Cost

As we have discussed several times, doing nothing is simply not an option. We need to reform our health care system -- not despite our economic crisis, but because of the significant impact health care has on U.S. workers and businesses.

In an article for the Washington Post this morning, Peter Orszag, Director of the Office of Management and Budget, stresses that "as we enter the homestretch, the greatest risk we run is not completing health reform and letting this chance to lay a new foundation for our economy and our country pass us by."

He states that if we do not do anything to slow the rising cost of health care, the federal government will end up spending more on Medicare and Medicaid than all other government programs combined. And our country could not afford to let that happen.

We have established that the cost of doing nothing is high, yet, as Orszag notes, some still have their reserves. These are the people wondering whether it is truly possible to achieve comprehensive health reform in a fiscally responsible and sustainable manner.  

But just in time for the Senate vote, Orszag takes the time to explain why in fact we do not need to fear the fiscal impact of health reform.

As we've written a lot on end of life care, we notice when others do the same.  NPR's Joseph Shapiro this week reported on La Crosse, WI where 96 percent of the adults who die have an advanced directive. That extraordinarily high figure arises from the innovations and commitment from Gundersen Lutheran hospital. Careful, sensitive discussions by trained doctors and nurses -- they use a 12 page guide -- is time consuming. Medicare doesn't reimburse them for that time, A provision in the House health care bill would change that -- the provision that was caricaturized as a "death panel." The Senate bill doesn't contain it.

Not many health writers -- not many writers of any ilk, for that matter -- can match T.R. Reid's ability to bring a light, witty touch to really serious topics. Like health policy around the globe.

Tom (that's what the "T" in "T.R." stands for) was the featured speaker at the Peterson Institute of International Economics today. Not the usual venue for the book tour for his best-seller, "Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care." Before his talk, he told me he was planning to stress the moral case for covering everyone. Not the approach, perhaps, that this particular crowd was used to hearing. Go ahead, I told him. It is, after all, a roomful of economists eating a free lunch.

And that's what he did.

Slate's Timothy Noah provides a thoughtful overview of the intellectual origins and political evolution of the public option's place in health reform.

It's a complicated case, the public option. Lotta ins. Lotta outs. But Timothy Noah is the Big Lebowski of health writers, and is the man for the job to keep all these strands together. (Yes, we know we've made that joke before, but like our living room rug it really ties the blog together.)

Noah's goal was to understand why the CBO and others estimated that premiums for a so-called level playing field public option would cost more than private plans. Noah spoke with New America's Len Nichols, whose paper with John Bertko helped outline how a public option with negotiated payment rates could compete on a level playing field with private plans.

After weeks of anticipation and speculation, Senate Majority Leader Harry Reid has unveiled the legislation that will bring health reform to the Senate floor in the coming weeks.

While waiting for the details of the bill to come out Wednesday, we created a little office pool, called the Price is Right for Health Reform. In an office-wide email, we asked our peers to guess the CBO's estimates of the gross costs of the bill. Showcase Showdown rules (closest without going over) applied. We were intentionally vague in our question because estimating the true costs of the bill is inherently a difficult process.

The number we were looking for was $848 billion. The CBO's estimate of the gross cost of the bill is essentially the total cost of coverage provisions over the next 10-years. This is the number most frequently reported in the media as the "cost" of the various health reform bills being discussed. But is this really the best indicator of the true costs of health reform? Maybe not. First, timing matters: $848 billion over ten years is a lot different than a $787 stimulus bill where 90 percent of the money is spent within the first 3 years. So do deficits. How much does a bill cost if it's fully paid for and in fact reduces the deficit as is the case for both the House ($109 billion) and Senate ($130 billion) bills?

We received plenty of calls from our co-workers asking just these questions. We tried to stay quiet, because we were interested in what the educated, non-health policy wonks think about the cost of reform. True to our think tank's "post-partisan roots" we got a range of answers from "too little" to "$600 trillion, Obama lies." We got a couple of "$1" which we assume was a reference to the bill's deficit neutrality, and $90 billion which seems like a reasonable estimate of yearly costs.  But the majority of the answers clustered within the $800-$900 billion range, surprisingly close to the final answer. Few people seemed willing to go above $900 billion, suggesting the power of the official price tag President Obama put on reform during his September address to a Joint Session of Congress. So who won? The answer after this non-commercial break:

The latest version of Senate health care legislation (pdf available here) crafted by Majority Leader Harry Reid is making its rounds.  There is a lot to review, but an initial read shows the bill is close to the legislation approved by the Senate Finance Committee in early October with a few notable changes: more generous subsidies, a higher threshold for the excise tax on insurers who offer high-cost plans, an increase in the Medicare payroll tax for Americans making over $250,000, and the addition of a long-term care insurance program for people with disabilities.

While this legislation also delays the implementation of insurance market reforms and subsidies (when compared to the Senate Finance legislation) there are a number of provisions that would start helping Americans immediately. In particular, the legislation:  

Last week, Medicare's chief actuary (formally known as the Office of the Actuary, or OACT) released an analysis of the financial impact of the health reform legislation recently approved by the House of Representatives (H.R. 3962).  Here are a few thoughts:

Get familiar with the source.  Remember their history.  The Medicare and Medicaid actuarial team's job is to track and understand Medicare spending patterns.  By design, it is also their job -- and their historical pattern -- to be skeptical about proposals for change. Just for context, the office's estimate of the cost of the Medicare Modernization Act in 2003 (the bill that created the Medicare prescription drug program, Part D) was $100 billion, or 25 percent, more than the Congressional Budget Office's (and CBO is also conservative by nature and design).  Last year CMS's Chief Actuary testified to Congress that the 10-year cost of the Medicare drug benefit is 37 percent lower than originally projected in 2003, and 17 percent lower than the previous year's updated projections.   Don't get me wrong. We need conservative estimators to prevent Pollyanna policy from being enacted into law.  But we should take that conservatism for what it is: a useful check on the naturally optimistic expectations of reformers.

A new study from America's Health Rankings predicts 103 million American adults (43 percent) will be obese by 2018, if obesity levels continue to grow at their current rate. At that point, the U.S. will spend approximately $344 billion dollars annually on health care costs attributable to obesity, according to the new study.

The study, conducted by Emory University professor Kenneth Thorpe, utilizes weight data, Census statistics and medical expenditure information, according to USA Today. Thorpe's study, The Future Costs of Obesity: National and State Estimates of the Impact of Obesity on Direct Health Care Expenses, is the first to provide projections for the future medical costs of obesity, and also provides state by state calculations for obesity levels and cost, according to a press release from the United Health Foundation. (Mississippi tops the list for the most obese population, while Colorado is all the way at the bottom.) USA Today has some highlights from the report:

The New York Times had two interesting reports this week on the pharmaceutical industry.

Monday Duff Wilson reported that drug makers have raised the prices of wholesale brand-name prescription drugs by more than 9 percent during the  the last year (more than twice the general inflation rate of 3.8 percent).

The paper reported that this dramatic price increase will boost the U.S. prescription drug tab by more than $10 billion this year. Total pharmaceutical spending is expected to trump $300 billion (up from $230 billion in 2003), and at least one analysis indicates that this will mark the highest annual rate of inflation for drug prices since 1992.

Remember, this is despite the pharmaceutical industry's pledge to reduce the nation's drug costs by $80 billion over 10 years after health care reform kicks in.

Huh?

"Price adjustments for our products have no connection to health care reform," said Ron Rogers, a spokesman for Merck. The drug makers say that several patent expiration dates are right around the corner and that they need to maintain high profit margins to invest in research and development. 

The government paid $47 billion (that's billion with a B) in false or questionable Medicare claims last year, according to a new federal report obtained by the Associated Press.

The report shows a dramatic increase in Medicare fraud from previous years. In 2008, the government paid an estimated $17 billion in improper claims. So what caused this number to nearly triple in the past year? The most likely culprit is not more fraud attempts, writes the AP, but the increased scrutiny on Medicare claims. The Department of Health and Human Services's new  stricter methodology is part of the Obama Administration's effort to crack down on Medicare fraud.