Leavitt speaks at the National Press Club on health reform

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When: March 12, 2010, noon

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The air waves have been abuzz again with stories that doctors will drop out of Medicare because they face a 21 percent reduction in their fees. Congress again is on the brink of whether it would prevent the decrease from going into effect. Congressional leadership has repackaged the “doc fix” as it is known in the Nation’s Capital with “must pass” legislation to extend unemployment benefits. Tremendous political pressure was brought to bear on individual Senators to accede to an unanimous consent request to allow the legislation to be voted on. Washington depends upon, and even manufactures, a crisis to break political logjams.

But like Bill Murray in “Ground Hog Day,” Congress will re-live the same chain of events all over again. At a cost of $1 billion to delay the reduction in payment that is otherwise due under current law, the “fix” is good for only a month.

Why are doctors once again in this situation? Was Congress unaware that Medicare doctors and their patients were at risk of the reduction? Hardly. A year ago, the Congressional Budget Office (CBO) warned the House Budget Committee not only would the 21 percent reduction occur in 2010, by 2014, the reduction would reach 40 percent. CBO predicts that under these large reductions, physicians will likely withdraw from Medicare and beneficiaries will lose access to care. CBO also points out that as physician access is reduced, access to other medical services will also decline. Use of prescription drugs, therapies, tests, etc. relies on a physician’s orders. CBO warns quality of care will be compromised, the health of seniors will deteriorate, and, ironically, costs elsewhere in the health care system will increase as seniors will be forced to seek care in hospital emergency rooms.

These programmed reductions are the result of a formula called the Sustainable Growth Rate (SGR) written into law under the Balanced Budget Act of 1997. The formula is designed to lower payments when physician costs exceed growth in the rest of the economy. It should be noted that reimbursement is based on practice costs, not performance. Poor care at the physician level increases total health care costs.

For years, Congress has routinely delayed the reductions from going into effect. It has not fixed the problem, only delayed the impact and in the process, racked up huge cumulative costs. Under the President’s latest budget, the Office of Management and Budget (OMB) estimates it will cost $371 billion over ten years to “fix” the Medicare payment structure for physicians and other health care providers. Paying for the full 10 year cost to the federal government has been a deterrent to Congress. Moreover, Medicare beneficiaries bear 25 percent of Part B benefits. Members of Congress are acutely aware that millions of seniors would see their monthly Social Security benefit eaten up by the “fix” under the framework of current law.

Congress must responsibly confront the reality that a 10 year “fix” is more expensive in each passing year. Our nation’s doctors rightfully complain they are political hostages to the federal government and no other health care providers are forced into this annual game of chicken. Hospitals are not treated in this manner.

No one has really explained why total health care costs should continue to increase at twice the rate as the rest of the economy. Physicians must take their rightful place in coordinating care and reducing excess cost by reducing over-utilization and under-utilization. The sooner the federal government, states, and the private sector truly reforms their payment systems which should be based on competition, outcomes, quality, and value, the better for all.

Eventually, Bill Murray learned from his mistakes and broke the Ground Hog Day spell. It is time for us to do the same.

Morley’s extensive and broad background in health care administration helps him extend valued consulting advice in areas that include strategic planning, resource and cost management, patient flow reengineering, construction planning, transition management, managed care contracting, and physician, employee, patient and community relations. Morley has provided consulting services throughout the United States in both for-profit and not-for-profit organizations, as well as academic medical centers. His applied utilization of technical expertise brings Leavitt Partners a valuable source of advocacy in the field of hospital administration.

As a Senior Advisor with Leavitt Partners, Morley will also share data and insights that will help clients increase profitability, improve operational effectiveness and create healthier and more effective work environments.

As a fellow of the American College of Healthcare Executives (FACHE) Morley holds a prestigious sponsorship and tenure from the American College of Healthcare Executives (ACHE). Morley possesses an undergraduate degree in Organizational Communications from Brigham Young University and a Master of Healthcare Administration from the University of Minnesota.

Tad enjoys the great outdoors and volunteers in the Boy Scouts of America. He takes pleasure in speaking and reading French regularly.

The recent decision by the USDA to abandon the National Animal Identification System (NAIS) has met with some surprise and concern in the food community. Questions of whether this means the administration is backing of traceability programs have arisen, as have concerns as to what the USDA will come up with to replace the NAIS.

Speculation around the true reasons behind the USDA decision on animal traceability abounds but at the end of the day the NAIS approach was not achieving the needed goals so something had to change. The key question in my mind is whether this is about food safety or trade – or a mixture of the two. Being realistic, creating not tariff trade barriers can do major harm in many ways and is not only problematic for the business community but will effectively be almost impossible to implement due to passive resistance – however much the law may require it. Thus the “wrong” solution will fail on both counts – food safety and trade.

So what is the optimal solution that will have a positive impact on food safety and a neutral effect on trade (at the very least)? That is the big question and I have not seen a good answer, but suggest that the following are some of the key attributes that need to be in such as system.

• The ability to know where animals have come from when they move out of state
• The need for key data elements that need to be captured at each step of the way as animals move around out of state.
• The importance of a national interoperable system – you can have different systems but they must be able to talk to each other.
• Ensuring the information is kept electronically and is fast to access when needed.

One of the worst outcomes of this would be multiple systems that don’t communicate with each other. If that happens one can almost guarantee that food safety will not be protected and trade will suffer.

We are in a global food market place and need to think and act globally with regard to both food safety and trade. This is the time for the leaders of the meat industry step up to the plate and develop solutions that work and not wait of for the regulators to come up with the answer.

On February 12, 2010, the White House invited the congressional leadership to a bipartisan meeting on February 25 at the Blair House to discuss health legislation. Since then, there has been much speculation about a new proposal from President Obama that would meet his four- part test to:

• Bring down costs for all Americans as well as for the Federal government
• Provide protection against abuses by the insurance industry
• Make coverage affordable and available to tens of millions
• Get us on a path of fiscal sustainability.

The President’s own proposal, posted on the White House website on February 22, appears to raise as many questions as it answers. The White House did not provide any documentation as to the cost or coverage. The Congressional Budget Office (CBO) has stated it could not provide estimates because the details were not sufficient. (see here)

Spend More, Get Less Coverage. From the various statements put out by White House officials, it appears likely that the Proposal will spend more than the Senate bill and get less new coverage than under the House bill. One area in which the President does lower cost is to reduce subsidies to the lowest income group. But he also proposes to lower the penalties for noncompliance. Because of weaker compliance requirements, there probably will be less coverage than even the Senate bill when the Proposal is actually scored.

The President’s Proposal adopts a “get it now, pay for it later” approach, delaying many of the tough fiscal decisions for future Administrations and Congresses to deal with. The Washington Post chides, “… what credit or credibility is due a president who endorses a tax but leaves to his successor the unpleasant task of collecting it?” (see here)

If A, then B Cannot Follow. The White House website insists that under the President’s Proposal, “… the Medicare Trust Fund will be extended for more than nine years.” This seems to be inconsistent with the other promise to not increase the deficit. If Medicare savings and revenues are used to pay for the rest of the legislative package, then they cannot be counted as extending the Trust Fund. Conversely, if they are used to secure the Trust Fund, they cannot be counted as paying for the new non-Medicare benefits.

More Questions. The Proposal generally used the Senate passed bill as its base with some modification. The website avoids dealing with the controversial issues of coverage of immigrants and abortion. The President’s Proposal adds a new Health Insurance Rate Authority that will give the Secretary of the U.S. Department of Health and Human Services the power to order a private health plan to “lower premiums, provide rebates, or take other actions to make premiums affordable.” The Proposal, however, does not specify the Secretary’s enforcement mechanism. To force compliance, will the Secretary be able to suspend enrollment in a health plan? Revoke its business license? Apply monetary sanctions? Will a health plan be able to appeal an adverse decision? To whom? Will this make health care more subject to political pressures rather than less?

According to the White House website, “… all Americans who can afford to purchase insurance will be asked to (emphasis added).” Generally, to be asked implies the individual is free to decline. Under the Obama Proposal, “asked” really means “required” and the requirement will be enforced with financial penalties. In reality, millions of Americans probably will not know if they are subject to the mandate until they walk into a government office. Many will be surprised to learn they will not qualify for the new subsidies to purchase private insurance but will be enrolled into Medicaid instead.

Why is catastrophic coverage sufficient only for some, not all? Why should it be illegal for Americans to buy only the coverage they deem necessary, including be allowed to “self-insure?” Once Americans accept the concept of an individual mandate to purchase health insurance, what next will the federal government compel us to do? Although many may not protest because the fine for noncompliance is so low today, what will prevent a future Congress from increasing the penalties if too many people pay the fine instead of buying coverage?

Budget Gimmicks. The Administration’s Medicare provisions also raise questions. Where is the “doc fix”? If the $200 billion cost of the “doc fix” were included, the White House claim that the Proposal will reduce the deficit by $100 billion clearly would not be true. The President’s Proposal calls for an extension of the State Children’s Health Insurance Program until 2019 but does not provide necessary new funding, forcing states to drop children or put them into Medicaid at a lower federal match rate. Finally, simply because the bill is being considered a year later, the budget score will substitute a more expensive year (2020) for less expensive year (2010) which will increase the overall cost.

Biggest Question. What happens if actual legislation shows:
• The cost will be more, not less than promised (a true score with the physician fix will exceed $1 trillion)
• Fewer people will be covered than under previous versions
• Millions of seniors will lose the coverage they have chosen (Medicare Advantage Plans)
• The Proposal is not really paid for

Will Congress still jam this through under budget reconciliation rules?

The Obama Administration has invited the Congressional leadership to attend a meeting on February 25 to discuss health legislation. The meeting is to be held at Blair House and will be broadcast live. In light of the Olympics and the beginning of baseball spring training, here are some stats on the invitees to Blair House so far:

1—the number of congressional women invited (Speaker Pelosi)
2.56—minutes per topic per participant (assumes 7 hours of discussion)
4—Administration participants (President Obama, Vice President Biden, HHS Secretary Sebelius and Office of Health Reform Director DeParle)
4—topics to be discussed (insurance reforms, cost containment, expanding coverage, impact of legislation on the deficit)
5—years of federal service of President Obama (in Senate and as President)
7—fewest number of years in Congress served by a Republican (Kline)
13—fewest number of years in Senate served by a Republican (Enzi)
15.8—average years in Congress served by House Republicans (range 7 to 25)
17—fewest number of years in Congress served by a Democrat (Clyburn)
24—average years in Congress served by Senate Republicans (includes House service; range 13 to 35)
27—fewest number of years in Senate served by a Democrat (Reid and Durbin)
31.8—average years in Congress served by Senate Democrats (includes House service; range 27 to 35)
33.3—average years in Congress served by House Democrats (range 17 to 55)
35—most years served in Congress among senators (Baucus, Harkin, Dodd and Grassley)
41—number of participants (21 from Congressional leadership; 16 designees by Congressional leaders; 4 from Administration)
47—age of youngest Republican (Cantor)
49—age of President Obama
55—most years served in Congress (Dingell)
57.8—average age of House Republicans
65—age of youngest Democrat (Miller)
73—average age of House Democrats
69.75—average age of Senate Republicans
68.6—average age of Senate Democrats
175—collective years in Congress served by Republicans
392—collective years in Congress served by Democrats