Medicare Advantage providers like Humana, Cigna and UnitedHealthGroup have been receiving payouts that are 14% higher than what the government pays for other Medicare beneficiaries, and throughout his campaign the Big O said his administration was going to stop that.

It’s now become apparent that the Big O’s follow-through on campaign promises is just as pristine as that on his sweet lefty J.

In fact when Obama proposed a $634 billion down payment on universal health coverage last week, he accounted for $177 billion of the total by removing funds that had been designated in previous budgets to pay for those Medicare Advantage programs.

The private insurer’s fees had heretofore been established using secret sauce, but now the Big O’s proposing they’ll have to bid competitively beginning in 2012 for the contracts.

It’s the mother of all Heimlich maneuvers for Big Insurance, which knew something bad was gonna’ happen but expected a smaller hit and a slower phase-in.

Several companies threatened that the moves will force them to pull out of certain markets altogether, but that sounds a bit hollow since Advantage plans have been their only source of growth now that employer plan membership numbers are dropping like a stone.

So for the moment they’ve held fire. “We will be a constructive participant in efforts to reform all parts of Medicare,” a simmering Robert Zirkelbach told the Wall Street Journal.

Then the spokesperson for Big Insurance hinted at a possible counterattack strategy. “This proposal asks seniors to pay a disproportionate share of the cost of health-care reform,” Zirkelbach said.

Enrollment in Medicare Advantage plans grew 14% last year. Seniors were attracted by low premiums and plentiful benefits compared with relatively spartan government plans.

Nearly 25% of all Medicare beneficiaries are enrolled in these plans.

Humana stock dropped nearly 20% on the day the story broke. Aetna slid 11% and Cigna lost 9%.

Three nanoseconds after the House signed off on a bill extending the State Children’s Health Insurance Program to 4 million children from low-income families, the Big O signed it into law.

The House had voted something like 7 times since 2007 to expand the program only to be stoned by George W. Bush who believed it would lead to “government-run health care for every American.”

The House never could muster the votes to overturn his poison pen.

SCHIP, originally formed in 1997 with bipartisan support, is directed at kids in families that earn too much to qualify for Medicaid and not enough to afford private insurance.

Forty House Republicans voted for SCHIP. Two Democrats voted against it.

The Big O, still seething over l’affaire Daschle, trumpeted SCHIP as an indication how different things’ll be in his administration. Uh, once he finds people to fill the posts, that is.

California Democrat Henry Waxman chirped “while this bill is short of our ultimate goal of health reform, it is a down payment, and is an essential start.”

Meanwhile, Iowa Republican Steve King, derided SCHIP as “a foundation stone for socialized medicine,” and his buddy Tom McClintock of California added it was “slowly replacing employer health plans with government-paid health plans, with spiraling costs to taxpayers.”

The new SCHIP extends coverage to children and pregnant women who are legal immigrants, a rider that rankled a number of Republicans that had supported earlier versions.

To come up with the $32 billion required to fund the SCHIP expansion, the bill calls for Federal tobacco taxes to be jacked from 39 cents per pack to a buck. 

Remarkably, even after the SCHIP expansion is fully implemented, there’ll still be 5 million kids in the US who remain uninsured.

New rules promulgated last November obligate Medicare to pay for expensive cancer drugs in hundreds of situations where the drugs are not approved by the FDA.

Medicare now covers Eli Lilly’s Gemzar for 16 different cancers for example. The FDA approves the $5,000 per month drug for four.

And Genentech’s Avastin, which can cost twice that, will now be covered by Medicare for use in cancers of the ovary, brain and kidney. The FDA has approved no such thing.

The windfall is the result of Medicare’s new plan to delegate coverage decisions to a set of reference guides.  If one guide recommends it, Medicare pays unless another guide specifically says you’ve got to be crazy.

Medicare didn’t seem to mind that scientists it retained to study the guides found they “cited very little of the available evidence,” or that they varied markedly in their recommendations according to Amy Abernethy, a Duke oncologist who headed an investigation on the matter. Abernathy’s report is due out shortly.

And guess what? The editors of the guides have financial ties to Big Pharma!

One guide is produced by the National Comprehensive Cancer Network, for example. The Network routinely retains experts on the dole from drug companies.

Then there’s the American Hospital Formulary guide, compiled by the American Society of Health-System Pharmacists.

Last year, the Society inked a deal with a “Foundation” which  accepts $50,000 application fees in return for assuring the applicant’s favorite oncology drug gets reviewed by the guide within 90 days.

No word on whether applicants get their money back if the guide rejects their proposal. (more…)

WellPoint, the nation’s largest health insurer reported last week that its Q4 profits fell 61% to $331 million, or 65 cents per share.

The news provided a fitting denouement to a brutal year for the company which covers more than 35 million Americans. It came as no surprise since in mid-January the company announced that Q4 investment losses were going to approach $350 million.

Still there was some truly disquieting news: WellPoint saw enrollment declines versus Q3 in almost every kind of health plan it offers, including plans for individuals, employers and Medicare recipients.

Chief Executive Angela Braly rationalized that nearly half the 288,000 covered lives lost by WellPoint in Q4 were caused by rising unemployment and the associated loss of employee benefits.

That’s better than losing customers to other plans, but it doesn’t bode well for WellPoint and its competitors for the next several quarters.

With the Economic Crisis now in full bloom, WellPoint chose to provide vague guidance for 2009, saying it expects “low-single digit” percent increases in earnings per share. It promised to offer sharper targets at an investor conference later this month, according to the Wall Street Journal.

“Economic conditions will continue to deteriorate and unemployment will continue to increase,” Braly sighed to analysts on a phone conference. “This will impact commercial membership in 2009.”

WellPoint does business in 14 states under the familiar Blue Cross Blue Shield brand. In several of these states, unemployment is predicted to rise above 10%. California is WellPoint’s largest market. Already, its unemployment rate stands at 9.3%.

We know why China’s State Council just announced a $120 billion, 3-year plan to improve its health care system.

Most Chinese don’t have health insurance, and the system requires payment at the time of care, so tens—maybe hundreds of millions have been doing without since China’s economy was, well, developing.

And to the extent possible in a society where free speech isn’t, people are becoming a bit testy about that.

Besides, China’s government knows that citizens who are one medical event away from economic ruin aren’t going to be aggressive consumers, which must happen if its suddenly wobbly domestic economy is to stabilize.

(It’s either that or wait for the Americans to start spending and wouldn’t you know it? After decades of Relentless Xtreme Profligacy, those quirky Americans have put both hands in their pockets and threw in some super-glue.)

China’s government desperately needed to do something in health care even if the Hang Seng was still hanging-10. In 2006 for example, China spent less than 1% of its GDP on health care.

That puts China and its second largest economy in the world, in 156th place out of 196 countries surveyed for health spending by the World Health Organization, which is what Larry Gottlieb would call a travesty of a mockery.

The $120 billion equals 3% of China’s 2008 GDP. By comparison, America spends 17% of a GNP that’s twice as large as China’s on health care.

Details of the State Council program are nearly as sparse as those in a similar announcement made last October. The plan includes building new public hospitals, tuning up existing ones and improving access using networks of outpatient facilities. Other than that, who knows?

There are also plans to expand health insurance to 90% of China’s citizens by 2011, or one year later than that promised in the October release.

Welcome to the First World boys and girls!

When two health insurance trade associations announced they’d agree to cover everybody regardless of pre-existing conditions if the Big O required everybody to get coverage, some sensed Big Insurance had become worried it couldn’t squash health reform as it did—with help—in ’93.

In the month since, health care reform has acquired an aura of inevitability and Big Insurance is backpeddling faster than Ali in the Thrilla in Manila.

In fact when Big O supporters hold their tea, arugula and health-reform parties this week, they can expect Big Insurance types to show up in droves.

That’s what the health insurance companies are telling their supporters to do, in what amounts to a complete capitulation to the Big O and his ground-up health reform process.

There will be roughly 4,000 such meetings around the country. Attendees don’t have to disclose their affiliations or employers.

Big Insurance has a problem with the Big O’s plan to create a new public insurance program that would compete, unfairly it fears, with none other than Big Insurance.

Then there’s that promise he made to cut the Medicare payments they receive in return for providing care to Medicare beneficiaries.

After tea is served, Big Insurance wants its supporters to assert that like Medicare and Medicaid, the new public program will stiff providers.

How honorable to stick up for providers like that, but providers and anyone with a pulse knows the Big O will print money if that’s what’s necessary to keep the ball rolling. 

So Big Insurance better come up with something else quick.

“Why do you need a new public program?” offers Alissa Fox, vice president of the Blue Cross and Blue Shield Association.

Because “public plans…do a better job of controlling costs,” retorts Richard J. Kirsch, the national campaign manager for Health Care for America Now.

“Private insurers are always looking for ways to avoid paying claims or covering sick people. Their mission is not to provide health care, but to increase shareholders’ profits,” he added.

We hope zingers like that don’t spoil dessert.

Health insurance giant United Healthcare is launching an online consumer health information portal known as myoptumhealth.com.

In doing so it enters a crowded space featuring front-runners like WebMD, Revolution Health and Mayo Clinic, and a host of profitable niche sites.

UHC’s health-and-wellness unit, OptumHealth will operate the site. It will be free and designed for the general public rather than UHC plan members, corporate clients or employees.

Myoptumhealth.com will feature symptom checkers, tools and calculators, health-related search and a secure online personal health record similar to the ones offered by Cerner, Google, Microsoft, Intel, Cleveland Clinic and just about everyone who knows HTML.

Although the health information portal concept is not new, many feel the sector will continue to grow as the Great Economic Crisis of 2008 forces people to pay for care out of pocket and make medical decisions on their own, according to the Wall Street Journal.

Naturally, UHC hopes its site will generate business for its core medical, vision and dental insurance products and its fee-based phone counseling services for chronic disease patients.

The consumer health information market has been active lately. In October, two large online health information companies, Waterfront Media and Revolution Health agreed to a $300 million merger that could vault the new entity ahead of WebMD, the current market leader.

But WebMD is also expanding. The site, which according to comScore had 17.3 million unique visitors in July, recently announced plans to acquire QualityHealth.com for $50 million.

If myoptumhealth.com doesn’t fly out of the box, look for cash-rich UHC to go into acquisition mode to grow its play in this space. Right now, several cool niche players are swimming freely.

Federal regulators will soon swap out an antiquated medical coding system for a new one that describes modern health practices more precisely. But the transition is going to hurt.

ICD-10 is the new system. It increases by a factor of 10 the number of codes specifying medical conditions and procedures in the US health system. The increased specificity should allow insurers to assign payments that accurately reflect the complexity and intensity of medical services.

As a bonus, the improved data should facilitate quality improvement projects and retrospective studies like the one revealing an adverse interaction between heartburn drugs and Plavix.

But many worry that the transition will be costly and error-prone. Minimally, thousands of providers will have to purchase new software and train nurses, physicians and coders. In fact, the Centers for Medicare and Medicaid Services, the agency that oversees the system, expects implementation costs to top $1.5 billion.

This estimate doesn’t include waste associated with an inevitable increase in coding errors as people get used to ICD-10. It also doesn’t account for a likely increase in billing fraud and payment delays.

There’s also concern that CMS’ proposed 3-year roll-out is too aggressive.

CMS’ recent track record on large implementation projects is not reassuring. In the last two months alone it has been accused of bungling the transition to a new claims processor and called out by a US Senator for poor service on its 1-800-Medicare help line.

ICD-10 implementation dwarfs those challenges.

Medicare owes tens of millions of dollars to physicians in California, Nevada and Hawaii. The delinquent payments are in some cases so large and so late that physicians have been forced to turn away beneficiaries, lay off staff and default on rent.

Medicare owes Tim Ganey and his oncology practice $750,000 for example, and as a consequence the practice doesn’t have cash to purchase chemotherapy drugs for its patients. So it either needs to take out a loan, cajole the drug companies, or admit patients to hospitals which are inconvenient and inefficient places for cancer therapy.

Things have gotten so bad for Walnut Creek cardiologist Sally Davis that she’s taken to doing the office laundry to save money. Davis told the Los Angeles Times that Medicare owes her practice $700,000.

The payment delays result from Rube Goldberg-like process complexity in 2 organizations.

Earlier this year, the Centers for Medicare and Medicaid Services began assigning new ID numbers to physicians as part of its plan to expedite Medicare payment. ID assignments were supposed to be complete by May but physicians in some western states had not received their numbers by September.

That was when CMS switched Medicare claims processors for those western states, and the handoff didn’t go well. The new vendor, Palmetto GBA of South Carolina had to contend with unstable CMS databases arising from the ID project. It may not have received properly formatted information from CMS or the previous vendor. And it managed to botch a host of mundane administrative tasks like processing address change requests.

Then, when Palmetto went live it was not staffed to handle the flood of calls from irate physicians. Palmetto’s call center received 45,000 calls that first day. It was staffed for 2,500. Three months after start-up, 90% of calls to Palmetto were still greeted by a busy signal.

But CMS officials have defended Palmetto. Torris Smith, an associate regional administrator pointed to Palmetto’s 40 years of experience as a Medicare contractor and asserted the organization was selected using a “full and open competition.”

“There are always going to be general transition issues,” Smith told the Times. He added that the backlog of applications for the ID numbers should be cleared out by the end of the year.

No word though on when the docs actually get paid.

The Great Economic Crisis of 2008 is taking a bite out of personal health spending, and we’re not talking about Botox and liposuction.

There’s the Texas woman for example, who showed up in an ER with back pain. Physician Doug Curran found cancer on her X-ray. “She’d had a lump in her breast for awhile, but things were tight and she said she couldn’t get it looked at,” Dr. Curran told the Washington Post. “We’re going to see more of that.”

Indeed. The number of Americans that skipped a doctor visit, didn’t fill a prescription and paid for health care using retirement savings all rose this year, according to a survey by Time Magazine and the Rockefeller Foundation. Ten percent of respondents said they had postponed their children’s check-ups during the year to save money.

These trends will worsen as the Crisis drags into 2009. “An economic downturn drives more people to be uninsured,” the New America Foundation’s Len Nichols told the Washington Post. “They lose their jobs, they lose their income and their insurance.”

“Many times in health care there’s a lag of three to six months before it really hits hard, added Donald Fisher, President of the American Medical Group Association who spoke with the Post about health seeking behavior during economic downturns. “If they have a problem, they get it fixed while they still have health insurance. Then we see a decline in elective procedures, and then we really see a drop-off.”