Washington, DC, United States (KaiserHealth) – In his State of the Union speech, President Barack Obama made just one explicit mention of the 2010 health law. Here is a transcript of the few parts of his speech that mentioned health care issues:

Innovation also demands basic research. Today, the discoveries taking place in our federally-financed labs and universities could lead to new treatments that kill cancer cells but leave healthy ones untouched. …

I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny your coverage, or charge women differently than men. …

Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else – like education and medical research; a strong military and care for our veterans? Because if we’re serious about paying down our debt, we can’t do both.

The American people know what the right choice is. So do I. As I told the Speaker this summer, I’m prepared to make more reforms that rein in the long term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors. …

I recognize that people watching tonight have differing views about taxes and debt; energy and health care. But no matter what party they belong to, I bet most Americans are thinking the same thing right about now: Nothing will get done this year, or next year, or maybe even the year after that, because Washington is broken. …

I’m a Democrat. But I believe what Republican Abraham Lincoln believed: That government should do for people only what they cannot do better by themselves, and no more. That’s … That’s why we’re getting rid of regulations that don’t work. That’s why our health care law relies on a reformed private market, not a government program. …

Above all, our freedom endures because of the men and women in uniform who defend it. As they come home, we must serve them as well as they served us. That includes giving them the care and benefits they have earned – which is why we’ve increased annual VA spending every year I’ve been president.

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Indiana Gov. Mitch Daniels delivered the Republican response. Here are excerpts of his remarks:

[We] must unite to save the safety net. Medicare and Social Security have served us well, and that must continue. But after half and three quarters of a century respectively, it’s not surprising that they need some repairs. We can preserve them unchanged and untouched for those now in or near retirement, but we must fashion a new, affordable safety net so future Americans are protected, too.

Decades ago, for instance, we could afford to send millionaires pension checks and pay medical bills for even the wealthiest among us. Now, we can’t, so the dollars we have should be devoted to those who need them most.

The mortal enemies of Social Security and Medicare are those who, in contempt of the plain arithmetic, continue to mislead Americans that we should change nothing. Listening to them much longer will mean that these proud programs implode, and take the American economy with them. …

It’s not fair and it’s not true for the President to attack Republicans in Congress as obstacles on these questions. They and they alone have passed bills to reduce borrowing, reform entitlements, and encourage new job creation, only to be shot down time and time again by the President and his Democratic Senate allies.

This year, it falls to Republicans to level with our fellow citizens about this reality: if we fail to act to grow the private sector and save the safety net, nothing else will matter much. …

In word and deed, the President and his allies tell us that we just cannot handle ourselves in this complex, perilous world without their benevolent protection. Left to ourselves, we might pick the wrong health insurance, the wrong mortgage, the wrong school for our kids; why, unless they stop us, we might pick the wrong light bulb!

– Provided by Kaiser Health News.

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Washington, DC, United States (KaiserHealth) – Do U.S. doctors make so much in the U.S. because we pay so much to hedge fund managers?

The competition for top intellectual talent is one possible explanation for a sure-to-be-controversial study published in the latest issue of the policy journal Health Affairs.

The analysis from researchers at Columbia University’s Mailman School of Public Health looked at why the U.S. spends so much more on physician care than Australia, Canada, France, Germany, and the U.K. do. And the differences are eye-popping.

In 2008, the U.S. spent roughly $1,600 per person on physician care; the rest of the combined nations that belong to the Organization for Economic Cooperation and Development, just over $300. That’s more than 80 percent less.

And, yes, that higher spending translates into higher incomes for doctors. U.S. primary care doctors, although frequently considered underpaid, nonetheless earned more on average ($186,582 a year, after practice expenses, but before taxes) than primary care doctors in any of the other countries studied. Orthopedic surgeons, the specialists examined in the study, also earned the most in the U.S., with an average salary of $442,450, well above second place U.K. orthopods, at $324,138.

One of the biggest reasons, concluded authors Miriam Laugesen and Sherry Glied, is that doctors in the U.S. get paid more for each service than doctors in those other countries. That’s not as obvious as it seems; it rules out the possibility that doctors in the U.S. perform more services (which they apparently do not) or differences in the supply of physicians.

And the main reason for the price differential, it turns out, is that doctors in the U.S.get more of their payments from private rather than public insurers. Private insurers in the U.S. aren’t the hardest bargainers around, it turns out.

Now before you point out that doctors in the U.S. have to pay for their own educations, while doctors in Europe and elsewhere generally don’t, the researchers took that into account. And while the educational debt close the gap somewhat, “it doesn’t seem to explain those differences,” Laugesen told Shots.

Nor does the cost of malpractice insurance, since the researchers’ calculations counted that as a practice expense, building it into the comparisons.

So what might? Let’s go back to the hedge fund manager concept for a moment. When it comes to human capital, the researchers found:

[T]he medical care delivery sector cannot be fully separated from the rest of the economy: Physicians everywhere are drawn from the peak of the educational distribution, and their earnings reflect the cost of drawing highly skilled people to the profession in an economy where the rewards for skilled individuals are higher than elsewhere.

So does that mean that the only way to pay doctors less is to lower salaries for the top-paid people in society? Laugesen said that question was outside the scope of this research.

But primary care doctors in particular may want to watch over their shoulders. The American Academy of Physician Assistants reported yesterday that their ranks surged to an all-time high in 2010 of 83,466. That’s a doubling over the past decade.

– Provided by Kaiser Health News.

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United States (KaiserHealth) – Hospitals, nursing homes, doctors and state health programs could survive a brief pinch if the Washington debt ceiling deadlock leads the government to stop paying Medicare and Medicaid bills. But if an impasse were to drag on for more than a few weeks, health care providers could be unable to pay their staffs or even face insolvency, according to health care experts and former government officials.

Even as the Tuesday deadline for a deal between President Barack Obama and Congress approaches, much of the implications of a worst-case scenario remains speculative. The Treasury Department hasn’t signaled how it would prioritize which government bills to pay. Few health care providers have made any doomsday plans, but the uncertainty is making many edgy.

“It’s not a matter of planning right now because there’s too much unknown,” says Cheryl Phillips, senior vice president for advocacy for LeadingAge, an association of 5,600 not-for-profit home health agencies, nursing homes and other organizations that work with seniors. She says that many of their members have very limited operating margins, so a stop in payment could quickly be destructive.

There’s no precedent for this kind of fiscal crisis, although Medicare providers have experienced short-term delays in the past when Congress made last-minute changes to Medicare reimbursement rates, says Gail Wilensky, who ran Medicare, the federal health program for the elderly and disabled, under President George H.W. Bush.

“I’m sure it irritated the providers, but it didn’t affect the beneficiaries,” Wilensky says, noting that despite delays that sometimes stretched for several weeks, business continued as usual. “In the short term, there should be little to no effect.”

Others believe financial pain could come rapidly. John Reiss, a Philadelphia lawyer who advises hospitals, doctors and medical device makers for the firm Saul Ewing, says his clients are “dumbfounded” by the ongoing deadlock but still assume that there’ll be a deal before it’s too late.

If not, he says some facilities have enough cash on hand to last for several months, but “there are some hospitals surviving on six or seven days cash on hand and those places are going to be in trouble.”

Stan Rosenstein, a health care consultant and the former director of California’s Medicaid program, known as Medi-Cal, says a prolonged impasse could be “devastating.” Nursing homes in particular rely on Medicare and Medicaid, the joint state-federal program for the poor, for most of their payments and could rapidly be unable to finance their daily operations, he says.

“California has had a lot of experience in this with its late budgets and it only takes a couple or three weeks for it have a major impact,” says Rosenstein, referring to when the state legislature deadlocked over budgets and the state stopped paying its bills, including for Medi-Cal.

But the worst case scenario here would be more apocalyptic, he says. That’s because health care providers would lose revenues from Medicare and Medicaid at the same time. Plus, a debt default could also unnerve the capital markets, making it difficult or impossible for providers to borrow money to stay afloat. And states are having so many financial problems that they’re not in a position to fill in the gaps.

Matt Salo, executive director of the National Association of Medicaid Directors, says that in the “worst-case scenario, Aug. 2 comes around with no deal, Medicaid is not going to shut down.” But if the bond markets melt down, states could face higher interest rates on money they’ve already borrowed from investors, making it even harder for states to pay their share of Medicaid, which is generally about half, he says. The federal government on average pays about 56 percent of Medicaid costs.

How quickly states feel the pain depends on the schedule Medicaid pays them. Rhode Island receives payments every two weeks, and it was just paid yesterday, says Fred Sneesby, a spokesman for the state’s Department of Human Services. The next scheduled payday is Aug. 12. California, though, is paid every week, Rosenstein says.

“I don’t think there’s any state that has the wherewithal to advance the money,” says Rosenstein, who advises states, insurers and providers for the consulting firm Health Management Associates.

Thomas Scully, who was the administrator for Medicare under President George W. Bush, says if there is a default, the Obama administration’s political decisions will determine how quickly health care payments are shut off. “They’re either going to shut down Medicare and Social Security first or last,” he says. “If they want to provoke a crisis they would quit paying hospitals and doctors and quit sending out Social Security checks.”

Donna Shalala, who was health and human services secretary under President Bill Clinton, says Medicare pays its claims within two weeks, which is faster than many private insurers. “The health care system is very dependent on Medicare payments, because they come very quickly,” she says. “If they’re not reimbursing, that would create problems for the entire industry – hospitals, doctors, everyone. It is not a happy scene.”

Doug Myers, chief financial officer for Children’s National Medical Center in Washington, D.C., says 55 percent of the hospital’s patients are on Medicaid. He said the hospital would “start feeling the impact” within 30 days of a halt in federal funding.

“Whatever happens to Medicaid, happens to Children’s National,” he says.

Martha Roherty, executive director of the National Association of States United for Aging and Disabilities, says she’s been advising state agencies that advocate for services for the elderly to immediately claim any money they’re entitled to from federal grants. Usually, she says, they do it just once a month or quarterly.

“We have been telling them” to “take it now,” she says. Roherty added that basic services that rely on federal money, such as senior centers and nutrition meals that are delivered to people’s homes, could quickly shutter if the federal government stops paying those bills.

Paul Ginsburg, president of the Center for Studying Health System Change, a Washington think tank, says the health care system is actually in a better position to handle a halt in government payments than many other sectors of the economy. “Medicare and Medicaid beneficiaries are going to be able to get care for a while, while if a store is selling something and people don’t have money to buy it, that will hit immediately,” he says.

Salo agrees that by the time health providers are in serious trouble, everyone else will be too. “If we go into default for a really long time,” he says, “I’m guessing cash flow in Medicaid is not going to be the biggest of our concerns.”

Kaiser Health News staff writers Julie Appleby, Mary Agnes Carey, Juan E. Gastelum, Peggy Girshman, Shefali S. Kulkarni and Bara Vaida contributed to this story.

– Provided by Kaiser Health News.

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United States (KaiserHealth) – The annual scramble to prevent next year’s scheduled pay cut for doctors who treat Medicare patients kicked off Thursday with physician leaders calling for a five-year program of guaranteed annual raises and a high-ranking House Republican calling for another short-term fix.

The issue – known inside the Beltway as “the doc fix” – is the residue of a law enacted by Congress in the late 1990s that sought to limit the growth of Medicare spending on seniors’ health care. The law limited physician pay increases to same growth levels as the overall economy, which became known as the sustainable growth rate or SGR. Since health care spending over the last decade grew twice as fast as gross domestic product, implementing the SGR would dramatically shrink physician pay as a share of overall Medicare spending.

It never happened. Every year members of the American Medical Association and specialty societies bombard Capitol Hill with demands to restore the old system. And every year, Congress voids the SGR-mandated cuts.

But that means that every year the size of the scheduled pay cut under the original law grows larger. Unless Congress acts before January 1, physician pay next year will be reduced by 29.4 percent. The estimated 10-year cost for the “doc fix,” according to the Congressional Budget Office, is approaching $300 billion.

Rep. David Camp, R-Mich., chair of the House Ways and Means Committee, told a Health Affairs briefing on Thursday that finding $300 billion for a ten-year fix “was untenable in the current situation” when Congress and the White House are struggling to find ways to reduce the $1.5 trillion budget deficit. Rather, he said, the Republican-led House will consider a “several-year fix . . . to get out from under this, and then look to the long-term fix.”

However, even a short-term fix would cost tens of billions of dollars next year, which could wipe out a significant portion of the budget reductions that Republicans are seeking as part of the debt-ceiling negotiations that kicked off yesterday.

Legislators looking for a magic bullet to the physician pay issue received no help from physician lobbying groups who testified on Capitol Hill. At a hearing of the House Energy and Commerce subcommittee on health, the American Medical Association called for scrapping the SGR and instituting a five-year program of regularly scheduled pay increases, during which time the Centers for Medicaid and Medicare Services (CMS) could experiment with alternative payment models like bundled payments — a single payment for all services related to a treatment or condition, rather than a series of separate payments — or special reimbursements for coordinating care.

“The SGR is a failed formula,” said Cecil Wilson, an internist from Winter Park, Florida, who is the current president of AMA. “The longer we wait to cast it aside, the deeper the hole we dig.”

The American Academy of Family Physicians, which represents relatively low-paid primary care physicians, called for higher reimbursement rates for their specialty. The American College of Surgeons, which represents some of the highest paid specialists and would be hurt by a shift in pay toward primary care, also called for SGR’s repeal and setting a “realistic” budget baseline for future payment increases for all specialties, which should reflect the actual cost of providing care.

Mark McClellan, who headed CMS during the George W. Bush administration and now heads the Brookings Institution’s health care policy shop, told the subcommittee “the payment reforms in the Affordable Care Act are a foundation for this.” That was an ironic statement coming from a former high-ranking Republican official, since the House majority, in a vote taken earlier this year, repealed the new health reform act in a largely symbolic gesture.

The special interest scramble to get Congress to ditch the SGR every year is a cautionary tale about strategies from both sides of the aisle for Medicare cost control. The health care reform legislation pushed through by President Obama and the Democrats achieves a half trillion dollars in Medicare savings over the next decade largely by putting a ceiling on the program’s annual growth rate that is one percentage point faster than GDP.

Obama, in his deficit reduction plan announced last month, upped the ante by calling for a ceiling growth rate of GDP plus 0.5 percentage point. The vehicle for achieving these savings in either case will be the reform law’s new Independent Payments Advisory Board, which starting in 2015 is scheduled to send mandatory cuts to Capitol Hill whenever health care grows faster than the target rate. Congress could either approve those cuts, or substitute a package of its own that achieved similar savings.

Camp attacked that approach yesterday, saying it was unacceptable for “a bunch of unelected bureaucrats” to dictate cuts that “will only cut payments to providers.” But the Republican plan for lowering Medicare’s unsustainable growth, which is called premium support because it would give future seniors a voucher to buy private insurance, has a cap of its own. It pegs the growth in the government’s annual contribution of premium support payments to a formula that is one percentage point higher than the consumer price index, which in most years is well below the growth in the economy.

In reality, any such formula could be thrown out the window by future Congresses – just as the SGR will be when Congress passes its next “doc fix” sometime before next January.

– Provided by Kaiser Health News.

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