high blood pressure. And the committee obtained documents that showed Blue Cross supervisors praised employees in performance reviews for rescinding policies.

One employee, for instance, received a perfect 5 for "exceptional performance" on an evaluation that noted the employee's role in dropping thousands of policyholders and avoiding nearly $10 million worth of medical care.

Committee members took turns, alternating Democrats and Republicans, condemning such practices.

Even worse, the executives refused to limit recission to cases of fraud - as they should be doing.

Late in the hearing, Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show "intentional fraud."

The answer from all three executives:


The only good thing is that this may undermine the insurers' efforts to shape the health reform debate.

Experts said it could undermine the industry's efforts to influence healthcare-overhaul plans working their way toward the White House.

"Talk about tone deaf," said Robert Laszewski, a former health insurance executive who now counsels companies as a consultant.

Democratic strategist Paul Begala said the hearing could hurt the industry's efforts to position itself in the debate.

"The industry has tried very hard in this current effort not to be the bad guy, not to wear the black hat," Begala said. "The trouble is all that hard work and goodwill is at risk if in fact they are pursuing" such practices.

This may make it easier to get a public option passed. Karen Ignagni, President and CEO of their trade association, has publicly said that she's aware the public has lost confidence in health insurers, and is willing to accept increased regulation of the industry. Insurers had better follow their own trade association.

That said, malpractice and defensive medicine are a problem that should be addressed

Parija Kavilanz has an article on CNN Money about malpractice and defensive medicine in the US.

Defensive medicine occurs when a doctor orders tests or procedures not based on need but concern over liability, explained Dr. Alan Woodward, former president of the Massachusetts Medical Society (MMS) and vice chairman of its committee on professional liability.

"If you're serious about (health care) reform, you have to be serious about this issue," Woodward said. He estimates that more than 80% of doctors across the country are engaged in defensive medicine.

President Obama, who has so far made information technology a key to his plan to reform health care, addressed this issue Monday in his speech to the American Medical Association (AMA).


A 2008 study from PricewaterhouseCoopers found that wasteful spending in the health system accounts for more than half of all of health care spending. The firm identified defensive medicine as the biggest area of excess.

"Each doctor has a very different risk profile," said Dr. David Chin, managing partner of consulting firm PricewaterhouseCoopers' Global Healthcare Research Institute. "If one doctor asks for an additional test, it's not always because they are practicing defensive medicine."

The Congressional Budget Office, the federal agency that will calculate how much money health reform will cost or save, has estimated that medical malpractice costs -- which include defensive medicine -- amount to less than 2% of overall health care spending.

Chin said his guess is in line with the CBO's number.

Michael Morrisey, a professor of health economics and health insurance at the University of Alabama's Lister Hill Center for Health Policy, is also skeptical about defensive medicine's impact on health care costs. He said states that have capped malpractice claims haven't seen any significant decreases in health care costs or heath insurance premiums.

"To me, the three biggest challenges for health care reform are tax treatment of employer-sponsored insurance, retooling health care payment systems and technological advancement in health care," said Morrisey.

Woodward disagreed. He ranks defensive medicine as the second-biggest burden on health care costs after the fee-for-service model in which doctors are paid for the quantity, rather than the quality, of services provided.

Woodward estimates that defensive medicine accounts for about 10% of health care costs. Some industry studies have translated that to more than $100 billion in health care costs annually.

"We are driving the standard of care more and more in the defensive direction," he said. "Physicians are practicing maximalist medicine rather than optimalist care.

Woodward defines optimalist care as everyone getting high-quality care, when they need it, in a cost-effective way.

He said the uninsured are getting "minimalist" care while insured Americans are getting maximalist care, or more than what they need from doctors due to fear of liability, the fee-for-service payment model and direct-to-consumer advertising.

Consumer impact: Redundant tests can pump up premiums for the insured. "Consumers' premiums could be 10% lower if doctors stopped this practice," Woodward said.

From a medical standpoint, excessive tests can also be harmful to patients if errors or complications occur, said Dr. Manish Sethi, a member of the MMS' board of trustees and co-author of a 2008 study that investigates and quantifies defensive practices in Massachusetts.

The MMS surveyed more than 830 physicians across eight specialty areas in the state and found 83% reported practicing defensive medicine at an estimated cost of $1.4 billion per year.

"The bottom line is doctors across the country are ordering more tests because of liability concerns," said Sethi. "I am not advocating liability reform but we could look at other options."

The American Medical Association, the group representing doctors, last month mentioned "health courts" as one option.

"Let's have special courts for patients just like bankruptcy court or patents courts and judges have medical training," said Woodward. "In the current system, medical cases are heard by judges who may not be trained in health care. Jurors have no background in health care and jury awards are huge."

Sethi offered other ideas such as a national standard of care, enforced by the Department of Health and Human Services, mandating specific clinical practice guidelines for doctors.

Sethi feels this would mitigate some of the liability concerns and encourage more doctors to accept high-risk patients, countering another aspect of defensive medicine.

In Massachusetts, lawmakers are also considering a bill allowing doctors to apologize to patients and their families for a medical error. However, that apology wouldn't be admissible in court during any future lawsuit brought by the patient.

"What a patient wants when errors happen is full disclosure, an apology and assurance that it won't happen again and compensation," said Woodward, adding that this process can help prevent complaints ultimately going to court.

I am most convinced by the fact that the states which have enacted the strongest tort reforms have not seen health care costs grow more slowly. Newt Gingrich touted Texas' tort reforms but Texas has in fact seen its costs grow faster than most other states. Health care cost is a systemic problem. Tort reform alone isn't going to get us there.

Why I trust my doctor but not the American Medical Association

Businessweek has an article on the American Medical Association's response to President Obama's talk. An excerpt:

Obama's speech came just days after the AMA said it opposed the creation of a public insurance plan fashioned after Medicare to cover the uninsured. That's an option favored by Obama and many Democratic legislators. But Obama did not back down—a sign that the AMA may no longer have the clout it once had to control the health-care agenda.


fee-for-service inefficient and wasteful

Obama wants to change that math. He has made it clear that he expects doctors to sacrifice along with insurers and drug companies. Although the President made no significant new proposals in his speech, he strongly reiterated his position that the current payment system, in which doctors are reimbursed for every service and office visit, leads to waste and inefficiencies and must be changed.

"It is a model that has taken the pursuit of medicine from a profession— - a calling -—to a business," said Obama. "And a lot of people in this room know what I'm talking about."

If they did, they didn't show it. The 500 delegates in the room met this portion of his speech with a deafening silence. Only his call to reform malpractice laws met with sustained applause, though Obama quickly followed up that statement—quieting the room—by saying he would not impose caps on malpractice awards, something doctors have long fought for. Nor was there much enthusiasm for his call to use Medicare reimbursements to reduce the number of patients readmitted to a hospital within 30 days of release, which would almost certainly lower hospital revenues. Likewise for the President's call to adjust Medicare payments to reflect medical advances and productivity gains, which would almost certainly lower payments to doctors.
only 25% of U.S. doctors are in the AMA.

In the past, such statements would almost certainly have set the AMA on a collision course with any reform attempts. The group has been able to block significant health-care reform efforts dating back to President Theodore Roosevelt's Administration. In 1948, when President Harry S Truman tried to enact universal health insurance, the AMA urged its members to "resist the enslavement of the medical profession." The group tried to stop the creation of Medicare until it was outmaneuvered by President Lyndon B. Johnson. And in 1986, President Ronald Reagan failed to persuade the AMA to support a Medicare freeze. Reagan was the last President prior to Obama to plead his case directly to the group.

Malpractice laws are a symptom, but in themselves they are not the main problem. They can and should be reformed, but malpractice premiums account for maybe 1% of total medical spending. The Congressional Budget Office says defensive medicine accounts for perhaps another 1%.

The main problem is the astronomically increasing cost of new medical technology and its inappropriate use. Too many doctors and hospitals are performing inefficient, excessive care.

In contrast, while insured through Kaiser Permanente, an integrated HMO, my doctors have prescribed cheap, effective generic drugs. Physicians who are on a salary, and employed directly by a hospital or healthcare system, perform fewer unnecessary tests. The problem is, most doctors practice independently. Under present payment systems, they have incentive to perform more tests and services.

Someone's waste is someone else's profit. The AMA, unfortunately, seems to be more concerned about its own profits than society's waste.

But medicine has splintered into dozens of specialties in recent decades, many of them with opposing interests. The AMA now represents 245,000 doctors, about one-fourth of the nation's total. The second-largest group, the American College of Physicians—or ACP, with 126,000 internists as members—looks much more favorably on a public plan and a payment model that rewards different specialists working together as a team to provide care for an individual patient rather than the piecemeal approach that now typifies American medicine. "We think changing the system that simply rewards volume rather than value is very important," says Dr. Joseph W. Stubbs, president of the ACP. In fact, a survey of U.S. doctors last year found that 59% support federal legislation to establish national health insurance.

Moreover, doctors are no longer seen by the public as infallible or untouchable. An influential article in the New Yorker last month by Harvard-trained surgeon Dr. Atul Gawande laid out the huge regional disparities in U.S. health-care spending and pinpointed the main cause as overtreatment by doctors who seek to boost their earnings. The article has become a rallying cry for health-care reformers. Obama made it required reading in the White House, and it is regularly referred to by legislators on Capital Hill.

I trust my doctors, but I do not trust the American Medical Association. America's Health Insurance Plans realize that they've lost the public's trust - they've said so in public and basically asked to be regulated. I hope the AMA comes to the same realization. Meanwhile, their lack of concern over the need to practice medicine more efficiently shows that right now, they are part of the problem.

NY Times Op Ed: The Obama Haters’ Silent Enablers

An op-ed from the New York Times, by Frank Rich.

WHEN a Fox News anchor, reacting to his own network’s surging e-mail traffic, warns urgently on-camera of a rise in hate-filled, “amped up” Americans who are “taking the extra step and getting the gun out,” maybe we should listen. He has better sources in that underground than most.

The anchor was Shepard Smith, speaking after Wednesday’s mayhem at the United States Holocaust Memorial Museum in Washington. Unlike the bloviators at his network and elsewhere on cable, Smith is famous for his highly caffeinated news-reading, not any political agenda. But very occasionally — notably during Hurricane Katrina — he hits the Howard Beale mad-as-hell wall. Joining those at Fox who routinely disregard the network’s “We report, you decide” mantra, he both reported and decided, loudly.

What he reported was this: his e-mail from viewers had “become more and more frightening” in recent months, dating back to the election season. From Wednesday alone, he “could read a hundred” messages spewing “hate that’s not based in fact,” much of it about Barack Obama and some of it sharing the museum gunman’s canard that the president was not a naturally born citizen. These are Americans “out there in a scary place,” Smith said.

Then he brought up another recent gunman: “If you’re one who believes that abortion is murder, at what point do you go out and kill someone who’s performing abortions?” An answer, he said, was provided by Dr. George Tiller’s killer. He went on: “If you are one who believes these sorts of things about the president of the United States ...” He left the rest of that chilling sentence unsaid.

These are extraordinary words to hear on Fox. The network’s highest-rated star, Bill O’Reilly, had assailed Tiller, calling him “Tiller the baby killer” and likening him to the Nazis, on 29 of his shows before the doctor was murdered at his church in Kansas. O’Reilly was unrepentant, stating that only “pro-abortion zealots and Fox News haters” would link him to the crime. But now another Fox star, while stopping short of blaming O’Reilly, was breaching his network’s brand of political correctness: he tied the far-right loners who had gotten their guns out in Wichita and Washington to the mounting fury of Obama haters.

What is this fury about? In his scant 145 days in office, the new president has not remotely matched the Bush record in deficit creation. Nor has he repealed the right to bear arms or exacerbated the wars he inherited. He has tried more than his predecessor ever did to reach across the aisle. But none of that seems to matter. A sizable minority of Americans is irrationally fearful of the fast-moving generational, cultural and racial turnover Obama embodies — indeed, of the 21st century itself. That minority is now getting angrier in inverse relationship to his popularity with the vast majority of the country. Change can be frightening and traumatic, especially if it’s not change you can believe in.

We don’t know whether the tiny subset of domestic terrorists in this crowd is egged on by political or media demagogues — though we do tend to assume that foreign jihadists respond like Pavlov’s dogs to the words of their most fanatical leaders and polemicists. But well before the latest murderers struck — well before another “antigovernment” Obama hater went on a cop-killing rampage in Pittsburgh in April — there have been indications that this rage could spiral out of control.

This was evident during the campaign, when hotheads greeted Obama’s name with “Treason!” and “Terrorist!” at G.O.P. rallies. At first the McCain-Palin campaign fed the anger with accusations that Obama was “palling around with terrorists.” But later John McCain thought better of it and defended his opponent’s honor to a town-hall participant who vented her fears of the Democrats’ “Arab” candidate. Although two neo-Nazi skinheads were arrested in an assassination plot against Obama two weeks before Election Day, the fever broke after McCain exercised leadership.

That honeymoon, if it was one, is over. Conservatives have legitimate ideological beefs with Obama, rightly expressed in sharp language. But the invective in some quarters has unmistakably amped up. The writer Camille Paglia, a political independent and confessed talk-radio fan, detected a shift toward paranoia in the air waves by mid-May. When “the tone darkens toward a rhetoric of purgation and annihilation,” she observed in Salon, “there is reason for alarm.” She cited a “joke” repeated by a Rush Limbaugh fill-in host, a talk-radio jock from Dallas of all places, about how “any U.S. soldier” who found himself with only two bullets in an elevator with Nancy Pelosi, Harry Reid and Osama bin Laden would use both shots to assassinate Pelosi and then strangle Reid and bin Laden.

This homicide-saturated vituperation is endemic among mini-Limbaughs. Glenn Beck has dipped into O’Reilly’s Holocaust analogies to liken Obama’s policy on stem-cell research to the eugenics that led to “the final solution” and the quest for “a master race.” After James von Brunn’s rampage at the Holocaust museum, Beck rushed onto Fox News to describe the Obama-hating killer as a “lone gunman nutjob.” Yet in the same show Beck also said von Brunn was a symptom that “the pot in America is boiling,” as if Beck himself were not the boiling pot cheering the kettle on.

But hyperbole from the usual suspects in the entertainment arena of TV and radio is not the whole story. What’s startling is the spillover of this poison into the conservative political establishment. Saul Anuzis, a former Michigan G.O.P. chairman who ran for the party’s national chairmanship this year, seriously suggested in April that Republicans should stop calling Obama a socialist because “it no longer has the negative connotation it had 20 years ago, or even 10 years ago.” Anuzis pushed “fascism” instead, because “everybody still thinks that’s a bad thing.” He didn’t seem to grasp that “fascism” is nonsensical as a description of the Obama administration or that there might be a risk in slurring a president with a word that most find “bad” because it evokes a mass-murderer like Hitler.

The Anuzis “fascism” solution to the Obama problem has caught fire. The president’s nomination of Sonia Sotomayor to the Supreme Court and his speech in Cairo have only exacerbated the ugliness. The venomous personal attacks on Sotomayor have little to do with the 3,000-plus cases she’s adjudicated in nearly 17 years on the bench or her thoughts about the judgment of “a wise Latina woman.” She has been tarred as a member of “the Latino KKK” (by the former Republican presidential candidate Tom Tancredo), as well as a racist and a David Duke (by Limbaugh), and portrayed, in a bizarre two-for-one ethnic caricature, as a slant-eyed Asian on the cover of National Review. Uniting all these insults is an aggrieved note of white victimization only a shade less explicit than that in von Brunn’s white supremacist screeds.

Obama’s Cairo address, meanwhile, prompted over-the-top accusations reminiscent of those campaign rally cries of “Treason!” It was a prominent former Reagan defense official, Frank Gaffney, not some fringe crackpot, who accused Obama in The Washington Times of engaging “in the most consequential bait-and-switch since Adolf Hitler duped Neville Chamberlain.” He claimed that the president — a lifelong Christian — “may still be” a Muslim and is aligned with “the dangerous global movement known as the Muslim Brotherhood.” Gaffney linked Obama by innuendo with Islamic “charities” that “have been convicted of providing material support for terrorism.”

If this isn’t a handy rationalization for another lone nutjob to take the law into his own hands against a supposed terrorism supporter, what is? Any such nutjob can easily grab a weapon. Gun enthusiasts have been on a shopping spree since the election, with some areas of our country reporting percentage sales increases in the mid-to-high double digits, recession be damned.

The question, Shepard Smith said on Fox last week, is “if there is really a way to put a hold on” those who might run amok. We’re not about to repeal the First or Second Amendments. Hard-core haters resolutely dismiss any “mainstream media” debunking of their conspiracy theories. The only voices that might penetrate their alternative reality — I emphasize might — belong to conservative leaders with the guts and clout to step up as McCain did last fall. Where are they? The genteel public debate in right-leaning intellectual circles about the conservative movement’s future will be buried by history if these insistent alarms are met with silence.

It’s typical of this dereliction of responsibility that when the Department of Homeland Security released a plausible (and, tragically, prescient) report about far-right domestic terrorism two months ago, the conservative response was to trash it as “the height of insult,” in the words of the G.O.P. chairman Michael Steele. But as Smith also said last week, Homeland Security was “warning us for a reason.”

No matter. Last week it was business as usual, as Republican leaders nattered ad infinitum over the juvenile rivalry of Sarah Palin and Newt Gingrich at the party’s big Washington fund-raiser. Few if any mentioned, let alone questioned, the ominous script delivered by the actor Jon Voight with the G.O.P. imprimatur at that same event. Voight’s devout wish was to “bring an end to this false prophet Obama.”

This kind of rhetoric, with its pseudo-Scriptural call to action, is toxic. It is getting louder each day of the Obama presidency. No one, not even Fox News viewers, can say they weren’t warned.

Tuesday, June 16, 2009

No hard evidence, but possible signs of fraud in recent Iran election

I went so far as to pray that Mir Hossein Mousavi, a moderate and a former prime minister, would beat Mahmoud Ahmedinejad in Iran's recent election. Ahmedinejad officially won with over 60% of the vote to Mousavi's 34%.

The Washington Post reports that there are some signs of fraud but none are clear:

There are many signs of manipulation or outright fraud in Iran's disputed election results, according to pollsters and election experts, but the case for a rigged outcome is far from ironclad, making it difficult for the United States and other Western powers to denounce the results as unacceptable. Indeed, there is also evidence that Mahmoud Ahmadinejad, the incumbent president deeply disliked in the West for his promotion of Iran's nuclear program and his anti-Israeli rhetoric, simply won a commanding victory.

Some analysts have suggested that the attention given the protests and anger in Tehran -- where Western media outlets are concentrated -- gives a misleading picture of the Iranian electorate. The official results show that the leading challenger, former prime minister Mir Hossein Mousavi, was competitive in Tehran, losing by 52 percent to 46 percent, while trailing badly outside the capital. "You could get more of an impression of a horse race in Tehran," said Flynt Leverett of the New America Foundation, who said Ahmadinejad is a "really good campaigner" who blunted Mousavi's momentum in their final debate.


Mehdi Khalaji, an expert on the Iranian political system at the Washington Institute for Near East Policy, said that votes at each polling station are supposed to be counted and recorded on a form with the approval of representatives of the candidates, the Interior Ministry and the Guardian Council, a 12-member body selected by Khamenei, the head of the judiciary and Iran's parliament, which validates the election. But the numbers on these forms remain secret. They are sent to the Interior Ministry, which tallies the various forms from polling stations and reports on the totals for each province.

Khalaji said the system provides many opportunities for vote manipulation, but in this election many representatives of opposition candidates were not permitted to vet the initial counting. He said it was also highly suspicious that 20 million paper ballots -- or more than half of those cast -- were announced as counted within three hours of the polls closing. Adding to the vote-counting challenge was an increase in voter turnout: More than 11 million more ballots were cast this year than four years ago.

Various analysts have used statistical analysis to poke holes in the final tallies. Renard Sexton, writing on FiveThirtyEight.com, noted that higher turnouts in Iranian elections have historically resulted in lower winning percentages. The turnout in this election was 80 to 85 percent, suggesting the vote would be much closer. "We would have expected Ahmadinejad's result from Friday, informed by the polling, historical trends and a bit of bet-hedging, to be between 40 percent and 55 percent," he concluded.

It is definitely possible that Ahmedinejad won fair and square, as this piece from the New America Foundation argues.

Like much of the Western media, most American “Iran experts” overstated Mir Hossein Mousavi’s “surge” over the campaign’s final weeks. More importantly, they were oblivious – as in 2005 – to Ahmadinejad’s effectiveness as a populist politician and campaigner. American “Iran experts” missed how Ahmadinejad was perceived by most Iranians as having won the nationally televised debates with his three opponents – especially his debate with Mousavi.


Similarly, Ahmadinejad’s criticism that Mousavi’s reformist supporters, including former President Khatami, had been willing to suspend Iran’s uranium enrichment program and had won nothing from the West for doing so tapped into popular support for the program – and had the added advantage of being true.

More fundamentally, American “Iran experts” consistently underestimated Ahmadinejad’s base of support. Polling in Iran is notoriously difficult; most polls there are less than fully professional, and hence produce results of questionable validity. But the one poll conducted before Friday’s election by a Western organization that was transparent about its methodology – a telephone poll carried out by the Washington-based Terror-Free Tomorrow (TFT) during May 11-20 – found Ahmadinejad running 20 points ahead of Mousavi. This poll was conducted before the televised debates in which, as noted above, Ahmadinejad was perceived to have done well while Mousavi did poorly.

American “Iran experts” assumed that “disastrous” economic conditions in Iran would undermine Ahmadinejad’s reelection prospects. But the IMF projects that Iran’s economy will actually grow modestly this year (when the economies of most Gulf Arab states are in recession). A significant number of Iranians – including the religiously pious, lower income groups, civil servants, and pensioners – appear to believe that Ahmadinejad’s policies have benefited them.
And, while many Iranians complain about inflation, the TFT poll found that most Iranian voters do not hold Ahmadinejad responsible. The “Iran experts” further argue that the high turnout on June 12 – 82 percent of the electorate – had to favor Mousavi. But this line of analysis reflects nothing more than assumptions.

Ahmedinejad is an extremist and is hard to engage. However, unless clear and convincing evidence of fraud is uncovered, the US should respect the election results and continue engagement with Iran.

Monday, June 15, 2009

My fiance's travails with health insurance

My travails with health insurance are unpleasant. My maximum out of pocket liability will be quite high if I take a bare-bones plan that we can afford. However, as I mentioned, I am insurable.

My fiance is not. Her asthma and depression are under good control with medication. However, in the individual and small group markets, people must go through medical underwriting in most states. That means that insurers assess your health status and raise your rates if they determine you will cost more. If you have two expensive chronic conditions, they'll deny you.

Kaiser, which I seriously respect as an organization, denied my fiance individual insurance. Frankly, there is a sound business reason for doing so. In a market where you can underwrite, if Kaiser allowed the sick people onto its plans and other insurers didn't, Kaiser would eventually get all the sick people. Other plans would attract the healthier people by charging less. Kaiser would have to raise their rates for everyone in the individual insurance pool. That would start driving people out, most likely starting with the healthiest members who feel they can take their chances, which would raise everyone else's premiums, and then Kaiser would eventually have to drop that line of business. So, while it's wrong and inexcusable of them to do so, they have no choice from a business perspective.

Ironically, her chronic conditions are under control with medicine under normal circumstances. However, stress makes it harder to control these conditions. Not being able to afford medications would do the same.

In the US, insurance market regulations differ by state (the exception is large employers who hire people in multiple states; they are allowed to self-insure regardless of state regulations and contract with an insurance company to administer their plans). New Jersey, for example, has what is known as community rating and guaranteed issue in the individual insurance market. The former means that people cannot be charged premiums that differ by health status (strictly, community rating means that everyone pays the same premium, but often premiums can vary by demographic factors like age and sex). The latter means that everyone who applies for health insurance must get it regardless of health status.

These regulations sound good for consumers. However, once sick people can get insurance and get charged lower premiums than their health status would otherwise dictate, they will be more likely to get insurance. That drives up costs for everyone in the individual market. Again, that causes the healthier people to decide they'd rather take their chances and drop insurance. In New Jersey, the lowest quote I could get for individual insurance is $128.91, compared to $52 in Maryland. The individual market is not working well in New Jersey.

Anyway, this leaves my fiance in a very bad spot. We are between states, but once we are eligible for Maryland residency, she'll be able to enroll in the state's high risk pool. Some states have high risk pools, which insure people who are denied coverage elsewhere due to health reasons. This sounds like a good deal, but high risk pool coverage is expensive. The absolute cheapest option will cost her nearly $100 a month for very poor coverage (i.e. high cost sharing). Additionally, all high risk pools in the states that have them need to be subsidized. Lastly, I've heard a friend who has a chronic illness complain about the quality of the care she got with the state's high risk pool administrator, CareFirst.

The McCain solution to health reform was to increase funding for high risk pools. That's still costly and it still doesn't guarantee quality care. High risk pools are small by nature, which means higher administrative costs in proportion to larger plans. They're a bad deal. It would be better to require to get everyone insured under a mandate plus subsidies. That way, the healthier can subsidize the sick. Some people don't like that, but you're doing so already - doctors, hospitals and economists generally agree that the general public pays indirectly for the cost of care delivered to the uninsured both through higher insurance premiums and charitable donations.

In my fiance's case, until we can get her on that crappy plan to limit her out of pocket liability if she does have an accident, she'll just have to be very very careful. Additionally, we have to be extra diligent about seeking out low cost options like community health centers, other low-cost doctors with sliding scale fees, MinuteClinics and medication assistance programs.

I was prescribed a nasal steroid spray for allergies; I'm going to lie to my doctor that I need that prescription extended so she can use it. I figure in this economy, God will forgive me. Additionally, as I said, the actions of the insurance industry have been execrable. This includes Kaiser Permanente, which is otherwise an exemplary organization. What goes around, comes around - I know a lot of young adults are probably doing this these days.

Sunday, June 14, 2009

My travails with health insurance

I recently took a 6 month paid internship at a think tank. While the firm is a smaller employer, it is quite generous indeed with its health benefits. In the US, if you lose your employer-sponsored insurance, you have the option to continue it under COBRA (the Consolidated Omnibus Budget Reconciliation Act). You do have to pay 102% of what it actually costs your employer to provide those benefits for you; the 2% extra is for their administrative fees.

My internship is ending. I study health policy for a living, but I was still a bit shocked when our administrative assistant told me that the full cost of my benefits was $400 a month. There is a subsidy provision in the recent stimulus bill that has the Federal government paying for 65% of the cost of that insurance for up to 9 months. I'm unsure if I'm eligible, because I was neither a permanent resident nor a citizen while working for the organization (was on a student visa). If I am, I would pay $135 a month for up to (I think) 9 months. While working for them, I was paying $17, and my employer was eating the rest.

I will be able to get an individual insurance policy for $52 per month. Neither my fiance nor I will be employed for an unknown amount of time, so we may just have to do this. However, the individual plan is really bare bones. It has far higher cost sharing. Let's go through some insurance terms.

Premiums: a monthly fee you pay to enroll.

Cost sharing: amounts you pay out of pocket for services, meant to discourage you from going to the doctor unnecessarily. Cost sharing includes the deductible, co-pays and co-insurance.

Deductible: A fixed dollar amount you must pay out of pocket before your insurance kicks in. The individual plan I'm looking at has a $8,000 deductible. My present one doesn't actually appear to have one - this is known as first dollar coverage. Some rather weasely policies exclude certain things from the deductible, like mental health services. Kaiser Permanente, my present and probably future insurer, doesn't do this.

Co-pay: a fixed dollar amount you pay for each service. For example, a $5 co-pay for generic drugs means that for every generic drug I'm prescribed, I pay $5 and the insurance covers the rest, no matter how much it is (generic antidepressants might be as much as $30-100 a month). To encourage use of generics, insurance companies have tiered co-pays, where they charge you more for branded drugs. This is generally a good thing - the drug companies aren't having trouble paying the bills.

Co-insurance: a percentage amount you pay for each service. For example, 20% co-insurance for hospitalization means that if (God forbid) I got hospitalized, I'd pick up 20% of the cost.

Out of pocket maximum: some policies have OOP maximums. I would pay no more than, say, $10,000 a year including premiums and cost sharing no matter what happened to me on the individual policy I'm considering. Not all policies have this. In fact, some have...

Maximum annual benefits: Policies which have these won't cover anything over a certain amount. Some employer-sponsored policies won't cover amounts over $1 million. Massachusetts Young Adult Plans, which are cheap bare-bones plans for young adults, often cover no more than $50,000. At the latter amount, one hospitalization could land you in a lot of debt. I would like to see these abolished or curtailed, frankly. The individual policy I'm considering doesn't do this.

When shopping for insurance, DO NOT look only at the premium. All else equal, a lower premium means higher cost sharing and possibly lower max annual benefits. The reverse is also true.

There is nothing inherently wrong with cost sharing for most people except the poor. Cost sharing discourages unnecessary use. However, it's a blunt instrument - cost sharing also discourages use of necessary services. Some surveys have found that as many as 1/3 of Americans aren't filling their prescriptions these days due to cost. Needless to say, the poor have far less slack in their budgets than the middle class or the rich, and Medicaid plans usually impose zero or minimal cost sharing. This is good.

At the end of the day, if I get that Kaiser plan, I can be confident that my maximum possible liability in the event of major illness will be a high but manageable amount. I'll also get the advantage of Kaiser's purchasing power for generic and some prescription drugs. However, the financial protection isn't really adequate. I'm in a less usual situation among young people in that I could afford $10,000 in out of pocket costs if I really had to, without going into debt. Many young folks starting their careers are not in that situation, as are many poor people. And I am insurable - I'll touch on the issue of pre-existing conditions in the next post.

Saturday, June 13, 2009

Funky tax issue: taxing employer health insurance

In the US, employer-sponsored health insurance is excluded from taxable income. This is an artifact of World War II. Wage controls were in place, but the Internal Revenue Service ruled that health insurance wasn't wages. As a result, employers offered health insurance to attract workers. The system became institutionalized.

It is inherently regressive. Most countries have progressive tax systems, where there are multiple tiers of tax brackets. In any such system, any sort of tax exclusion or deduction gives more benefits to those in higher tax brackets. Let's say I'm earning $15,000 and I'm paying 10% of my income in tax. If my employer pays $500 for my health insurance, and that amount isn't counted in my income, that's worth $50 to me. If I'm earning $150,000 and paying 33% of my income in tax, the same $500 in health insurance would be worth $165 to me.

The tax exclusion does make it cheaper for employers to provide health benefits to their workers. Employers have an inherent interest in a healthy workforce - sick people aren't productive. Due to economies of scale, especially with large employers, health insurance is considerably cheaper for large businesses than for individuals or employees of small businesses. Larger employers also find it easier to promote wellness initiatives and use onsite clinics, because they have the size to do so. Many smaller employers (not to mention individual buyers) have found themselves priced out of the market, meaning that their workers don't get any tax advantage when they purchase insurance on the individual market. This is inherently unfair also.

Lastly, having the true cost of health insurance excluded from taxable income makes workers less sensitive to the price of health care. If workers demanded cheaper health insurance en masse, providers and insurers would be more diligent about saving them money.

Sen. John McCain proposed to repeal the tax exclusion outright in his campaign. He would give workers a flat tax credit. This is inherently progressive. However, his other health proposals would have done nothing to reform healthcare or to cover the uninsured. Repealing the exclusion outright would be very disruptive to the system - not to mention that his tax credit was insufficient for many people to buy health insurance.

There are proposals to put a cap on the value of health insurance that can be excluded from income. For example, if we set the tax exclusion at $13,000 for an individual, and I was in a firm that spent $16,000 on my health insurance, my taxable income would rise by $3,000.

The tax exclusion costs the US a lot of money in foregone revenue every year. It is very unlikely that the US will be able to pay for health reform without touching the exclusion. In addition, capping it would make people more sensitive to the price of healthcare - this is not the only factor driving up healthcare costs, as the Republicans seem to think, but it does play some role. Other good tax measures have been proposed, but many of them are not being considered or are drops in the bucket. For example, a value added tax could generate significant revenue; VATs are inherently regressive, as the poor must spend more of their income on necessities, but doing a VAT in the context of health reform with subsidies to the poor to buy insurance would be a net progressive move. Taxing soda is a great idea, if we can get past the ^*&#ing soda lobby, would generate $4-5 billion a year - a lot of money to you and me but not much in the context of the Federal government.

Some have argued that capping the exclusion will harm children. An improperly designed cap might not account for the difference in value between individual, individual plus one and family plans. Employers are likely to reduce children's benefits first, rather than workers'. Those arguments are nothing that cannot be solved by a properly designed cap and a minimum benefit standard applying to all insurance that includes pediatric benefits. In addition, health reform itself will benefit children. Holding up health reform over one tax issue will harm them. This comes from the Economic Policy Institute.

Unions have argued against capping the exclusion as well. There are some indications that union-negotiated plans are expensive (caution, article is from the Wall Street Journal) because they have low deductibles and co-payments. If this is so, I would advise union folks to suck it up. Health care is expensive for everybody. Like I said to the folks at EPI, if you hold up health reform over one tax issue, you will harm everybody.

Thursday, June 11, 2009

CNN Money: energy utilities generally fail to advertise efficiency programs

From CNN Money, most utilities in the US do not make sufficient investment in energy efficiency programs, or fail to advertise.

This gets right back to incentive structure, which is a huge issue in health care. Most utilities make more money by selling more electricity. A few jurisdictions, such as California (US), Ontario (Can) and Victoria (Aus), have decoupling schemes that address this:

U.S. utilities, in particular, may soon get a regulatory kick in the pants when it comes to energy efficiency initiatives. As it stands now, The American Energy and Security Act currently working its way through Congress would require utilities to reduce 10 percent of their electricity demand by 2020. If that act, or other policies, drives utilities to get more serious about energy efficiency, the good news is that they’d have at least a few positive models to follow.

Some regions or jurisdictions — California; Ontario, Canada; Victoria, Australia; and the Netherlands, to name a few — have utilities that are rolling out effective initiatives for customers to reduce energy use, Sumic noted. One reason the utilities are more aggressive with these energy-saving initiatives is because they operate under regulatory environments, often called “decoupling,” in which the revenue they generate is not directly tied to how much power they produce — in essence, driving down their customers’ energy bills won’t affect their bottom lines. As a result, utilities regulated in this way are offering programs like time-of-use billing and demand response.

Some are bullish that decoupling will eventually make it to the federal level, instead of being driven by progressive states. The stimulus package gives a nod to utility decoupling but shies away from more aggressively enforcing it.

Wednesday, June 10, 2009

NYT: Kansas Abortion Clinic Operated by Doctor Who Was Killed Closes Permanently

From the New York Times, the closure of Dr. Tiller's clinic after his murder has led to significant limitations in abortion access in his service area. I imagine Dr. Tiller also provided other reproductive health services and education.

The Kansas abortion clinic run by the doctor who was shot to death in church last month has closed permanently, his family said on Tuesday.

The clinic of Dr. George R. Tiller, in Wichita, had been one of a few in the country to provide abortions to women late in their pregnancies, and for decades, women had traveled there from all over the nation and overseas. The office, Women’s Health Care Services Inc., was also the state’s only remaining clinic, even for abortions performed early in pregnancy, outside the Kansas City area.

“Notice is being given today to all concerned that the Tiller family is ceasing operation of the clinic and any involvement by family members in any other similar clinic,” a statement issued by Dr. Tiller’s lawyers read. The lawyers said the Tiller family would offer no additional comments.

After Dr. Tiller was killed as he served as an usher at his church on May 31, national abortion rights advocates had hoped, they said, that others might step in and keep his clinic open to provide late-term abortions. Many of these advocates expressed empathy on Tuesday for the decision of the Tiller family, which had been the target of criticism, protest and attacks for more than 30 years, but they also said the loss of the clinic might prove devastating to families of those few women who learned late in pregnancy of catastrophic health issues.

“It is unacceptable that anti-abortion intimidation and violence has led to the closing of Dr. Tiller’s clinic,” said Nancy Northup, president of the Center for Reproductive Rights. “Not only have we lost a fearless defender of women’s fundamental health and rights in Dr. Tiller’s murder, but the closing of his clinic leaves an immediate and immense void in the availability of abortion.”

Warren M. Hern, a doctor from Boulder, Colo., who also performs late-term abortions and was a friend of Dr. Tiller, described the outcome as “horrifying.”

“Where does it end?” Dr. Hern said. “The anti-abortion fanatics got exactly what they wanted.”

Dr. LeRoy Carhart, a Nebraska physician who had worked with Dr. Tiller in his clinic at times, issued a statement saying he was “currently exploring every option to be able to continue to make second- and early, medically indicated third-trimester abortions available.” Nebraska law bars such abortions, and Dr. Carhart provided no details about what options he was considering to make them available without Dr. Tiller’s Kansas clinic.

Abortion opponents, who had devoted years to fighting Dr. Tiller’s clinic with criminal investigations, protests and, earlier, blockades of the building, described this outcome as “bittersweet.”

“We are thankful that Tiller’s clinic will not reopen and thankful that Wichita is now abortion free,” Troy Newman, the president of Operation Rescue, which moved to Wichita because of Dr. Tiller’s clinic, said in a written statement. “It is our sincere prayer that threats to open another third-trimester abortion clinic in Kansas will not come to fruition so that the healing process for this state and community can begin.”

Still, Mr. Newman said, “we have worked very hard for this day, but we wish it would have come through the peaceful, legal channels that we were pursuing.”

Mr. Newman and many others in Wichita have said since Dr. Tiller’s death that they firmly believed an investigation by Kansas regulators into possible license violations would have resulted in Dr. Tiller’s losing his clinic in a matter of months. (That investigation, a Kansas spokeswoman said Tuesday, was closed after Dr. Tiller’s death.)

The president of the Kansas Coalition for Life, Mark S. Gietzen, who since 2004 had arranged for daily volunteers to stand outside the clinic and call out to the women going in, said his group might turn its efforts to abortion centers in the Kansas City region now, or perhaps to North Dakota.

“It looks like our prayer was answered,” Mr. Gietzen said of the clinic’s closing.

“We would have liked to have done this a different way though,” he said. “Now we have thousands of people bad-mouthing us, refusing to donate, telling us our Web site incited this.”

Scott P. Roeder, an abortion opponent from Kansas City, Mo., is in a Wichita jail, charged with murder in Dr. Tiller’s death. In Wichita, the anti-abortion groups have said Mr. Roeder was not a member or donor, though some leaders said they had seen him before or received phone calls from him.

In a jailhouse interview on Tuesday, Mr. Roeder told a reporter from CNN that he had received letters of encouragement, and described the closing of the clinic as “a victory for all of the unborn children,” according to CNN.

In the first days after Dr. Tiller’s death, his family said the clinic would close for the moment, but no permanent decision was made public until Tuesday.

In the statement released by lawyers, Dr. Tiller’s family said it wished to assure his previous patients that it would work to keep their medical histories and patient records “as fiercely protected now and in the future as they were during Dr. Tiller’s lifetime.”

The family also said Dr. Tiller’s work would be honored through private charitable work. Abortion rights advocates said they thought the abortion providers nearest to Wichita might now be about three hours away, in Overland Park, Kan.; Kansas City, Kan.; and Tulsa, Okla.

WSJ: US temporarily suspends deporting widows

The Wall Street Journal reports that the US has ceased deporting widows or widowers whose citizen spouses died while they were waiting to get permanent resident status. It's a completely sensible policy that should have been done from the beginning. However, it's also a good sign. It only affects about 200 people, but it's a sign that the administration is serious about reforming immigration policies.

Monday, June 08, 2009

WSJ: US sees a thinner future for coal

A Wall Street Journal indicates that the US Geological Survey has recently concluded that US coal reserves may not be as plentiful as once thought. The total amount of coal resources is unquestioned, but USGS now estimates that under 6% of resources are economically recoverable.

Coal provides nearly half of US energy needs, and US production is 1.15 billion short tons of coal; this makes the US second in the world behind China and ahead of India (2.80 and 0.53 billion tons respectively). Coal production is expected to drop 5-10% this year, probably most of which is due to a lull in demand due to the recession.

USGS estimates that there are 201 billion short tons of coal in Wyoming's Powder River, only 77 billion of which are physically recoverable. Coal from basin currently sells for $8.50 a ton. At $10.50 a ton, only 6% of the coal could be profitably extracted (4.6 billion tons). At $60 a ton, as much as 47% (36.2 billion tons) could be extracted. But at that price, coal would be hard pressed to compete with other fuels - and that's a good thing.

In 2007, USGS estimated that the US had 500 billion tons of coal resources, 267 billion of which were economically recoverable (they assumed mining companies would need to see an 8% return for the example above). 6% of that number is 30 billion tons - enough for under 30 years worth of estimated 2007 coal production. Coal prices will rise, unless the US imports.

Fear and loathing about comparative effectiveness, but what is it really?

Every profession has its own argot that is somewhat impenetrable to laypeople. In health policy, you hear terms like adverse selection, health services, risk adjustment, and now, comparative effectiveness.

Comparative effectiveness is when you compare the effectiveness of medical treatments. Surprisingly little of this is done in many quickly evolving fields.

For example, as Businessweek reports, medical researchers recently found that in patients with stable heart disease, angioplasty works no better than drugs. Angioplasty is putting a stent into an artery to keep it open. In other words, angioplasty should be limited to those with severe heart attacks or severe chest pain (aka angina).

Comparative effectiveness is needed because people and companies profit off procedures that don't improve health.

In addition, Dr. Albert G. Mulley, an associate professor of medicine and health-care policy at Massachusetts General Hospital, sees angioplasty as "the poster child for supply-induced demand." Once hospitals have made big investments in the catheterization laboratories, where the procedures are done, they have every incentive to use them as much as possible. Plus, patients also have bought into the argument that clogged arteries should be propped open. "There is a huge demand from patients for quick dramatic fixes," says Mulley.

It's not that we're going towards socialism, as some charge, but we do want some mechanism to help people make money off the stuff that improves health, rather than the stuff that doesn't do better than cheaper alternatives.