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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

AAPS Analysis: Call to Action Health Reform 2009
by Senate Finance Committee Chairman Max Baucus (D-MT).

Read full text of Senator Baucus' "Call to Action"

From the Executive Summary: AAPS Commentary:
"The U.S. is the only developed country that does not guarantee health coverage for all its citizens." This is not true. In Canada, for example, between 2% and 5% of Canadians are not enrolled in a provincial health plan. If they go to an emergency room and do not pay cash, they are denied treatment. The United States, in contrast, has a law (EMTALA) prohibiting emergency facilities that accept federal funding from refusing screening and stabilization of patients with acute conditions, whether or not they have any means of payment.
There are 46 million ["Americans"] uninsured and another 25 million underinsured.Many of the uninsured are non-citizens. Many "uninsured" citizens, perhaps 25%, are eligible for SCHIP or Medicaid and will be promptly signed up as soon as they require treatment. "Underinsured" probably means that the person has chosen not to have the type of "comprehensive insurance" that Sen. Baucus prefers, but instead has chosen the most cost-effective type, for catastrophes only, and pays for routine care out of pocket with premiums savings.
"[F]amilies are struggling to keep up with out-of-pocket costs for medical care." Owing to the heavy burden imposed by government through taxation, regulation, and litigation, families are struggling to keep up with the cost of everything, including insurance premiums. Medical inflation is greatly worsened by using third-party payment for 85% of costs.
"Despite high levels of spending on healthcare, research documents poor quality of care received by patients in the U.S.""Quality" is defined to mean receiving care "recommended" by experts it has nothing to do with proper diagnosis or skilled treatment. It is quite likely that the poorest care of all is received by patients with government coverage, particularly Medicaid. As "cost containment" and "prevention" are emphasized, increasing "recommended healthcare" will be at the expense of sickness care needed and desired by patients.
"The nation s healthcare stakeholders are signaling that they are ready and willing to engage in serious and comprehensive reform of the health system in crisis."The "stakeholders" most of them not caregivers are "at the table" in order to try to preserve or enlarge their "share" of the $2.3 trillion dollars that flow through the system and their control. None of them have an interest in dramatically lowering the flow of money. The ultimate payers taxpayers, insurance subscribers, and patients have no meaningful influence in a system mostly dependent on third-party payment.
Healthcare reform is essential "to sustain our economy, our ability to compete internationally and over the long haul to deal with our long-term fiscal challenges." Malinvestment throughout the economy is the result of government monetary and tax policy. Noncompetitiveness of American industry results from an unfavorable business climate (taxation, regulation, and litigation) as well as the more generous compensation package received by American workers (including health benefits). Increasingly intrusive government meddling in "healthcare" (one-sixth of the economy, and one of the healthiest sectors), could sink the rest of the economy also.
"Today, the costs of care for the uninsured are largely borne by those with insurance." This is not true. The uninsured use fewer medical services than the insured, and they pay a substantial share of their own costs. Indeed, they may be charged much higher costs than an insured person for the same service. Uncompensated care constituted only 2.7% of medical expenditures in 2004. Nationally, the uninsured paid $30 billion in medical costs out of pocket. One study showed that half the uninsured with incomes at least twice poverty received medical care for which they were charged: 80% paid in full, and 10% were paying in installments. An additional 8% received pro bono care.
"Providers charge higher prices to patients with private coverage to make up for uncompensated care." And: "Requiring all Americans to have health insurance will help end the shifting of costs from the uninsured to the insured." Cost-shifting is used to make up shortfalls in payment owing to Medicare and Medicaid price controls or "prospective payment." Today, productive Americans pay for the medical care given to Medicare and Medicaid patients both through taxes and in inflated insurance premiums or out-of-pocket charges. Providers would have to cut services if they could not shift costs to a private sector.
"Covering all Americans would also insure that the insurance market functions effectively." Effective functioning of the insurance market depends on the accurate pricing of risk which is rendered impossible by community rating and guaranteed issue.
"If a significant portion of Americans does not purchase insurance until sick, then premiums for all enrollees will increase." This is the effect of community rating and guaranteed issue; states implementing these policies have much higher premiums and have driven large numbers of Americans out of the insurance market.
"Covering all Americans is essential to effective prevention and wellness efforts in managing chronic illnesses." This statement assumes that all Americans are so irresponsible that they take care of themselves if and only if someone else is paying their medical bills! This contradicts common sense and all experience.
"Efforts to guard against and better manage illness are an effective tool to improve health and contain costs." Very few "preventive" measures (leaving aside public health engineering measures such as sanitation) have ever been shown to save more than they cost.
"Wellness and prevention would be prioritized." Sickness care would have a low priority. This proposal would discriminate against the sick, the injured, and the disabled.
Americans are "locked into a job based on the need to retain their health coverage." This is often true; consumer-directed health care attempts to make insurance self-owned rather than employer-owned. Forcing companies to buy insurance substitutes job loss for job lock.
"Those who already have health coverage could keep what they have." Would Americans be allowed to keep their high-deductible plans and Health Savings Accounts? Would additional Americans be permitted to enroll?
The Baucus plan proposes to set up a health insurance exchange, presumably like the Connecter in Massachusetts. Massachusetts has experienced cost overruns, severe cuts in funding to safety-net hospitals, and denial of affordable high- deductible coverage to citizens who would prefer that.
"While the Exchange is being created, the Baucus plan would make healthcare coverage immediately available to Americans age 55 to 64 through a Medicare buy-in." Medicare patients are finding it increasingly difficult to get an appointment with a physician, as physicians are being forced to cut back on their Medicare practice owing to costly rules and nonremunerative fees. Bringing more Americans into Medicare and Medicaid may mean that more Americans nominally have coverage, but their access to medical services may be significantly curtailed.
"Once affordable, high-quality, and meaningful health insurance options are available to all Americans through their employers or through the exchange, individuals would have a responsibility to have health coverage." There is no way of knowing when this nirvana will occur, if ever, and the key definitions of "affordable," "high- quality" and "meaningful" are all great unknowns. Americans are now supposed to be responsible for paying bills they incur. What additional penalties will be imposed?
The Baucus "RightChoices" is supposed to guarantee access to recommended preventative care. Where will the funding, personnel, and facilities come from? Will resources be shifted away from the care of the sick and the injured? Away from educational, law enforcement, or other parts of the government budget? Cost savings are hypothetical, and are realized only in the long term if at all.
"Today s payment systems reward providers for delivering more care rather than better care." This is only partly true. Managed care systems actually reward practitioners for delivering less care. Any reward for "better care" means submitting reports of rendering "recommended" services, likely at the expense of other services that patients prefer. In a free market, patients would pay more for care that they perceive to be better or more important. Under today s price controls, the best, most experienced, and most qualified providers cannot be paid any more than the least qualified ones.
Baucus recognizes that it is necessary to fix the "unsustainable Medicare physician payment formula" [the "sustainable growth rate" or SGR formula]. The SGR means constantly diminishing returns for the same work it is unsustainable because physicians cannot indefinitely continue to work if payment is nonremunerative. A fix, however, is probably impossible because of the unsustainability insolvency of the Medicare system itself. The only solution that would not bankrupt the system and yet would enable physicians to earn a living is to repeal the ban on balance billing.
"According to the Congressional Budget Office, up to one- third of that spending more than $700 billion does not improve Americans health outcomes." A substantial portion, probably at least one-third, is not spent on medical care at all. The only way to reduce that amount is to reduce the amount of third-party payment, and return to direct payment of most expenses by patients who are spending their own money and can benefit from economizing. Third-party payment should be only for extraordinary expenses, or on behalf of those who are truly unable to pay.
"Health IT is needed for quality reporting and improvement and to give providers ready access to better evidence and other clinical decision-support tools." Physicians and medical facilities already have access to IT, and adopt the technology that they find to be cost effective and beneficial to their practice. Billions have been spent on IT that was unworkable and in fact impeded medical care. "Quality reporting" shifts effort and resources into the areas that are monitored and away from areas that are not.
The Baucus plan "would invest more to detect and eliminate fraud, waste, and abuse in public programs."Baucus should start with state Medicaid bureaucracies, especially with eligibility determinations. So far, antifraud efforts have largely been targeted at private physicians offices. Bounty-hunting private contractors have been deployed to search for coding errors. The huge penalty that a physician can face for inadvertently violating an incomprehensible rule is another strong reason for physicians to avoid publicly insured patients.
"Considering policies to shift the focus from institutional care to services provided in the home and community could improve the quality of care delivered and reduce costs."A disastrous consequence in the opposite direction is also possible. Turning chronically mentally ill patients out of state hospitals into "community programs" resulted in dumping large numbers of them onto the streets as chronically homeless.
"In the short term, healthcare reform would cost taxpayers more than the government can achieve in savings from all reforms and financing changes."This is true, and the long-term savings are purely hypothetical. In contrast, consumer-directed healthcare has resulted in immediate savings to many of those who have adopted it.
Additional comments on body of report:
Medical care costs too much (p 1).True. It costs even more when paid for through third parties, owing to necessary administrative expenses, perverse incentives, and corruption and fraud. We need to funnel less money through third parties, including government, not more.
An example of an AARP Medical Advantage plan with a policy limit of $37,000 per year: Ms. Kelly is now paying $2,000 each month for her accumulated medical bills (p 2).This policy appears to be a very bad deal. One should buy coverage for high-end, not low-end expenses.
In Japan s largest private system, the cost for magnetic resonance imaging is less than $100, compared to $1,200 in the US.This should refute the assertion that high-tech means high- cost. MRI is widely available in Japan in a highly competitive market.
The U.S. has higher infant mortality (p 6).Such statistics are meaningless without comparable definitions of a live birth, adjustment for population characteristics such as marital status and maternal drug abuse, and stratification for birth weight. The U.S. saves more low-birth-weight babies.
Patients with chronic care receive "recommended services" only about half the time (p 7).The effect on cost or outcome is unknown. Note that the actual population is much more complex than the study population from which recommendations are derived.
The "current system does little to steer providers toward the right choices" (p 7).The current system has a large but unmeasured influence on decisions through its payment policy, paying handsomely for some drugs and procedures (perhaps not the "right" ones) and poorly if at all for others. Proposed new "steering" mechanisms are also financial.
Americans want "a complete overhaul of the health system" even if it means "higher taxes."Apparently, the same people who are deemed incapable of making intelligent decisions for themselves are capable of decisions about the system as a whole. Not specified is the acceptable amount of tax increase, nor whether the respondents are actually paying taxes themselves. Also unknown is how much control Americans are willing to give up over treatment options.
"National health reform" has failed since the early 1900s." The Wagner-Murray-Dingell bill [which AAPS was founded to fight] failed in the 1940s (p 13). These bills were called "national health insurance" or "socialized medicine." They were purportedly about payment only, not about reorganizing and controlling care.
Elements of the Baucus plan:

(1) "Individual responsibility"

Translations: Collective responsibility for paying everybody's bills through insurance, with relief of responsibility for paying charges the patient incurs himself.
(2) "Strengthening the employer-based system"Not necessarily a good idea; moreover, proposals such as expanded SCHIP historically crowd out private options.
(3) "Guaranteed access to affordable coverage"Subsidies for policies made less affordable by mandated coverage
(4) "Strengthening public programs"Increasing the strain on already insolvent programs by adding beneficiaries and mandates
(5) "Focusing on prevention and wellness"Rationing care to the sick and the disabled
(6) "Addressing health disparities"Seeking equality rather than improvement or excellence; always achieved by redistributing resources from some to politically favored others.
"Our system also prohibits certain legal immigrants from getting healthcare for five years" (p 14). Both legal and illegal immigrants can buy medical services now. Apparently, Baucus favors immediate or quicker eligibility for taxpayer funding.
Baucus deplores the shifting of costs from the uninsured to the insured (p 15). Usually, the shift is the other way around (see above). What the Baucus plan would do is shift wealth from private hands, where it can be used for private needs, to public pools.
The IRS is described as a "point of contact between individuals and the government," and thus using the IRS as the enforcer of mandates would "take advantage of the existing relationship" (p 15). Most Americans do not view their interaction with the IRS in a positive way.
It is claimed that 71% of Massachusetts working-age adults supported the state s health reform efforts (p 16). Which 71%? The ones receiving subsidies, or the ones paying higher taxes or forced to buy more expensive insurance?
Low-risk individuals would pay the same premiums as high- risk individuals (p 17).This turns insurance into a welfare system. Baucus makes the assumption that using health insurance premiums as a leveling device is more fair and affordable than using taxation.
"Differences in premiums between packages will be due to the difference in benefits and not differences in expected risks" (p 18).If the plan cannot bring in adequate premiums by pricing risks correctly, then it will ration care to the sickest individuals. People will pay for their benefits one way or another: either with money, or with inconvenience, prolonged disability, or even their lives.
Baucus recognizes the above problem: "offsetting some of the potential risks to insurance plans is intended to limit plans incentives to enroll only the healthiest individuals" (p 18).This assumes that plans who use nefarious methods to select out the healthiest individuals will not use equally sinister methods to restrict care to the sick.
A new Independent Health Coverage Council "would ensure appropriate income-related annual limits on out-of- pocket costs so that families were not at risk of bankruptcy by their medical expenses" (p 19). The more you earn, the more you have to pay for medical care. This is another way of equalizing income and leveling down, and constitutes a tax on work and productivity.
The budget-neutral Medicare buy-in for Americans age 55 to 64 is said to be temporary until the Exchange is established. It is assumed that Medicare can offer the coverage at less cost than the individual insurance market. The benefits would be the same as those available to current Medicare beneficiaries (p 21). Presumably, the package would have the same rules and price controls that are making medical care unavailable to increasing numbers of senior citizens. If physicians restrict their Medicare panels, would an influx of 55-year-olds crowd out the older patients?
Enabling individuals to buy into Medicare could enable them to remain healthy and continue working and prevent disabling conditions (p 22).This assumes that coverage is equal to care, and that care effectively prolongs working life.
The Medicaid system is causing severe financial stress to states, particularly during times of economic downturn. All states except Vermont are constitutionally bound to balance their budget (p 24). The federal government can print or borrow money, presumably without limit.
"An estimated 80% of heart disease, stroke, and type II diabetes, and 40% of cancers, could be prevented if Americans stopped smoking, adopted healthy diets, and became more physically active," according to Robert Beaglehole, World Health Organization s Director of Chronic Diseases and Health Promotion, in a keynote address before the Phillip Hauge Abelson Advancing Science Seminar, December 8, 2005 (p 28). The connection with a "fractured delivery system in which individuals with chronic conditions often see more than one provider and take multiple medications" is apparently left as an exercise for the reader. What does Baucus plan to do with patients who already have heart disease or cancer or with patients who persist in unhealthy behavior?
"To make prevention a cornerstone of the healthcare system requires a fundamental change in the way individuals perceive and access the system as well as the way that care is delivered."The report is silent about this could be achieved or about the need to shut down acute care facilities or redirect their funding.
RightChoices cards are to be given to the uninsured so they can immediately get physical examinations, immunizations, health risk assessments, and a plan to maintain good health. With a shortage of medical personnel nationwide it is not clear where all of the personnel will come from to do all of these tests, and what will they stop doing in order to make time for these.
On health disparities: "One of the most glaring differences in health status is reflected in infant mortality. African- American infants die at a rate of 13.6 per 1,000 live births, a rate that is higher than any other racial or ethnic group and twice that of whites" (pp 30-31).No cause or remedy is suggested. Not noted is that premature and extremely premature births are much more common in blacks, as are induced abortions, an important risk factor for early delivery.
One source of health disparity is "lack of language compatibility" (p 31). Would Baucus add still more translation requirements for medical facilities?
The Relative Value Scale and the AMA's RUC process undervalues primary care. The Baucus plan would "seek a continued focus on the high value of primary care-related services, with corresponding reductions in relative values for overvalued services. The fee schedule rates must accurately reflect priorities that the healthcare system must adopt to bend the healthcare cost curve and improve quality over time" (p 38).The Baucus plan would reduce payments to specialists.
To get additional payments for the "medical home concept," providers would have to meet a set of "stringent service and capacity criteria in order to qualify" (p 39).Solo physicians and small practices would probably not qualify.
Modernization means a prospective payment system for federally-qualified health centers, FQHCs (p 41).This is an expansion of the system that causes hospitals to discharge patients "quicker and sicker."
Baucus would expand pay for performance from pay for reporting to more aggressive pay for quality. Penalties would be added to "incentives." Episode "groupers" would enhance the effectiveness of per-capita reporting for identifying "outliers." The technology "may encompass multiple interventions over a period of time and care furnished by multiple providers." He speaks approvingly of inclusion of mandatory participation in quality reporting for specialty board recertification (pp 43-45).Peer group pressure would be added to financial rewards and punishments to achieve the objective of equalizing and standardizing care.
On SGR reform: "In addition to the massive budgetary shortfall, there are also substantive obstacles to SGR reform. The fundamental flaw of the SGR is that the behavior of an individual physician, even a large group practice, cannot affect a formula driven by the practice habits of more than 800,000 providers" (p 47).Some way of decreasing the amount of care is needed perhaps a global budget?
The Medicare demonstration project called Physician Group Practice Demonstration addresses the problem that physicians and facilities paid separately have little incentive "to work together" to "effectively manage patient care." Any savings from "better care coordination" now accrues to Medicare (pp 48-40). "Bundled payments" and "gainsharing" are also proposed.These methods are collectivized incentives for rationing care. Note that readmissions are attributed to lack of coordination rather than premature discharge.
Uses of health information technology (HIT) include: tracking patient care, reporting to chronic disease registries, and providing evidence-based decision support to physicians. It is a critical part of "quality performance measurement and reporting" (p 57).Baucus acknowledges obstacles such as loss of privacy, high cost, and the fact that any savings accrue to payers, not providers. However, a "way forward that drives adoption must be found."
If the private sector didn t meet the deadline for a timely consensus, then the office of a national coordinator health IT would immediately promulgate "harmonized interoperability standards."As with HIPAA, if one entity (Congress for HIPAA privacy standards, the private sector here) doesn't meet a deadline, the bureaucracy will do it.
On cost: Much of the savings would not accrue until policies have been in place for several years" (p 66). Eventually, we'll save the $700 billion in excess of what is needed to get today's outcomes. If we don't do it now, we'll end up spending $4 trillion on health care. The source of additional funds is unspecified, as is the amount. An eventual payoff on the "investment" a reduction in what we would otherwise have spent must be taken on faith.
Expenditures for control of waste, fraud, and abuse are not keeping pace. Baucus cites the 1994 definitions by June Gibbs Brown, Inspector General of HHS. "Abuse is any practice that is not consistent with the goals of providing patients with services that which are (1) medically necessary; (2) meet professionally-recognized standards; and (3) are fairly priced. Waste is the incurring of unnecessary costs as the result of deficient practices, systems, or controls."Apparently, Baucus envisions considerable savings from more severe punishment of those who provide "unnecessary" care that does not meet quality standards. Physician-owned hospitals are one target.
Professional liability: The high cost of liability insurance is not considered to have a substantial effect on overall health spending. Alternative dispute resolution, better preventative efforts that lead to fewer risky procedures, administrative determination of compensation, and specialized health courts are discussed (p 74).More data collection is a centerpiece.
Tax incentives: forgone revenue from the tax exclusion for health insurance is estimated at $300 billion. Various modifications of the tax exclusion are discussed; Baucus does not want to cause "widespread disruption of employer-based health benefits." Lacking is any proposal to expand Health Savings Accounts (HSAs); the Call to Action barely acknowledges their existence.
Conclusions: "The time for incremental improvements has passed; health care reform must be comprehensive in scope." And "the costs of inaction, both in human and financial terms, are greater than any initial outlays."This proposal is about radical reform of the way medicine is practiced, not just about payment. It is alleged that the cost of inaction is greater, but no way is given to estimate costs.