Thursday, October 31, 2013

Fwd: qotd: Tom Scully's message on privatizing health care

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Subject: qotd: Tom Scully's message on privatizing health care
Date: Thu, 31 Oct 2013 04:38:24 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

The New York Times Magazine
October 30, 2013
The President Wants You to Get Rich on Obamacare
By Adam Davidson

(Tom) Scully was scheduled to deliver the keynote address at an event
hosted by the Potomac Research Group, a Beltway firm that advises large
investors on government policy (tag line: "Washington to Wall Street").

When Scully finally began his speech, he noted that the prevailing
narrative among Republicans — assuming that many in the room were, like
him, Republican — was incorrect. "(Obamacare) is not a government
takeover of medicine," he told the crowd. "It's the privatization of
health care."

Scully then segued to his main point, one he has been making in
similarly handsome dining rooms across the country: No matter what
investors thought about Obamacare politically — and surely many there
did not think much of it — the law was going to make some people very rich.

A couple of years ago, Scully identified his best bet. NaviHealth, the
company he co-founded, is designed to streamline an enormous but often
overlooked corner of the health care market that, many studies conclude,
is the most financially wasteful: post-acute care, or the treatment of
patients (mostly seniors) after hospitalization for surgery or serious

Scully has a simple way of describing what NaviHealth — and much of the
Affordable Care Act — brings to medicine. "It's called capitalism," he
told me. "Which doesn't exist in health care, really."

In 2001, after George W. Bush appointed Scully the administrator of what
would soon be known as the Centers for Medicare and Medicaid Services,
he at last began to implement his ideas. Scully focused on designing and
executing Medicare Part D, which opened one corner of
government-provided health care — pharmaceuticals — to market forces.
This created a new role for a previously relatively obscure business,
the pharmacy benefit manager, or P.B.M., which streamlined
prescription-drug services. Express Scripts, a once modest Midwestern
company, used economies of scale to lead the effort in shifting seniors
from expensive name-brand drugs into generics. According to Fortune, it
is now the 24th-largest company in America.

By the time Medicare Part D went into effect in 2006, Scully, who was by
then in the private sector, put his theory to the test. He invested in a
smaller P.B.M., MemberHealth, which grew, in three years, from $6
million in revenue to $1.2 billion. "It was a hockey stick," he recalls.
"It took off like a rocket." When the A.C.A. was near passage, Scully
hoped to repeat the success. Once he and his partners at Welsh, Carson
realized no one else had seen the potential in post-acute care, he
thought he had another MemberHealth on his hands. "That's what I
expected with NaviHealth," he told me. "I felt the same way: we would
take off like a rocket."

On the morning that Congress finalized the deal that would reopen the
government and defeat — for a few weeks, at least — the latest
Republican effort to derail Obamacare, I visited Scully in his New York
office. Scully then began a set speech I had heard many times about how
Republicans don't understand the new health care law, that it's actually
more, not less, capitalistic than anything that came before.

Whether all this money flowing from Washington to Wall Street will
benefit the rest of us is another question. Glenn Hubbard, the
pre-eminent economist who helped devise George H. W. Bush's health plan
with Scully, told me that the cost of the A.C.A. will far outpace any
possible efficiencies. Dean Baker, an economist at the progressive
Center for Economic and Policy Research, told me that a government-run
single-payer plan would be far more beneficial.

Comment: Former CMS administrator Thomas Scully has been a major player
in injecting more capitalism into health care. This article describes
his mindset, including the fact that he intends to get his share of the
mega-wealth that health care privatization is creating.

Look at some of the trends:

* Medicare + Choice was established to allow private insurers to compete
with Medicare with the goal of eventually transforming our public
Medicare program into a market of private health plans.

* When the insurers couldn't compete, Medicare + Choice was replaced
with Medicare Advantage - a scheme designed to overpay private insurers
by 14% in order to give them an "advantage" in the Medicare marketplace
- with the intent of eventually displacing traditional Medicare.

* The Medicare Part D drug plan was designed to use private pharmacy
benefit managers - diverting a massive amount of taxpayer funds to the
capitalists, while prohibiting government negotiation of fair drug prices.

* The architects of the Affordable Care Act rejected a government
single-payer solution and set up exchanges of private insurance plans
that would siphon off more taxpayer dollars to pay for the private
sector's wasteful administrative excesses.

* Although the widely discussed "public option" would have had little
impact since it would not have changed our basic, fragmented health
financing infrastructure, nevertheless, even it was rejected as allowing
too much of a government role in a health insurance market that the
pro-market capitalists wanted to control completely.

* As a token tossed to the public option advocates, co-ops were
authorized in the Affordable Care Act. These organizations - to be
managed by representatives of the patients - were poisoned by a model
that saddled them with massive intolerable debt service that would make
it impossible to compete with the private insurers, not to mention that
they are prohibited from marketing their product to the public.
Competition is fine when the private sector is given unfair advantages
over government programs, but, in the minds of these capitalists, it is
unfair to allow a government or even quasi-government program to compete
against the private sector. The government cheats by unfairly providing
greater efficiency and value. Medicare's administrative costs are 1.4%
whereas the Affordable Care Act grants private insurers 15% to 20%
administrative costs including profits.

* The Affordable Care Act also gave a great boost to consumer-directed
health care - a concept of expanding the role of marketplace decisions
in the purchasing of health care. By establishing a low actuarial value
in the benchmark plans in the insurance exchanges - the patient pays a
greater percentage of health care costs out of pocket primarily through
high deductibles - much needed regulatory oversight is being replaced
with the flawed theory that price decisions in the marketplace will
bring health care costs under control.

* Under the false theory that government austerity measures are required
to stimulate a thriving market by limiting taxation, Medicare and Social
Security remain under threat by those who would privatize these programs
through measures such as Medicare vouchers.

We need to understand what Scully is trying to say: The law is going to
make some people very rich. Is that what we what from the most expensive
and most dysfunctional health care system of all wealthy nations? We
have been warned.

Dean Baker got only one line in this very long article: a government-run
single-payer plan would be far more beneficial. That should be our
take-home message.

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