Monday, May 24, 2010

Is Scott Gottlieb lying?

The other day TheRaven was flying along and blew through a 15mph school zone at 35 miles an hour.

If we stop here, without looking at all the facts, you'd have typical Faux "news". A sliver of fact plucked from a complete picture and served up completely out of context, with every intent to deceive. TheRaven wonders how the irony of Rupert Murdoch turning a profit from the Tass business model is so overlooked.

Schools aren't in session where TheRaven lives. The Raven went flying on a Sunday, there wasn't a kid in sight and the posted speed limit for non-school hours is.....35 miles per hour. The complete picture is much different than the selected fact....blew through a 15mph school zone at 35 miles an hour...and the initial presentation sought to influence your opinion by suggesting irresponsible action ("blew through"). This simple example illustrates how the right-wing lies: one or two facts are used out of context to subvert understanding of government programs, laws and market forces. From anti-government lunatics to sophisticated lobbyists, regardless of subject and irrespective of rhetoric, the playbook doesn't vary.

Scott Gottlieb, a physician/fellow with the American Enterprise Institute, published an op-ed piece in the Wall Street Journal which is reproduced here, with commentary from TheRaven interspersed with Mr. Gottlieb's case study in disinformation.


No, You Can't Keep Your Health Plan

Insurers and doctors are already consolidating their businesses in the wake of ObamaCare's passage.

By Scott Gottlieb

President Obama guaranteed Americans that after health reform became law they could keep their insurance plans and their doctors. It's clear that this promise cannot be kept. Insurers and physicians are already reshaping their businesses as a result of Mr. Obama's plan.

TheRaven: deception at the outset. Gottlieb says that insurers and physicians are "reshaping their businesses" because of  "Mr. Obama's plan". The unstated presumption here is that said plan has taken away all other options from insurers and physicians leaving them only with "reshaping" that is somehow detrimental to patients. 
The health-reform law caps how much insurers can spend on expenses and take for profits. Starting next year, health plans will have a regulated "floor" on their medical-loss ratios, which is the amount of revenue they spend on medical claims. Insurers can only spend 20% of their premiums on running their plans if they offer policies directly to consumers or to small employers. The spending cap is 15% for policies sold to large employers.

TheRaven: there is nothing inherently wrong with requiring medical insurers to spend 80% of their premium intake on patients. There's also no reason why medical insurers can't turn a reasonable profit with 15%-20% of premium intake consigned to administrative overheads and profit. Insurers can deploy technology improvements to lower labor costs, reduce management layers, shrink executive bonuses and perks, relocate back-office operations to lower cost areas and stop wasting resources persecuting patients with, for example, automatic fraud reviews for patients diagnosed with cancer. There are plenty of high-volume, low-margin industries (grocery stores, mining, agricultural commodities) and each one has a few standout companies that earn above-average returns for their shareholders. These companies have common traits, such as competent management teams and an aversion to needless overheads, like fancy corporate headquarters. The law doesn't limit profitability, it limits the share of premium intake to be split between overhead expenses and profit at 20%. The rest is up to the insurer.

This regulation is going to have its biggest impact on insurance sold directly to consumers—what's referred to as the "individual market." These policies cost more to market. They also have higher medical costs, owing partly to selection by less healthy consumers. Finally, individual policies have high start-up costs. If insurers cannot spend more of their revenue getting plans on track, fewer new policies will be offered.

TheRaven: regarding patients with more complicated medical histories, Gottlieb omits a few considerations: 1) the cost of such patients will be spread over a larger insured population; 2) U.S. economic growth has been impinged by decades of falling workforce mobility, which has been caused in part by the increasing cost and unavailability of reasonable medical coverage. He's looking only at the cost side of the ledger. Increased availability of coverage will drive economic growth, which in turn will create more business for health insurers.

Why would policies sold over the Internet with a one-hour follow-up telephone interview have "high start-up costs"? The customer invests their own time filling out forms online and is then directed to a local lab for specimen collection. The insurance company basically waits for an inflow of digital information it doesn't have to pay for. The only real cost is that one-hour interview which, including all overheads, might cost $100-$200. Fairly small change to bring in policies with annual premiums of several thousand dollars.

This will hit Wellpoint, one of the biggest players in the individual market, particularly hard. The insurance company already has a strained relationship with the White House: Earlier this month Mr. Obama accused Wellpoint of systemically denying coverage to breast cancer patients, though the facts don't bear that out.
Restrictions on how insurers can spend money are compounded by simultaneous constraints on how they can manage their costs. Beginning in 2014, a new federal agency will standardize insurance benefits, placing minimum actuarial values on medical policies. There are also mandates forcing insurers to cover a lot of expensive primary-care services in full. At the same time, insurers are being blocked from raising premiums—for now by political jawboning, but the threat of legislative restrictions looms.

TheRaven: a doctor defending an insurance company wants us to believe that the President issued his opinion on Wellpoint without DHS first doing some due diligence? He then conflates "minimum actuarial values" with insurer's ability to control costs, which suggests that all medical cases are created equal. The old DRG system has more than 500 codes and there are approximately 9,000 ICD-9 codes, hardly a uniform picture. "Standardized insurance benefits" will lower aggregate costs, for example, by lowering insurer's legal expenses to defend their claims denials. "Expensive primary care services?" Exactly what is expensive about primary care, compared to specialties like radiology and cardiology? Gottlieb doesn't mention the cost reduction benefits of expanded primary care, for example, nutritional counseling for diabetics that reduces the incidence of expensive surgery.

One of the few remaining ways to manage expenses is to reduce the actual cost of the products. In health care, this means pushing providers to accept lower fees and reduce their use of costly services like radiology or other diagnostic testing. To implement this strategy, companies need to be able to exert more control over doctors. So insurers are trying to buy up medical clinics and doctor practices. Where they can't own providers outright, they'll maintain smaller "networks" of physicians that they will contract with so they can manage doctors more closely. That means even fewer choices for beneficiaries. Insurers hope that owning providers will enable health policies to offset the cost of the new regulations.

TheRaven:  Gottlieb doesn't mention the billions of dollars wasted each year on duplicated testing and he also fails to mention risk to patients from excessive use of medical imaging. Insurers can realize cost savings by cracking down on cowboy physicians who don't coordinate care on co-morbid patients.

Gottlieb argues that insurers will give up revenue for sake of control? Why would a for-profit corporation ever want to give up revenue, especially when the 80% payout rule will motivate insurers to find economies of scale? He refutes himself by mentioning insurers are trying to vertically integrate.  Vertical integration is typically motivated by potential economies of scale.

Doctors, meanwhile, are selling their practices to local hospitals. In 2005, doctors owned more than two-thirds of all medical practices. By next year, more than 60% of physicians will be salaried employees. About a third of those will be working for hospitals, according to the American Medical Association. A review of the open job searches held by one of the country's largest physician-recruiting firms shows that nearly 50% are for jobs in hospitals, up from about 25% five years ago.

Last month, a hospital I'm affiliated with outside of Manhattan sent a note to its physicians announcing a new subsidiary it's forming to buy up local medical practices. Nearby physicians are lining up to sell—and not just primary-care doctors, but highly paid specialists like orthopedic surgeons and neurologists. Similar developments are unfolding nationwide.

TheRaven: Gottlieb is saying here is that ObamaCare is causing market consolidation towards the care delivery model proven by Kaiser Permenente and the Mayo Clinic. These organizations deliver the same quality care as market leaders like UCLA at half the cost. When doctors work for the hospital, cowboy medicine is replaced by integrated care. Tests aren't needlessly repeated, costs are dramatically lowered and human health care isn't run as a physician annuity. Gottlieb would apparently prefer the model reported by Atul Gawande, in which a poor Texas town racked up the highest per-capita Medicare spending in the U.S. because each physician ran his own show.

Consolidated practices and salaried doctors will leave fewer options for patients and longer waiting times for routine appointments. Like the insurers, physicians are responding to the economic burdens of the president's plan in one of the few ways they're permitted to.

For physicians, the strains include higher operating costs. The Obama health plan puts expensive new mandates on doctors, such as a requirement to purchase IT systems and keep more records. Overhead costs already consume more than 60% of the revenue generated by an average medical practice, according to a 2007 survey by the Medical Group Management Association. At the same time, reimbursement under Medicare is falling. Some specialists, such as radiologists and cardiologists, will see their Medicare payments fall by more than 10% next year. Then there's the fact that medical malpractice premiums have risen by 10%-20% annually for specialists like surgeons, particularly in states that haven't passed liability reform.

The bottom line: Defensive business arrangements designed to blunt ObamaCare's economic impacts will mean less patient choice.

TheRaven: there is no evidence that Kaiser or Mayo patients experience longer waiting times. How does more efficient care delivery translate to higher operating costs? Is Gottlieb really complaining about the IT investment needed to provide integrated care? Physicians should benefit from lower malpractice insurance premiums and surrounded by hospital infrastructure, better use of their time. The traditional group practice doesn't scale. Gottlieb doesn't mention that U.S. physicians are better paid than in any other developed nation and that, thanks to the President's legislation,  they will remain well-compensated, as hospital employees.

Dr. Gottlieb, a former official at the Centers for Medicare and Medicaid Services, is a fellow at the American Enterprise Institute and a practicing internist. He's partner to a firm that invests in health-care companies.

TheRaven: Gottlieb is a contemptible shill  for insurance companies and old-school physician entitlement.

UPDATE 1: A New York Times piece reports results of a study indicating that reductions in medicare fees paid to doctors didn't reduce patient access to healthcare, as was previously feared. Such reductions had exactly the opposite effect. To maintain incomes, doctors treated more patients. Such response is precisely what we'd expect in a rational economic system and runs counter to Gottlieb's "thesis".

UPDATE 2: A LA Times article reports that Aetna is the 2nd of California's four big health insurer to withdraw a proposed double-digit rate hike because it had made "math errors". The other large health insurer suffering from an arithmetic deficit is Blue Cross Blue Shield. "This was a simple human error," said spokeswoman Anjanette Coplin, who did not elaborate. "As soon as we uncovered this mistake, we informed the California Department of Insurance."....."There were multiple errors … in the way [Aetna] annualized premiums and in the compounding of the rate increase," said state Insurance Department spokesman Darrel Ng. Perhaps the health insurance industry will blame their computational challenge on healthcare reform. People like Mr. Gottlieb are certainly willing to make that case.

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