Despite evidence that changes to Medicare are necessary to solve our debt crisis, most people are opposed to altering the program.  How are we going to move forward in fixing our very serious financial situation if most people are against changing a key element of the problem? Let’s take a look at the situation and the thinking behind these opinions.

Last year the U.S. deficit, the amount that had to be borrowed to cover 2010 expenses, was a whopping $1.3 trillion.  This year’s is close behind.  The U.S. debt, all money we owe from previous years’ deficits, is $14.6 trillion.   What’s scary is this amounts to more than our annual Gross Domestic Product (GDP) which is what our country produces, and that compares to the likes of bankrupt Greece, Spain, and Italy!  So what does all this have to do with Medicare?

Last December, the President’s Debt Commission identified health care entitlements as our single biggest fiscal problem.  Looking at current US expense totals, Medicare and Medicaid followed by Social Security and Defense are by far the largest expenditures.  But it is Medicare that is growing the fastest, 7% per year, twice the growth of overall federal spending.  Unless checked, it will double from $500 billion to $1 Trillion in 10 years, an unsustainable amount.  This is why Medicare has become the focus of attention.

The fact that Medicare’s rapidly rising costs were not covered in July’s heated budget discussions was cited by Standard and Poors as one of the major reasons for the unprecedented down-grading of U.S. credit.  Ben Bernanke, Federal Reserve Chairman,  warned that unless we address this problem the world will no longer be willing to fund our debt.

Despite the earlier warning of the Debt Commission and, now the S&P downgrade, polls show people consistently oppose changes to Medicare.   While a Kaiser Family Foundation poll revealed that 2/3 of Americans are ‘very concerned’ about the size of the federal budget, 57% of the same people want no reduction to Medicare.  Only 30% of those polled support even minor reductions.  Incredibly, of self-identified Tea Partiers, a group centered on reducing the debt, 7 of 10, in a Marist poll, opposed cuts to Medicare.

People were asked in a Wall Street Journal/NBC News survey if they thought cuts to Medicare were necessary to reduce the deficit.  Only 18% said yes, while 54% said no.  The rest “didn’t know.”  There seems to be a denial that Medicare, if it continues as it is now, can bankrupt the country:  The failure to recognize the central role Medicare plays in our budget predicament is  making our long term debt picture bleak.  Why aren’t people seeing the seriousness of the situation?

I think there is a variety of explanations to account for this.  One is the alleged existence of a Medicare trust fund in which workers’ contributions have been amassed and which will  cover Medicare expenses for decades to come.  For years, various commentators have countered concerns about Medicare viability with this fallacy.   There is a Medicare Hospital Insurance Trust Fund; but it is a fund in name only.

I remember talking with my late mother-in-law about this years ago.  She was stunned when I explained that her contributions were not being saved up but shoveled into the government general fund and spent.  “What will happen when there’s not enough?”  she asked.  What indeed!   Now, as reported in the 2011 Trust Fund Actuarial report, money paid into the fund by today’s workers no longer covers the cost of ensuring the current enrollees.  Not surprisingly, talk about the trust fund reserve has retreated in the media.  In the meantime, however, many people believe their Medicare is safe; so why change?

Many other people feel, instead of cutting Medicare, taxes on the rich should be used to cover the budget gap.  By a ratio of 2 to 1,  people surveyed in a McClatchy/Marist poll believe higher taxes on those making $250,000 and up should be used to fill the budget gap.  But this won’t solve the problem.  In 2008, the entire taxable income of everyone earning over $100,000 was $1.582 trillion.  A tax rate of 100%  would barely cover just one year’s deficit.  Even taxing millionaires by 50% while simultaneously eliminating all loopholes and deductions would reduce the deficit by only 8% and the debt by 1%.

For many, the most basic visceral reason Medicare changes should not be considered is a moral one: It doesn’t seem right to have frail old people without many resources fending for themselves in their sunset years.  However, that picture may be flawed.   It’s true that in 1959 35% of the population 65 and over lived below the poverty line; but today it’s 9.7%.  Older people today, in fact, are more prosperous than any previous generation in history.  One half the nation’s wealth is owned by people 55 and older.

Perhaps the root of the debt problem for all of us is that we can’t fully conceptualize just how big our debt problem is and, consequently, why more consequential measures are needed to fix it. This hit home to me this morning, reading a magazine commentary about the phrase, “millionaires and billionaires‘, being taxed.  The point taken was not about whether they should be taxed or not but how inappropriate it was to lump them together.  A person with a billion dollars is literally a thousand times richer than someone with a million.  In scale, this is like comparing someone who has $10,000 in the bank with someone who has $10 million socked away.  No comparison!  It indicates to me that even our country’s leaders have no idea of how much money we’re talking about here.  And if a billion is that enormous, how much more enormous is a trillion?

To explain a trillion, CNN interviewed John Allen Paulos and asked him to verify a recent statement heard in the media that if you’d have to spend a million dollars a day from the day Jesus was born to the present before you’d spend a trillion.  The noted mathematician said that was incorrect: you’d only spend 3/4 of a trillion in that time frame!

No approach to reforming Medicare will be perfect or painless.  Nevertheless, before open and honest discussions on the subject can take place, all these misconceptions must be addressed by anyone serious about solving the problem.

Medicare is in the forefront of the discussions about our country’s budget deficits; but most people, including current beneficiaries, don’t really understand how it works.  Meanwhile, the media, along with politicians on all sides, seem intent on exploiting the public’s lack of knowledge to further their own ends.  To better understand the role Medicare plays in our economy and how it affects the national debt, I’ve put together what I consider an objective and accurate course in Medicare Basics.

First of all, there are actually four parts to Medicare: A, B ,C and D.  However, it’s just Medicare Parts A & B that are relevant in debt discussions.

Medicare Part A covers hospital, skilled nursing and hospice care.  With a few exceptions, anyone who is a citizen or permanent resident and had (or whose spouse had) Federal Insurance Contribution Act  (FICA) funds deducted from their wages for a combined total of 10 years qualifies to receive Part A coverage for life beginning at age 65.  It’s the Medicare portion of the FICA tax, 1.45% of  employee wages plus another 1.45%  contributed by employers, that finances Part A health coverage.

While Part A covers hospitalization costs, Medicare Part B covers doctors’ services and outpatient care.  With some exceptions, only people entitled to receive Part A benefits can enroll in the  Part B program.  Unlike Part A, Part B is optional and requires payment of a monthly premium. Up until 2007, everyone who chose Part B paid just 25% of what it cost the government to cover an individual under the plan.  Since then, the cost of Medicare Part B coverage is means-tested so that people with incomes higher than $85,000 or couples making more than $164,000 pay 30-80% of the average cost. This year, most people paid $96.40 for Part B coverage, while those with high incomes paid up to $384.60.  It also should be noted that 89% of seniors also buy private ‘gap’ or supplemental health insurance to cover what Medicare doesn’t.

The Medicare portion of FICA taxes collected from workers and their employers (for Part A) and the premiums paid for Part B are recorded in two separate accounts called, respectively,  the Hospital Insurance (HI) Trust Fund and the Supplemental Medical Insurance (SMI) Trust Fund.  The actual payment, however, goes into the Treasury along with all the other taxes and fees the government collects.  Meanwhile, the costs for both programs are, in reality, paid out of the general fund.  In this sense, the use of the term “trust fund” is a misnomer.

If, at the end of each financial period, the amount spent on Medicare Part A beneficiary hospital needs is less than what was collected in FICA taxes, that excess amount is recorded in the HI Trust account as loaned to the Treasury.  In effect, it’s an I.O.U. that the Treasury writes to the fund and “pays” interest on.   During the years when there were many more workers than retired seniors, this was a common occurrence.  In those years, if the government’s budget was balanced, the Treasury used this ‘borrowed’ money to pay off the national debt.  In the years that the budget was running a deficit, the ‘borrowed’ money was used to cover government expenses.

When the amount collected during the year fails to cover all the expenses incurred by  Medicare Part A beneficiaries, the missing amounts are recorded as loans repaid by the Treasury, lowering the I.O.U. total.  But, nothing really changes.  The cost of the program is still paid through the government’s general fund.  This is actually the case now!  From now on, as reported in the 2011 Trust Fund Actuarial Report,  the HI Trust Fund for Medicare Part A will never take in enough to cover the costs of the program.  The biggest reason for this, according to the Fund’s actuaries, is that the retiring of baby boomers, longer life spans and lower birthrates mean fewer people are paying into a system supporting increasingly larger numbers of  beneficiaries.

Meanwhile, misinformation about what this means is filling the media.  When the actuarial report came out, all the major media outlets announced that the Medicare fund will be ‘broke’ in 13 years.  What  is factually true is that the surplus that was collected over the years and ‘loaned’ to the Treasury to pay government bills will be used up by 2024.  USA Today even reported that seniors’ benefits would then be reduced.  Again, in reality, nothing will change.  The money to pay for Medicare Part A beneficiaries’ health care will come from the government’s general fund (or from government loans)  as it always has.  The deeper issue is that the Medicare Part A program has begun costing more than it’s taking in, and that is happening now, not 13 years from now, adding another factor to our record high annual deficits.

Medicare Part B’s trust fund, on the other hand,  can’t go broke since it is, by law, meant to be largely financed by the government.  But of course, that along with the HI Trust Fund situation, is precisely the reason our health care costs have been identified as our biggest budget challenge and a threat to our economic future.   Medicare has become a comfortable rite of passage for seniors but, whether people like it or not, changes are coming.  Some of these changes are already in the works.  Is it possible that people aren’t aware of them?  Opinion polls suggest as much.  We’ll take a look at what’s ahead for Medicare and its beneficiaries in our next blogs.

A recent poll of Massachusetts residents found that 63% of respondents were in favor of the universal health care initiative started there 5 years ago.  My son, Paul, cited these poll results in challenging my contention that the Massachusetts health care system is running into serious problems.  The issue is important because the Massachusetts health care reform law was used as a model for the Affordable Care Act (ACA); and as a consequence, it may provide a preview of  what’s ahead for the rest of us.

Like the ACA, the Massachusetts system

• – requires everyone to have insurance
• – provides for a highly regulated insurance exchange
• – subsidizes insurance costs to middle class workers making $64,000 per family of 4
• – increases the number of people receiving state-provided insurance (Medicaid)
• – dictates employers to provide health insurance or pay a penalty
• – demands that health insurers now accept patients regardless of their medical condition

Since the health care reform law was passed, less than 2% of Massachusetts residents lack health insurance, and 401,000 people have become newly insured, mostly through government programs or subsidies.  These achievements, however, are being overshadowed by serious setbacks and escalating problems.

To begin with, under the law, health insurance premiums have risen dramatically.  People who are not receiving subsidized medical insurance are paying 30% more than the U.S. average.  Furthermore, the per capita rate at which their premiums is rising significantly faster  than the U.S. rate.  In addition, those people insured through their employers are being asked to contribute more as well.

Doctor access is another an issue.  A 2011 Massachusetts Medical Society poll shows waiting periods for new patients to see a doctor have been steadily mounting since the new law went into effect.  It now takes 48 days to see an internist and 36 days for a family doctor.  In fact, Boston has the longest wait time to see a doctor in the nation

1 in 5 working-age adults say they have trouble even finding a doctor.  One reason, according to a 2011 Massachusetts Medical Society study is that 53% of primary care doctors are not accepting new patients. In 2007 that percentage was 30.  Another reason is that 62% of family primary care doctors and only 53% of internists will accept Mass Health (Medicaid).  If the person is covered by government-subsidized insurance, they’ll find only 56% family doctors and 43% internists will accept them.   It’s even worse for people employed by small businesses who purchase their health coverage through the Massachusetts insurance exchange.  Only 44% family doctors and 35% internists will accept their insurance.

The State of Massachusetts, itself, faces far greater problems.   Costs of the Massachusetts health care plan are rising faster than revenues.  In addition, the federal stimulus money used to finance health care reform is running out.  Other federal subsidies are soon to end as well.  In short, the current cost outlay is unsustainable.

As a result, Governor Deval Patrick called for sweeping changes to the health care system, which he put before the Massachusetts legislature.  In his proposal, fully 1/4 of Massachusetts residents would be switched into a new payment plan in which doctors and hospitals would be given a limited budget for each patient.  This would apply to all state employees, Medicaid recipients and all others covered with state-subsidized health insurance. Altogether, 1.7 million residents would be affected.  He also proposed increased co-payments and deductibles for people on the subsidized health plans.  Other changes include price controls and restrictions on almost all health care providers.   Legislative leaders said, in response, that it would take as much as 2 years to consider the plan because, in the words of one, “It would turn the health care system upside down.”  The governor said, however, that what he proposed “was not an option” and absolutely necessary given the state’s financial situation.

Considering the wait times, growing doctor shortage, the highest health care costs in the country and headlines forecasting financial disaster for the state, why do polls show majorities supporting the Massachusetts health care reform?  Let’s take a closer look at the poll’s results for some answers.

People making $30,000, qualifying them for state subsidized care, were most likely to say the new health care system helped them.  And, since government subsidized insurance is provided to people making up to $64,000, it is no surprise that people making more than $75,000 were more likely to say the law is hurting their health care costs.  Coincidentally, in 2010, the median income in Massachusetts was $64,057 meaning approximately half  of the population in the state qualifies for government subsidies.  With respect to the poll, it would be hard not to like something someone else is paying for.

In addition, regarding the state’s financial crisis, only 39% of the respondents recognized that the state cannot continue providing the benefits promised in the law.  Despite the headlines, the majority weren’t aware that major changes to their health care system were necessary.

So, Paul, that’s why I contend that, despite the poll results, the Massachusetts health reform effort is running into trouble.  And this should be a wake-up call for U.S. health care reform as well.  Given the facts that the Affordable Care Act provides more liberal subsidies, creates and expands more agencies and adds more regulations, I’d say we’re headed for even bigger trouble.

There’s good news and bad news for cancer patients.  New drugs more effective at targeting the deadliest forms of cancer are coming on-line.  That’s the good news.  The bad news is that no one can afford them

New drugs have always been relatively expensive.  It takes years of research and development, rigorous testing and a tedious Food and Drug Administration (FDA) approval process before they can even be tested on humans.  Successful drugs must be priced to cover not only their own cost of development but that of all the failures that preceded them.  Complex and expensive manufacturing processes can drive the cost still  higher.

Cancer, the big ‘C’, the most universally dreaded of all diseases, has defied all efforts to find a cure. One reason is that what we call cancer is really many individual diseases with distinct conditions and behaviors.  Until recently, patients faced a standard regime of chemotherapy, radiation and surgery, methods which gained mixed results and weakened the entire body.  Instead, the new drugs target specific forms of cancer by changing the cellular, chemical, or genetic environment that allow that particular type  to thrive.

Unlike earlier cancer treatments, however, many of these new developments benefit only a small subset of cancer patients.  Consequently, the tiny market and new technology propel the drug prices into the stratosphere costing $100,000 and more per treatment.  As a result, these new drugs will spike total spending on cancer drugs by an estimated 42% in the next 2 years!

Although Otis Brawley, chief medical officer for the American Cancer Society, refers to these new developments as the “next frontier”, he also cautions that they’re not cures. In fact, with a few exceptions, the new cancer drugs have but a marginal effect on most patients, extending lives a few weeks or months.  Provenge, a prostate cancer drug,  extends lives by an average of 4 months at a cost of  $93,000 per treatment. In treating colon cancer, Avastin, costs $100,000 and extends lives less than 5 months.  The few cases where  drugs do fulfill their promise fuel the hopes of the afflicted and result in a desperate demand that everyone be treated regardless of the cost.

These super-costly drugs put pressure on a medical delivery system already lacking any incentive to reduce costs.  People seldom directly pay for expensive treatments.  Someone else – an insurance company, the government or an assistance program – covers most of our medical costs so people rarely make medical choices based on cost.  Medicare, a major driver of health care costs in this country, is forbidden by law to consider cost in making coverage decisions.

As a result, our fee-for-service dominated health care system gives medical providers an incentive to administer expensive treatments.  Consequently, doctors don’t consider cost in prescribing treatments.  Dr. Eric Nadler, a researcher at Harvard Medical School, studied the attitudes of oncologists on this issue and found 80% of them would prescribe a drug costing up to $70,000 even when the patients life would be extended by no more than 2 months.  Finally, there is no incentive for drug companies to develop low cost drugs or drug delivery systems.  On the contrary, people are demanding cancer ‘cures’ and insurance companies and governments are pressured to pay whatever is being charged.  How can this situation be better managed?

Is government the answer?  With health care entitlements already accounting for most of our record breaking  deficits, it’s not probable.  That being said, many feel government is still our only possible solution.  Given high cost and limited resources, however, it’s obvious that not everyone wanting these drugs would get them.  Rationing, on some basis, would be called for.  Should it be based on ability to pay?  Probably not.  Almost everyone would qualify.  And, if only poor people were helped, we’d have tax payers paying for cancer drugs they themselves couldn’t have.

In Great Britain, where government is the answer, they use a formula based on longevity, quality of life, and comparable costs to determine what cancer treatments people should receive.  In considering the new oncology drugs, their National Institute for Health and Clinical Excellence (NICE) eliminated several of the most expensive ones because of their limited value relative to cost.

One study conducted by a team of bio-ethicists and health policy experts compared the British system with that of the U.S. and determined neither approach solved the problem of providing expensive drugs of limited value to people who are facing the end of their lives.  They admitted they had no answer.

During the last 2 weeks, I informally polled not only friends but others I encountered at the fitness center, in my doctor’s waiting room,  and at our neighborhood 4th of July planning meeting.  Respondents spanned the entire political spectrum.  Universally, people felt that patients and their families should be responsible for expensive treatments that offered short life extensions.  Many stated that death was a fact of life and it was wrong to expect others to pay to delay the inevitable.

If people had to pay for the drugs themselves, fewer people would elect to do so.  With fewer buyers, drug companies would have to find a way to lower prices or work harder to develop drugs with better results.  But with fewer buyers will drug companies still have the resources to push through to a real cure for cancer?  I’m guessing ‘yes’ but it might take a bit longer…..

As a provision of the Affordable Care Act (ACA),  adult children up to 26 years old can now be covered under their parents’ health insurance policies.  Is this a good thing?  Alan Katz, in a recent blog, called it a ‘relatively’ good thing and cited it as one of the most popular features of the ACA with more than 600,000 individuals taking advantage of it.  I, however, am uneasy about it.

The new law’s provision applies to any ‘child’ under the age of 26 whose parent is covered by health insurance that provides dependent coverage.  It doesn’t matter if the young adults are financially independent or on their parents’ tax return.  Moreover, it’s OK if  they are  married and even have children of their own.  And, unless the health plan has been ‘grandfathered’ (not changed in any respect since March 2010), young adults can be covered by their parents’ health insurance even if they are eligible for their own employer- provided health insurance.  On top of that, this particular benefit is not means tested.  It doesn’t matter if these adult ‘children’ can afford to buy their  own insurance.

So what’s not to like?  To start with, it’s not free.  The Department of Health and Human Services estimates a 1% increase every year until 2014 when uninsured people will be guaranteed insurance coverage through state insurance exchanges.  Most of the enrollment so far is taking place through self-insured employers who share the added expense with their employees.  It, therefore, becomes another factor in rising employer health benefit costs.  Because of this, some employers are eliminating dependent coverage.  One small business had so many 18-25 year olds drop their employee health insurance in favor of their parents’ that the average group age rose, making the insurance so expensive the business had to drop health coverage for the rest of its employees.

But, the real source of my unease with this provision is that it breeds a sense of entitlement and dependency to a new group,  young adults.  First of all, 25 year olds are not children.  They can vote, drink, and be drafted into combat.  Why would we treat them as children still dependent on their parents?   Traditionally, we bring our children up to be independent, to be responsible, and to work for what they need.  Entitlement means that if I need something, I’m entitled to get it without worrying about who ultimately has to pay for it.  Having others pick up the burden of providing one’s life necessities doesn’t make for responsible, self-reliant adults.

The justification given for adding this provision to the ACA is that many young adults are without insurance because they often work for small companies that don’t provide health coverage; or they have pre-existing conditions that make it difficult to get health insurance.  Some don’t make enough money to buy their own insurance.  However, government programs like Medicaid, already exist to cover financial hardship.  Another government initiative, the Pre-Existing Condition Insurance Plan, provides for state-wide special ‘pools’ for people who otherwise couldn’t get health insurance.  This new entitlement is unnecessary.

The problem is that once people have an entitlement, they won’t give it up no matter what the cost to others might be.  The best example of this is the public and political reaction to suggestions that Medicare must change.  Even though the facts are irrefutable that Medicare is a leading factor in our growing, record breaking national debt, seniors across the country, are against any measure that might threaten their entitlement.  Is the ACA making us a nation of dependents?

Rationing takes place when governments provide health care because everyone wants the best possible medical treatments, health care is expensive,  and resources are inevitably  limited.  Because the Affordable Care Act (ACA) greatly expands the role of government in providing health care, it’s no surprise that health care rationing will follow.  We’ve seen previously how the Independent Payment Advisory Board (IPAB) created by the ACA, will restrict available medical services by limiting what service providers will be paid.  Unfortunately,  IPAB isn’t the only rationing element in the ACA.  The Patient-Centered Outcomes Research Institute , (PCORI) is another entity to be concerned about.

PCORI is set up as a government sponsored organization that seeks to reduce medical costs by identifying medical practices it deems costly, ineffective, and unnecessary.  Comparative Effectiveness Research (CER), the process to be used to do this, involves research that evaluates competing medical treatments, procedures, devices, diagnostic tools, and drugs used to treat, manage and diagnosis medical conditions.  In effect, every option used to treat medical conditions will be evaluated for its effectiveness against every other possible option.   The results are to be made available to physicians, health care providers, patients, IT vendors, professional associations and, notably, Federal and private health insurance plans.

Doctors and other health care providers will, therefore, “be advised” of which treatments the Institute recommends.   First of all, using the CER method exclusively to determine medical treatment standards has been debated.  Secondly, is this really necessary?   The health care organizations already engaged in research are legion and include medical schools, teaching hospitals, disease-specific groups, medical specialty associations, and organizations like the Rand Corporation.  On top of that, government organizations such as the Federal Drug Administration and the Agency for Healthcare Research and Quality are also engaged in medical evaluations.

So, do we really need more research?   Not really.  Health care quality is not the heart of the issue here – it’s the cost of that quality.  Government experts, among them Donald Berwick,  the Administrator of the Centers of Medicare and Medicaid Services (CMS), see common practice and standard, shared solutions, the way to bring down the escalating cost of health care. (In fact, Berwick was named head of CMS when Congress was not in session because  his oft-quoted views supporting  health care rationing made his Congressional approval unlikely.)

The problem with imposing standard solutions on medical professionals is that health care isn’t a rote science.  If it was, physicians wouldn’t need 12 years of medical education.  They could just check the government database against the patient’s condition and follow the standard procedure.  We know that won’t work.  There are too many of us who don’t respond to common treatments and don’t have common symptoms.

During the rancorous Congressional health care reform debate, concerns were also raised over the similarities between the proposed PCORI and the British National Institute for Health and Clinical Excellence (NICE).  NICE controls costs by limiting what medical treatments are available to people using age, conditions, and cost, as well as effectiveness, as criteria.

To fend off these criticisms and ensure passage of the ACA, assurances that PCORI findings would not be used to mandate medical practice or insurance coverage involving age, conditions, or cost were added to Section 6301 of the bill.  However, this sub-section,  labeled “Limitations on Certain Uses of Comparative Clinical Effectiveness Research”, is a mass of contradictory legalese obfuscation.  Buried in what one critic labeled  “a rat’s nest of regulatory complexity”  is the admission that PCORI’s  findings, because they’re based on CER, can, indeed, be used to make Medicare  coverage determinations.

Given that insurance companies follow Medicare guidelines, PCORI standards are sure to affect all health insurance as well. Furthermore, mandating that insurance companies be made aware of the Institute’s findings is a veiled threat that covering non-compliant medical practices might be cause for lawsuits.  The same applies to physicians and other health care providers.

We’ve attained the medical gold standard with the highest cancer survival rate in the world.  This couldn’t have been done following PCORI standard practices and medical practitioners.  While we all recognize that health care costs need to be contained, we don’t want to lower the quality of our health care.  IPAB and PCORI are not the answer.

Other countries that provide health care for their citizens all use rationing of one sort or another to control costs.  In the last 2 years, laws have been passed in this country that greatly expand government’s role in providing health care.   Likewise, along with that legislation, agencies have been created to control costs by, in effect, rationing health care.

Several agencies have been charged with this task.  Among them are the Institute of Medicine (IOM), the Patient-Centered Outcomes Research Institute (PCORI), the Federal Coordinating Council for Comparative Effectiveness Research (FCCCER) and the Independent Payment Advisory Board (IPAB).

Until recently, these new agencies have escaped public attention and “Death Panel” headlines partly because they are in the beginning stages of formation.  However, President Obama called attention to IPAB in his recent budget address saying it was a key component in reigning in the cost of Medicare and bringing down the deficit.   Without giving any details, he then called on Congress to ‘strengthen’ the Board’s power.

From the earliest discussions of the health care reform legislation, IPAB was one of the most controversial portions.  Democrats as well as Republicans were against this particular part of the Affordable  Care Act (ACA) from the start.  Earlier this year a prominent Democrat, Rep. Allyson Schwartz (PA),  a health care reform champion, co-authored legislation repealing this provision of the health care reform bill.   After the president’s speech, she penned a letter to fellow Representatives, asking their support in not strengthening the board, as the President suggested, but getting rid of it altogether.

Someone giving Section 3403 in the ACA a quick scan , however, might judge IPAB relatively harmless.  IPAB is a 15 member panel appointed by the President. Its function is to ensure that the  Medicare cost growth rate compared to inflation (and later, GDP) doesn’t exceed certain measures. When it does, the Board must propose changes to Congress that will bring  those costs in line.  However,  IPAB  is prohibited from:

• ·    increasing taxes
• ·    changing benefits
• ·    increasing premiums
• ·    increasing cost sharing
• ·    rationing care
• ·    changing eligibility

One might stop there, conclude IPAB couldn’t do any damage, and go on to the next section. But wait, there’s more.  It’s not explicitly stated, but what the Board can do is reduce reimbursements to medical service providers.  Health care and senior advocates are alarmed, fearing this will result in rationing care.  This is happening now with Medicaid which pays physicians and hospitals less than what other insurers pay.  As a result, doctors are refusing to treat Medicaid patients, resulting in fewer available doctors, longer waits and, often, lesser quality care.  Hospital emergency rooms are filled with Medicaid patients unable to see a doctor in a reasonable amount of time.  Consequently,  frustrated Medicaid patients often forgo medical treatment altogether.  Thus, the cascading effect of low payments to health care providers results in rationing.  The fear is that this will happen to seniors under Medicare as well.  In fact, when called in to review this part of the ACA, the respected Chief Actuary of Medicare, Rick Foster, expressed this very concern.

But wait,  there’s more:  Normally government agencies make proposals to Congress and Congress, after deliberating, is free to accept or ignore them.  IPAB, however, has been given special powers.  Congress, if it disagrees with the Board,, must come up with cost cutting plans of their own that meet or exceed those of the Board’s.  Not only that, these must pass the Senate by a 3/5 majority.  In addition,  discussion and voting must be ‘fast-tracked’. This means the legislative process can’t exceed 30 hours.  If the House and Senate proposals disagree , they have only another 10 hours to reconcile their differences.  Unless Congress can pass countering legislation, the Board’s proposals will be implemented.    These conditions make it nearly impossible to challenge any IPAB proposal, effectively making IPAB an autonomous un-elected legislative body and stripping Congress of its authority over Medicare expenses.    Incredibly, the  ACA  also states that the Board’s proposals are exempt from judicial review!   Constitutional law experts, as well as members of Congress, see this as an executive branch take-over of  congressional and judicial branch functions.   Consequently,  a lawsuit challenging the constitutionality of  IPAB is winding its way now through the federal courts.

And still more: The health care reform law, passed by the 111th Congress, has put unprecedented obstacles to repealing this part of the ACA.  Both the House and Senate must pass such a resolution with a 3/5th majority; and no action can be taken before 2017, keeping future Congresses from making any changes.

The problem is IPAB isn’t the only government agency with a rationing function in our future.  And while IPAB affects mainly Medicare patients, there are other agencies that will affect us all.  We’ll look at these next.

Do people have a right to Health Care? Responses to our informal poll on the subject ranged from “No one has a right to health care”  to “It’s a basic human right for everyone.”  Most poll participants, however, felt certain conditions should be met before health care is provided.  If so, who determines what these are?

The question of who decides if and how much health care one gets, hit the headlines recently with the story of “Baby Joseph“.  Canadian health officials had ruled that 13 month old Joseph Maraachi, who was suffering from a rare neurological disease and required breathing apparatus, was in a vegetative state and had no chance of recovery.  They gave the parents just a few days to say their goodbyes and sign release papers allowing the medical staff to remove the child’s life support. The parents, instead, wanted the child’s immediate medical condition improved with a tracheotomy which, they felt, would allow them to care for him at home.  Canadian medical authorities, refused their request.  In desperation, the parents sought the help of U.S. medical facilities and was able to transport the child to a  St. Louis facility where the tracheotomy was performed.  The parents intend to return home and, with the aid of ventilators, keep their child alive as long as possible.

Who decided to terminate life support for the child in the first place?  It was Ontario’s Consent and Capacity Board.  News accounts referred to them as a “Death Panel” for their refusal to consider the parents’ wishes.  But the truth is, systems likened to “Death Panels” are inevitable wherever a government, such as Canada, is the sole provider of health care.

Every publicly supported health care system in the world has an organization responsible for defining what health care services can and cannot be covered by public funds.  In Great Britain, it’s the National Institute of Clinical and Health Excellence (NICE) that determines what procedures and circumstances are covered by Britain’s National Health Service.  Today, NICE is being reviewed for changes to its organization but, nonetheless, its rationing functions will remain.  NICE uses a formula based on the length and quality of life to determine whether a medical procedure is ‘worth’ the cost.    Looked at rationally, this might make sense but when it’s our life or a loved one’s that’s involved, it’s brutal.

This is, however, how decisions concerning money or valuable resources are made every day.  It’s the people who must pay for something who get to decide what and how much to buy based on whether it’s needed and affordable relative to other priorities.  The same holds true for health care.  For most working people, that’s their employer or themselves.  It’s the government who decides what Medicare covers for older people and it’s the government who makes the decisions for the poor through Medicaid.

Until recently, “Death Panels” isn’t something we equated with health care in the U.S.  However,  last fall, facing a $1billion budget shortfall, the governor of Arizona, Jan Brewer, announced, among other things, that organ transplants, specifically for heart, liver, lung,  and pancreas, would no longer be covered by Medicaid.   (Medicaid is the program funded jointly by states and the federal governments to provide health care for the poor and disabled.)  When the announcement was made, the charge of ‘Death Panels’ was hurled against the governor and the state legislature.  State health officials claimed, in defense, that the transplants did not significantly extend life expectancy.  Nevertheless, they are expensive.  The costs for heart, lung, and liver transplants are, respectively, $864,700, 496,500, and 529,900 for the first year providing a saving from not covering them at $4 million a year. Dr. Michael Shapiro, Chief of Organ Transplantation at a New Jersey medical center was critical of the Arizona decision ,  but admitted, “we can’t afford to pay for everything for everyone.”

The explosive growth of Medicaid costs was at the heart of their $1 billion deficit, according to the Governor, citing a 65% rise in 4 years and a 29% share of the state budget.  It should be noted that, although transplants are not mandated by Washington, most states cover them.  Also, just this week, the Arizona legislature and governor worked out cuts in other places, allowing organ transplants to be covered by Medicaid once again.

Arizona is not alone.  Many states are facing budget short-falls with rapidly rising costs of Medicaid.  Nevada, Illinois, Wisconsin, Nebraska, Colorado, South Dakota, Kentucky and Washington are among the states attempting various means to bring down the cost of Medicaid.  Given other critical priorities of education, security, public safety, and infrastructure, these are hard decisions to make.  Texas is cutting rates to medical providers: doctors, dentists, hospitals and clinics.  Faced with a 179m budget deficit, Florida is reducing services like therapy, transportation, personal assistance and job training.  Kentucky is requiring a medical approval process before allowing expensive new cancer drugs.  Who is making these decisions?

In each state, a group of people are charged with recommending how the funds available for Medicaid will be spent. In the state of Washington it’s the Health Technology Assessment Committee,  a group of 11 physicians.  They determine what medical procedures and devices will be used based on their cost and effectiveness.  Because cost is a factor in their decisions, they’ve been criticized and compared to Britain’s NICE.  It’s not surprising that the subject of “Death Panels” has come up here as well.

We’ve seen here how Medicaid,  the government’s health care system for the poor, uses types of “Death Panels” to  contain costs.  Is there any “Death Panels” in our future?   Although it’s been denied and derided, there’s evidence that there are.  We’ll look at that next.

Is there a right to health care?  Those that argued for a single-payer option during last year’s health care reform debates believe passionately that people do.  Opponents of the proposed legislation think just as strongly otherwise.  This accounts, to this day, for the deep divisions between those who are for and those against the Affordable Care Act.  In a CNN/Opinion Research Corporation poll conducted earlier this month and  exactly one year since the health care reform bill was signed into law — 37 percent of those surveyed said they supported the law, while 59 percent said they opposed it. In March 2010, those numbers were nearly identical, with 39 percent supporting it and 59 percent opposing it. What is the basis for peoples’ thinking on the subject and why the deep divisions?

Those who think people are entitled to health care find validation in the United Nations Declaration of Human Rights, a document signed by the U.S. in 1948.  Article 25 states  that everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including ……  medical care The International Covenant on Economic, Social, and Cultural Rights, a U.N. document affirmed by the U.S. in 1966, guarantees the right of everyone to the highest standard of health possible.  Since these are not formal treaties, Congress has never voted on them; and the U.S. remains one of the few, if not the only, developed nations that do not provide universal health coverage for its people.

Looking to the laws in the U.S., both sides of the argument cite The Declaration of Independence and The Constitution to support their position.  The Preamble to the Constitution declares  that we, the people, in forming a more perfect union must, among other things, promote the general welfare.  Proponents argue that health care is fundamental to a people’s welfare and, therefore, an inherent right.  In response, the opposition points out that ‘promote’ does not mean ‘provide’.

Then there’s The Declaration of Independence which states all men have an unalienable right to life.  Not providing health care, according to the rights advocates then, is denying people that right.  The opposing side, on the other hand, sees the liberty of citizens infringed upon when they are forced to provide health care for others.  The freedoms we’re granted in the Constitution, they say, don’t allow us to infringe on others’ freedoms.  As an example, they cite the fact that we can freely own firearms, but the government isn’t required to provide them. Rights people counter with the fact that even though education is not explicitly cited in the Constitution, it is necessary for our well being and, as a result, every community in the U.S. provides public schools.

Since I know people on both sides of the argument, I though I’d conduct my own ‘poll’.

Some were absolute in their opinion:
- “Access to health care is a human right.  It shouldn’t depend on someone’s financial resources.”
- “Life and death decisions should not depend on how much money you have.  If rich people can have organ transplants and expensive drugs, these should be available to poor people as well.”
- “There is no ‘right’ to health care.  People who’ve worked hard should not have to pay for others’ needs.  People will stop being responsible if they know someone else will take care of them.”
- “I don’t believe people owe others unrelated to them the right to healthcare.  I do, nevertheless, think that, voluntarily, it is the right thing to do.  Giving people, however needy, a blank healthcare check is not the way to go.”

But most of  the responses began with “it depends”.  For instance:
- “It depends on whether people have made healthy choices in their lives.  If their medical problems were caused by smoking or over-eating or drug abuse, I shouldn’t have to pay for them.”
- “It depends on whether they’re legal citizens.   Why should we pay for people who come here illegally?”
- “It depends on whether their condition is life threatening.  I shouldn’t have to pay for elective treatments like in vitro-fertilization.”
- “It depends on their situation.  How can you tell if they can’t afford it or really need it?   If something is free, people won’t respect it.”
- “It depends on how people get access to it.  If something is free and limitless, it gets overused.   Maybe an allowance system with catastrophic insurance to protect life savings would work better.”

Most people, it seems, want to help people in need, but they don’t want to write blank checks.  So, I’m thinking the better question to ask is “To What Extent Do People Have a Right to Health Care?”  Since arguing about the merits of the health care reform law is just going around in circles, why don’t we push politics aside for a moment, and address this underlying question instead?  That approach would more likely lead to the civility and compromise we crave on addressing this divisive law.   We might even solve our national health care problems.

According to the Congressional Budget Office’s latest 10 year budget projection, the accumulated federal deficits in 10 years will total over $7 trillion dollars.  Spending on health care alone will double in that time period.  That is why changes to Medicare and Medicaid, infamously untouchable in previous budget considerations, are finally on the table.  Incredibly, changes to the biggest expansion of government health entitlements, the Patient Protection and Affordable Care Act, are not.

Why not?  Because it was passed as a cost saver.  We know, however, it’s a budget buster.  You can’t increase Medicaid enrollment by 16 million people,  begin subsidizing health care for the middle class, force insurers to accept all applicants at the same cost, create 159 new federal programs and bureaucracies to make it all happen and save money while doing so.  Meanwhile, existing health care entitlements are already proving unsustainable:  Federal Medicare costs for each individual average now 3 times what the person contributed while state budgets, already in crisis, are being over-run with Medicare expenses.

Given the facts, how can anyone say that expanding health care entitlements like this can save money?  It can’t but the truth is held hostage by the methods used to calculate the cost of the bill.  Congress charges the Congressional Budget Office (CBO) with estimating the cost of each piece of legislation but stipulates that the CBO must accept, without reservations, all estimations, assumptions, and statements within the bill.  Regardless of how implausible or illogical its contents, any proposed law must be estimated without questions or caveats by the CBO.   The Affordable Care Act is the result.

To ensure its passage, the bill was crafted with a number of implausible and downright dishonest assertions.  Among them:

- stating that doctors’ fees would be reduced by 23% but passing a separate law reinstating the fees
- assuming Medicare costs would be reduced by $575 million although health care experts felt this was unrealistic and even dangerous to elder health care
- calculating the bill’s net cost using 10 years of revenue but only 6 years of major expenses
- double-counting benefits by claiming cost cuts to Medicare and Social Security scored as savings to those programs and the Affordable Care Act
- not counting the costs to States for the additional 18 million people being added to their Medicaid roles.  (Initial federal aid to the states to cover this is only temporary.)
- not counting the higher insurance rates that would be incurred by all people when insurance companies would be required to accept everyone at the same relative cost.
- claiming the revenue from a long-term-care program, Community Living Assistance (CLASS) without including the cost of the program
- framing a 2700 page bill with countless references to regulations, agencies, scope, and timeframes that are to be defined sometime in the future, making the calculation of the involved costs impossible

These sleight of hand accounting maneuvers did not go unchallenged, however.  In March, 2010, just before the bill passed, the Douglas Elmendorf, CBO director, sent a letter to Congress, in effect a warning, stating that the accuracy of the CBO cost estimate of the health care reform bill was dependent on the accuracy of the assumptions made in the bill.  He also expressed doubts about the probability of reducing doctors’ fees and the huge ‘savings’ projected for Medicare.  Another expert, the respected Chief Actuary for Medicare, Richard Foster,  reported that the health care reform bill would increase, not decrease, government health care spending.  In addition, he feared senior health care would be jeopardized if the $575 million cut to Medicare was implemented. Foster reiterated his opinion in a January 2011 House Budget Committee hearing saying the Affordable Care Act would not keep health care costs down.  Another authority, former CBO director, Douglas Holtz-Aiken, estimated that, after removing the accounting gimmicks, the Affordable Care Act would raise, not lower, federal deficits by $562 billion.

Considering the facts, it is astonishing that the Deficit Commission, charged by the President to propose solutions to bring down our record high debt largely ignored the Affordable Care Act.  Although the Commission stated that federal health care spending was our single largest long term fiscal problem, they focused on changes to Medicare and Medicaid, bypassing the  biggest federal health care program of all time.  Moreover, given the fact that full implementation of the bill is 3 years away, it would be the easiest, least wrenching program to cut.  Why didn’t they include it?

Given the highly charged, politically divisive opinions surrounding the bill, the Commission probably recognized that including changes to the Affordable Care Act to their report would divert attention from the rest of the report.  Instead of a call for action to end the deficit, the report would become fuel in the health care reform debate.  This is unfortunate because, really, the time to stop this budget busting entitlement package is now!

Here’s the danger:  People who ‘perceive they are getting a benefit, regardless of its real value, will resist giving up that benefit.  While people feel strongly about reducing the deficit, a recent Pew Research Center survey revealed that less than 12% wanted to reduce Medicare, a major factor in our growing deficit numbers.   Now we have an opportunity to do something about a huge entitlement, affecting even more people, that will take full effect in 3 years.  If the CBO sees a deficits ahead totaling a whopping 7 trillion dollars in 10 years without taking into account the true costs of the Affordable Care Act,  how much more of a deficit are we really facing?

If we’re serious about reducing the deficit, the Patient Protection and Affordable Care Act must be on the table.