Peggy Noonan vs. the New England Journal of Medicine

Let’s put to rest, once and for all, the idea–or rather, the  notion
(it’s not even an idea,  just a vague impression, based on
hearsay)–that the health reform legislation now under discussion
includes no plans for containing health care spending.  

reform proposal now being debated in Washington would put a brake on
health care inflation. As an eye-opening essay in the most recent
(March 4) issue of the New England Journal of Medicine explains, Medicare
would, at last, have the power it needs to lead the way,  not by cutting
, but by restructuring how it does business.

pundits such as Peggy Noonan feel free to pronounce health care
reform “a disaster” and “a colossal waste of time
”without giving any
indication that she has ever read the legislation. Presumably Noonan
bases  the opinions that she expresses in her recent Wall Street
Op-ed on  what other pundits have said.

Thus, she declares reform a “waste of history’s time” because “the
president chose health-care expansion  . . . at the exact moment voters
were growing more anxious about the cost and reach of government.” On
the question of whether the reform bill would control costs, Noonan does
acknowledge President Obama’s claim that reform will "'bring down the
cost of health care for millions’ that it is ‘fully paid for’ and that
it will lower the long -term deficit by a trillion dollars.”

her response is purely rhetorical: “Does anyone believe this?"

the problem with Op-eds—no proof, no evidence.  Much bombast, trimmed
with rick-rack (metaphors found in the Notions’ Department of the mind.)

contrast, one of the nice things about articles in peer-reviewed
medical journals is that they are footnoted. This doesn’t mean that
they’re always right, but at least you can track what the author is
relying on as facts.

The Evidence:  How the Legislation
Contains Spending

The piece by Robert Mechanic and Stuart Altman
in last week’s NEJM may be less colorful than Noonan’s, but in place of
self-expression, it offers truth grounded in careful analysis of the
legislation:  The Senate and House reform bills lay out a blueprint for
cost-containment,  spelling out precisely how Medicare can squeeze waste
out of the system while simultaneously lifting the quality of care.
Anyone who tells you that seniors will no longer have access to needed
tests and treatments is, pure and simple, lying.

You may think
that you have heard talk of Medicare slowing health care inflation in
the past
— with little in the way of tangible results.  But as
Mechanic and Altman point out, this legislation is different: The
Secretary of Health and Human Services (HHS) will have the authority to
expand pilot programs
and put them into practice—without going
through Congress.  In the past, the need for congressional approval has
derailed initiatives.
This will no longer be the case.

even if the reform legislation now under consideration doesn’t pass,
the authors argue that Congress will then be forced to pass stand-alone
Medicare reform legislation that targets fraud and waste. “Whatever the
fate of current reform proposals, Congress cannot avoid important
decisions about Medicare,” they declare. (As I wrote earlier this week, I
very much doubt that Obama and Pelosi have gone out on a limb planning
to join hands and jump:  I believe that Congress will pass the
comprehensive legislation

But even in the worst-case
scenarios, if legislators should fail, the authors argue that Congress
will have no choice but to address Medicare spending in a separate piece
of legislation. I agree.

How can Mechanic and Altman be so sure
that legislators will roll up their sleeves and take on the hard task of
putting a lid on the nation’s spiraling Medicare bill? “Without new
legislation [Medicare’s ] Hospital Insurance Trust Fund will become
insolvent by 2017. Regardless of whether Congress addresses these
challenges in separate [Medicare reform] legislation or as part of a
broad reform package,” legislators have no choice. They must find a way
to make sure that we begin to get better value for our Medicare
dollars.  No one wants to be responsible for letting Medicare slide
south on his or her watch.

Either way, I see reason to be
optimistic.  Whether Medicare is overhauled as  part of the broader
legislation, or in a separate bill–the effect will ripple throughout
our health care system.  Private insurers already have told the Medicare
Payment Advisory Commission (MedPAC) that if Medicare takes the lead,
changing the way it pays for care so that it is rewarding providers for
quality rather than quantity, private insurers will follow. They just
want Medicare to provide political cover.

Road to Reform
Already Spelled Out in the Legislation

The plans for a Medicare
overhaul that would lead to substantial savings are  embedded in both
the House and the Senate bills. The key is a series of voluntary pilot
programs that would change how health care is delivered, what we pay
for, and how we pay for it.  Because these will be “pilot programs”
and not simply “demonstrations” the Secretary of HHS will be able to
implement them on a “nationwide” scale without waiting on Congressional
(See the Senate Bill, H.R. 3590, Patient Protection and
Affordable Care Act, § 3021 (2009), establishment of Center for Medicare
and Medicaid Innovation within CMS, p. 723).

Affordable Health Care for America (AHCA) staff
explain the difference between a pilot and a demonstration:  Unlike a
demonstration project, a pilot does not need explicit permission from
Congress for continuation—the agency (HHS)  holds all the power. In
fact, the House bill converts the existing acute care episode
demonstration project into a pilot program—presumably for that reason.  

provision is critical,” Mechanic and Altman note, because in the past,
lobbyists have blocked efforts to make successful initiatives part of
the program—even though we know these programs work.

Already Know How Medicare Can Save Billions

The legislation
promises that Medicare can save billions over the next ten years, and we
already know how this can be done.  As an example, Mechanic and Altman
point to Medicare’s heart-bypass demonstration project which paid a
single global fee for services provided by hospitals and cardiac
surgeons involved in a  bypass operation, including doctors who saw the
patient both before and after he left the hospital. (This is also known
as “bundling” payments.)

As a result, participating providers
did a better job of coordinating care, patient satisfaction rose,
Medicare saved money and both hospitals and doctors saw higher profits.

more could you want?
(Medicare rolled out this voluntary program
nation-wide , why wouldn’t private insurers follow suit, reducing their
own costs while pleasing both doctors and patients?)

Yet for
reasons best known to politicians, Congress never expanded the program
beyond the seven initial hospitals. For more on the success of this
project, scroll down to “The Medicare Experience”  here .For a general
discussion of global fees, see this Commonwealth Fund report.

Who blocked
implementation? My best guess is that hospitals and doctors who never
read the final report on the project feared that they would lose under a
global fee system, and so lobbied against it.  As Dr.  Don Berwick,
president of the Institute for Health Care Improvement (IHI) points out in the film, Money-Driven Medicine,
a great many stake-holders worry, needlessly, that they will lose
something under reform.
Berwick acknowledges that “some oxes will be
gored” as those who profit from waste lose revenue. “But a lot of
people with oxen that won't get gored think they will,” Berwick notes.
And this "coalition of the people who would be better off under reform”
plus those “who are needlessly afraid of change .  .   that's an immense
coalition, “ he observes, “That's eighty percent of America!”

who oppose reform are always available to confirm a stake-holder’s most
paranoid fears. Those who support reform should counter the spread of
misinformation.  Unfortunately, it’s much, much easier to “frame” a lie
than it is to explain the truth. Lies lend themselves to one-liners.
Typically, the truth is far more complicated. I understand why reformers
have had a hard time explaining reform.

Mechanic and Altman
offer a second example: a demonstration project that tested competitive bidding
for durable medical equipment between 1999 and 2002, and discovered
that the bidding reduced Medicare expenditures by 19% . Needless to say,
those who profit from making equipment were not thrilled. They were
horrified—and with some reason. They, in fact, would lose under a
competitive bidding system. Ultimately, Congress authorized the Centers
for Medicare and Medicaid (CMS) to expand the program, but it delayed
implementation until 2010.

The Senate and House bills also
propose a program that would let accountable care organizations
that successfully control growth in spending while simultaneously
meeting quality goals share in Medicare’s savings. In addition, the
bills recommends rewarding doctors who create medical homes that
focus on disease management—and keep patients out of the hospital.

Center for Medicare and Medicaid Innovation

Perhaps the most
important cost-saving innovation in the legislation that the president
is championing calls for a new independent Center for Medicare and
Medicaid Innovation (CMI).  “Several aspects of the proposed CMI offer
hope that this effort could be fundamentally different from previous
Medicare-sponsored experiments” Mechanic and Altman explain.  (See the
Senate bill, H.R. 3590, Patient Protection and Affordable Care Act, §
3021 (2009) (establishment of Center for Medicare and Medicaid
Innovation within CMS, p. 723)

For one, as noted, the Secretary
of HHS could roll out successful pilot projects on a broad scale, making
them part of the Medicare program.

 Secondly “although the CMI
proposal lists 18 payment or delivery models for consideration, the
center would have broad authority to select the programs best suited to
its objectives.”  By contrast, today, "the CMS’s Office of Research,
Development, and Information has far less flexibility, because a large
proportion of its resources are devoted to congressionally mandated

A third critical difference is that the CMI would
not have to require projects to be budget-neutral during their initial
testing period.  “Many health care innovations require initial
investments in staff, training, and infrastructure to achieve long-term
efficiencies. But federal budget-neutrality requirements frequently
discourage potential applicants, leave valuable concepts on the
cutting-room floor
at the Office of Management and Budget, and cut
short promising programs that appear to be increasing Medicare costs

Finally, the proposal includes a $10 billion
appropriation for the CMI through 2019
. “This would allow the CMS,
which has faced chronic shortages of administrative resources, to build
the capacity necessary to manage the program effectively.  It would also
allow the CMI to pay for services such as care coordination that
aren’t covered by traditional Medicare and to support activities such as
electronic data sharing, performance measurement,
and quality
improvement at participating health care systems.”  Keep in mind, both
medical research and practical experience show that when it comes to
health care, higher quality and lower spending go hand in hand.

Providers Who Want to Be More Efficient

The CMI would encourage
delivery innovation by creating alternative payment structures for
organizations that would like to reduce waste, but have been held back
by the knowledge that, under the fee-for-service system, if they “do
less,” they will lose money.
  Mechanic and Altman suggest that CMI
might “follow the new quality-based global payment model that Blue Cross
Blue Shield of Massachusetts has already implemented in contracts
covering about 20% of the providers in its
health-maintenance-organization network. Medicare participation would
magnify the potential rewards.”  In other words, CMI wouldn’t have to
reinvent the wheel. In various parts of the country, providers have
moved away from fee-for-service, and watched local health bills fall
while outcomes remained at least as good—if not better—as they had been
when doctors and hospitals were paid piece-work.

priorities will be crucial. The authors of the NEJM article highlight
the importance of making sure that Medicare payments are “aligned with
scientific evidence about what works. One opportunity for moving in this
direction lies in having the CMI fund delivery systems that document
which care processes are the most effective for specific medical
conditions. Having this information would help the CMS  develop payment
policies that reward hospitals and physicians who follow best practices.

model described in the CMI proposal is a collaborative of health care
organizations equipped with electronic records that could document and
implement best practices and assist other institutions in employing
them,” Mechanic and Altman explain. “In such a rapid-learning network,
participants would embed decision support into their electronic health
records to guide clinicians through specific care processes, document
outcomes, report results, and adjust clinical practices on the basis of
those results.”  Such a collaboration could also “provide valuable
information for the proposed national center for
comparative-effectiveness research , but would be fundamentally
different, because the CMI would pay for clinical services, not just
sponsor research.
” This is important—Medicare needs to move beyond
theory to practice. Reform legislation would let Medicare do just that.

and Altman go on to explain that, under the reform proposals, CMI would
have the opportunity to align Medicare payment with state and local
reform initiatives:  Individual states and most private payers do not
have sufficient clout to implement payment reforms if providers are
reluctant to participate. However,  "a Medicare waiver could allow
states such as Massachusetts, which has proposed moving toward a global
payment system, to establish a uniform structure of incentives that
reward organizations for becoming more integrated and more accountable
for cost and quality.”

Providers would not be forced to
. But under such a system,  doctors and hospitals who are
prepared to accept alternative payment models would be rewarded.
Mechanic and Altman acknowledge that incomes might nor soar the way they
do today when some providers make up for flat fees by “doing more.” 
Still, those who experimented with alternatives such as “bundling”
payments to doctors and hospitals would receive bonuses for good

And they would no longer have to paddle harder just
to keep up with rising costs.  Many providers don’t want to have to “do
more” just to keep the lights on. They would like to be able to spend
more time with patients—and to be paid for the quality of their care,
rather than how quickly they are able to “churn” patients. That’s what
Medicare’s restructuring of how it pays for care is all about. The goal
is to change “how” care is delivered.

Let me be clear:  doctors
would not be forced to accept “alternative payments” from Medicare.
Those who chose to remain in the fee-for-service system” could, but 
they “ would face diminishing financial prospects.”  In other words they
wouldn’t be eligible for the bonuses for better outcomes under
alternative payment systems.  

 New Leadership for CMS

and Altman acknowledge that “success is ultimately about execution. The
CMI would have to overcome a risk-averse CMS culture
that promotes
rigid adherence to rules. Although risk-averse behavior may be rational
in a government bureaucracy, it often kills innovation. “

would it take to establish an effective innovation group within the CMS?
“ they ask. “The first step is to select a leadership team that
understands health care delivery and federal government operations,
thinks outside the box, and is willing to accept occasional failures as
it pursues its objectives
. It will need to interact regularly with
innovators and build on existing knowledge about what works.”

Obama administration has not yet appointed a new director for CMS
. I
have argued that I believe that White House health care policy-makers
want to select someone strong enough to pursue a relatively radical
agenda.  My guess is that the White House did not want to face a battle
over Senate confirmation of such a candidate while fighting the larger
war over healthcare reform.

Rumors have circulated in
Washington for months about who will be offered the position—and who may
have already turned it down.   All of the names I have heard would
be excellent candidates: visionary, experienced, articulate and
They would be willing to break the bureaucratic mold,
as needed, discarding worn ideas, embracing new ones and admitting to
mistakes along the way, in a process that IHI’s Don Berwick describes as
“continuous improvement.”

It is clear that, as Mechanic and
Altman suggests, we need a CMS director who will overhaul how we pay
for care, penalizing inefficiency, ferreting out fraud
,  and
squeezing out waste,  while rewarding better, safer, more collaborative
care. .  Medicare must pay for Value, not Volume.

Mechanic and
Altman conclude: “Successful innovation is essential to the long-term
sustainability of Medicare and Medicaid. The CMI would cost relatively
little in the context of the overall CMS budget, but if it were
successful, the long-term effect on the U.S. health care system could be

Yes.  Since I began this blog in 2007, I have argued
that Medicare reform will pave the way for health care reform.  And we
don’t have to wait for the broader reform legislation to roll out in
2014. Medicare can begin saving money and improving quality this year.

CMS has announced
that it will no longer pay for an excessive
number of preventable hospital readmissions, that it is cutting
cardiologists’ fees while raising fees for primary care doctors and
nurse practitioners, and that it is slashing fees for some diagnostic
tests that are being recommended more and more often –with no medical
evidence of better outcomes for patients.  

The Wall Street
has reported on the proposed changes and how much money
could be saved here.

But I guess Peggy Noonan
doesn’t read the Wall Sreet Journal, she just writes for its
editorial pages.



11 thoughts on “Peggy Noonan vs. the New England Journal of Medicine

  1. It seems to me that these REAL system reform aspects of the bill were underplayed in any “selling” of the reform bill to the public. I am not sure why that was, but maybe it was a mistake. Maybe the better way to sell the bill was to scream upfront that the current system was broke, dangerous and UNSUSTAINABLE, and here is the path we will follow to try to reform the actual delivery system. Oh, BTW, we will also include everyone and rein in insurance company abuse.
    Maybe put the “selling” of the delivery reform aspects of the bill in front priority order would have been better than stressing the insurance reform aspects??

  2. I try not to allow what is becoming a personal crusade against Bob Laszewski to get too out of control, but let’s contrast what he said on Friday about Ms. Noonan’s article:
    “In case you missed Peggy Noonan’s column in the WSJ yesterday, let me suggest it is worth your time.
    I think she hit the nail on the head”
    I really don’t understand when he became a Republican shill. Of course he won’t publish my comments on his blog but you will!
    It’s possible they’re underplaying these reforms because they’re trying to message the bill as being about the insurance companies when in reality we all know the problem is the providers. Publicly taking on hospitals and doctors is a sure way to lose what remaining support they have.

  3. NG & Mike C-
    My guess is that the Congresspeople who drafted the legislation were wary of stressing Medicare reforms because people tend to get very upset when you talk about cutting waste from Medicare. Immediately, they ask: “who will decided what is waste?”
    They fear that what someone else considers waste is something that they will need.
    These leads to talk of death panels, etc.
    In fact the “waste” that MedPAC writes about and the waste that the Medicare Commission (a panel of physicians and health care experts) will be looking at are unncessary treatments and tests that only expose patients to added risk. But most people don’t yet understand this.
    By contrast, almost everyone likes the idea of
    going after the insurance companies . . .
    Secondly, insofar as the Medicare reforms involve structural changes– changing how we pay for care, and changing how care is delivered (by rewarding providers for collaborating, for managing chronic diseases so that a patient doesn’t have to be hospitalized, etc.) — these structural changes are complicated.
    People have an easier time understanding the idea of cutting fees–and they may not like the idea that their cariologist is going to be paid less for diagnostic tests that he does in his office.
    (We know that when docs lease or buy the equipment to do tests in their office, they twice as many. It’s so easy–and they have to do tests to pay for the equipment. This suggests overtreatment, and this is why Medicare is cutting fees in this area.)
    In fact, much of the savings under the pilot programs won’t come from cutting fees but from making these structural changes such as “bundling” payments to docs and hospitals and paying more for better outcomes rather than paying fee-for-service and rewarding providers who “do more” whether or not the outcomes are good.
    But this is complicated. Most people don’t know what bundling is. Most people don’t know that it’s already working at Geisinger.
    This probably explains why the politics aren’t talking about these Medicare reforms.
    But that still leaves the question: why aren’t liberal bloggers, jouranlists and others who support reform talking about Medicare savings?
    I’m afraid the answer is that many people haven’t read the bill, and don’t realize how it spells out ways that Medicare can save. Most people don’t know about the pilot tests that have been successful in saving money–but were never implemented because Congress blocked them.
    I had suspected that under reform, Medicare would figure out a way to change how it does things without having to go through Congress. But I didn’t pick up on the subtle but crucial difference between a “pilot projection” and a “demonstration project” until I read this NEJM article. (I then double-checked another source to make sure I fully understood the difference.)
    This is what I found: “Medicare has always made a distinction between a ‘pilot’ and a ‘demonstration’ project. A demonstration is an experiment, funded for a limited time, with the purpose of testing a promising clinical and/or organizational model; a pilot is the launch of a model that already has proven merit, with prospects for ongoing funding, and high expectations of continuation.”
    I also learned that Medicare has a demonstration project going on “medical homes” but is now planning to replace it with a “pilot project” exploring medical homes.
    Finally, when it comes to cutting and raising fees, Medicare does need approval from Congress, but Congress has a limited time to say “yea” or “nay”–if it doesn’t act, the changes automatically go into effect.
    If Congress wants to modify the cuts and hikes that Medicare proposes, it can, but it would have to achieve the same level of savings.
    In other words, if Medicare plans to cut cardiologists fees by 6% while raising primary care fees by 4% and nurse practioner fees by 3% (which it does) the only way Congress could block the cuts would be to find other places to cut Medicare spending and lower hikes to primary care so that the net savings remain the same.
    This puts Congress in a tough spot. They can’t just say “no”– they have to find a better way to rein in Medicare inflation.
    So this year, next year, and the year after, they may just do nothing, and let the Medicare Commission’s proposal go through. (Changes to the fee schedule are supposed to continue over the next 4 years.)
    Right now I think the cardiologists cuts and primary care raises are going into effect.
    The cardiologists are upset and have tried to block the cuts by going to court, but the court dismissed the suit against Medicare.
    Mike C–
    In the past I have quoted Bob L. and found some of his posts very useful.
    But in recent months, as we came closer to reform, he became increasingly insistent that it must be bi-partisan reform. He has been extremely critical of the Democrats’ proposals, and has been saying that they should scrap the legislation and start over.
    Insofar as he supports the Republicans, this suggests that he doesn’t view universal coverage as a priority. (The Republicans would cover only 3 million of the uninsured, not 30 million.)
    I was startled to see him endorsing Noonan’s Op-ed.

  4. Everyone involved in the discussion of health care needs to be clear about one thing: US health care costs must be controlled and decreased or they will become unsustainable, resulting in loss of health care for most people except the wealthy and in severe damage to the health of the population and severe damage to the economy.
    There are only two ways to do this.
    One is the way Obama and his allies have proposed beginning to implement: changing payment patterns to reduce unnecessary and harmful care, waste, and practices that lead to added costs and deaths.
    The other is to cut health care payments either directly, by decreasing payments for care indiscriminately across the board, or indirectly, by increasing deductibles, co-pays, and co-insurance to prevent most people from accessing care freely.
    The second approach will lead to exclusion of more and more people from access to health care, including routine preventative care, and in the long run to worse health outcomes, but is favored by many politicians and public figures since it will make access a privilege for the wealthy and preserve the incomes of technology and pharmaceutical companies.
    The first approach is used in every other developed country, resulting in measurably better health care results at much lower costs, but is attacked with scare arguments about non-existent death panels and destruction of Medicare, despite the fact that many of those making the attacks actually wish to use increased costs to ration and destroy Medicare coverage for most people.
    The final insult in these arguments is that the opponents of reform keep insisting that the Obama reforms do not make any effort to contain costs, when in reality they are a good beginning toward implementing real effective cost containment without compromising real quality.
    It is time for us to recognize that the central argument here is between those who believe health care should be a right available to everyone and those who believe it should be a privilege based on ability to pay in a market system. That realization makes the behavior of members of both camps easily understandable.

  5. Maggie, your blog is very enlightening. Could you clarify exactly what the bill would do to Medicare Advantage accounts. My understanding is that the insurers would lose their 13 to 14% subisidy. How much would this increase premiums for the insureds?

  6. Maggie, thank you so much. I’m feeling much better about the current legislation.

  7. NG:
    Thanks for providing that story.
    Many people link the mandate of auto insurance with the mandate of health insurance.
    Here in Texas, only liabililty auto insurance is mandated, which is about $50 a month.
    To mandate health insurance AND provide subsidies to the upper middle class (probably should be even higher) is another very different situation.
    Would it be constitutional, or even prudent, to require everyone have an IRA, with the government providing matching contributions?
    Don Levit

  8. Pat S., NG, John H., Patricia
    Pat S., In general, I agree.
    Though I would raise co-pays on popular tests and treatments that we know aren’t beneficial.
    AT this ponit, no payor can say “we won’t pay for annual mammograms for average-risk women of a certain age”–even though we have medical evidence that risks outweight benefits for many women.
    But we could raise co-pays, perhaps gradually, and steer women away from unncessary teats that lead to unnecessary treatments.
    John H.
    Medicare Advantage plans that are efficient and actually provide value would survive. (Here I’m talking about well-established HMOs.)
    Other Medicare Advantage plans will probably fold.
    NO, this won’t lead to single-payer (Single-payer also would have to mandate that everyone buy insurance. And it wouldn’t be that cheap. For a family it woudl cost $11,500– plus if they actually decided to invest in invetigating fraud and abuse.
    And your employer wouldn’t be sharing the cost of that $11,500 with you. In theory he’d either be giving you a raise in lieu of benefits or contributing to a pool to help cover subsidies for low-income and middle-class people.
    But if you think tha in this economy, your employer would cotribute anything close to the 75% to 100% of premiums that large employers now pay, you’re dreaming.
    Be careful of what you wish for.
    Finally,if this “not constitutional ploy”
    works what it will result in is no health insurance for a great many people (including children) who suffer from pre-existing conditions.
    Thanks. I’m still optimistic that reform will pass. (Though with so many people saying and doing so many dumb things . . . it can be discouragnig.)
    But Obama, Pelosi, Orszag and his healthcare adviser Zeke Emmanuel are not dumb.
    And the legislation itself contains many good ideas that will, in fact, save $$$.