Apr
14
:: Health Care Reform Through The Lens Of Federalism
Filed Under Democratic Candidates, Policy, Republican Candidates, Senator Clinton, Senator Obama | Leave a Comment
Try this little quiz -
Proposal A:
Maintain the current preemption provisions of the Employee Retirement Income Security Act.
Proposal B:
Amend ERISA to curtail the preemption provisions of the Employee Retirement Income Security Act.
Question:
Which candidates support Proposal A and which support Proposal B?
It may come as a surprise, but despite the reflexive identification of ERISA preemption with big business interests (”Republican” constituents), and diminution of ERISA’s preemptive reach as consonant with employees’ interests (”Democratic” constituents), the facts do not appear to be working out that way.
In a recent Human Resource Executive, Dallas Salisbury observes that neither Democratic candidate favors altering ERISA’s preemption provision. And, in an article today, the same author writes that McCain would likely favor substantial curtailment of ERISA’s preemptive reach.
Many of Sen. McCain’s proposals coincide with the interests of business groups — although not all, particularly his proposal to remove self-insured plans from ERISA exemption. His proposals offer a clear contrast with his Democratic opponents.
As I have previously noted, the civic value of federalism, much diminished in the past century, now finds a central place in the continuing debate over the proper approach to health care reform. The issue divides the candidates along unfamiliar vectors.
Professor Roderick M. Hills, Jr., a federalism advocate, notes that much rides on how we approach the question.
It is not as if these preemption issues are small potatoes: The 2004 campaign involved prominent discussion of “Patients’ Bills of Rights,” federal bills that would have eliminated some ERISA preemption of state-law claims against HMOs. McCain was, indeed, the co-sponsor of one such bill (the McCain-Kennedy-Edwards Patient Protection Act). And the issue has been the source of raging controversy in DC, with the FDA, OCC, and other federal agencies taking strong preemption positions, opposed by the trial lawyers, one of the most powerful of the democrats’ constituencies.
On the other hand, he does not see it likely that the candidates or voters will see the issue in terms of larger policy issues, nor does he interpret the candidates’ positions as reflecting their platform in these terms:
But none of the candidates’ websites have anything to say about preemption. John McCain’s website has but a single line favoring tort reform, without elaboration.
In short, it appears that the candidates are stating their platforms in arrays of proposals on popular issues without much regard to the level of government implicated in the proposed solutions. Is the concept of federalism as a value too obscure to interest voters?
Professor Hills offers a possible rebuttal to this point of view in a recent paper by Professors Robert Mikos and Cindy Kam, Do Citizens Care About Federalism? An Experimental Test
From that article:
Our theory of political safeguards explicitly acknowledges that ordinary citizens play a role in policing the limits of federal power. Certainly, citizens care about policy outcomes. But they also care about preserving the authority of their state governments, first, because they trust their state governments more than the federal government, and second, because they value federalism.
We provide the first systematic examination of whether citizens can be entrusted to safeguard federalism.
When the dust clears on the health care reform debate, Professors Mikos and Kam will likely have additional empirical data bearing this thesis.
Almost forgot - the answer to the quiz:
Proposal A: Clinton, Obama *
Proposal B: McCain *
Bonus question: Which candidates support federalism as a principle of policy choice?
Answer: Possibly none of the above.
* Subject to question under a paradox which I will not declare in this post
Apr
3
:: Wal-Mart’s Mea Culpa
Filed Under Commentary, ERISA | Leave a Comment
The recent decision by Wal-Mart to drop its claims to reimbursement from Deborah Shank’s personal injury recovery has led to inevitable speculation about the reason for the decision as well as the broader implications for other cases. (See, Brain-damaged woman at center of Wal-Mart suit)
Here’s Wal-Mart’s explanation -
Occasionally others help us step back and look at a situation in a different way. This is one of those times. We have all been moved by Ms. Shank’s extraordinary situation. Our current plan doesn’t give us much flexibility, so we began reviewing the guidelines for the trust that pays medical costs for our associates and their family members.
We wanted to understand the ongoing impact of any potential changes to the trust, and ensure that any action we take is in the best interests of our associates and their family members who participate in and contribute to our plan. We have decided to modify our plan to allow us more discretion for individual cases, and are in the final stages of working out the details.
Wal-Mart will not seek any reimbursement for the money already spent on Ms. Shank’s care, and we will work with the family to ensure the remaining amounts in the trust can be used for her ongoing care.
We are sorry for any additional stress this has put on the Shank family.
Here’s the alternative view (from the WSJ Law Blog) -
And what to make of Wal-Mart’s motives? Lynn Dudley, vice president for policy at the American Benefits Council in Washington, D.C., told the AP that the negative publicity around the case was beginning to draw the attention of lawmakers who might want legislation to stop or limit subrogation.
As one considers the broader questions, sometimes the analytical details escape notice. Suzanne L. Wynn, Esq. asks a very lawyerly question that takes the issue back to the empirical realm.
CNN is also reporting as part of this story that Walmart is amending their plan to allow more discretion in individual cases. If anyone has a copy of the amendment and could send it my way, I would really appreciate it. Under ERISA, I am curious about how much discretion they could be amending into their plan.
I do not have the answer to this question, but perhaps some recent cases involving the pugnacious retailer will be of service here. Wal-Mart’s plan evidently has the standard grant of discretion to the plan administrator. Consider this finding from the Eighth Circuit’s opinion in Associates’ Health and Welfare Plan v. Gamboa, 479 F.3d 538 (8th Cir. 2007):
The Plan Wrap Document gives the Administrative Committee, as the plan administrator, complete discretion to interpret the terms of the Plan. Accordingly, we are limited to reviewing the Administrative Committee’s interpretation of the Plan for an abuse of discretion.
Is it likely that Wal-Mart will remove this grant or circumscribe it in some way so as to trigger de novo review of the plan administrator’s decisions? Not a chance.
Nor do I see Wal Mart as likely removing or modifying its subrogation provision.
The Plan has the right to … recover or subrogate 100 percent of the benefits paid by the Plan on your behalf … to the extent of … [a]ny judgment, settlement, or any payment made or to be made, relating to the accident…. These rights apply regardless of whether such payments are designated as payment for … [m]edical benefits [or] [w]hether the participant has been made whole (i.e., fully compensated for his/her injuries)…. The Plan has first priority with respect to its right to reduction, reimbursement and subrogation.
And for a very sensible reason. If they did not have that provision, then the plan would be subject to the amorphous “make whole” doctrine of the various jurisdictions imposing that as a default rule.
The short take on the Wal-Mart decision, in my opinion, is this:
The plan document was not the constraint suggested by Wal-Mart, but rather a makeshift argument to deflect responsibility for Wal-Mart’s aggressive stance in the Shank case. The abuse of discretion standard is broad enough to permit a uniform, yet flexible, rule of reason embodied in a set of protocols that address extenuating circumstances, e.g., where liability coverage is insufficient. Their approach in all things legal, however, has been monolithic and dogmatic to a fault. (See, e.g., Will New Wal-Mart Policy Help Catch More Drunken Drivers?)
Whether Wal-Mart actually intends to institute any changes in its approach remains to be seen. A good marker for that might be to examine whether it accords any similar concessions after its recent victory in Administrative Committee for Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Horton, 513 F.3d 1223 (11th Cir. 2008). (See, :: Eleventh Circuit Holds Conservator Proper Defendant In ERISA Health Plan Subrogation Litigation)
In any event, I seriously doubt any policy changes will require revision of their trust’s plan documents.
Here’s a translation of the PR piece into plain English. My translation is in brackets:
Occasionally others help us step back and look at a situation in a different way. [The media attention to this case is causing us some concerns.]
This is one of those times. We have all been moved by Ms. Shank’s extraordinary situation. [We had no idea the public would be so interested in this case.]
Our current plan doesn’t give us much flexibility, so we began reviewing the guidelines for the trust that pays medical costs for our associates and their family members. [We are not to blame, the lawyers that wrote our plan caused this mess.]
We wanted to understand the ongoing impact of any potential changes to the trust, and ensure that any action we take is in the best interests of our associates and their family members who participate in and contribute to our plan. [We want you to understand/believe that we are really just protecting your money, not ours.]
We have decided to modify our plan to allow us more discretion for individual cases, and are in the final stages of working out the details. [We will soon have a plan in place to defuse these media bombshells before they reach critical mass.]
Mar
31
:: A Closer Look At The Stuff Promises Are Made Of
Filed Under Democratic Candidates, Policy | Leave a Comment
The latest annual report on the prospects for Social Security and Medicare projects a $42.9 trillion shortfall over the next 75 years, at current levels of benefits and taxation.“Congress in no rush to fix Medicare and Social Security” The Christian Scientist Monitor (March 27, 2008)
Against the backdrop of the insolvency of Social Security and Medicare, the candidates promise health care reform that has no visible means of support.
The Wall Street Journal reports that President Bush’s projected $410 billion budget deficit for 2008 could climb to $500 billion or more, partly as a result of the soft economy’s effect on tax collections. Meanwhile, the credit crisis has brought on a renewed Keynesian approach to economic problem solving, beginning with a $152 billion stimulus package.
Now enter health care reform. The proposals are big on promises, but woefully inadequate on financial specifics.
Robert Laszweski at The Health Care Blog has it right where he says:
These Democratic proposals are about access—getting just about everyone covered. Getting everyone into this unsustainable system will then make things even more unsustainable creating an imperative for a second wave of real cost containment when the feel good list of cost containment proposals now in their plans falls short.
Unfortunately, cost containment is the issue least interesting to the candidates.
Mar
26
:: How Profit Incentives May Inhibit Patient Health Management Incentives
Filed Under Policy | Leave a Comment
Scott MacStravic, Ph.D, questions whether insurance industry payers have sufficient economic incentives to promote their members’ proactive health management. Scott writes:
At first glance, health insurance plans ought to be major supporters of proactive health management (PHM) for their member populations, at least to the extent that this reduces members’ use of sickness care. Most health plans do offer some kinds of PHM services, and many are into it in a big way, with large plans such as CIGNA and Aetna offering PHM to employers who are not even their health insurance clients. But the first glance may be too simplistic.
His counterintuitive observation lies in the effect of lower health care costs on total revenues -
Consider the full “systems dynamics” effects of engaging in PHM. True, when done effectively, PHM can significantly, often dramatically reduce healthcare costs for populations affected. But this also reduces the “loss ratios” for the plans, and can threaten their overall profits, since to maintain the same percentage of profits with lower premiums, its total profit amounts will be reduced, even if their margins remain constant. They will enjoy less growth in revenue, which will threaten their share prices, and shareholder as well as Wall Street analyst happiness.
What is particularly interesting here is Scott’s empirical approach to the issue. Rather than assuming, a priori, that a health plan payer would prefer lower loss ratios in all cases, his observations suggest the importance of market analysis.
Think about his point this way. Managed care companies are essentially paid to administer health plan costs. At some point, decremental loss ratio factors will affect profit margins since the significance of services rendered is also diminished. Perhaps the greater incentive would be, for example, to shift more costs to members (though Scott did not suggest this), rather than actually lowering claims volume.
He also points out the problem that investment in PHM may actually inure to the benefit of competitors. Here he observes that:
there is a built-in risk when engaging in PHM that some portion, perhaps a significant, even the major portion of the benefits of PHM investments will end up aiding some other plan, as members change plan selections at least annually. If employed members have high turnover relative to their employer, or high “churn rates” relative to their plan selections, they may not remain members of a given insurer long enough for any, or at least enough payoff to the insurer that paid for their PHM services.
These observations require analysis in specific cases before reaching conclusions, but the careful approach to analysis of economic incentives for improvement in delivery of heath care services is so often lacking in reform initiatives. Scott is a regular contributor to The World Health Care Blog on health care issues.
Mar
20
Federal pre-emption of state insurance law was deliberate—Although some argue the original decision by Congress to pre-empt was casually made, historical evidence suggests it was deliberate and essential to the enactment of ERISA.
Pierron, William L. and Fronstin, Paul , “ERISA Pre-emption: Implications for Health Reform and Coverage” (February 2008). EBRI Issue Brief, No. 314, February 2008
For a practical take on the implications of reform proposals, readers will gain access to empirical data with a summary of seminal ERISA preemption authorities.
The authors conclude with an analysis of the risks that regulatory incursions pose to the continued vitality of ERISA group health plans, the source of health benefits for a large segment of the work force.
Given the current pre-emption structure, as states continue to pass incremental regulations and benefit mandates on insured plans, it seems clear that more employers will be forced to consider self-insuring their health benefit plans, simply as a response to the significantly growing regulatory costs. And, as the cost of insured coverage rises, smaller employers may consider dropping coverage entirely.
The work is a rare combination of empirical data, law and analysis written in an accessible format.
Note: EBRI is a private, nonprofit, nonpartisan, Washington, DC-based organization that does public policy research and education on economic security and employee benefit issues. William Pierron, EBRI Fellow, previously worked for the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and EBRI. Paul Fronstin is director of the Health Research and Education Program at the Employee Benefit Research Institute (EBRI). This study was funded by the U.S. Chamber Of Commerce.
Mar
20
Lawrence Solum at the Legal Theory Blog notes a recent publication by Lee Anne Fennell (University of Chicago Law School) that takes a look at some of the issues attending allocation of entitlements.
The essay provides analysis of the incentives and hindrances that are involved in reconfiguring resources. This issue has significant bearing on the health care reform debate. In a reconfiguration of the allocation of resources, one must begin with the acknowledgment that resources are finite.
For example, regardless of ultimate policy objectives, most should agree that the Fourth Circuit made this point aptly in the context of ERISA health plans in Fielder:
The undeniable fact is that the vast majority of any employer’s healthcare spending occurs through ERISA plans. . . . From the employer’s perspective, the categories of ERISA and non-ERISA healthcare spending would not be isolated, unrelated costs. Decisions regarding one would affect the other and thereby violate ERISA’s preemption provision.
While Fennell’s observations are not directed at any particular legislation, much less health care reform, her analysis alerts us to important concepts that are constitutive of any legislative allocation of entitlements.
For example, she writes:
One interesting and important choice is whether law arrives from the factory (legislature) presliced, so that rules of limited and precise applicability are generated, or whether instead the slicing is done in the field, through choices about application and enforcement. The lumping and slicing of law itself is a little different than that of private property entitlements, in that the protocol under which these reconfigurations takes place is typically political in nature, so that unanimous consent is not required for a change. Still, efficient lumping and slicing may be easier or harder in some contexts than in others, and we might want to know what institutional body is in the best position to do the job.
Entertaining to read, and thought-provoking, the essay supplies the reader with a helpful framework for approaching issues of aggregation and division of entitlements.
Thanks to Lawrence Solum for calling the article to our attention. (If you haven’t visited, he has a really sharp presentation with great content over there at Legal Theory Blog.)
Mar
8
:: Medicare Fiscal Intermediaries - A Healthy Role For Insurers After Health Care Reform
Filed Under Naive, Policy | Leave a Comment
Barbara Calder lives in nearly constant pain. Her limbs dislocate at the slightest movement, even when she turns over in bed at night. She wears her hair short because brushing it hurts too much.
Mrs. Calder suffers from Ehlers-Danlos Syndrome, a rare genetic disorder in which the connective tissue that binds the body together gradually falls apart. But, although she began suspecting she had the disease 16 months ago and had health insurance, she spent a year battling numerous roadblocks just to see a specialist who could diagnose her condition. Now Mrs. Calder says she is left wondering whether she’s going to die suddenly because she can’t get the test that would tell her whether she has the fatal form of the disease . . .
Mr. Calder, whose father was a doctor and mother was a nurse, grew up believing the U.S. health-care system was the best in the world. But he says his wife’s struggle has eroded that faith. “I’ve actually turned around to where I’m thinking, ‘Yeah, Europe may not be a bad thing.’ ” “How U.S. Health System Can Fail Even the Insured”, Wall Street Journal (November 16, 2007)
The adjudicative record of Medicare fiscal intermediaries should give pause to those who see health care reform solutions in a broad, publicly funded program.
Mar
8
Building on the 2006 symposium and Health Policy Forums, national leaders from all areas impacted by health care will convene to create highly participatory, action-based proposals for reform. Participants will be asked to look beyond their own sector’s perspective and collaborate to create reform solutions that will be in the best interest of patients.
Take a look at the information at 2008 Mayo Clinic National Symposium on Health Care Reform. The program looks very interesting. On the other hand, I see journalists, physicians, pundits, hospital administrators, a large insurance company, and even WalMart (!) with a place on the program, but not one lawyer, and so far as I can see, no pharmaceutical industry representatives and no third party administrators. (The agenda appears here.)
Some of my own views as to where these initiatives should begin appear in :: A Skeptic’s View: Removing The Ideological Obstacles To Health Care Reform.
Note: Mayo’s own reform platform appears here. The Mayo program favors creation of an “independent health board (similar to the Federal Reserve)” to define essential health care services, a value-based reimbursement model for physicians, and a requirement that individuals purchase private health insurance for themselves and their families. The labor model for physician reimbursement has been roundly criticized and, in my view, justifiably. Moreover, I have yet to see a good explanation of how that requirement can be effectively enforced. (The recent Massachusetts experiment may be on the verge of supplying one example that it cannot be.) More on this later.
Mar
7
THE skirmishing between the Democratic presidential candidates over the mechanics of universal health coverage will soon give way to a quite different general-election debate — about whether universal coverage should even be a national priority.
The New York Times, “Coming Soon: Health Care Debate, Part 2″
The Democratic faithful have a reality check in the calendar year ahead.
Neither Clinton nor Obama have the slightest idea how to pay for the health care programs they propose.
Why do I say that? Because they do not know how to manage the bills for the Great Society promises already made. Please refer to Exhibit A:
The Democrats do not say, in any detail, how they would slow the growth of Medicare and Medicaid or what they think about the main policy options: rationing care, raising taxes, cutting payments to providers or requiring beneficiaries to pay more.
NYT, Robert Pear “About Those Health Care Plans by the Democrats …” (March 3, 2008)
So, when Teddy proposes “Medicare For All”, we might wonder if it would not be prudent for him to conceive of a plan to pay for Medicare for those presently covered. Again from Mr. Pear:
The two programs, for older Americans and low-income people, cost $627 billion last year and accounted for 23 percent of all federal spending. With no change in existing law, the Congressional Budget Office says, that cost will double in 10 years and the programs will account for more than 30 percent of the budget.
Health care reform, indeed.
As the NYT reports, “they are fighting over the narrowest of bands in a broad policy spectrum, and the focus on universal coverage — rather than on cutting costs — may have far less resonance come Nov. 4.” In other words, the accounting side of the equation is going to drive the issue come the general election.
Feb
29
:: A Conservative’s View Of Health Care Reform
Filed Under Naive | 2 Comments
I cannot think of a good reason for subsidizing health insurance, or, indeed, for the demand for noncatastrophic health insurance. The economic explanation for insurance is that because of diminishing marginal utility of income, people will pay to avoid a big financial loss (e.g., will pay $2 to avoid a 1/100,000 prospect of a $100,000 loss, even though the actuarial cost of such a prospect is only $1), but most medical expenses are modest. So if there were no tax subsidy for health insurance, probably much less would be purchased, which would be fine. People might even be healthier, because diet and other life-style choices are substitutes for medical care and thus for health insurance.
Didn’t know judges could blog with the rest of us? Sure they can! The foregoing excerpt is Judge Posner’s view, a sitting judge on the Seventh Circuit Court of Appeals and a professor at the University of Chicago School Of Law.
For the balance of his comments on health care reform, read his blog entry here.
His observation:
. . . the demand for medical care is driven primarily by the prevalence of illness and the progress of medical technology rather than by the payment scheme.
Unfortunately, the present health care system works more on a street ethic, far removed from the sanctuary of the elite jurists.
For example, consider this from the Washington Post:
Four makers of artificial hips and knees paid doctors more than $800 million in royalties and fees in four years to influence their choice of implants, a U.S. investigator told Congress.