Is Max Baucus Ready to Cave On a Public-Sector Insurance Option? Tauzin Defends Baucus on Campaign Contributions Part 2

This week, Ted Kennedy is back on Capitol Hill, and health care reformers are moved and relieved to see him, stalwartly carrying on, despite his illness.  Ever since he collapsed at President Obama’s inaugural luncheon, Kennedy has not been able to spearhead the fight on healthcare reform in Congress as he might have wished, buttonholing colleagues in the halls of Congress on a daily basis.  Instead Senate Finance Chairman Max Baucus has become the Democrat’s point-man on reform. And some liberal reformers fear that Baucus may be too quick to compromise with Republicans.

Earlier this week, The Hill explained why liberals have more faith in Ted Kennedy: “. . . they say he will fight to ensure the health care reform package is one they can support comfortably.  . . ‘Sen. Kennedy is our hero on this,’” Senator Ben Cardin (D. Maryland)  told The Hill. “’He will give the passion that’s needed . . .. If we’re able to get this done, it has to be a bill worthy of support and that’s where Sen. Kennedy comes in.’” (Thanks to reader Brad F. for calling my attention to this story.)

Will Baucus Betray Reform?

Meanwhile, progressives fear that Baucus might bend too far as he stoops  to make a deal with conservatives.  “He’s been doing that for years,” a senior Senate Democrat  told The Hill, noting that Baucus cut a pivotal deal with Republicans that allowed former President Bush’s 2001 tax cuts to pass Congress.

Critics also point to the fact that Baucus brokered a deal with Republicans to pass landmark prescription drug legislation, an accomplishment that some political analysts say helped Bush win reelection in 2004. (Kennedy originally supported the legislation,” The Hill explained, “ but became a vocal opponent after Senate Republicans changed it during negotiations with the House.)”

Baucus and Kennedy also disagree on whether the Senate budget should include a provision for “reconciliation” that would protect health care reform from a Republican filibuster, allowing Democrats to pass it with only 51 votes.

Baucus has told reporters “Reconciliation would hurt health care reform; it would make it partisan, it would hurt, it would stymie, it would make it very partisan.”

By contrast, on Tuesday, Kennedy spokesman Anthony Coley told The Hill: "Our first preference is to continue to working with our Republican colleagues on this effort and if bipartisan talks don't produce desired results, then reconciliation would be an important measure to have."

The American Prospect’s Ezra Klein offers the most insightful analysis I’ve seen on the reconciliation issue:

 “The reconciliation argument has a Mobius strip quality: Democrats promise reconciliation won't be used unless the cooperative spirit and constructive process collapses. Republicans swear that if reconciliation is used, the cooperative spirit and constructive process will collapse. That's undoubtedly correct. . . ..”

But “If Republicans don't want Democrats to use the reconciliation process, then there's a very simple answer:  Cooperate to write and pass a health reform bill. If that cooperation never breaks down, then reconciliation will never be used. But if that cooperation breaks to the point that Democrats can't find three Republican votes to overcome the filibuster, then saying reconciliation will break it further isn't a particularly compelling threat. “

At the end of the day, Klein suggests, Republicans are trying to tell Democrats how to handle a situation where Republicans refuse to co-operate.  “In that event, Republicans would like Democrats to admit total failure while Democrats would like to pass a bill.”  In other words, if you agree with Baucus, you are saying that a show of bipartisanship is more important than trying to fix our health care system.
Finally, as I reported in part 1 of this post, last week Senator Baucus gave a speech that suggested he might be willing to cave on the idea of giving Americans a choice between private insurance and a  public-sector insurance plan (Medicare E, or Medicare for Everyone)  that would compete with the for-profit insurers’ offerings.  As I noted in that post,  Baucus recently indicated that he viewed Medicare E as merely a “bargaining chip.”

Baucus and the Lobbyists

Then, there is the fact that Senator Baucus is so well-liked by both drug-makers and private insurers.  A recent report by ConsumerWatchdog.org reveals that, during the last two election cycles, the Senator received more campaign contributions from the pharmaceutical and health insurance industries than any other Democrat currently in the House or Senate. All told, Baucus received some  $183,750 from insurers and $229,020 from drug companies.

The report notes that “At the recent White House health care summit, Senator Baucus said that the insurance companies and drug companies had told him they would help drive a solution.”

"When the engineer of the health care reform train is getting more fuel from the HMOs and drug companies that any other Democrat on Capitol Hill, you have to wonder who is really driving the train and whether average Americans will be tied to the tracks," commented Carmen Balber, Director of Consumer Watchdog's Washington D.C. office.

It may be unfair to make too much of Baucus’ favorite son status within the industry..  After all lobbyists knew that he would be a key figure in the health care reform debate. Still, as the Consumer Watchdog lists below show, Baucus is one of relatively few Democrats who attracts such largess from industry.  Drug-makers and insurers don’t bother wasting huge sums on committed reformers like Kennedy.

       Top 10 Senate Recipients of          Top 10 House Recipients of
        Health Insurer Money                       Health Insurer Money

  Senator                          Amount                 Representative                Amount
  McCain, John (R-AZ)        $251,834         Cantor, Eric (R-VA)          $113,850
  McConnell, Mitch (R-KY)  $200,200        Camp, Dave (R-MI)            $112,923
  Baucus, Max (D-MT)        $183,750        Pomeroy, Earl (D-ND)         $104,500
  Lieberman, Joe (I-CT)     $101,400        Boehner, John (R-OH)         $101,200
  Chambliss, Saxby (R-GA)    $98,600       Deal, Nathan (R-GA)          $100,000
  Collins, Susan (R-ME)      $96,500          Towns, Edolphus (D-NY)        $87,750
  Kyl, Jon (R-AZ)                $90,450              Rogers, Mike (R-AL)           $74,000
  Warner, Mark (D-VA)        $89,700          Blunt, Roy (R-MO)             $72,800
  Hatch, Orrin (R-UT)        $85,903            Ryan, Paul (R-WI)             $69,000
  Nelson, Ben (D-NE)         $83,300           Tanner, John (D-TN)           $68,500


       Top 10 Senate Recipients of          Top 10 House Recipients of
       Drug Co. Money                                  Drug Co. Money

  Senator                             Amount             Representative                Amount
  McCain, John (R-AZ)       $294,603       Barton, Joe (R-TX)           $187,100
  Baucus, Max (D-MT)        $229,020      Dingell, John (D-MI)         $180,300
  McConnell, Mitch (R-KY)   $225,200     Boehner, John (R-OH)         $156,125
  Lieberman, Joe (I-CT)     $196,540      Frelinghuysen, Rodney (D-NJ) $152,850
  Hatch, Orrin (R-UT)       $186,900        Clyburn, James (D-SC)        $145,514
  Spectre, Arlen (R-PA)     $179,650       Buyer, Steve (R-IN)          $141,350
  Mendez, Robert (D-NJ)     $147,243     Cantor, Eric (R-VA)          $135,600
  Enzi, Mike (R-WY)         $134,500        Rogers, Mike (R-AL)          $133,946
  Kyl, Jon (R-AZ)           $118,350          Blunt, Roy (R-MO)            $133,500
  Cornyn, John (R-TX)       $115,900       Gerlach, Jim (R-PA)          $131,660

 
When The Washington Post picked up on the story about campaign contributions Baucus aides defended him, arguing that “the Montana senator has championed many policies opposed by health insurers and drug companies, including cuts in payments to Medicare Advantage plans and support for importing lower-cost drugs from Canada.

"’For 30 years, Max Baucus has only been influenced by one thing: what's right for Montana and what is right for the nation,’" Baucus spokesman Ty Matsdorf  told the Post. "’Health-care reform is the same. His only goal is to make sure that every American has access to quality, affordable health care.’"
W.J. "Billy" Tauzin, the former Republican House member who now runs the drug-makers’ lobby ( the Pharmaceutical Research and Manufacturers of America , or PhRMA), chimed in, arguing that “campaign contributions from his industry simply reflect participation in American democracy.”

"’We do what most people do in political systems: We support people with whom we agree and with whom we believe in," Tauzin told the Post, adding, "We also support other people who don't always agree with us but are honest and fair and open-minded."

It’s worth noting that Tauzin became the head of the PhRMA lobby after he helped steer President Bush’s Medicare Modernization Bill through Congress—the bill that prohibits Medicare from negotiating for discounts on drugs.

It is not clear if the Post chose Tauzin as an expert on campaign contributions to support Baucus or to bury him.

Comments

[Market Research Report]

I like the article.

[Maggie Mahar]

Belinda, Geoff T and
iblogWestHartford--

Belinda -- thanks for the kind words.

Geoff T.-- as I said in the post, the numbers come from consumerwatchdog.org.
If you click on them (see report in blue) it will take you to a spreadsheet.

I'm not familiar with opensecrets. But what I would say is that the fact that the Washington Post used consumer watchdog's numbers suggets that they
are considered reliable. (I don't agree wtih WaPo on
many issues, but if they published number on canpaign contributions that weren't true, there would be too many people in Washington who would know better and call them on it . .. .

iblog West Hartford-- thanks for calling our attention to this program.
I'll go to the website to learn more.

[iBlogWestHartford]

But the news isn’t all bad (or, worse, confusing). We need not search far for a model "public plan" proposal built around expansion of an employee insurance pool – the “latest” proposition that seems quite promising.

In Connecticut, HB6600, or "SustiNet," just got a favorable report from the state legislature's Public Health Committee and is gaining momentum. SustiNet ensures that the state wisely uses the dollars it is already spending on state employees, HUSKY (for low-income children) and SAGA by uniting them into a large self-insured health plan. It uses this critical mass of insured residents to improve how health care is delivered in our state and to phase in the enrollment of more residents of Connecticut, including: the uninsured; people with unaffordable or inadequate insurance; sole proprietors and other self-employed people; small businesses, municipalities, and non-profit employers; and businesses of any size.

SustiNet was developed with extensive input from all health care stakeholders and with the expertise of Stan Dorn of the Urban Institute and Jonathan Gruber of MIT. They estimate that, when fully operational, SustiNet could save Connecticut employers and employees some $1.7 billion/year (over the status-quo expenditures). It has the support of, among others: the Connecticut Realtor’s Association; the Connecticut State Medical Society; the Connecticut Public Health Association; and Small Businesses for Health Care Reform.

For more information about the bill, you can go to: http://www.healthcare4every1.org/site/PageServer?pagename=learn_thesolution

[geoff t]

where are you getting the figures on Baucus' campaign figures. Opensecrets.org shows much higher figures in the 2008 cycle:
insurance 590k healthprofessionals 537k phama/healthproducts 524k hospitals/nursing homes 330k - thats NOT COUNTING 360k from healthservices/hms!
That's over 2 million bucks in the last cycle--SURE Baucus is not corrupted by this much dough.......ps Baucus got so much money he couldn't even spend it all( total collection 11 mil, actual spending 9 mil, 2 mil remains in the bank thanks.
Geoff Thomas

[Belinda]

Hello,

My Name is Belinda. I think your web site gives great news on current healthcare market. As i am also into healthcare research. Its a good site with lots of information. Keep the good work on.

I will definitely bookmark your web site for my research work. You may also kindly visit my web site blog related to healthcare industry that is http://newsonheath.blogspot.com and i would appreciate if you could kindly have a look at my blog too. Its updated on a daily basis

Thanks & Regards,
Belinda

[Pat S]

Barry --

The federal law authorizing the creation of Advantage pre-empts state insurance regulations, allowing for profit insurance vendors to do business in states that usually allow only companies that are at least technically non-profits. In Minnesota this has led to two new developments: 1.) Many insurers and HMO's that were already present in the state as non-profits started up for-profit divisions to sell Advantage coverage. 2.) Many insurance companies previously not in the state due to the laws entered the state and market Advantage plans. One of the most noticeable was insurance, claims processing, and health services giant United Health Group, which is of course headquartered in Minnesota but previously could not sell insurance in the state. Many smaller out of state companies also entered the market and advertised heavily and worked with insurance sales businesses. It is the smaller companies that have been associated with some of the more questionable policies, including the ones I cited.

[Barry Carol]

Pat,

When I mentioned that I thought that HMO’s might be able to manage younger patients better than traditional FFS Medicare, I was referring to the ability to do disease management, wellness, care coordination, etc. for less complex patients with fewer co-morbidities. I wasn’t referring to medical underwriting allowing healthy people to buy insurance for less as long as they remain healthy.

Presumably, while a younger population, defined as under 65 in this context, will have its share of heart disease, hypertension, diabetes and cancer, there will, presumably, be a lot less dementia and Alzheimer’s and complex and often emotional end of life care issues. Even including sometimes ultra expensive care for very premature babies, according to a recent Milman study, per member healthcare spending paid by insurers for the under 65 population is in the $4K range vs. into the five figures for both Medicare and Aged, Blind and Disabled (ABD) segment of Medicaid beneficiaries. I know that recent disease management demonstration projects for Medicare patients did not go especially well, but I suspect that the concept may be considerably easier to apply to younger, less complex patients.

I continue to support community rating coupled with guaranteed issue and a mandate to acquire insurance with help from subsidies for lower income people. BTW, I thought only non-profit insurers can sell health insurance in Minnesota. Did I understand you to say that these rules don’t apply to Medicare Advantage policies? If so, it seems strange to allow for profit insurers to sell insurance to often unsophisticated seniors while they can’t sell to presumably sophisticated employers who can buy help from brokers and consultants. Go figure.

[Pat S]

Barry --

You are right when you say that Advantage has a big following among low income seniors who enroll in large numbers in Advantage programs that use the extra money from the govenment to provide discounts in premiums. The low income folks tend to like the programs a lot until they actually have to use them. For example, the biggest (70% plus market penetration) provider in my community just dropped 4 Advantage companies from their list of insurers they accept because the companies were trying to insist on discounts to below the payment by Part A and B. There was another company in town that advertised that they covered rehab costs -- it turned out they did, for up to three days of inpatient or three appointments of outpatient. That compares to up to 59 days of inpatient rehab under Part B. There may be some insurers out there playing it straight, but in my state the fact that Advantage providers are exempted from state insurance regulations has led to an invasion by bad news players.

I think you are also right when you say that for younger, healthier people private insurance with underwriting and resulting lower cost policies can be attractive. The problems with that are two fold: first is that over the lifetime of the enrollee the private plans gradually become more and more expensive as health risk increases, even if they don't end up being dropped if costs go too high. The second is that this undermines one of the basic tenets of insurance -- one you have been fond of citing -- that low risk people carry the weight of higher utilizers in exchange for possible or eventual higher utilization patterns for themselves in the future. Underwriting destroyed the original BC/BS models of community rating clear back in the late 50's, when the working population contained a lot of young people. As I noted, early HMO models were also successful because they could cover the costs of a small number of high utilizers through payments from people who rarely if ever even came in. One HMO I am familier with had a model back in the 70's and early 80's where they actually had primary care doctors who specialized in high utilizers. The costs from the high demand patients were under better control when some doctors who were very good at patient relations were given extra time to deal with patients who had significant problems or were just high anxiety people. Unfortunately, as the baby boomers they were caring for got older that program broke down as more and more patients fell into higher use patterns, and they ended up stopping the system and forcing the doctors back into the "meter is running" type of resource management of doctors that was popular in HMO's in the later 80's and 90's, causing a lot of their better doctors who liked the old pattern to depart for private practice or multispecialty groups where doctors could do more of setting their own patterns, provided they were willing to give up income to do so.

Anyhow, private insurance does have advantages for some clients, but right now has fallen off the tracks in terms of their responsibility to the whole society. A good universal care program with community rating, guaranteed issue, and a strongly competitive federal option coverage could go a long way to making the system work. If private insurance can function under those circumstances, they will have a definite continued role in US health care.

[Barry Carol]

Pat,

That’s a very interesting point about the Medicare population being very different from the population that HMO’s were originally designed to serve. It makes me wonder, though, that if HMO’s couldn’t serve Medicare beneficiaries more cost-effectively than standard Medicare because the model wasn’t designed for high utilizing patients with multiple co-morbidities, it may also suggest that regular FFS Medicare can’t serve the younger population that the HMO’s WERE designed for as cost-effectively as private insurers can, whether they are non-profit or for profit.

I also have never seen any data regarding either Medicare + Choice or present day Medicare Advantage with respect to the impact those plans had on reducing beneficiaries’ out-of-pocket costs vs. what they would have been under FFS Medicare. With Medicare Advantage especially popular among lower income seniors and many of them unable to afford Medi-Gap policies, they may be getting care that they could not otherwise afford to access under standard Medicare. That said, even I don’t think MA should be paid more than 100% of standard Medicare. The private insurers should have to earn their keep through better utilization management, weeding out high utilizing, cost-ineffective providers, pushing more widespread use of living wills and advance directives and the like. The cost shifting issue with respect to hospital payments and, to some extent, payments to very large multi-specialty physician group practices to offset what they see as underpayment by Medicare (and Medicaid) is probably the biggest impediment to providing care for less than standard Medicare. As I’ve said before, though, that raises the separate issue of what care would be like if all hospitals and doctors had to accept Medicare rates from all patients even after getting paid more than now for Medicaid patients and eliminating uncompensated care.

[Pat S]

Yes, Clinton took the private sector seriously when they said that they could provide health care more cheaply and efficiently than Medicare and funded them at slightly under the cost of A and B. The end result was a lot of patients being abandoned by their insurance companies when the companies couldn't provide care for what they thought they could.

HMO programs in general have had problems with Medicare over the years, because the HMO model, initially designed for the walking well employees of large organizations, in Medicare drew high utilizers. In my state one HMO actually went completely out of business, abandoning something like 7,000 patients with no coverage.

However, at least Group Health of Puget sound was been able to chug along on the program and stay in the black. My mother enrolled in the Plus program back in the mid-90's and they stayed in business until the program was changed to Advantage, when they switched her over.

Kaiser went through a chaotic period in the 90's when they lost their footing with more than just the Plus program. Learning the lessons from that period plus changeover of upper management has helped them get back on track.

[Maggie Mahar]

Barry-
Sorry, I forgot to respond to this point:
I think you are right that in the 1990s, "Medicare Plus", the program that provided Medicare through private insurers was paid only 95% of what Medicare would spend to care for the same seniors.

This is because,a the time, many people were convineced that the private sector could provide the same services-for less.

But it turned out that Medicare Plus couldn't do it--weren't even close to doing it. If their losses were just 5 percent, they might have persevered and tired to figure out how to bridge the gap.

But their losses on this program were larger, so they abruptly cutfits and then canceled picies. (As I know you realize, the lack of warning caused major problems for many seniors.)

[Maggie Mahar]

Healthcare Advocate, Barry

Thank you for your comments.

Healthcare Advocate--
I agree that we cannot roll out universal coverage without addressing costs. The failure to do that was the fatal flaw in the Mass. plan.

As Thorpe describes it,
Vermont sounds better.

Btw, rumor has it that Thorpe is in the running to become the new head of
Medicare (CMS).

Barry--
You are right: few have been getting rich on drug stocks in the past 5 years. (Few have gotten rich on most stocks if you look at average returns over the last 3 years or so.)

My point was that through much of the last 20 years drug stocks have been paying huge returns.

Now, the party is over.
They made enormous gains, now their investors must take losses (unless they got out when they saw the handwriting on the wall).

Investors who enjoyed a Gilded Age of excessive profits must accept the fact that the good times are over.

More importantly, companies that produce necessities-- heat, light, medicine, etc.-- should be tightly regulated so that they do not gouge their customers.

Insofar as these companies are producing necessities and are for-profit, I believe that they should be like old-fahioned utilites (I think of the old Bell Atlantic, before it tried to become a "growth" company).

The companies that produce necessities should pay a steady dividend, (3% to 4% or so in today's marekt) without aiming for high profit growth and high capital gains.

As a society, we just cannot afford to pay the high prices for heat, light and neeeded medications that are required to fuel high profits.

[Teo Fernandez]

Please be factual. Lipitor is made by Pfiser. Merck makes Zocor which is now simvastain(generic name) Which I have used daily for the last ten years without any problems! Also, there are pt that react differently. I know of one whose blood preasure can only be properly control by avalide and the doctor has to call medicare for approval for every refil!

[healthcare advocate]

http://www.huffingtonpost.com/kenneth-thorpe/massachusetts-is-not-the_b_182265.html
Massachusetts is Not the Only Health Reform Model
By Kenneth Thorpe
Posted April 2, 2009
As discussion continues on the President's budget and whether the nation can afford to take on health care reform, a number of experts -- and two of the nation's leading newspapers -- have suggested that we look to Massachusetts as the nation's test case. These critics point to the cost growth which has occurred under Massachusetts' new universal health care system as a demonstration for why the nation should proceed cautiously with its own reforms.
But if we are looking for lessons, there are other "real world" examples that we can consider. A state just across Massachusetts' Northern border took a different road to reform -- and one that is actually much closer to the route proposed by President Obama and Senate leaders such as Max Baucus.
In May 2006, a month after Massachusetts passed its own health care legislation, Vermont also enacted a sweeping set of health reforms. Whereas Massachusetts chose to make universal coverage its initial goal, Vermont's primary focus was to make health care more affordable and at the same time expand coverage.
While it is still too early to pass judgment on either state, there are three core elements that have Vermont showing early signs of promise, and which could be replicated at a national level:
Health care legislation must be bipartisan and have something "in it" for everyone. Vermont's health reform program was solidly bipartisan -- enacted by a Republican governor and a Democratic legislature. Key to the reform's political success was the recognition by both sides that the debate would need to be refocused on broader systemic ills, like cost and quality, rather than solely on the contentious and politically-charged issues, like coverage and payment. At the time reform was being debated, the vast majority of Vermonters -- and almost all voters in the state -- had health insurance, so policymakers had to communicate what these people would get out of reform, other than a higher tax bill, and the answer was lower health care costs.

Health care legislation must be comprehensive. Vermont passed comprehensive legislation to modernize chronic care delivery models, create a statewide health IT platform, implement effective efforts to prevent disease and build a new insurance program for the uninsured (Catamount Health). By 2010, an estimated 96 percent of Vermont residents will have health insurance coverage.
Health care legislation must address cost, which means getting a handle on the root cause of spending. For years now, many of the health reform proposals that have been introduced in this country have failed to control the root of increases in spending. More than anything, that root cause is that Americans are in poor health -- and many of their chronic health problems are preventable. Recognition of these "unhealthy truths" helped to shape the types of policy solutions proposed in Vermont during the 2006 debate. Controlling chronic conditions through prevention and disease management featured prominently in Vermont's plan to make health care more affordable.
Less than three years have passed since both these states passed their health care reform plans, which is not enough time to pronounce either effort as a success or failure. In addition, Massachusetts has created a state commission to figure out how to control costs, which may yet yield improvements.
What we can pull from both efforts is that in addition to moving to universal coverage, passing fundamental reform nationally will require legislation designed to reduce the growth in spending, provide high-quality, efficient medical and preventive care for all Americans, and roll out community level resources and support that make it easier for Americans to lead healthy, active lives.
And for the critics, this means acknowledging what was done right as well as pointing out what was done wrong.
Ken Thorpe, Ph.D., is Executive Director of the Partnership to Fight Chronic Disease, and Chair of the Department of Health Policy and Management at the Rollins School of Public Health at Emory University. Dr. Thorpe served as Deputy Assistant Secretary of Policy at HHS under the Clinton Administration in the early 1990s.

[Christopher George]

I was trying to make the point, ineffectively it appears, is that diversity of practice resolved by open debate trumps the approach where the New Men (and New Women, though Stalin didn't include them in his original phrase ) make decisions for everyone. The marketplace of ideas beats censorship. Distributed decision making yields better results then centralized ones. It does seem irrational to some.

The example I come back to is George Crile, Jr. He performed lumpectomies on both of his wives to the general snickering of the surgical community at the time. Time has proven that the less disfiguring surgery was every bit as effective as radical mastectomy. The Cleveland Clinic was right and the smug eastern academic establishment was wrong(again). Care to guess which curiously influential hospital was among the LAST in the country to recognize this advance?

Another example: Steve Parker pioneered needle biopsy for suspicious breast lesions over disfiguring surgical open biopsy from his private practice in Denver. It is now the standard of care around the world. Guess who his most voracious critics were?

[Barry Carol]

In the late 1990’s, I think the Medicare + Choice plans were only reimbursed at 95% of standard Medicare’s per capita spending which made it hard to be successful. I’m also not sure if they had the risk adjustment mechanism that they have now.

Regarding Medicare negotiating directly for drugs, I haven’t heard much about the secondary issue of also having to negotiate with pharmacy chains. There are approximately 60,000 pharmacy counters in the U.S. of which more than 13,000 are owned by two companies – CVS and Walgreen. With generic dispensing rates already approaching 70% for non-specialty drugs, a meaningful part of the cost of a generic drug is the pharmacy dispensing fee. While generics account for less than 20% of the dollars spent on drugs, they are a material source of profits for both drug chains and PBM’s. The large pharmacy players have been known to walk away from Medicaid business when a particular state pushed too hard on reimbursement. It will be interesting to see how this plays out. It would be quite easy for private players to offer a narrow formulary product along the lines of the VA at a very competitive price, especially since most of the drugs on that formulary will be generics which are already cheaper in the U.S. than anywhere else. The question will be how popular it proves to be among consumers as compared to a more expensive offering with a much more inclusive formulary.

The biggest cost issue regarding drugs, in my opinion, relates to the ultra expensive specialty biologics, especially those that treat cancer. If there is a segment of medicine that cries out for QALY metrics, it’s here. This is also a key area of R&D focus for many of the large drug companies today.

Finally, as for drug industry profiteering, it hasn’t been a pretty picture for investors in drug stocks with a couple of exceptions. Five year performance (excluding dividends) through yesterday for a group of the largest companies is as follows: Amgen, -20.5%; Glaxo SmithKline, -20.3%; Lilly, -50.7%; Merck, -40.1%; Novartis, -9.8% and Pfizer, -61.8%. There were two winners – Genentech, +71.6% and Wyeth, +10.5%. The S&P 500 for the same period was -26.9%. It doesn’t look like many investors have been getting rich in drug stocks to me.

[Maggie Mahar]

Christopher, Barry & Pat

Barry--Thanks-- of course, I meant Vioxx, not Lipitor. (I associate them simply because there are so many questions about overuse of Lipitor)

Christopher-- If Mayo is
simply practicing "evidnence based medicine as they interpret the evidence," it's curious isn't it, that
Mayo, Kaiser and the VA
all independently interpreted the evidence the same way (each using their own database of how the drug effected their patients) --and turned out ot be right?
Of course evidence requires interpretation, and of course the interpreation can be flawed-but evidence-based medicine is still the best medicine we have.

Pat--
As I'm sure you know Medicare-Plus pretty much folded as insurers pulled out because they weren't making enough money-- including Kaiser..
For example this story from September, 2003:

: "WASHINGTON, D.C. – Congresswoman Lois Capps today strongly denounced the decision of two major Medicare Plus Choice private insurers to drop coverage for seniors in areas of Ventura County.

"The Center for Medicare Services (CMS) announced today that Blue Cross of California is dropping 2,937 seniors and KAISER Foundation is dropping 3,500 seniors from coverage. Those seniors affected by these plans will be notified by October 1.
"Congress created the Medicare Plus Choice plan in 1997 to contract with private insurance companies in order to provide the option of additional coverage through private managed care plans. Since then, criticism of the program has grown as plans across the country have raised rates, cut benefits, then dropped out of the program altogether."

When they started Medicare Plus the idea was that because the private sector is always more efficient than the government, Medicare Plus insureres could provide better coverage for the same amount of money.

It turned out not to be true. (So then Bush had the bright idea: let's give them a windfall bonus!)

Now perhaps if Kaiser and Pugot Sound were operating in a market where for-profit insurers were tightly regulated, they would have been able to
succeed with Medicare Plus.

For-profit insurers have created a very difficult situation for Kaiser in California by competing ufairly-- siphoning off the healthiest customers by selling deeply discounted policies to young people that are filled with holes (cover pregnancy for instance, but
not compolications during pregnancy or during childbirth).
This eventually forced Kaiser to sell its own cheap plans--including a high deductible plan. When I asked Kaiser's CEO if he though high deductible plans were a good idea he said "As social policy, definitely not. We held out as long as we could. But if we wanted to survive in this market . ."

I definitely think that non-profits like Kaisers and
Pugot Sound should be able to survive health care reform and compete with Meedicare E. I think it would be good for Medicare E to have to compete with them. (Another reason I don't support single-payer).

I'm not so sure that Kaiser or Puget will be able to offer Medicare Advantage in the current unregulated marketplace if they lose their windfall bonus . . .

But your mother is very lucky to be in Group Cooperative- I've interviewed the people there. Extremely enlightened.

But of course, it's the Northwest--a.k.a. "Canada
South."

[Pat S]

Maggie --

After reading the government report about Medicare Advantage that indicated that although most providers are doing a poor job, some provider systems -- Kaiser and Group Health Puget Sound were specifically cited -- can actually run Advantage programs for a little less than Part A and B cost, while providing better care. Based on that information, I would hope that Advantage continues to function for provider systems that can do the job of providing better, less expensive care.

The simple way to do this would be to return to the way the program was run under Clinton when it was originally started -- when it was called Medicare Plus.

At that time payments to Plus providers (Advantage now) were reimbursed only up to the cost of Medicare A and B, rather than the wasted payments they get now.

So just lower Medicare Advantage payments to the level of A and B costs (and provide rules to stop preditors from taking advantage of seniors who are confused by plans that providing poor programs with weak benefits.) That will solve the cost issue and weed out the poor players, leaving only systems that can actually provide a true "Advantage."

A potential conflict of interest: my mom is a Medicare Advantage subscriber, using Group Health of Seattle. She is very happy with the program, and as a retired hospital nurse with four children who are doctors she is a tough audience when it comes to health care.

[Barry Carol]

Maggie,

The Merck drug that was pulled from the market was Vioxx, not Lipitor which is manufactured by Pfizer.

With respect to the comprehensiveness of the VA drug formulary vs. the most popular Part D and FEHB plans, see http://www.lewin.com/content/publications/VAFormularyComparison.pdf.

[Christopher George]

The Mayo Clinic, along with many doctors not associated with the Mayo Clinic practice evidence based medicine, as they interpret the evidence, not as an overarching board of non-practicing doctors and non-doctor academic see the evidence.

It is not the same thing.

[Maggie Mahar]

Pat S., Jim, Barry, Pat S. (your most recent commet) Martha

Thanks for your comments.

Pat S.-- Yes D spells disaster.
And Americans are overwhelming against the
part of the law that prohibits Medicare from negotiating for discounts.
This is what makes Part D
needlessly expensive.

Jim-- a poll that includes only those who signed up is, indeed, skewed to favor of Part D.
And as Pat points out AARP
has a financial stake in
Part D, which calls its poll into question, especially when other polls paint a very different pictue.

Barry--
As Pat S. points out,Part D
was less expensive than expected because fewer people enrolled.

And I don't know what makes you say that the list of drugs that the VA make available is "limited"--have you looked at it?
Have you compared it to the Mayo Clnic's formulary?

Yes, Mayo has a formulary.
Like the VA, it practices
evidence-based medicine,
and to protect its patients, does not include drugs that are no more effective than older drugs that have been fully tested.

This is why both Mayo and the VA (and Kaiser) took
Lipitor off their lists more than a year before Merck was forced to take it off the market becausae the DRUG WAS KILLING PEOPLE (heart attacks and strokes.) Merck, of course, had been concealing that information.

So we want Medicare to have a formulary. We want Medicare to look at the data we already have, and to ask manufactuers for more and better data before
agreeing to pay for a drug or device. And we want Medicare negotiating for
discounts.

As Pat S. points out, there are many ways to put teeth into the negotations.

Finally, Part D should be folded into Medicare-- Medicare and Medicare Part E should offer drug cocverage directly. (Private insurers could also offer it--if they think they can compete with Medicare and Medicare E--which they probably can't.)
Drugs would be much less expensive if Medicare negotiated discounts (the way the VA does) and offered D rather than forcing seniors to pay for
insurers' advertsiing, lobbying, excessive executive salaries, an profits for shareholders when buying drugs.
Finally, you cannot mandate that all seniors must buy part D from a private insurer. You cannot
pass a law that forces all
Americans to support a particular industry's investors.
On the notion tat other countires are getting a free ride on "our R&D"-- the amount of original reserach that
U.S. drug comapnies have done in recent years is minimal. (To a large degree, for-profit drug companies have been gettng a free ride on government drug reserach supported by taxpayers.)
And, over most of the past 20 years, drug-makers have been racking up double-digit profits while charging exorbitant prices.
The money they have been making by overcharging for their products has not been going into reserach; it has been going into bribes to doctors in the form of dinners, vacations at expensive resorts, "consulting fees"
etc. as well as advertising, bribing our Congressmen, sky-high
salaries for all executives, and excessive (double-digit) profits for shareholders.
I call those
profits "excessive" because the 50% of all Americans who don't have enough discretionary income
to invest in stocks should not be forced to pay through the nose for necessary medication in order to provide double-digit capital cains for drug company invetors.
In other markets, consumers have a choice-- they can say, no I'm not willing to pay that much for a thin-screen TV--I'll do witout it until prices come down.
In the healthcare market, consumers usually don't have that option.They need the medication. And this is why
government must protect them--by setting and regulating prices.
By charging $100,000--and more--for cancer drugs that provide a six exgtra months of life, our drug-makers have shown a complete lack of responsibility and contempt for their customers. They charge whatever the market will
bear and they have found that it is pretty easy to bully someone who is dying. . .
Yes, I know they give some drugs away at low cost or no cost to patients who can't pay.
But we also know that they
sell many more $100,000 drugs than they give away (or they wouldn't make them) and that they have the upper hand with the patient.

Pat S--
Yes, I like the idea of sweeping D into Medicare
parts A, B and E.
I doubt Medicare Advantage is going to be around for a lot longer-- as the windfall bonus disappears, I expect many/most insurers will drop out of the program, just as they did the last time we tried to privatize Medicare and insurers decided they weren't making enough money.

Martha--I agree that Chris
Dodd should have told the truth about what he did-- I was very disappointed.

But in other cases I have seen him stand up to the corproations-- particularly on the question of stock options for executives.

As for Ted Kennedy "marginalizing" people--can you name another old-fashioned passionate and charismatic liberal willing to stand up to the conservatives and the lobbyists?

How many Democrats even had the spine to vote against the war in Iraq (when anyone old enought ro remember Vietnam can see it was goind to be a replay of that disaster)??

Outside of the black caucus, there really aren't many passionate liberals left in Congress.
(Though of course there are many legilslators who I don't know and who don't get much publicity. For example, there is Rosa DeLauro in the House--an old-fashioned liberal, but
she wouldn't have the power to lead the fight on the hill.

[jim jaffe]

Barry's point about adverse selection is well taken. that is why part D, like part B, is structured so that folks who get in late pay a penalty, which can be substantial, in higher premiums. in other words, if you stay out until you get sick, you have to pay a much higher cost to get in. all elements of Medicare are imperfect, certainly, but it is wrong to say they don't protect against adverse selection because they do.

[Pat S]

Barry --

I agree with your comment that no insurance company can sustain programs where people can opt out when their costs are low and opt in when costs are high without a financial cost.

That is one of the main reasons that Part D needs to be restructured to be more sensible. It needs to be structured so that people with lower costs are motivated to join and so that the donut hole is abolished.

The most sensible way to do that is to sweep Part D into Parts A, B, and Advantage, and any new part E. By ending the notion that drugs are something seperate from health care, clearly not correct, and incorporating drug coverage in regular plans, including private plans -- many of which do so already -- we will stop people from trying to game the system.

[Martha]

Barry: I have read different numbers as to who ends up in the donut hole. I wrote an article laste last year on Medicare D and remember a number closer to 22%. I also remember that most of those people don't get to the other side. I'll hae to look up where I found those numbers--it might have been Kaiser.

Maggie: as far as finding another leader in the Senate, I feel that Ted Kennedy may have marginalized other people who would have been willing to carry some of the burden and now we may all pay the price. I also don't want to rag on Chris Dodd--you seem to like him, but he has really damaged himself recently with the Countrywide connections and not being more forthcoming about his role in the AIG debacle. I think that he was treated unfairly for what he put in that legislation but he hurt himself by first trying to deny that he did it rather than acknowledging it right away and then explaining it.

[Barry Carol]

Dr. Pat,

I have no problem with the government negotiating prices. My problem is with dictating prices as CMS does with Medicare Parts A and B. This results in cost shifting to the private sector and overpaying for some services, tests and procedures while underpaying for many others. As you pointed out in an earlier thread, generic drugs are cheaper here than anywhere in the world which suggests competition can work as intended. If one of the consequences of drug price negotiation were that prices in other countries increased somewhat, that would also be fine by me. We both know that the marginal cost of manufacturing most pills is pennies at most. Other countries take advantage of that and, in effect, free ride on U.S. R&D.

I have encountered seniors who mistakenly think that brand name drugs are superior to chemically identical generics and want their doctor to prescribe the brand even though it’s much more expensive as long as it doesn’t cost them anymore out of pocket. They either should not be allowed to do this or have to pay much more for the privilege.

Finally, people who don’t enroll in Part D because their drug costs are currently very low or even zero, should have to pay significantly more for the insurance if they want it later. No insurance can be financially sustainable if significant adverse selection is allowed. If we want mandatory participation for the under 65 population so the healthy can help to pay for the sick, it should be required for seniors too.