How to Rein in Medicare Spending Without Hurting Seniors

In his Inaugural speech, President Obama renewed his commitment to safety nets:  ”Medicare and Medicaid and Social Security–these things do not sap our initiative, they strengthen us.

Yet last week, he signaled that he is “open to making modest adjustments to programs like Medicare.” Should seniors brace for bad news?

No. There are many ways to cut Medicare spending without drawing blood. It’s a matter of using a scalpel, not an axe, to trim the fat.

Not long ago, the Center for American Progress (CAP) unveiled a Senior Protection Plan that would do just that, revealing how we could reduce Medicare spending by $385 billion without harming beneficiaries.”

The administration pays attention to CAP. Recently Bloomberg News described CAP as “the intellectual wellspring for Democratic policy proposals, including many that are shaping the agenda of the Obama administration.” This suggests that the report’s proposals may offer a preview of “adjustments to Medicare spending” that the president would consider.

How would CAP save $358 billion without rationing benefits or shifting costs to middle-class seniors? The report focuses on squeezing waste out of the system. Waste doesn’t help beneficiaries.

During recent fiscal cliff negotiations, Democrats and Republicans agreed to adopt four of CAP’s proposals, and I suspect that, over time, we will see more of its recommendations become part of the reality of health care reform.

Recently, I interviewed CAP president NeeraTanden and Topher Spiro, CAP’s managing director for health policy. I was impressed by how their practical approach differs from conservative strategies for slicing “entitlements.”
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Health Wonk Review-The Holiday Edition

On this last holiday week-end, I hope many of you will have the time to read  the  newest edition of Health Wonk Review, a round-up of some of the best health care posts of the past two weeks.

This time Lynch Ryan hosts HWR on  Worker’s Comp Insider. . The posts raise provocative  questions:

Did the LA Times Sensationalize Blue Cross of California’s rate increases?

Why doesn’t President Obama require that CMS negotiate for drug discounts –a move that would take us $200 billion closer to a cliff-avoiding deal?

[My guess is that this will happen sometime this year. Back in April of 2011 Naomi published a HealthBeat post suggesting that Obama had put the idea of letting Medicare negotiate prices back on the table].

How do commercial insurers evaluate physician quality?

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U.S. Media Loves “Fiscal Cliff” Metaphor; The Economist Recognizes that It’s An Imaginary Line in the Sand

In the U.S., pundits cannot resist the fiscal cliff metaphor: it’s colorful, punchy and easy to understand. It’s just two words long. What’s not to like?

It’s not true.

The metaphor assumes that if Republicans and Democrats fail to reach an agreement on the budget by the end of the year, the U.S. economy falls over a cliff,  crashes, and burns.  The “cliff “metaphor complements the equally imaginative “iceberg metaphor” that some fear-mongers use to portray the deficit. (Think Titanic) 

It’s all a bit more complicated than the metaphors suggest.

What few conservatives mention is that the deficit has already begun to dissolve:  since 2009 the deficit has fallen from 10% of GDP to 7% in the fiscal year that ended on September 30th.  By historic standards this is still enormous, and must be addressed. But  the numbers demonstrate that, over time, we can reduce the deficit without renting the nation’s safety nets.

As for the cliff, there is no precipice—just an imaginary line, drawn in the sand, as Republicans and Democrats play “chicken.”

The Economist understands all of this. The lead story in the most recent issue focuses on the “cliff” and points out that “worries” about what will happen if we go over that precipice are “understandable”  but “overblown.” The “risk of economic catastrophe is minimal.” Any damage would be short-term. 

I don’t always agree with the Economist: the UK publication has its own sometimes eccentric slant on things. But on the whole, it is a thoughtful publication—well-researched and fact-checked.  Moreover, in this case, distance may give the Economist a perspective on the problem that some in the U.S. lack.

                                   Exaggerating the Threat to the Middle-Class      

Yesterday’s New York Times suggests that if we cross that line in the sand, an already beleaguered the middle-class will suffer great hardship, and this “Complicates Democrats’ Stance in Talks.” 

The analysis suggests that Democrats don’t dare just stand back and let Bush’s tax cuts expire– as they will if party leaders don’t reach a settlement by year-end: “Only a small handful of policy voices on the left are making the case for the tax cuts to fully expire. In part, that is because the economy is still growing slowly, and tax increases have the potential to weaken it.” But it is also because “If the two parties fail to come to a deal by Jan. 1, taxes on the average middle-income family would rise about $2,000 over the next year. That would follow a 12-year period in which median inflation-adjusted income dropped 8.9 percent, from $54,932 in 1999 to $50,054 in 2011.”

This assumes that once we miss the January 1 deadline, tax hikes for the middle-class would become permanent—which, of course, is not true. Talk about how much more a family would pay over the course of 2013 falls somewhere between hyperbole and hysteria, ignoring what everyone knows:

If the Bush tax cuts expire, Democrats will presumably simply propose to restore them in January for those [families] earning less than $250,000,” the Economist observes, “daring Republicans to block them.” 
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Obama Wins Round One of Budget Negotiations

CNN is reporting that the “Fiscal cliff deal is down to wrangling over the details.” While others in the media continue to say that talks are stalled, everything I know about both the economics and the politics of the situation tells me that CNN is right.

At 4:30 this afternoon, CNN updated its story: “Both sides agree the wealthy will pay more, so now fiscal cliff  talks come down to how much Republicans can wring out of the White House in return for giving in on taxes.

“To President Barack Obama, it’s all about first locking in additional revenue from raising taxes on high-income owners, an outcome the GOP has long rejected.”

President Obama had made it clear that negotiations over government spending on safety nets such as Medicare wouldn’t begin until Republicans accepted a higher marginal tax rate for individuals earning over $200,000 and couples earning over $250,000.

The president dug in, and, according to CNN, he has won round one.

“Retiring Republican Rep. Steve LaTourette of Ohio told CNN on Thursday that he sensed a shift in the House GOP approach during a conference meeting the day before.

“A GOP source told CNN that talks between staff members on both sides resumed Thursday for the first time this week, after Obama and Boehner spoke by phone the day before.”

A Two-Step Approach

It is not clear whether negotiations over so-called “entitlements” will be concluded before the end of the year. But CNN, reports

“All signs point toward a two-step approach sought by newly re-elected Obama — an initial agreement that would extend lower tax rates for income up to $250,000 for families, while letting rates return to higher levels from the Clinton era on income above that threshold.”  That agreement on taxes will be signed and sealed before the end of the year.

“Even conservatives such as Oklahoma Sen. Tom Coburn and Louisiana Gov. Bobby Jindal acknowledge the obvious — taxes on the wealthy are going up despite opposition by Republicans.

“‘Whatever deal is reached is going to contain elements that are detrimental to our economy,’ Jindal wrote Thursday in an opinion piece published by Politico. ‘Elections have consequences, and the country is going to feel those consequences soon.’”

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FDA Behind The Curve In Monitoring Safety of Approved Drugs

Over the past decade or so, there have been at least 20 prescription drugs removed from the market, including several cases of high-profile blockbuster drugs that were found to be harmful only after millions of patients had taken them. Vioxx, the pain reliever sold by Merck is one example; taken by an estimated 20 million Americans, it increased the risk of heart attack and stroke in some patients. The company ended up paying out a $4.85 billion settlement after the drug was pulled from the market in 2004. The diet drug Meridia, also linked to a higher risk of heart attack and stroke, was on the market for over 12 years before it was withdrawn last year. According to the watchdog group Public Citizen, drugs taken off the market since 1993 were sold for an average 4.1 years before being pulled.

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A New Team at the FDA — Sharfstein’s Critics

Over the week-end, when I heard that President Obama had selected Margaret  Hamburg as FDA commissioner and Joshua Sharfstein as deputy commissioner, I began Googling “Sharfstein.”  I already had read about Hamburg and I knew the former New York City health commissioner has earned very high marks. 

But I didn’t know much about Sharfstein. So my heart sank when I read this in the “Comment” section of yesterday’s Guardian: “Although Dr Margaret Hamburg, the nominee for commissioner, boasts significant experience in government and is highly thought of in the public health community, her new deputy, Dr. Joshua Sharfstein, is an inconceivably poor choice.”

Reportedly, Sharfstein is going to be the point man regulating drugs and devices. Meanwhile Hamburg  will ovesee food safety and tobacco—if the agency wins some control over the substance. (According to the Wall Street Journal, a bill that puts tobacco under FDA regulation seems poised for passage next session).  Given how the FDA’s work will be divided, Sharfstein’s appointment becomes extremely important. Indeed,  the “Comment” in the Guardian notes: “from the vantage point of industry and patients, this would make Sharfstein a far more influential figure than his nominal boss – but without requiring confirmation by the Senate.” Here they seem to be implying that the Obama administration is trying to slip a weak candidate past the Senate.

But then the article’s authors, Jeff Stier and Henry Miller set out to explain why they object to Sharfstein. And at this point, I begin to smile.They portray Pharma as an industry that has been bullied, by the government and the press: “The new FDA leadership must  confront a trend that has become popular – especially among members of Congress and the media – of vilifying drug companies, and even alleging that regulators have become too cosy with industry.”  Imagine that.

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The FDA: What Happens When You Starve the Beast

In October, I talked to a source inside the FDA who suggested that the agency was having a hard time keeping up with work-flow.  I quoted him on this blog as explaining that since the FDA has committed to reviewing applications for approval of a new drug within 10 months, drug-makers have been submitting “shabbier” applications that contain less evidence about risks and benefits.

“For the drug-maker it’s a gamble. The company is betting that, because we want to make the 10-month deadline, we won’t send the application back,” said the source. And often, he acknowledged, the drug-maker is right. “If you find a problem or there is something missing and it doesn’t seem terribly material, there is a tendency to overlook it. Because if you don’t it will just delay the whole process.”

In the past, he added, a company submitting an application knew that if the application wasn’t up to snuff, the FDA would send it back. But those standards have fallen: “Now we send it back [only] if it’s really crappy.”

Yesterday the FDA Science Board dropped a bombshell in the form of a report which suggests that standards at the FDA haven’t just fallen—they’ve fallen off a cliff. The title of the report says it all: FDA: Science and Mission At Risk.
The problem, according to the report: a lack of funding. The Coalition for a Stronger FDA,  co-chaired by the last three secretaries of Health and Human Services (the department that oversees the FDA), says the FDA needs a 15 percent boost in funding per year for the next five years. 

Here are just a few highlights from the report:

  • “The Information Technology situation is problematic at best—and at worst it is dangerous.”
  • “The FDA has substantial recruitment and retention issues”.
  • “Critical data…including valuable clinical trial data…are sequestered in piles and piles of paper documents in large warehouses."
  • “The FDA has an inadequate and ineffective program for scientist performance."
  • "The FDA has inadequate funding for professional development to ensure that staff maintain scientific competence."

William Hubbard, a former FDA associate commissioner who supports the Coalition for a Stronger FDA, told ABC News that the report stands out because of the "intensity of the feelings" expressed by the subcommittee.

"These people were horrified by what they found," he added.

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How the Media Covers Health Care

Sometimes health care reporters remind me of the financial journalists who helped hype the bull market of the 1980s and 1990s. I began my career as a journalist at Money magazine, and I remember sitting in an editorial meeting where we talked about an upcoming cover story: “The Ten Best Mutual Funds NOW.”  One intrepid reporter asked: “What if there aren’t ten great mutual funds that you really should invest in right now?”

“Let the fact-checker worry about that,” someone else quipped, referring to the person who would be double-checking the details of the story just before it went to press. Almost everyone sitting around the table laughed.

And Money was generally a pretty responsible magazine that tried to warn investors against the risks of the market. Still, “good news” cover stories sold magazines—just as “breakthrough” medical stories on the local evening news keep viewers from changing the channel.

Gary Schwitzer, an associate professor in the School of Journalism and Mass Communication at the University of Minnesota, recently published a provocative piece about how the media covers health care in the American Editor. Schwitzer begins his piece by asking his reader to “Imagine a reporter filing a story from the Detroit Auto Show. She writes about one car maker’s hot new model as if it is the best thing since the ’57 Corvette. But in the excitement over the chrome and style, she doesn’t mention the cost of the new model, doesn’t compare it with other manufacturers’ offerings in the same class, and doesn’t mention anything about performance (fuel efficiency, handling, braking, safety issues, etc.)

“An editor would certainly raise questions about this kind of puffery.

“But over on the health care beat,” Schwitzer observes, “the majority of stories on new products, procedures, treatments and tests are published without including comparable information. Claims that would never be accepted unchallenged from a politician are accepted unquestioningly from physicians and researchers and company spokespersons.”

Schwitzer, who publishes HealthNewsReview.org, a website that grades health care news stories for accuracy, balance, and completeness, has evidence to back up his claim.  Below I’ve re-posted some of his data on some 400 stories from almost 60 major news organizations (available at his website) to demonstrate how many health care stories “provide a kid-in-the-candy-store portrayal of the health care system that leaves readers with the impression that most products or procedures in health care are amazing, harmless and without a price tag”:

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The New York Times “Gets Cracking” on Rising Health Care Costs

On Sunday the New York Times published an editorial that set out to analyze “The High Cost of Health Care.” The result might best be described as “muddled.”

What is exasperating is that about 85 percent of the facts in the editorial are true. But a good 15 percent are simply wrong.  And the Times’ editors managed to weave truth and error together in such a way that it would take a knitting needle to separate the two. As Matthew Holt put it on The Health Care Blog: “the piece looks entirely as though it was written by a committee that couldn’t agree with itself.”

As you read the editorial, you can almost see the editors sitting around a table, negotiating. “Okay,  we’ll let that sentence about the value we’re getting for our dollars stand—as long as well keep this sentence about  ‘skin in the game.’”  The result, a mix of propaganda and analysis, is far more dangerous than outright lies because the many true facts make the whole thing sound credible.   

Because I hate to see our paper of record disseminate disinformation, I am going to try to separate the wheat from the chaff. Begin with the truth: Near the top of the story, under a sub-head that reads “Varied and Deep-Rooted,”  the Times provides a nice summary of the main reasons why we lay out roughly twice as much as the average developed nation, without getting care that is twice as good:

“we pay hospitals and doctors more than most other countries do. We rely more on costly specialists, who overuse advanced technologies, like CT scans and M.R.I. machines, and who resort to costly surgical or medical procedures a lot more than doctors in other countries do. Perverse insurance incentives entice doctors and patients to use expensive medical services more than is warranted. And our fragmented array of insurers and providers eats up a lot of money in administrative costs, marketing expenses and profits that do not afflict government-run systems abroad.”

Spot on. If only this section of the editorial had not begun with a casual half-truth: “Contrary to popular beliefs, this is not a problem driven mainly by the aging of the baby boom generation, or the high cost of prescription drugs, or medical malpractice litigation that spawns defensive medicine.”

They first part of the sentence is correct: the aging of the boomers is not a major cause of health care inflation.  The last clause of the sentence is debatable, though probably true.
What’s troubling is the middle clause:  Why does the Times feel obliged to declare that the “high cost of prescription drugs” is not an important factor behind soaring medical bills?

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How Wall Street Reacts to Fraud in Our Health Care Industry

This appeared on Bloomberg News today:

“WellCare Shares Jump After Analyst Calls Fraud Probe `Limited’

Nov. 20 (Bloomberg) – WellCare Health Plans Inc., the U.S. health insurer under investigation for possible government overpayments, rose the most in two weeks in New York trading after an analyst upgraded the company.

“The analyst, Carl McDonald of CIBC World Markets in New York, called the probe ‘limited’ and raised his rating of WellCare to ‘sector outperform-speculative’ from ‘sector perform.’ WellCare rose $2.38, or 6.8 percent, to $37.39 at 9:40 a.m. in New York Stock Exchange composite trading after touching $38.14.

“A U.S. government raid of WellCare’s Tampa, Florida, headquarters on Oct. 24 yielded thousands of records, including papers pulled from a shredder bin and files on offshore bank accounts, according to court filings. McDonald said the filings suggest the probe is focused on Florida’s Medicaid program for the poor.

“’It’s possible that the Florida Medicaid investigation spreads into other areas, but the document seems to rule out widespread, systemic fraud,’ the analyst said in a note to clients today.”

Bloomberg also reveals that: “The agents seized records from the desks of Chief Executive Officer Todd Farha and Chief Financial Officer Paul Behrens, according to the court records. From Behrens’ desk, agents grabbed a document called the ‘Stairway to Heaven Plan,’ according to the inventory.

“Also taken were wire transfers, tax returns, bank accounts in the Grand Cayman Islands, a calendar of political visitors and contributions, and phone lists. One seized document was labeled ‘Re: Possible Kickback,’ according to the court records”.

Yet none of this seems to bother the analyst who upgraded the stock or the many investors who followed his upgrade–pushing the share price up 6.8 percent this morning.  The analyst predicts that “that WellCare [will] settle, pay a fine, but remain in all its businesses, rather than being put out of business.”

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