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Daschle: What Can We Expect Of The Health Czar In Waiting?

December 15th, 2008

When Tom Daschle, President-elect Barack Obama’s designate for Secretary of Health and Human Services, published a book earlier this year titled Critical: What We Can Do about the Healthcare Crisis, I saw the favorable reviews and made a mental note to buy and read it. After Obama’s announced choice of Daschle for HHS secretary, this became more salient. It is well worth reading carefully, as it provides some important clues to the likely course of health reform under Obama’s administration.

Any book on health policy by a Democrat needs at least three key ingredients:

1) A collection of personal-interest horror stories about well-meaning citizens who’ve been damaged by our health system (a significant editing challenge since there are, legitimately, millions of these stories).

2) A mention of the widely discredited Himmelstein and Woolhandler fictoid about 31% of U.S. health costs being “administration” (see the McKinsey Global Institute’s 2007 “Accounting for the Cost of Healthcare in the United States” for a more rigorous analysis).

3) A mention of the World Health Organization (WHO) study about how we rank 37th in the world in “health care” despite spending trillions more than any other country (dispatched efficiently earlier this year by Cato’s Glenn Whitman).

You’ll find all three obligatory ingredients in Daschle’s book. What is surprising and refreshing, however, is his thoughtful analysis of Congress’s epic struggle with health reform, particularly the failure to enact it during the Clinton presidency, when Daschle was a senior member of the Senate Democratic majority. Almost 25% of the book is a superb congressional history of health reform going back to 1914. Daschle has done his homework.

Daschle acknowledges that disunity within his own party played a crucial role in sinking health reform under Bill Clinton, who had Democratic majorities in both houses. He also blistered Clinton and his advisers for wasting critical time dissipating public support for reform, as well as for handing down an absurdly complex and bureaucratic bill that provided “a target the size of Philadelphia” for opponents.

If you accept his critique of the Clinton failure as a clue to Daschle’s approach, the key elements of Obama’s strategy are likely to be: speed, simplicity, and alignment with congressional health policymakers. Thus, we should expect a couple of hundred page bill drafted collaboratively with congressional policymakers. Daschle will certainly not voluntarily produce anything remotely resembling the 1,346-page behemoth Health Security Act so many of us used as a doorstop.

Rather than blaming the Executive Branch alone for the failure to accomplish health reform, however, the book pivots around the most breathtakingly candid declaration of collective incapacity I’ve ever heard from a former member of Congress. Daschle actually says: “Professional expertise and trustworthiness — these are qualities that Congress lacks when it comes to healthcare.”

The Federal Health Board: A Proposal Designed To Depoliticize Benefits Decisions

The centerpiece of Daschle’s argument is that Congress and the administration should be insulated from the politically unmanageable process of determining health benefits and payment strategy under health reform by a Federal Reserve-like entity called the Federal Health Board.

This Board would be filled with presidential appointees (Senate confirmed) with ten-year terms designed to overlap presidencies. Daschle would ask the Health Board to:

1) create an evidence-based benefit package consistent across federal agencies but also offered by employers;

2) design a Medicare-like public health benefit for those under age 65 to be offered in conjunction with private health plans in a multiple-choice format similar to the Federal Employees Health Benefits (FEHB) program;

3) design and manage an evidence-based coverage policy for drugs and procedures that factors in both health and cost impacts;

4) suggest research priorities for the National Institutes of Health (NIH);

5) analyze federal health data to determine clinical effectiveness;

6) promote transparency of costs and quality in the provider system; and

7) recommend changes that would “rationalize” the nation’s health care infrastructure.

The Federal Health Board is designed to insulate Daschle’s former colleagues from pressures that many in Congress find both uncomfortable and distasteful: micromanaging health programs for powerful contributors or constituents: “We’ll be able to wrest power from Congress and the White House only when political leaders realize they are incapable of making the technical decisions on benefits that are so crucial in any healthcare system.”

Daschle’s focus on managing the benefit makes him the first major national political figure to acknowledge publicly the crucial connection between the politics of the mandated benefit and the affordability of universal coverage. If you wish to mandate that either employers or individuals purchase health coverage, you must, at some point, declare what services they are to be legally required to purchase. It’s not something you can talk candidly about during a political campaign, because the incentive is to pander to every pressure group and not exclude anything or anyone from coverage.

By focusing on “depoliticizing” benefit and coverage decisions, Daschle has targeted the two areas that, if left to nature, would render federal health reform unaffordable. In a fiscal climate as challenging as that facing the next Congress, this is a prescient concern. Technology coverage and payment policy is, if anything, even more contentious and subject to continuous political micromanagement.

Many health policy experts believe that a more research-based approach to coverage and payment might help rein in medical technology spending, a major driver of health cost inflation. Gail Wilensky, Uwe Reinhardt, and others have long advocated creating a Center for Comparative Effectiveness, modeled on the National Institute for Health and Clinical Excellence (NICE) in England, to bring available scientific evidence to bear on making coverage and payment recommendations for medical technology. Apparently, Daschle’s vision is that the Federal Health Board would perform this function.

Daschle’s Approach Could Help Pass Health Reform In A Poor Economy

Tactically, adopting Daschle’s approach could enable Obama to pass health reform quickly without putting a stake in the ground on the precise cost of his program — a plus in a rapidly deteriorating fiscal climate. With a congressionally defined benefit, CBO scoring and concerns from fiscally conservative Congresspeople like the Democratic “Blue Dogs” could quickly sink the process.

Under Daschle’s approach, the key decisions about precise benefits, as well as the politically dangerous issue of what individuals would have to pay out of pocket for mandated benefits, could be punted to the Federal Health Board, which could take at least eighteen months to get organized and report to Congress on how to structure the benefit. This would conveniently buy Obama time for the economy to recover, time to find funding for needed federal subsidies to small businesses and the unemployed uninsured, as well as time for business to strengthen enough to afford an employer mandate.

Some in the health policy world have criticized the Health Board idea as an attempt to “take the politics out of politics.” The appointment process, of course, is inherently political. And the $2.5 trillion health care “industry” could hardly be expected to be indifferent to who was appointed and how the ground rules for technology evaluation and payment policy are set up, let alone what gets covered by any mandated private benefits or public programs.

Further, Medicare and Medicaid remain crucially integrated into the federal fiscal picture, making it inevitable that Congress considers aggregate funding levels as part of its budget reconciliation process. The politics do not disappear under Daschle’s proposal; rather, they are held at arm’s length, submerged in a technocratic process and subject to economic tests. It is also the case that the “evidence” behind evidence-based benefit design and technology coverage decisions is both fragmentary and in a state of evolution. Medical technology development is a learning process — one that certainly could be less expensive than it is now without damaging patients. It is challenging, even with the best of intentions, to subject emerging technologies with limited use and cost data to this process; it is the early use and perhaps overuse of the technologies themselves that help define the boundaries of what is appropriate. (See the excellent discussion of the limitations of technology evaluation in the current issue of Health Affairs by Steven Pearson and colleagues reviewing the challenge of CT colonography.)

To set the evidence bar too high too early could further damage an already laboring medical technology industry in the U.S. and drive both research and development overseas. Marked increases in funding for evaluation research would be required to catch up and fill the yawning evidence gap. However, pharmaceutical companies and medical technology firms, which are profoundly threatened by an American version of NICE, are going to have their work cut out for themselves in arguing that we shouldn’t have a more rigorous process than we have now.

However, the acid test for Daschle will be his ability to sell his idea of restraining Congress’s fine hand to his former congressional colleagues. It is difficult to imagine Henry Waxman, who has formidable expertise on health issues and has in the past relished shaping minute elements of federal health policy, surrendering some of the considerable powers of his newly attained Chairmanship of Energy and Commerce to a body of economists and health policy experts. Similarly, it is difficult to imagine Charles Rangel, an embattled but savvy legislative craftsman as Chair of Ways and Means, setting aside some of his committee’s considerable power over the federal health benefit.

Whether Waxman and Rangel and their counterparts in the Senate will ultimately find it in their interest to surrender some of their power to shape private and public health benefits and coverage remains to be seen. Their new executive branch partner in health reform has certainly paid his dues, and he knows what the world looks like from their point of view. It could make a crucial difference in whether, as many of us hope, health reform actually happens this time.

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1 Trackback for “Daschle: What Can We Expect Of The Health Czar In Waiting?”

  1. Critical of Critical | The Health Care Blog
    August 22nd, 2009 at 7:16 pm

10 Responses to “Daschle: What Can We Expect Of The Health Czar In Waiting?”

  1. RogerCollier Says:

    Tom Daschle is a canny and experienced politician who was reelected as a Democrat in a conservative state numerous times over a twenty-six year period before finally succumbing to Karl Rove’s political machine, so it’s reasonable to assume that he has a good sense for what Congress might pass. Equally important, given the considerable commonality between his prescription for our health care ills and the campaign promises of President-Elect Obama, we can guess that what we may see from the new White House Office of Health Care Reform may look a lot like Part Four of Critical.

    Various reviewers have been pretty dismissive of several aspects of Daschle’s proposal, but it has some obvious attractions. The underlying assumption is that a redesign of our existing system would gore too many oxen, and that the answer is to build a competing and better regulated structure around FEHBP—the one traditional insurance program that the federal government does control—in the expectation that the new system will succeed as the old erodes. It’s all a little like what Japanese and Korean automakers have achieved at the expense of Detroit by building new plants in the South.

    One can question Daschle’s proposal to give regulatory power in the new structure to a federal health board, but it’s hard to come up with a better one. Yes, there would be attempts to lobby the new Fannie Med (thank you, Matthew Holt), and yes, over time changes in board membership could result in big changes in policy. On the other hand, whatever free marketers may think, we do need regulations and someone has to set them, and so far the politicians haven’t done too great a job.

    So, if Daschle’s sense of political feasibility is correct, is the Critical proposal likely to solve our critical problems? We have two huge ones: number one, our total health care spending of close to 17 percent of GDP, and, number two, the lack of affordability that has resulted in 46 million uninsured. (There are other big problems of quality and access and the Medicare deficit, too, but let’s just focus on these two.)

    So far as our number two big problem is concerned, there’s little doubt that Daschle’s proposed imposition of play-or-pay, provision of tax credit premium subsidies, and expansion of Medicaid and SCHIP, would make health care more affordable for many. Unfortunately, as fiscal conservatives will instantly point out, pouring enormous amounts of public money into the health care system will make our number one big problem (as well as the deficit) even worse. The major strength of Daschle’s proposal, to leave the present system essentially intact while adding a competitive “something better,” turns out also to be its biggest weakness.

    There are other weaknesses, too. First, the downside of minimal meddling with the present system is that all its problems (like administrative burden, cost-shifting, medical ineffectiveness, and so on) will be perpetuated for a long time to come. Daschle’s hope that the new federally-regulated system will put “tremendous pressure on everybody else to follow suit” seems wildly optimistic. The theory hasn’t worked in Detroit yet, and it’s unlikely to work in health care.

    In addition, for small employers not to fight the proposal, their play-or-pay “pay” levies must be low, thereby encouraging those currently offering coverage to ditch it, with the result that the employer contribution to the federal pool will be far less than expected. In fact, this may result in other dominoes toppling, as medium-sized employers demand the same deal, and so on—a death spiral caused by pandering to the intransigent.

    Finally, at least in terms of this brief critique, inclusion in the new federal system of a Medicare option—plus expansions of Medicaid and SCHIP—is likely to kill the proposal stone dead. Given the current federal programs’ cost-shifting effects (highlighted in a recent Milliman actuarial report), insurers can be expected to fight tooth and nail against something that depends on provider payment rates that they are likely to have to subsidize.

    Other current proposals, like those from Max Baucus, and from Hillary Clinton’s presidential campaign, have some of the same problems as Critical. They are all thoughtful and well-intentioned but, in ducking the risk of alienating the present system’s key players, fall into the trap of trying to buy coverage expansion with too little regard for total costs. The Ron Wyden-Bob Bennett bill avoids expansion of Medicare and Medicaid (in fact, it shrinks the latter), but comes with all the risks associated with major system change (especially eliminating the tax exclusion of health care benefits), and with its own weaknesses (do we really need fifty-plus new state agencies to manage enrollment?).

    With President-Elect Obama talking of years of trillion dollar deficits, and with Bernie Madoff not available to juggle the numbers, it’s going to be extraordinarily difficult to create a health care reform proposal that doesn’t look like it’s going to break the bank and does reform.

    For those who haven’t given up hope after reading this, there is a little encouragement in the number of proposals, and in the number of commonalities among them. Baucus’ plan is artfully vague on some key points, and so lends itself to modification; the Wyden-Bennett bill has attracted cross-aisle support—essentially for reaching the magic sixty votes; Daschle’s Critical proposal has the virtue of building on a health insurance plan that actually works fairly well. Now, if only we could take the strong points of each without including the weaknesses…before it’s too late.

  2. Dennis Cotter Says:

    The creation of a Federal Health Board sounds somewhat reminiscent of DHHS’ National Center for Health Care Technology (1979-82) whose charge was to assess the value of established and new technologies. Although its tenure was short, one should learn from the reasons for its demise.

  3. Christopher Hughes Says:

    I’m supposed to get the book for a Christmas present – how sad a comment on me is that? – but the summary you have given is encouraging to me.

    The Federal Board seems to have been fairly well thought out. Given the Obama transition team approach to seeking as much public input as possible (unprecedented, in fact), I have hope that we will have the vigorous debate we sorely need.

    I, too, have to comment on another “drive-by” by the author, in addition to the Woolhandler one. If the Cato report cited is an example of “dismantling” WHO’s report, I think Cato needs to spend even more money on thinkers for the tank than it already does.


  4. rfattaleh Says:

    Very good article; however several points not being mentioned by Daschle and others:
    1. no type of medical reform or healthcare savings can exclude some type of malpractice reform;
    2. not included in most analyses or public comment on a national scope is the monumental cost and consequences of the concept of patient “non-compliance” or “poor” compliance. Frequently there is no incentives for patients to improve themselves. This is seen every day in clinical practice.
    3. discussion on our “disability” system: its fundamental ties to medicare, its own cottage industry (lawyers and advocate companies), and its meteoric rise in medicare beneficiaries.
    4. the fundamental national concept of patients and their families expecting everything yet not wanting to pay for any of it; collectively we all want John Hopkin’s level of care at someone else’s expense.
    5. the discussion regarding the medical system and its complex intertwining with social issues and problems. Currently, the medical system has an unfunded mandate of often being assigned to fix social problems.
    6. the realization the information technology will possibly NOT fix or save costs in the near short term.

  5. mkjgrima Says:

    Good article and helpful, but why the drive-by trashing of Seffi Woolhandler?

    Woolhandler’s approach to identifying administrative costs in the U.S. and the Canadian health systems differed substantially from that employed by McKinsey. Woolhandler’s group added estimates of administrative costs in hospitals, physician practices, long term care settings, pharmaceutical companies and employers to the administrative cost of insurance borne by insurers which McKinsey measured. Once this is accounted for, the amounts identified in each study as administrative waste actually appear quite comparable.

  6. brucequinn Says:

    I think advocates of the board misunderstand the problem as regards costs. A board making “coverage decisions” on “hard questions” will occasionally save costs. However, *most* overutilization is very very difficult to control by binary decisions. It isn’t whether MRI is useful for a sore shoulder or not; allowed or forbidden. It’s which patients it’s clinically useful for and when. It isn’t a question of whether overnight sleep testing ($1000) is useful for potential sleep apnea patients, it’s which patients and when and how the data are then understood and used clinically. Trying to capture such decisions on paper either results in very cumbersome long qualitative documents or is not useful. And the insurance processing system – a procedure code and a diagnosis code – is very poorly suited to adjucated decisions other than the most simplistic binary ones (pay, don’t pay; pay for 3 per month; etc.) (ICD-10 will have relatively small impact on the problem.) To use an analogy – which deliberately accentuates the mismatch – he complexity of clinical care is akin to “Encyclopedia Brittanica” whereas the complexity of insurer claims processing and decisions is akin to “Tic Tac Toe” – you can’t map the former onto the latter. Or, another analogy of mismatch, malnutrition is bad, and flu shots are good, but you can’t solve malnutrition by access to flu shots. Boards or panels (such as a National Coverage Decision at Medicare) work for very discrete binary decisions, on specific technologies, so yes, there is some “gateway” effect. But I think that only 10% or 20% of cost inflation is amenable to being addressed by this mechanism. I was a regional Medicare medical director for four years and saw the issue daily.

  7. acavale Says:

    Excellent observations. Unfortunately, looking at solutions from a purely economic standpoint will eventually lead to inadequate solutions, if any. Any possible solutions to the health care crisis must include the major stakeholders – patients and their physicians. Any Federal Health Board devoid of these two constituents will be much of the same, depending on the leanings of the Board members. In my opinion, costs can be contained relatively easily if health care decisions are made at the time of contact between patients and their doctors, rather than by bean-counters elsewhere (CMS or private insurers). Transparency and direct contracting between patients and physicians for routine ambulatory care will go a long way in eliminating wasteful expenditure of money that only goes towards fulfilling arbitrary technological and other procedural requirements imposed by third party payers. Encouraging individual health coverage might prove to be the lesson for Mr. Daschle to learn, especially given the enormity of lay-offs underway over the past year. Millions more will be without employer-sponsored health coverage as the lay-offs continue.

    The point about what “evidence-based” really means, given the fluid nature of “evidence” in health care. The future government would do well to improve transmission of current evidence from the NIH to community physicians, so that “evidence” is disseminated in real time, rather than the current methods, where it might be a few years before any “evidence” reaches clinical practice.

    Taking politics out of politics is not such a bad idea after all. Mr. Daschle, I am afraid, has rather stale ideas wrapped in a new cover. It would be encouraging for him to consider the views of those who might be opposed to his thoughts, but are willing to work with him in order to produce “real” reform to the health care system.

  8. mgoozner Says:

    I find it curious that the author attacks Waxman and Rangel for micro-managing health care while the evidence suggests that these individuals are not the culprits. For instance, the issue Goldsmith addresses in his blog post — CT Colonography — is the subject of a pending Congressional resolution introduced last December that calls for mandatory Medicare reimbursement despite the lack of evidence of its efficacy. H.R. 4879 was introduced by Rep. Barbara Cubin (R-WY), and it had nine co-sponsors from both political parties.

    How about H.R. 353? That bill encourages mass use of imaging to look for prostate cancer in aging men. It’s another bi-partisan affair that brings members of the black caucus together with Rep. Issa (R-CA) and Burton (R-IN), two of the most conservative members of Congress.

    Goldsmith has highlighted the need for evidence to inform any insurance program, whether government or privately-run. But who is really the stumbling block to getting to evidence-based medicine: Congress, or the special interests who lobby them to jump on specific technology bandwagons despite the lack of evidence?

  9. HarryCain Says:

    Two Questions about the Daschle proposal: 1. is there any chance (politically) of getting the public plan out of the Exchange offerings? We know from Medicare experience, where the Part C Plans (private) compete with Parts A and B (public), when the going gets rough for Parts A and B, Congress (which owns, and is on the hook for, A and B) changes the rules for Part C. There can never be a fair competition when one of the competitors can set the rules for all the competitors. 2. One has to applaud Daschle’s desire to remove the reform program from politics, as far as possible. The same logic must apply, a fortiori, to Medicare. One major way to do that, of course, is to change it from defined benefit to defined contribution — which the Reform Commission tried to recommend a decade ago. Any chance of that happening now, either for Medicare or the Reform proposal? Thanks, Harry Cain

  10. Dan Groszkruger Says:

    Very insightful analysis and commentary by Jeff Goldsmith. However, the Daschle plan will necessitate rationing (the “r-word” that is off-limits for political discourse) and the proposed federal board will ensure that the rationing decisions will be made by individuals who are political appointees, and directly subject to the special interest pressures in healthcare politics. This is the reason why such a “solution” to the healthcare delivery system will never work. The 800-lbs. gorilla is the federal government, itself, which is the true source of every major problem in healthcare delivery. But, I don’t see any likelihood that Mr. Obama and his Secretary of HHS will ever propose a solution that is founded on minimizing the role of government in healthcare delivery and financing. So, the best we can look forward to for the next 4 years is continued gridlock — not such a bad thing, as opposed to some of the wacky pie-in-the-sky “solutions” already making the rounds.

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