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In this podcast interview, Charlie Baker, Republican candidate for Governor of Massachusetts discusses his views on healthcare with healthcare business consultant David E. Williams, president of the Health Business Group. This is the first in a series of nine in-depth interviews with the candidates. For a complete schedule and an explanation of the questions visit the intro post.
Excerpts from the interview are below. The full transcript is available here.
Question 1: Does Chapter 224 represent the right approach to addressing rising health care costs? If not, where does it miss the mark and what would you do differently?
Baker expresses openness to this approach, but only if the Commission and administrators can address three main issues he sees as “fundamental to dealing with the rising cost of healthcare”:
- Lack of transparency regarding price and performance. Price variations are “known to many people who currently work in the system, but are not known to those actually receiving the service.”
- 224 must address the “…roughly 5% of the population who account for 50% of healthcare expenditures.” These are people managing multiple chronic illnesses, who end up “pinballing all over the healthcare system”.
- 224 has the potential: “to move us in the opposite direction” due to the “enormous amount of administrivia in healthcare.” The state should focus on working with the provider community to reduce the amount of “non value-added” paperwork and bureaucracy within the current system. “There’s a lot of money we’re chewing up that isn’t really adding very much to the patient experience.”
Question 2: Certain provider systems in Massachusetts are reimbursed significantly more than others for the same services even though there are virtually no differences in quality. Does the state have a part to play in addressing these disparities?
Baker believes the state already has the power to “make the system more transparent.” He thinks the state should be “a lot more aggressive” about making information publicly available.
He says providers that do a good job at offering a reasonable price for services should be “rewarded…and given the public recognition they deserve…”
Baker highlights disparities in reimbursements for the same services between Medicare, Medicaid, and private payers, which are known to those within the health care system, but not the general public. “The more sunshine the better. If everybody looks at [this issue] and says we’re fine with it, that’s one thing. But that ought to be something the people are made aware of.”
Question 3: More than a dozen state agencies have a role in health care. Is there an opportunity to consolidate or rationalize them?
Baker is critical of the state’s approach to addressing healthcare issues, saying: “…when we have a problem, we create a new agency.” He believes this approach has the effect of “fragmenting a lot of the decision-making, a lot of the data collection, and a lot of the regulatory activity across multiple agencies.”
Baker says that this leads to conflicting regulatory directions coming from multiple agencies.
He says “there is a big opportunity, to rationalize the way the state works with, and relates to, all the players in the system.”
Question 4: Government policy has encouraged adoption of electronic medical records. However many providers complain about the systems and the benefits have been slow to materialize. Should state government play a role in helping to realize the promise of health information technology?
Baker says the most important role the government can play in this area is requiring provider organizations to use interoperable technology for electronic medical records.
He says the trend has been to develop closed systems that work within providers, but “don’t connect and communicate with anybody else’s system.”
Baker states: “Electronic medical records need to be able to share data with other provider organizations”, and he believes that patients should not be “responsible for owning and carrying around their medical records from…provider to provider.”
Question 5: Hepatitis C is 3 or 4 times more common than HIV. New drugs that can cure the infection are coming on the market this year but they are very expensive. What role should the state play in ensuring that residents are tested, linked to care, and have access to these new medications?
Baker says: “it depends on facts that I don’t believe are currently available to us.” Once more information is collected the state can develop conclusions about best practices using models that have been proven to work in other areas.
He cites his experience in state government, especially the development of strong community-based networks to ensure universal access to vaccines for children. For Hepatitis C, he would “develop a delivery strategy that builds on some of the successes we’ve had with joint efforts with the provider community and the plans before.”
Question 6: There are multiple health care related ballot questions. What are your thoughts about them?
Baker says he believes the state “has capacity to create more transparency,” but indicates that he needs to spend more time to get a better understanding on what the state has the ability to accomplish, and whether a ballot question is the best route to address transparency in hospital financial reporting.
On nurse staffing ratios, Baker says “there’s nobody who likes, admires, and appreciates nurses more than me.” When he was in state government he pursued a number of initiatives to help nurses “significantly broaden their portfolio with respect to what they were able and capable of doing under existing and proposed state law and regulation.”
He states that before making a decision on the ballot question, he would seek input from the nursing community, so that his actions don’t “freeze in place the notion that we absolutely, positively, know and understand what it is we think nurses should be doing…”
Question 7: How did your experience as CEO of Harvard Pilgrim Health Care prepare you to be Governor?
Baker says his eight years working in state government and his ten years as CEO of Harvard Pilgrim Health Care give him unique qualifications.
He describes two major things he learned from his past work:
“You have to be able to create a culture of accountability. Set the bar high, hire really good people, and work with the people you have.” But he states that the most important move is to “come up with metrics and ways to monitor performance, and then expect people to perform and achieve to that level.”
The second thing is to create “a real culture of service.” This, he says, is why “Harvard Pilgrim went from receivership to number one in the country for member satisfaction when I was there.” Baker says: “I would like to bring that same maniacal approach to dramatically enhancing and improving the state’s ability to think about service and to deliver service on behalf of the people of the Commonwealth”.
Baker continues: “I would very much like to have the chance to turn Massachusetts into a national model around its ability to deliver a high quality service experience for everybody; people who are looking to get permits, people who are looking to get questions answered, people who are looking for guidance with respect to regulatory policy, and all the rest. “
Question 8: Much of the emphasis in health care reform is on adult patients. Is there a need for a specific focus on children’s health?
Baker says: “Massachusetts has done a good job of covering both its adults and its kids, but I worry about the impact these federal reform laws are going to have on the ability to continue the things that have worked here. And I have been disappointed by the inability of the Health Connector to get anything done, and to work for the people who need to rely on the Connector to get their coverage.”
He continues: “I’m a huge believer in expanding the capacity and support for primary care. That includes pediatrics, which I think is an area that has been neglected by the healthcare system over the course of the past decade or so.”
Question 9: Is there anything you’d like to add?
“I bring a unique blend of public and private sector experience to this job. I’ve been able to demonstrate my capacity to lead and to succeed as a manager and as a leader in healthcare over the course of the past 20 years. I think that’s a really important area for us as we go forward as a state, not just in terms of quality and cost, but also as a major employer and a major source of innovation and entrepreneurship in Massachusetts.”
”I’m a big believer in discipline and focus. I will bring an aggressive approach to making sure the state’s assets are well-managed, if people choose to give me the opportunity to serve as their Governor in 2015 and beyond.”
By health care business consultant David E. Williams, president of the Health Business Group.
This is the transcript of my recent podcast interview with Charlie Baker, Republican candidate for Governor of Massachusetts. Visit the original post to listen to the podcast and read a summary. This is part of a series of interviews with all nine candidates for Governor. The full schedule is available here.
David E. Williams: This is David Williams from The Health Business Blog. I’m speaking today with Charlie Baker, candidate for Governor. Charlie, thanks for joining today.
Charlie Baker: Happy to be here, Dave.
Williams: Charlie, does Chapter 224 represent the right approach to addressing rising health care costs? And if not, where would you say it misses the mark and what would you do differently?
Baker: I’ve been in and around the health care policy space for a lot of my professional career, having served as Secretary of Health and Human Services and as the CEO of Harvard Vanguard Medical Associates (a big provider group practice in Massachusetts), and CEO of Harvard Pilgrim for ten years. We took the company from receivership to number one in the country for member satisfaction and clinical effectiveness.
So this question about health care costs is one that I’ve been wrestling with for most of my career. I guess what I would say is that it depends. What I mean is there are certain core elements that are fundamental to dealing with the rising cost of health care. There’s a lot in Chapter 224, and if the folks who are involved in the work of the Commission that was established by this can address some of the issues I’m about to raise, then yes, I think it will be the right approach. But if they can’t or don’t, then I would expect that we’ll continue having some of the same problems we have had until now.
The first one – and it’s one I’ve talked about for 10 years – is the lack of transparency around price and performance in health care. The same service, provided to the same person, with the same outcome, at four or five different provider organizations in Massachusetts, under the current system can translate into prices that vary by as much as 200% or 300%. So a service that delivers the same result to the same person at one institution might cost $500 and then in a different institution will cost $2,000. That information is known to many of the people who currently work in the health care system, but it’s not known to many people who are actually receiving the service.
I’ve said for a long time –and frankly every study that’s been done has said the same thing– that if we don’t create a more transparent system where people have access to information around how people perform and how much they get paid for doing that work, we will never create the sense of urgency and focus that’s going to be required to deal with the cost problem. So that’s point number one.
Point number two – and this again is not a big secret to people who are in the health care world – 5% of the population spends about 50% of the money and 95% of the population spends about 50% of the money. And that’s just a function of the fact that most people don’t get sick that much, but [the ones that do have] a lot of health care costs.
The 5% that we’re talking about who spend half the money is typically very sick, many times managing multiple chronic illnesses of one type or another. We should think about a more proactive and patient-centric approach to serving that 5%. A number of studies and articles – several, by the way, by Atul Gawande who writes for The New Yorker and is a surgeon at Brigham and Women’s Hospital- have pointed out that because we don’t have a health care system that thinks differently about that very medically complex 5% and comes up with a different way of taking care of them, they end up pinballing all over the health care system and in many cases, getting sub-optimal care. They spend too much time in the ER, too many times on return visits, and they don’t get the care in the community that they need to stay healthy, to stay well and to stay out of the hospital.
If we really want to get serious about improving the quality of care for our sickest members of society, and at the same time do something about the rise in health care costs, we’ve got to come up with different solutions to deal with the 5% that spends 50% of the money.
The third thing is where 224 has the potential to move us in the opposite direction. There’s an enormous amount of administrivia in health care. One of the things Massachusetts should focus on is working with the provider community and with others to reduce the amount of non value-added paperwork and administrative bureaucracy that exists within the current system.
I can’t tell you how many people I’ve talked to day in and day out – both when I was at Harvard Pilgrim in my prior life, and today – who tell me they spend a lot of time on a lot of stuff that doesn’t improve the quality of care, reduce the cost of care, or deliver better outcomes to patients. We need to come up with a very focused and disciplined approach to dealing with that. There’s a lot of money we’re chewing up that isn’t really adding very much to the patient experience.
Williams: You partially answered this question for me in your first reply, when you mentioned the differences in rates that are paid to different providers. As you mentioned, there are certain provider systems that are reimbursed a lot more for the same services even if there’s no discernible difference in quality. You mentioned transparency as a solution. Are there roles that the state should play in addressing those disparities?
Baker: The state has the ability to make the system more transparent right now, based on all the legislation that’s been passed over the course of the past decade or so. The state should be a lot more aggressive about making that information publicly available. The public has the right to know. And frankly, providers that do a really good job at a really reasonable price should be rewarded for that and given the public recognition they deserve for coming up with smarter, better, and more effective ways to provide care.
I would also point to the significant difference in what Medicaid, Medicare and a lot of the private payers pay for services. Again, we’re back to the same service delivered in the same institution. If you’re a Medicaid patient, that provider gets paid one amount. If you’re a Medicare patient, they get paid another amount. And if you’re commercial patient, they get paid another amount. There’s a very significant difference between those three categories. You can have situations right now in health care where the commercially insured population, the folks with Blue Cross, Harvard Pilgrim, or Tufts, just to name three, are paying significantly above what the Medicaid program or the Medicare program are paying for what, in effect, is the same service.
It may be once everybody sees that information publicly available, they’ll be OK with it. But it’s a big issue on why the cost of health insurance on the private side keeps going up. And I think that, again, more sunshine is better here. If everybody looks at it and says they’re fine with it, that’s one thing. But that ought to be something the people are made aware of.
Williams: There are more than a dozen state agencies that have some role in health care. Is there an opportunity to consolidate or rationalize any of them?
Baker: I spent several years in state government as the Secretary of Health and Human Services and as the Secretary of Administration and Finance. I’m well aware of the number of different state agencies that are involved in the health care world. One of the concerns I’ve always had about the state’s approach is, when we have a problem, we create a new agency. Then, whether the problem gets solved or not, we’ve created a new agency, and as a result we end up fragmenting a lot of the decision-making and a lot of data collection and a lot of the regulatory activity across multiple agencies.
I’ve talked to plenty of providers over the years, and I experienced this myself when I was at Harvard Pilgrim, where we get regulatory directions from one part of the state government that runs directly in the opposite direction from the regulatory input we get from another part of the state government. So we literally find ourselves, at times, looking across the table at each other and saying, well, if we comply with this department’s regulation and the rule making we just got from them, then we’re going to be out of compliance with this other one.
There’s a big opportunity to rationalize the way the state works with, and relates to, all the players in the system. I think, in some ways that would be a really good thing for providers. It would be a really good thing for health plans. It would be a really good thing for other service providers. And by the way, I think it will be a really good thing for consumers, too.
Williams: Government policy –federal and state– has encouraged adoption of electronic medical records. But there are a lot of providers who complain about the systems and the benefits have been somewhat slow to materialize. Do you think that state government should play a role in helping to realize the potential of health information technology?
Baker: Massachusetts is already involved in a number of ways on this issue. My view on this [is informed by my experience] as a regulator, as the head of a physician group, as the former head of a health plan, and as somebody who spent several years serving on the board of Athenahealth (one of the better known Massachusetts-based of practice management information technology companies.)
The biggest thing the government can do in this space is to make sure that provider organizations are required and expected to use open-source technology, so that when some patient needs to go from one provider organization to another, their medical information can travel with them. [That way the patient] doesn’t need to be the one who is the primary owner and supplier of their medical record.
One of the major reasons people wanted to create electronic medical records in is so that the clinician community would have better access to data at the point they actually have to make decisions about providing care to people. Over the course of the past ten years or so, a lot of the growth in electronic medical records has been in what I would call closed systems, where people build electronic medical records that work only for the doctors and the providers within their system, but don’t connect and communicate with anybody else’s system.
Patients don’t always stay within the same network to access the services and the care that they receive. One of the most important things the government can do is to say, “you know, If you’re going to have electronic medical records, we think that’s great. But that electronic medical record needs to be able to share data with other provider organizations.” That way the patients don’t continue to believe that they have to be responsible for owning and carrying around their medical records from place to place, from provider to provider, and doc to doc.
Williams: Charlie, Hepatitis C is three or four times more common than HIV. There are new drugs that can cure the infection that are coming on the market in 2014, but they’re quite expensive. What role should the state play in ensuring that Massachusetts residents are tested and linked to care and that they have access to these new medications?
Baker: The answer on this is one, and I don’t mean to sound political, is it depends. I think back on the way Massachusetts – and we did some of this when I was in state government – dealt with vaccines for kids, and worked with schools and with health plans and through the Department of Public Health with some of the folks that manufactured the vaccines for kids. We put in place a pretty strong and solid community-based network to make sure that they had universal vaccinations in Massachusetts.
The answer depends a little bit on facts that I don’t believe are currently available to us. What I would like to do is collect more data around the facts, and as we start to develop a sense about what best practice is here, use a model that’s similar to the one we used before in some of these other areas. [This] involves providing the community with the plans through the state, probably through the Department of Public Health, then developing a delivery strategy that builds on some of the successes we’ve had with joint efforts with the provider community and the plans before.
Williams: Health care is an issue on the campaign and on the ballot. Not only will the voters need to choose different candidates, but also there are some health care-related ballot questions. I’m wondering if you have any views on those questions.
Baker: Well, obviously, in the first question, I think the folks in your audience should certainly give me a good hard look on the first question, with respect to whom they should vote for for Governor. I’m assuming the two ballot questions you’re talking about, one is the financial reporting question and the other one is on staffing ratios?
Williams: That’s right.
Baker: OK. On the first one, I need to do a little more homework on what I believe the state currently has the ability to do with respect to transparency. I know the state has the ability to do more on price and performance than they’ve done, just based on conversations I’ve had with people in the legal community, and also folks who work in and around state government and the provider community.
I absolutely believe that the state has capacity to create more transparency around that than they’re currently doing. I would like to spend a little time to get a better understanding about what I believe the state has the ability to do with respect to transparency, and around some of these other issues around financial reporting and the like, before I make a call on whether or not we need to go down the route of the ballot question to do this. I think the state may have the ability right now to make a lot of this information available. So, I would like to spend a little bit of time figuring that one out.
On the nurse staffing question, having been on the provider side and on the plan side, and having worked closely with the nursing community in my job when I was in state government as well, there’s nobody who likes, and admires, and appreciates nurses more than me. When I was in state government, we pursued a number of initiatives to broaden the authority and the ability of nurses to do different things. That was important, because in many cases they had the training and the ability to significantly broaden their portfolio with respect to what they were able and capable of doing under existing and proposed state law and regulation.
I would just want to make sure that whatever we’re doing, here on this ratio question doesn’t freeze in place the notion that we absolutely, positively, know and understand what it is we think nurses should be doing.. I want to talk to some of the folks that I know in the nursing community about that before I sign off on that question as well.
My long story short here is I’m going to give both of these a “maybe.” But I have some homework to do here and obviously there’s several months to go before we vote on this. I assume I’ll have another chance to talk about it.
Williams: Clearly, your views on health care and these questions we have discussed are informed by your two-plus decades of experience in health care. Are there any specific things that you would point to that you learned from running Harvard Pilgrim that would be useful to you as Governor?
Baker: I think it’s bigger than that, Dave. Having spent eight years working in state government in Bill Weld’s and Paul Cellucci’s cabinets, combining that with the fact that I did spend ten years as CEO of Harvard Pilgrim, I think that gives me a unique ability to think about leadership as a major player in the public sector and the private sector.
I would say there are two big things that I learned at Harvard Pilgrim that I believe can be incorporated into my role as Chief Executive of the Commonwealth. Number one: you have to be able to create a culture of accountability. Set the bar high, hire really good people, work with the people that you have. But, come up with metrics and ways to monitor performance, and then expect people to perform and achieve to that level.
One of the things I used to say to people all the time when I was in state government and when I was at Harvard Pilgrim, was that I don’t care how good your plan sounds, I don’t care how good your plan looks on paper. If you don’t execute, if we don’t execute on that plan, that plan will not succeed. One of the things I can bring to this job is a tremendous appreciation and understanding about how important it is to follow through and execute on your plans and your objectives. That is not something that happens by accident. That’s something that happens by being somebody who sets the bar high and cheerleads for folks when it’s appropriate to cheerlead, but it’s also known by the team and by folks in the organization that I’m somebody who will hold people accountable and will expect them to perform.
The second thing: Harvard Pilgrim as you know, went from receivership to number one in the country for member satisfaction when I was there. We created a real culture of service in that organization. People got up every day and went to work believing that it was important that we figure out a smarter, better, more effective way to reduce errors and to enhance the performance of our interactions with our customers, with providers, with docs, with pharmacies, with everybody we did business with. I would like to bring that same maniacal approach to dramatically enhancing and improving the state’s ability to think about service and to deliver service on behalf of the people of the Commonwealth.
We leveraged technology, we used best practices and we learned a lot from one another, so that over the course of the time I was there, we went from being not very good on the service piece, to being better than everybody else. I would very much like to have the chance to turn Massachusetts into a national model around its ability to deliver a high-quality service experience for everybody; people who are looking to get permits, people who are looking to get questions answered, people who are looking for guidance with respect to regulatory policy, and all the rest.
Williams: Charlie, much of the emphasis in health care reform is on adult patients. Is there a need for a specific focus on children’s health?
Baker: The state of Massachusetts had done a terrific job over the years in expanding health care coverage for adults and children. We were one of the first states to create a children’s health plan. When I worked in the Weld and Cellucci administrations we continued to grow and expand that program for kids and I think we were way ahead of the rest of the country, if I recall correctly, in terms of actually getting kids signed up not just for that program but also for Medicaid.
Massachusetts has done a good job of covering both its adults and its kids, but I worry about the impact these federal reform laws are going to have on the ability to continue the things that have worked here. I have been disappointed by the inability of the Health Connector to get anything done, and to work for the people who need to rely on the Connector to get their coverage. I’ve actually talked to people who have kids, who have issues, who still don’t have health care coverage. One guy called me up and I talked to him about it. He said, “What should I do? I have to fill this prescription for my kid. It’s 90 bucks. What do you think I should do?”
In some ways we have tremendous work we need to do to make sure that Massachusetts can get back to doing what works here in Massachusetts, not just for adults but also for kids.
The other thing is I’m a huge believer in expanding the capacity and support for primary care. That includes pediatrics, which I think is an area that has been neglected by the health care system over the course of the past decade or so. I think that’s absolutely part of the answer. It’s not just internal medicine and behavioral health. When I talk about primary care, I’m also talking about pediatrics. I think we need to make a big investment there as well.
Williams: Charlie, thank you for answering all of my specific questions here about health care. Is there anything else that you’d like to add before we wrap up?
Baker: David, I would say that I think I bring a unique blend of public and private sector experience to this job. I think I’ve been able to demonstrate my capacity to lead and to succeed as a manager and as a leader in health care space over the course of the past 20 years. I think that’s a really important area for us as we go forward as a state, not just in terms of quality and cost, but also as a major employer and a major source of innovation and entrepreneurship in Massachusetts.
The other thing I would just point out, I’m a big believer in discipline and focus. I don’t think anybody will bring a more aggressive approach to making sure the state’s books and assets are well-managed than I will if I’m successful and people choose to give me the opportunity to serve as their Governor in 2015 and beyond.
Williams: Charlie Baker, candidate for Governor. Thank you very much for your time today.
Looking forward to seeing you.
By health care business consultant David E. Williams, president of the Health Business Group.
Massachusetts voters deserve a substantive, competitive campaign for Governor this year. I have decided to do my part to foster a productive debate by conducting one-on-one interviews with each of the nine candidates on health care issues. Most of the candidates are well known in the health care world but even those with non-health care backgrounds have studied the issues and have credible ideas.
I asked each candidate the same set of questions. The questions (at the bottom of this post) span a wide variety of topics: health care reform, cost containment, hospital market dynamics, health information technology, children’s health and public health. I sent the questions to the candidates a couple days in advance to give everyone the opportunity to think through their responses. As you listen to the interviews and read the transcripts and summaries I think you’ll develop a good sense of where each candidate stands.
I’ll start the series with the two Republicans, move on to the two independents, and conclude with the five Democrats. I’ll add hyperlinks to this post as the interviews are posted.
If you don’t care about (or actively disdain) Massachusetts politics, don’t worry! I’ll continue posting on other topics in between interviews. This week I’m at #HIMSS14 as an official social media ambassador, so look for some posts on health care IT from Orlando as well.
Here’s the calendar with links as they are posted:
- Charlie Baker (Republican), February 25
- Mark Fisher (Republican/Tea Party), February 27
- Evan Falchuk (United Independent Party), March 2
- Jeff McCormick (Independent), March 4
- Don Berwick (Democrat), March 5
- Martha Coakley (Democrat), March 6
- Joe Avellone (Democrat), March 9
- Steve Grossman (Democrat), March 11
- Juliette Kayyem (Democrat), March 13
- Analysis of the candidates’ positions, March 18
These are the questions I posed to each candidate:
- Does Chapter 224 represent the right approach to addressing rising health care costs? If not, where does it miss the mark and what would you do differently?
- Certain provider systems in Massachusetts are reimbursed significantly more than others for the same services even though there are virtually no differences in quality. Does the state have a part to play in addressing these disparities?
- More than a dozen state agencies have a role in health care. Is there an opportunity to consolidate or rationalize them?
- Government policy has encouraged adoption of electronic medical records. However many providers complain about the systems and the benefits have been slow to materialize. Should state government play a role in helping to realize the promise of health information technology?
- Hepatitis C is 3 or 4 times more common than HIV. New drugs that can cure the infection are coming on the market this year but they are very expensive. What role should the state play in ensuring that residents are tested, linked to care, and have access to these new medications?
- There are multiple health care related ballot questions. What are your thoughts about them?
- How has your experience as [__________] prepared you to be Governor? [Note: I personalized this one based on each candidate’s background]
- Much of the emphasis in health care reform is on adult patients. Is there a need for a specific focus on children’s health?
- Is there anything you’d like to add?
I hope you enjoy the interview series and I look forward to hearing your feedback.
By health care business consultant David E. Williams, president of the Health Business Group.
“Repeal and replace” has been the mantra of Affordable Care Act/ObamaCare opponents almost since ObamaCare. Although the “repeal” part has been tried many times in the House, very little serious attention has been paid to the “replace” part. The recent proposal by Republican Senators Orrin Hatch, Tom Coburn and Richard Burr is still couched in “repeal and replace” terms, but the actual contents of The Patient Choice, Affordability, Responsibility, and Empowerment Act are best described as an effort to retain much of ObamaCare –including changes to Medicare, bans on insurance coverage caps, coverage for children up to age 26 and so on.
There are all sorts of things in this proposal that I don’t like, but in the interest of spurring constructive dialogue to actually improve the Affordable Care Act I will highlight a couple of provisions that I think are improvements.
The first one is in Title 2, Section 201, which calls for allowing insurers to charge older people up to 5x what they charge younger people.
The second is Title 6, Section 601, which “caps the tax exclusion for employee’s health coverage at 65 percent of an average plan’s costs.” In other words, it limits the size of the tax deduction for employer-provided health insurance.
To reinforce my “retain and improve” label, keep in mind that both of these provisions are essentially tweaks to the ACA. The ACA limits insurers to charging 3x the premium for older v. younger people and the so-called “Cadillac Tax” also limits the deductibility of expensive plans.
In any case, here why I like these two provisions:
- Older people already get a very good deal from the government. Medicare represents a significant transfer from the working age population to those who are older. While it’s true that people pay into Medicare while working, the amount they pay comes nowhere near the actual costs of the program. It’s a cruel irony that there are many taxpayers without health insurance who pay taxes that subsidize older people on Medicare. The Affordable Care Act exacerbates the transfer from young to old by effectively making younger people overpay for insurance and giving older people a subsidy. The Republican proposal improves intergenerational equity and also helps stabilize the insurance market by bringing the ratio into line with the actual difference in cost.
- Providing a tax deduction for health insurance provides an incentive to spend more on health insurance and less on wages. It also represents an unfair advantage for those who get insurance through their work rather than on the individual market. I’m in favor of phasing out the deduction completely over time. This proposal from the GOP does a better job than ObamaCare of reducing the deduction
What do you think? Do you agree with the “retain and improve” label? Are there other things you like about the new proposal? Leave a comment on the blog or Twitter @HealthBizBlog
By David E. Williams of the Health Business Group
If you’re looking for a roundup of top posts on health care policy, jump over to HealthInsurance.org for the latest edition of the Health Wonk Review blog carnival.
CVS’s decision to stop selling cigarettes is a smart one. Cigarette sales are incompatible with the company’s positioning as a health care provider. With the reduction of smoking rates, growing restrictions on where people can smoke, and increasing numbers of localities banning cigarette sales in drug stores it will probably make business sense over time as well.
I’ve been surprised that so much of the commentary on CVS’s decision has focused on what else the company should stop selling. Candy, gum and soda are bad for you, too, so maybe CVS should stop selling that. And the list goes on from there –maybe some of their toys are dangerous, for example.
Asking what else CVS should stop selling is asking the wrong question. Cigarettes cause an order of magnitude more harm than those other categories and are more addictive. That’s a good reason to stop selling smokes without having to stop selling other things that aren’t 100 percent healthy.
I’d like to see a bigger emphasis on reducing the availability of cigarettes more broadly and making them more expensive.
Cigarette taxes vary wildly by state. Missouri is the lowest at $0.17 per pack and New York is the highest at $4.35. (New York City tacks on an additional $1.50.) The federal tax is $1.01 and some places add other taxes including state and local sales tax. The average retail price for cigarettes is about $6, so tax represents a big part of the price.
These big differences provide a major incentive for smuggling. Although no one knows exactly what percentage of cigarettes are smuggled, it’s a lot.
Indian reservations are another source of low-tax cigarettes. High tax states like New York have seen considerable friction as non-Indians have sought out on-reservation stores for bargain prices.
The effects can be insidious. A friend told me recently about a public housing project in his area where a man goes door to door selling cigarettes he obtains cheaply on a nearby reservation. If the price were higher the rate of smoking in this price sensitive population would be likely to decline.
I’m not proposing a specific mechanism to address these challenges, but I would like to see the low tax states raise their tax rates, more enforcement effort devoted to stopping interstate smuggling, and more aggressive action to reduce the availability of reservation cigarettes. Although this will never happen, one approach could be fore the federal government to charge a tax of $6 minus whatever the states charge. That would provide an incentive for every state to raise the tax to a uniform, high amount.
Taxi service in the Boston metro area is pretty bad. Cabs are still booked by phone. The dispatcher lacks caller ID so the street address and name have to be dictated. Cabs often show up late or to the wrong street. In speaking with cabbies over the years I’ve learned that one of the problems is that dispatchers play favorites, in particular by awarding jobs to those drivers who pay them bribes. One of the results of that is poor service for customers who are not always sent the most convenient cabs. I’m not the expert on corruption in the cab business but you can read more about it in the Boston Globe if you don’t believe me.
So I’m grateful for the Uber service, which provides a more convenient, less expensive service that in my experience has also been more reliable and friendlier than the taxi alternative. (If you don’t know, Uber is a smartphone app that allows passengers to request private cars, cabs, SUVs or black cars and to pay automatically.) Interestingly –and not surprisingly to me– I am encountering UberX drivers who are former taxi drivers for the taxi companies in my town. When I ask them what they like about Uber they mention the ability to determine their own hours –but when I push them a little more they open up about the lack of corruption as another reason to participate.
Now, not every one is so sanguine about Uber. (See Why Does Uber Suck Now?) for a different take by one of my neighbors. I agree that Uber staff have been a bit sleazy, at least in New York, and I’m sure that experience with drivers will be variable. But I don’t object at all to surge pricing. As long as it’s disclosed it should bring more cars on the road when there’s demand for them. (You can always take a cab if you don’t like it.)
At least for now, Uber is giving out its venture capitalists’ money to build up the business. If you use my invite code: psx4h to join Uber you’ll get a $20 credit and so will I.
If you’ve read all the way to this point and are wondering about the connection to health care, I’m sorry to say there isn’t one.
By David E. Williams of the Health Business Group
The latest edition of the Health Wonk Review blog carnival is up at Wright on Health.
For the past couple of decades antibiotics have generally been a low margin, low revenue business that big pharma has stayed away from. Lack of new drug development activity combined with an increase in antibiotic resistance and the rise of “superbugs” are leading us rapidly to a frightening place where we lack effective drugs to stop many dangerous infections.
A Wall Street Journal article (Drug makers tiptoe back into antibiotic R&D) provides the welcome news that drug makers are starting to invest in this area again. One reason: they are hopeful that when the new products get to market there will be a greater willingness to pay than there has been historically. Antibiotics can have a big payoff in the form of improved quality and length of life and avoided medical costs. Curing an infection in one person can also prevent others from getting it.
The article speculates about reimbursement from health plans and whether big insurance companies will be willing to pay more for new antibiotics than they have for old ones. The answer may be yes, but I’m not sure it’s the relevant question. I’m reasonably optimistic that in the new world of global capitation, accountable care organizations, and other methods for placing risk on providers that the providers themselves will be willing to pay because it will be a net positive for them financially.
There’s also a brief mention of introducing a licensing model for drugs based on number of patients and indications rather than quantity of product. I think that’s a great idea and have written about it in the past.
By David E. Williams of the Health Business Group.