Top Ten Health Policy Myths… and How to Debunk Them!

1. Top Ten Health Policy Myths… and How to Debunk Them! Cantankerous Grumblings of a Jaded Health Care Consultant February 15, 2006 By: David Allen (952/835-2009, dwallen@mn.rr.com)

2. Myth #10: The Grass is Greener Somewhere Else

3. Other Countries are having problems, too • Canada: Government financed health system being challenged • Great Britain: Efforts to improve quality and service by spending more is instead resulting in increased waste • China: Employer sponsored health coverage is leaving big gaps

4. Truth #10: The Grass is Brown Everywhere

5. Myth #9: Consumer-Driven Health Care Only Works for the Wealthy

6. Capitalism Works for All Income Levels • CMS “Independence Plus” Initiative • The Self-Determination project (19 states) • The Cash and Counseling project(3 states) • Research shows the poor benefit more from managing responsibility rather than simply being given handouts

7. Truth #9: Consumer-Driven Health Care Works for Every Predictable Health Expenditure

8. Myth #8: Medicare Part D was Designed to Give People Coverage for Drugs

9. Medicare Part D: A Response to a Major Gap in Medicare • Insurance lobby made sure that everything went through them, so they could take their cut • Pharmaceutical lobby made sure that the government didn’t allow price negotiations • Then, the government cobbled together Medicare Part D

10. Truth #8: Medicare Part D was Designed to Protect Insurance Companies and Pharmaceutical Companies (while also give Medicare eligibles drug coverage)

11. Myth #7: Health Plans have Administrative Costs of “Only” 8% to 10%

12. Administrative Expenses are HUGE • What Minnesota health plans report as administrative expenses are incomplete • Contributions to reserves, insurance agent commissions and costs, disease management, case management clearly excluded • Health education, utilization review, quality assurance are supposed to be counted as administrative, but ambiguities allow much to be excluded • Hospitals and physicians have huge costs associated with billing, complying with rules and waiting for payment – not counted

13. Truth #7: More than 30% of Health Care Expenditures are for Bureaucracy and Health Plans are More to Blame than Anyone

14. Myth #6: All Doctors and Hospitals Provide about the Same Quality

15. Quality Varies • Hernia surgery, recurrence rates: • 5% mode • 10% for some surgeons • 0.2% for some surgeons • Treatable colon cancer, 10-year survival varies from 20% to 63%, depending on surgeon • Cardiac bypass surgery, risk-adjusted death rates vary from 5% to <1%, depending on hospital and surgeon

16. Quality Varies • Anecdotally: • Tremendous differences in quality of hospitals • Substantial differences in the quality of physicians

17. Truth #6: There are Significant Variations in the Quality of Health Care

18. Myth #5: Pay-for-Performance is the Key to Improving Quality

19. Pay-for-Performance is Hot, but Unproven • Health Plans and Government identify PFP as key strategy for rewarding quality • Problems with PFP: • Controlling costs is a higher priority • Quality can’t be measured statistically • Quality varies by individual • Health plans don’t want informed patients

20. Truth #5: Information is the Key to Improving Quality

21. Myth #4: High Drug Prices are Necessary to Promote Innovation

22. The Drug Industry is Sick • Pharmaceutical industry historically one of America’s most profitable • Research and Development • Number of new drugs declining • Many new drugs are “me too” • Marketing • Distorts demand • Corrupts physicians and researchers

23. Truth #4: High Drug Prices are Necessary to Maintain Pharmaceutical Company Profits

24. Myth #3: Health Care Costs can be Reduced by Using Group Buying Leverage

25. Group Insurance is the Premise of Health Care Today • Big group insurance plans drive cost-shifting, not economy • Discounting payments to providers lead to provider consolidation • Profitability of big groups shift costs to small groups • Pawlenty’s “Smart Buy” Alliance

26. Truth #3: Group Purchasing is Not an Alternative to Market Competition

27. Myth #2: Consumer-Driven Health Care won’t work because 80% of health care costs are incurred by sickest 10% of patients

28. Shouldn’t Group all Health Care Expenditures Together • Predictable and Affordable (e.g. primary care) • Unpredictable and Affordable (e.g. minor trauma) • Predictable and Unaffordable (e.g. chronic conditions) • Unpredictable and Unaffordable (e.g. major trauma)

29. Truth #2: Consumer-Driven Health Care will work for most health care

30. Myth #1: Health care services are efficiently allocated

31. Examples of Misallocations • Physicians: RVU-based reimbursement distorts appropriate care • Hospitals: Reimbursement rewards high tech and patient volume, penalizes value • Health care coverage: disincentives for young and healthy

32. Truth #1: Health care services are grossly distorted

33. Three Principles for Debunking Health Care Myths

34. Principle #1: Insurance is optimal financing mechanism only if two conditions are met • Risk is unpredictable • Risk is unaffordable

35. Principle #2: Capitalism works better than socialism • Lack of free competition: • Distorts the health care market • Drives up costs • Capitalism also has negatives • Forces people to make choices • As Churchill said about Democracy…

36. Principle #3: The market must come before special interests • Our government is the hostage of special interests • Lobbyists have disproportionate influence • Campaign financing takes precedence over the best interests of the nation • The “establishment” naturally fights for the status quo

37. Principle #3: The market must come before special interests • Physicians need to be vocal and community leaders • Put competence ahead of ideology (“Not right, not left, but forward”) • Demand campaign finance reform