Speaking with Jim Lehrer in a TV interview last week, the president said, "the single biggest threat to our fiscal stability is Medicare/Medicaid." Never mind other aspects of healthcare reform, our spending on M&M "could drive us into long term debt." And he continued, "we have to reduce our healthcare costs." Seems pretty clear to me and echoes the sentiments of his OMB chief, Peter Orzag who has slides to emphasize the same philosophy. Cost control is the central theme. On the other side, CBO chief Douglas Elmendorf announced earlier that the health reform packages now in Congress would add over $1 trillion to the costs of healthcare in the U.S. Indeed, any parts of the current legislation that purport to save money are theoretical and tentative. Deliberately so. Any definitive savings must come out of somebody's pocket, so guess who's working to make sure that doesn't happen. Everybody. A page one headline in the Washington Post Tuesday announced, "Industry Cash Flowed to Drafters of Reform." I'm shocked. Truly shocked. And in our Nation's Capitol. So everyone's turning over rocks to find hidden savings, but that's not what you usually find under rocks. Concepts like wellness and prevention have their champions, but a hard look shows limited benefits in special groups. Early detection in the form of screening is not cost effective unless the testing can be targeted to high risk groups. So not a lot of help in that corner. "Excessive care" is frequently mentioned tho chiefly as a diversion. One of those concepts that seems too good to oppose until you press for details. Then you realize that this is just another term for rationing. Someone in Washington is going to decide what healthcare someone in Peoria can receive. At lunch today, a doctor advanced the idea that we shouldn't do knee replacements on people over age 75, because "they don't have enough life left to benefit." Soylent Green anyone? Most people, however, think that rationing of some sort will be part of the plan eventually. Various schemes have been tried in the past with poor results. RI tried to limit the number of doctors in the state--sort o like issuing taxicab licenses. You had to wait until someone died to get a new license. After a brief court hearing, that plan was abandoned. The most enduring plan was the Certificate of Need. Someone in the state government would decide how many CT scanners the state needed, and that's all they would allow. Unless you crossed their palm with serious money. At the end of the day, those with money and connections got what they wanted, and the healthcare resources in the state continued to rise. Almost everyone has abandoned this idea. Physicians are traditionally upset over tort reform. This is a broken system that sorely needs fixing. However, even considering "defensive medicine," experts don't see any meaningful impact on total healthcare spending. There will undoubtedly be some efforts to "change the way doctors are paid." Various bundling plans will share the goal of paying less. One plan would bundle hospital and physician care into one fee and let these parties duke it out. A benefit for closed panel HMOs that own facilities, but a test of negotiating skills for the rest. Still, there are successful examples. Not clear, however, that this is the new horizon for American medicine. The attractive part for the government is that this would make it easier to ratchet down payments in the future. That kind of leaves us with wringing the waste out of healthcare processes. This has been successful in most other industries but never really tried in healthcare. Opportunity knocks. Who will answer?

Kathleen Sibelius said in a recent TV interview that "it has to pay for itself." Seems that others have the same idea. Republicans are jumping all over the Tax-the-wealthy idea for raising cash. And no one seems to like taxing health insurance premiums. Doesn't leave much. Of the ideas to create internal savings, nothing seems to be working out. Most of the thoughts about "excessive care" and "prevention" put forth theoretical savings, and even those are projected far into the future. The Brits have wrestled with IT in the form of electronic records, and have finally given up on "Connecting for Health" their version of Interoperable healthcare records. The system won't be ready until 2014 at the earliest and will cost over $20 Billion. The Tories are proposing that Google or Microsoft keep the records of British citizens. An unnamed source said, "we fully expect multiple providers." Is America listening? There is also an interesting paragraph in the Times article about who is married to whom, outlining the ties between Google and the British government. Not everyone loves the idea, but a final quote says, "The chance for massive cost savings, however, are likely to outweigh these objections." So, the Brits are giving up on EHRs to save money, and we are thinking about creating them to save money. There is an interesting model here. HHS has developed a site to create a medical history of your family. The actual data stays on your computer, but the application that created the file is at HHS. Could a similar scheme work for personal health records? Well, of course, but it wouldn't satisfy those who want to data mine records in hospitals and doctors offices. Only interoperable record systems would permit that sort of perusal. Is that what we want? By the way, my family health history didn't work. Couldn't re-open the file I created at the HHS site. But hey. Nothing's perfect. Of course, if these guys handled ALL the health records in the country, things would be different. Sure. An editorial in the Washington Post today says, "Controlling cost is a different question...." And they go on to explain that the schemes launched so far to pay for the uninsured will do nothing to flatten "the upward trajectory of healthcare costs." This is the issue that Peter Orzag has been emphasizing. This is the "ticking time bomb for the federal budget" that Obama mentions. Healthcare just costs too much, and nothing so far addresses this fundamental problem. If the basic costs for healthcare services came down, the trajectory would be flat or headed in the other direction. Insurance premiums would (should) fall, because payments would decrease. David Broder writes in the Sunday Washington Post, "The realization is spreading in Congress that to achieve significant cost controls, a fundamental restructuring of healthcare delivery will be needed." Price competition anyone?

There is speculation in the press that healthcare reform may be doomed. Again. Vice President Biden said "We are closer than ever" to achieving reform, but perhaps not close enough. The sticky points are, ta-da, over money. Big news of the week was the agreement by hospital groups to accept decreases in Medicare and Medicaid payments of $155 billion. Why would they do that? Well, first, they want healthcare reform to happen. The provision of insurance for the currently uninsured would mean more paying customers--15% more, and fewer bad debts. Plus, they won't have to give up any of the bonus they're already getting to take care of those folks. The deal makes business nervous, because decreases in public financing usually mean increases in private financing, which translates into higher premiums that business pay. Just can't please everyone. There's still talk about taxing health insurance. The question now turns on what level of insurance will be taxed. The target is the more generous plans that pay more. The line may be drawn just above the level of insurance currently provided to U.S. government workers. Hardest hit by any such move would be union workers who typically have negotiated better benefits in their contracts. Government workers really don't have an effective union--at least not for issues like healthcare benefits. Then, there's a tax increase for those making over $250,000 (married, filing jointly). Hard for them to complain, particularly in today's climate. But all of this may still not be enough. We're talking about buying health insurance for roughly 15% of the population, and that's a lot of money. And that doesn't count the increased expenditures for healthcare IT, comparative effectiveness, and all the other add-ons that are supposed to save money but don't. So far, however, no one's looking at the cost of individual healthcare services. No thoughts that maybe we could do things a little more efficiently. If we could save, maybe 20% on the cost of individual healthcare processes, would that be enough to pay for insurance for 15% of the population? Well, maybe. Probably. Yes, I think so. We couldn't do this by legislating a reduction in payments. That would drive providers out of the market. Many are already complaining that M & M pay too little. You'd have to convince them to want to reduce their fees, and that would come only with price competition. If 10% of your business is hip replacements, and you stand to lose 100% of that business to a provider in the next town who charges less, you'll find a way to meet or beat his price. That's where the 20% comes from. There are a few demonstration projects in healthcare and abundant experience in other industries to suggest that this is a conservative estimate. Those who talk about savings in healthcare generally talk about vague concepts, like how prevention will reduce the need for healthcare over the next 10 years. Maybe. But the cost of the healthcare that's left remains the same. Pretty much all those talking have a vested interest in seeing more money come into the healthcare industry: hospitals, doctors, insurers, pharmacy, patients, AARP, etc. They all benefit if the government spends more on healthcare, and all are working hard to ensure that this happens. Only the taxpayer loses. Will it happen? Probably not in any meaningful way. Something will pass--a gesture that will not stem the flow of tax money into healthcare. Promises, promises. Too many groups with too much money are opposed to it.