Relevant and even prescient commentary on news, politics and the economy.

Healthcare reform op-ed

The current uptick in ‘medical inflation’ in private sector health industry is worth a separate post. The Standard and Poor Healthcare Economic Indices can be found here.
Lifted from a note from Run 75441 on the link I sent on healthcare reform.

Recently, Matt Stoller claimed Obama had a 61 vote majority in the Senate and enough to secure either Universal or Single Payer Healthcare. We all forget the one Senator from Aetna stand which killed any other options an Medicare for those starting at 55. President Obama did not have a filibuter proof 61 votes in the Senate for any other healthcare options muchless the ACA. The Blue Dogs (Nelson(s), Bacus, Bayh, Cantwell, Feinstein, Lincoln, Pryor, Widen, Conrad, etc) wouldn’t move for any healthcare plan unless they brought home the bacon as Nelson attempted to do for Nebraska. Just plain ordinary obstructionism to block whatever this President would attempt to do. Senator Lieberman killed anything beyond the ACA. 

Former Editor of the New England Journal of Medicine and others should be sorry if the entire ACA is struck down or dismembered as we will go another decade before a President and a Congress take up the issue again and heathcare costs (for which healthacre insurance is a reflection) will again rise faster than inflation. Because of the power of Medicare, it has been able to rein in rising healthcare costs so far at less than 3% than that of the commercial market at about 9% %. Standard and Poors Healthcare Economic Indices .

The last time healthcare reform was attempted was under Clinton and costs have increased multiple times. A failure to allow the ACA to go forward will allow the overall Healthcare Industry to again implement inflationary costs in a market which has no restraints. Certainly, I can not conjur up what SCOTUS will do. The kings in black robes will decide what is best for us as Congress lacks the will power to represent those who placed them there with the exception of ALEC, Koch(s), and Norquist.

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Health Care Thoughts: Human Capital Edition

by Tom aka Rusty Rustbelt

Health Care Thoughts: Human Capital Edition
In the past six weeks I have talked to and with health care executives and practitioners from at least 40 states. All of the conversations have been interesting to say the least.

What I hear from the hospital and (integrated) health system levels is the combination of PPACA (Obamacare), economics, health finance, technology and assorted regulations are making health care incredibly complicated, which is driving an executive feeding frenzy as organizations try to staff up to cope with change and as executives see new opportunities for their careers.

This is not all for the good.

One of my former students is, IMHO, one of the top integrated-with-hospital physician group managers in the country. Her take?

“The biggest danger now to health care are 30-something MBAs who are career builders.”
And clinical human capital? Right now it is important but not as important as the executive career hustle.

Take away?  Send your college-age children to study health care administration.

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Uwe E. Reinhardt on health spending

Uwe E. Reinhardt offers his viewpoint on trends in US health spending.  Following are excerpts from two articles in the NYT’s Economix  concerning the costs of our system and how they are apportioned in the big picture, and the impact on family budgets.  Reading the charts is actually important.

There are trends in our health care system that are in place and that providers are responding to, making the regulation process only part of the bigger story.

The Fork in the Road for Health Care

For 2012, the nationwide average of the total health spending for a typical family of four was estimated by Milliman to be $20,728. On a regional basis, that average varies from a low of $18,365 in Phoenix to $24,965 in Miami.

A just-released study by the Health Care Cost Institute shows that much of these spending increases are the result of rising prices and not of rising use. Reporting on the study, Julie Appleby of Kaiser Health News notes,

Higher prices charged by hospitals, outpatient centers and other providers drove up health-care spending at double the rate of inflation during the economic downturn – even as patients consumed less medical care over all. 

The chart below shows the path of the Milliman Medical Index since the year 2000. Although the increase of “only” 6.9 percent between 2011 and 2012 was the lowest since Milliman started publishing the index 12 years ago, a 6.9 percent increase is nevertheless alarming in a period when gross domestic product per capita and the gross wages of employees rise at much lower rates.

Although the family’s contribution of $8,584 is by no means trivial, it is less than half of the total average cost of a family’s health care cost. Most employees probably believe that “the company” – that is, its owners – absorbs the other 58 percent of the family’s total health spending. 

Economists have long argued that this is an illusion – that over the longer haul the bulk and possibly all of the ostensibly employer-paid health insurance premiums gets indirectly shifted back into the employee’s paycheck through lower increases in take-home pay. 

To the extent that there is a limit to this cost shift – e.g., for low-wage or unionized employees — the backward shift takes the form of reduced employment or, alternatively, the employer’s decision not to offer employees health insurance at all. 

This point on backward cost-shifting was driven home recently in a paper in Health Affairs by David Auerbach and Arthur Kellerman. The authors present data showing that a decade of health care cost growth in employer-based health insurance “has wiped out real income gains for an average U.S. family” from 1999 through 2009. Health care has come to chew up American household budgets like Pacman.

Is US health spending finally under control?

Charts 1 and 2 show the growth of health spending from 1965 to 2010, broken down by source of payment. Chart 1 exhibits the time path of actual health spending, not adjusted for inflation. Chart 2 exhibits the percentage of total national health spending contributed by the various sources in the chart. In the charts the green area denotes out-of-pocket spending at the time health care is consumed, the red private health insurance, the gray Medicare, the yellow Medicaid and the blue “other third-party payments.”

Economists would explain such a trend as flows: as the fraction of G.D.P. devoted to health care increases, the added satisfaction, or utility, that people derive from added health care is likely to diminish relative to the added satisfaction derived from consuming more of other things. It could explain a gradual decline in the excess growth of health care spending.

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Health Care Thoughts: Small Business, Obamacare, Tax Credits

by Tom aka Rusty Rustbelt

Health Care Thoughts: Small Business, Obamacare, Tax Credits

I am still struggling to get my arms around whether or not small businesses will dump employees into health exchanges rather than continue health care coverage. And still looking at related issues.
So what to make of the AP tax credit story today?
There are arguments about design, about complexity, about the tilt toward low wage employers, but whatever arguments we like or dislike, the program isn’t working very well.
CPAs may well be baffled on how to advise clients, and may find themselves doing a lot of calculations that are for nought.
Any thoughts welcome. Reference materials follow:
AP Story:
IRS Form:
IRS Form Instructions:

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Health Care Thoughts: Notes from the Conference World

by Tom aka Rusty Rustbelt

Health Care Thoughts: Notes from the Conference World

So in the past 10 days I have spoken to and with health care executives from 40 + states about their current view of the health care world. A few observations:

Accountable Care Organizations (ACOs), a keystone of Obamacare, are being viewed with great skepticism and are generally being avoided, especially by physician groups.

Hospitals and physicians are talking more, within Stark limits, about cooperative ventures without going all the way to an ACO format.

Private insurers feel empowered by the feds to ratchet down rates.

Older physicians are watching retirement funding very closely (shock fact: 1/3 of Michigan physicians are 60 years or older).

The complexity of managing any sort of health care facility is going from severe to insane. Regulatory overload and revenue cycle problems are prominently mentioned.

It is a happy time for lawyers specializing in health care transactions and regulations.

The words “under siege” are used frequently.

(Damn: just got an letter that my eye doctor is retiring.)

Stay tuned, it is getting interesting.

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Health Care Thoughts: Counterproductive Regulations?

by Tom aka Rusty Rustbelt

Health Care Thoughts: Counterproductive Regulations?

Depakote (divalproex sodium) is an anti-seizure medication approved by the FDA to treat epilepsy, migraines. and bipolar mania.

Many physicians and long-term care nurses (including my favorite nurse) are absolutely convinced Depakote is effective in mitigating the impacts of agitated dementia. Depakote has also proved useful in treating other conditions.

Depakote is important in long-term care because many other effective psych medications are routinely denied to nursing home patients by another set of counterproductive regulations (a topic for another column).
Abbott Labs is now paying $1.6B in settlement of criminal and civil charges by the feds. The states will also get a small cut of the loot.

Abbott’s crime? Telling physicians what they already k new, Depakote was a very valuable medication for “off-label” (unapproved uses).

In the irony department, prescribing and administering Depakote for off-label uses is legal, and may be considered best practices in certain instances.

The feds are thumping their chests (via press releases) about protecting patients and consumers, which is clearly not true. Abbott is going to bail out of the legacy drug business.

There has to be a better way.

Note; Both the government officials and the media has mentioned that Depakote was marketed to nursing homes. Nursing homes can only administer medications ordered by physicians, so marketing to nursing homes would be a complete waste of time?.Abbott actually plead guilty to this crime, which they very likely did not commit, just to get this case settled. Weird.

(Rdan…off label prescription of drugs is less common now but still widespread.   It is also an issue worth thinking about in relation to government policy, and also to examine physician expertise and competence in such matters either ‘on label’ or ‘off label’ in the aggregate, as well as the issue of trade regulations under the heading of health and medicine.   There is also the question of how to handle ‘best practice’ and ‘evidence based’ treatment, often full of the politics of medicine in addition to government regulation.  My thoughts can be found in comments.)

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Health Care Thoughts: Employer PPACA Options, More Analysis

by Tom aka Rusty Rustbelt

Health Care Thoughts: Employer PPACA Options, More Analysis

One of the more suspenseful issues of PPACA (aka Obamacare) is the question of employer conduct in 2014 and after.

  Question is, will employers drop health insurance and punt workers into the state exchange system? Some new perspectives have been added to the debate. (Both assume PPACA will not be repealed or materially altered before 2014, an issue to be settled by the 2012 election).

The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) have weighed in on the question ( . (Warning, very long) This report tries to cover multiple options and scenarios, but I think it comes to a Goldilocks conclusion, not to hot and not too cold, but something in the middle of the range of possibilities.

A McKinsey and Company (MC) study ( reaches much different conclusions. McKinsey sees up to 30% of employers dropping employer–sponsored insurance (ESI), and perhaps more as awareness spreads and 2014 approaches. MC also suggests exploration of any number of employer options, some good for employees, some not.

My spin? If the labor market remains weak, and underemployment and limited employee options continue, more employers will drop ESI and employees will have little so say or do about it. There is a lot to digest here. More analysis required.

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Cross-conflicting regulations health facility edition

by Tom aka Rusty Rustbelt

Health care thoughts: Cross-conflicting regulations health facility edition

The most recent regulatory question I had trouble answering. The situation is as follows (the state will remain nameless):

State nursing home inspectors: certain antibiotics cannot be administered for certain conditions without a three day lab culture being done first; if the nursing home administers certain antibiotics without the three day culture the facility, administrator and nurses are subject to citations and penalties.

State physician licensing board: physicians can order the administration of medications including antibiotics within the standards of practice, failure to do so may be considered malpractice State nurse licensing board: a nurse is to follow the orders of a licensed physician (or PA or NP supervised by a licensed physician) unless the orders fall outside the standards of practice or treatment is contraindicated (medication conflict for example); failure to do so may be subject to disciplinary proceedings

State nursing home inspectors: failure to follow physician orders makes the facility, administrator and nurses subject to citations and penalties, and possible referral to various licensing boards Office of the Inspector General: treatments which violate state or federal regulations (even unintentionally) may make the billing for such treatments an act of fraud.

So, a physician orders an antibiotic for a patient to be started immediately, in violation of the three day rule…….. the correct answer is?

(We did get a solution, sorta, will share that later.)

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Cross-conflicting regulations, employer confusion

by Tom aka Rusty Rustbelt
Health care thoughts: Cross-conflicting regulations, employer confusion

Most of you will be familiar with the medication drowsiness warnings to the effect of “don’t operate machinery or heavy equipment, etc. etc.” This is from FDA regs. (

OSHA has extensive guidance about employee safety with manufacturing machinery, heavy equipment and driving and the impact of drowsiness. (

So it seemed sensible for employers to ask for voluntary disclosure by employees taking pain medications in these work environments, because OSHA puts the safety burden on the employers.

Not so fast! The EEOC ( is litigating cases claiming the request for medication information is a violation of the Americans with Disabilities Act. For a plain English summary of a recent case see The EEOC.

So pretend you are the employer.  Which regulation do you see as primary? Anyone have a workable solution?

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Health Care Thoughts: Physicians "Rationing" Health Care

by Tom aka Rusty Rustbelt

Health Care Thoughts: Physicians “Rationing” Health Care  
Nine physician panels have recommended less testing of patients presenting with various conditions and diseases and less treatment for some diagnosis.  

For Details: New York Times

Much of this is low hanging fruit, such as using less antibiotics for sinusitis. Some of this is old news, my physician altered his cardiac and prostate screening years ago

Other recommendations may be more controversial. In 2009 evidenced based recommendations to do less breast cancer screening were met with a firestorm of criticism. Current recommendations to do less cancer screening may meet a similar fate.
There will be another controversy, whether or not these guidelines would protect a physician using conservative treatment protocols from malpractice suits. In my experience, probably not.
Eventually payment bundling and new payment schemes may accomplish the “rationing” via a different route.
Stay tuned.

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