P.S.  Are We Sure that Medicare Spending Is Still Outstripping GDP Growth? 

In yesterday’s post, I said that Wall Street was getting nervous about the stalemate over raising the debt ceiling—and the possibility that the U.S. Treasury would run out of the money needed to pay its bills. If the world begins to lose confidence in the full faith and credit of the U.S., it loses confidence in U.S. government debt (i.e. Treasuries)—which means that investors lose confidence in the dollar.  Looking for a safe haven, they begin to buy gold. This morning Bloomberg reported that gold futures have risen to a record $1,631.20 an ounce. Meanwhile, the dollar fell to a record low against the Swiss franc. Among paper currencies the Swiss franc is considered a relatively “safe haven.” This afternoon both gold and the dollar appeared to be correcting.

Wall Street abhors uncertainty, and uncertainty is seeping into the market. “Government securities, the traditional area of safety, are now at risk, so that’s why you’re seeing gold grind higher,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, told Bloomberg. “The level of U.S. government borrowing has caused the erosion of the dollar and adds more fuel to the metal’s rally.”

Wall Street’s rating agencies may lower the nation’s credit rating. “I’m pretty certain that the government is going to see a downgrade by at least one agency,” Kathleeen Gaffney, co-manager of the $21 billion Loomis Sayles Bond Fund said yesterday in an interview on Bloomberg Television’s “Street Smart.” She offered some reassurance: “Treasuries will continue to be a large, liquid market whether it’s AAA or AA.” (Gaffney is a seasoned investor. As Bloomberg notes her bond fund returned 14 percent in the past year, beating 98 percent of its competitors.)

Continue reading →

The Obama administration is now warning that the President will veto House Speaker John Boehner’s two-step plan to raise the U.S. debt ceiling and cut $3 trillion in government spending.

President Barack Obama’s Office of Management and Budget has announced that it “strongly opposes” the measure, which the House is set to vote on tomorrow, and would recommend a veto if it were passed by Congress.

Boehner is trying to round up the votes to pass the measure in the Republican-controlled House, but some conservative Republicans are refusing to sign on to the plan—either because they think that the cuts Boehner is recommending don’t go far enough, or because they oppose the whole idea of lifting the debt ceiling.

Meanwhile, Senate Majority Leader Harry Reid is seeking support for his alternative that would provide a $2.4 trillion increase, enough to get through the 2012 elections. Liberals argue that Boehner’s two-step plan won’t give financial markets the assurance they need. Bloomberg reports that Reid is now saying that the Senate will vote on his proposal “soon.”

Yesterday Wall Street remained sanguine, confident that politicians would make a deal, and avoid default. But today, Reuters reports, the Street is getting nervous: “Wall Street banks are preparing for the real possibility that the United States will lose its top credit rating, which they say will cost the country $100 billion in additional interest payments and hurt both consumers and the economy.”

It’s now likely that at least one of Wall Street’s three credit rating agencies will downgrade U.S. debt.  But a downgrade would be minor compared to an outright default that, as Reuters notes, “would catapult the United States to the top of the list of sovereign states whose political dysfunction supersedes sound economic management — above countries like Argentina, Ecuador and Russia.” 

It is difficult to imagine that this could happen. But in his televised speech yesterday, Harry Reid voiced his concern that conservatives might be more interested in “embarrassing the president” than in “doing what is right for the country. And today, the Washington Post’s Ezra Klein warned that “Many elected members of the GOP really are willing to let Treasury exhaust its borrowing authority. Very few elected Democrats can say the same. For that reason, Republicans always had the leverage on this issue . . .”

Senate Majority Leader Harry Reid today revealed his own budget proposal,  which would hand Obama the full $2.4 trillion borrowing authority he has requested—enough to last through the 2012 election—tied to $2.7 trillion in spending cuts that would leave Medicare, Medicaid and Social Security untouched. The plan does not attempt to raise new revenues: conservatives have been adamant that they will not vote for any proposal that raises taxes.

Reid announced his plan this afternoon, pointing out that his package meets Republicans’ two major demands: it does not raise taxes and the spending cuts are designed to meet or exceed the amount of the debt-limit increase.

“I spent all week-end trying to work something out with the Republicans,” Reid said. “We are spending $700 billion dollars this year on the military, more than all of the other countries put together. You would think the Pentagon could chip in some bucks. Gates thinks they can,” he added, referring to former Defense Secretary Robert Gates. “But this week-end, lo and behold, Republicans wanted to raise money for the Pentagon.”

Meanwhile House Speaker John A. Boehner has proposed a two-step plan to cut spending by nearly $3 trillion, laying out the details to his Republican colleagues this afternoon in a closed-door meeting in the Capitol. Boehner’s plan includes an immediate increase in the debt ceiling of up to $1 trillion that is paired with $1.2 trillion in cuts to discretionary spending over the next decade. A new, joint House-Senate committee of 12 lawmakers would then be mandated to come up with another $1.8 trillion in deficit savings over 10 years by Christmas.

“What they are trying to do is to force us to have the same debate on the exact same subject, two months from now,” said Reid. “A short-term agreement risks many of the same dire consequences that would be triggered by the default itself.” If Congress adopts a short-term approach, Wall Street might still lower the nation’s credit rating.

Christian Cooper, head of U.S. dollar derivatives trading in New York at Jefferies & Co., told Bloomberg that markets view Boehner’s two-stage plan as a “non-starter because we now know it is amateur hour on Capitol Hill and we don’t want to be painted in this corner again.”

Earlier today, Treasury bonds fell after Mohamed A. El-Erian, whose Pacific Investment Management Co. runs the world’s biggest bond fund, said the U.S. may lose its AAA debt rating even if lawmakers reach a plan to avoid a default.

While Reid’s plan takes Medicare and Medicaid off the table, Huffington Post’s Sam Stein reports that as for cuts to Medicaid or Medicare suppliers—namely hospitals and pharmaceutical companies—that remains less clear.”

According to Stein, Reid’s budget “leans heavily on cuts to discretionary spending. The package will also reportedly include roughly $1 trillion in savings that will come from the drawdown of the wars in Iraq and Afghanistan (which the Congressional Budget Office does score).” He explains, “if entitlement programs remain more or less untouched in the plan, there would be few other areas from which to draw ten-year savings.” Later this afternoon, Reid's office confirmed that $1 trillion will indeed come from the drawdown of troops.

Reid's proposal would also establish a congressional committee comprised of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed a Senate vote with no amendments by the end of the year.

Republican reactions to Reid’s plan were frosty, but reportedly, many of the cuts are ones that Republican leaders have agreed to in past discussion.

Reid’s proposal meets Republican’s major demand: no new taxes. At the same time, liberals will be enormously relieved that the package protects Medicare and Medicaid. From a reasonable man’s point of view this would seem like a win-win solution. Now we will find out how many reasonable men there are in Washington.

For a round-up of the most provocative posts that have appeared on health care blogs during the past two weeks, turn to Worker’s Comp Insider  where  Julie Ferguson has done a splendid job of hosting  the “Heat Wave Edition” of Health Wonk Review (HWR). As Ferguson observes, while it is “sizzling outside,” D.C.is “on fire” as “the budget battle heats up.”

 Below, I discuss and elaborate on two posts that seem particularly relevant to the war over the debt ceiling that is roiling Washington this week-end.

But I urge everyone to read the full “Health Wave Edition,” where they will find posts that focus on: a recent congressional hearing on Independent Payment Advisory Boards   (complete with video clips); an excellent primer on Health Exchanges, by Timothy Jost; The Fast Food Model for Corporate Medicine,” (a piece by Roy Poses’ that features Florida governor Rick Scott); why doctors offer credit cards in order to avoid discounting (from the Health Business Blog);  why less is more when it comes to angiograms (by Shannon Brownlee);  the effectiveness of Robotic Surgery (Gary Schwitzer); and whether OSHA's Voluntary Protection Program (VPP) is broken (Worker’s Comp Insider)

                        ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Demagogues, Deficits and HealthCare: Are Drug-makers Untouchable?

Over at Managed Care Matters, Joe Paduda makes it clear that he is fed up with political demagoguery. 

In this timely post, Paduda reminds us that Medicare Part D, the prescription drug program passed as part of the Medicare Modernization Act (MMA) in 2003, represents “the largest expansion of entitlement programs since the Great Society." This was “a Republican program," he observes, that was “completely unfunded; short term, long term, any term. The GOP decided to NOT set aside funds, or raise taxes, or cut other programs; they just passed Part D, committed to paying for it out of 'general funds' and to hell with the future.”

 Democrats opposed the bill; nevertheless, it squeaked through Congress.  As a result, Medicare’s Actuaries recently reported, “the Part D program has contributed $9.4 trillion to the ultimate Federal deficit.”

Wait a minute. I thought conservatives wanted to slash “entitlement” programs. Why would they pass such an enormous program without worrying about how to pay for it?  

“Part D was a  political masterstroke,” Paduda explains, that  “undoubtedly helped George W Bush get re-elected along with many GOP legislators, as seniors loved the new program.”  (Part D also represented a windfall for drug-makers, and they, too, were pretty happy.)

“I bring this up not to anger my conservative readers,” adds Paduda, whose forthright and even-handed blog appeals both to conservatives and to progressives.  “But rather to educate some who aren't aware that Part D, and the costs of Part D, are the handiwork of Eric Cantor, John Boehner, Mitch McConnell et al. [his emphasis here and throughout]

Continue reading →

Below, a guest post written by HealthBeat reader Jim Jaffe, a long-time Congressional staffer , who now describes himself as a Washington Observer. Here he makes the argument that, contrary to what you may have heard, we are not suffering from a shortage of doctors. (This post originally appeared on Huffington Post)

                          ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

There's a popular story circulating suggesting that America suffers from a shortage of medical care and the doctors who provide it.

The narrative basically goes like this. Many people fail to get care they'd benefit from because of inadequate insurance and a shortage of physicians that is becoming particularly acute for Medicare participants, largely because low reimbursement rates are convincing a significant number of doctors to stop participating in the program. This results in a shortage of timely care that feeds increasingly crowded hospital emergency rooms filled with people who are extremely sick.

This story is totally untrue. It is a dense package of misinformation that not only distorts the political debate, but undermines reform efforts to create a more efficient system. So it's worth deconstructing.
A few years ago the Kaiser Foundation compared public attitudes toward care with the views of experts, who believe that up to 30 percent of today's care is unnecessary. That perception was a foundation of the health reform debate — that squeezing out waste could make the system more affordable. The public didn't buy it — and still doesn't, with two thirds saying Americans aren't now getting the treatments they need. Not surprisingly, all the evidence suggests the experts are right.

Continue reading →

You’ve heard the news: If Republicans will consider tax increases, President Obama is willing to raise the eligibility age for Medicare, from 65 to 67. Instead of Medicare for all, we would have Medicare for fewer.

This is such a bad idea that I would like to believe that the President was bluffing. Over at Hot Air, blogger Allahpundit suggests that “Obama has been floating these ‘grand bargain’ packages involving . . . entitlement reforms. . . knowing that the GOP will reject them on tax grounds and fall back to a smaller package of spending cuts only, which O will sign. Then he can turn around and sell himself next year not only as the guy who approved $2.5 trillion in cuts or whatever, but as the adult in the room who was willing to tackle entitlements before Republicans backed out of the deal to protect the rich.”

Maybe, but I don’t think the President is quite that Machiavellian (though sometimes I wish he were.) On the other hand, it’s hard to imagine that he thinks that raising the bar for Medicare is a clever idea. Lifting the eligibility age to 67 only shifts costs while punishing those who need Medicare most: low-income and middle-income Americans.

Continue reading →

Below, a transcript of a column by George Lundberg, M.D., Editor-at-Large of MedPage Today that does a very neat job of summing up why healthy people should not be tested for disease unless they are experiencing symptoms or have good reason to believe that they are “at risk.”  Put simply, the math is against you.

Dr. Lundberg serves as president of the Lundberg Institute, and is a consulting professor of pathology and health research policy at Stanford University School of Medicine. (Full disclosure: I’m on the Advisory Board of the Lundberg Institute.)

Lundberg co-authored this piece with Dr. Clifton Meador. (If you’ve seen the film version of Money-Driven Medicine, you will remember Meador as the doctor who takes you on a tour of Nashville.) They promise a sequel on “false diagnosis” next Monday.

You will find the audio version of the column here.

Hello and Welcome. I'm Dr. George Lundberg speaking for myself and lead author Dr. Clifton Meador of Nashville, Tenn., in this At Large at MedPage Today.

Over the past several decades, there has been a shift in the kinds of patients seeking medical care.

The progression has been from sick to early sick to well to worried well to worried sick.
The reasons are beyond the scope of this article. There is a subtle and hidden, but potentially very damaging, factor operating in the diagnostic process when large numbers of well people seek medical attention in a system designed to care for the sick. This factor is the prevalence of disease.

The accuracy of the diagnostic process is ruled by strict arithmetic.

Specificity and sensitivity of the test itself and the prevalence (or pretest probability) of the disease in the population being tested control the accuracy of the process.

Pretest probability means the percent of people being tested who have the disease in question.
A pretest probability of 2% means that 20 people out of 1,000 have the disease. Obviously, 980 people do not have the disease.

At 2% prevalence, using a test with 95% specificity and 95% sensitivity, the rate of false positives will be 72%.

So, 5% of 980 well people will generate 49 false positive tests while 95% of 20 people with the disease will yield 19 true positives.

1,000 people; 49 "wild goose chases," and only 19 geese caught.

Trouble, especially for the 49.

When the prevalence of a disease decreases, the rate of false positives increases.

Even with a very specific and sensitive test, if the pretest probability in the population is low, there will be more false positives than true positives.

False positives lead to one of two things — one, they must be tracked down with additional tests, which are costly and will generate more false positives. Often this leads to unnecessary biopsies and anxiety. This is part of the sad story of mammograms and PSA testing. Or, two, the false positive test result becomes a label of a nonexistent disease and the person carries the burden of a disease he or she does not have. The amount of false diagnoses of any disease, other than heart disease in children, is unknown and generally unstudied.

It is pure arithmetic.

The increase of well people seeking medical care lowers the prevalence of all diseases and increases the rates of false diagnoses.

Beware of this current active Great American Medical Tragedy.

That's our opinion. We are lead author Dr. Clifton Meador of the Meharry Vanderbilt Alliance and Dr. George Lundberg, At Large for MedPage Today