What you can do for your country

FACT CHECK: Health insurers' profits 35th of 53

The Chicago rules say to pick on folks to win your points; (Alansky's Rules for Radicals)

RULE 12: Pick the target, freeze it, personalize it, and polarize it." Cut off the support network and isolate the target from sympathy. Go after people and not institutions; people hurt faster than institutions. (This is cruel, but very effective. Direct, personalized criticism and ridicule works.)

It seems, as highlighted by a recent article in AP, that the administration should have followed the "...not institutions..." part of the Alansky rule set.  Institutions have fact's that in the end come out.  Institutions at some point fight back.  The AP article goes on.....

In the health care debate, Democrats and their allies have gone after insurance companies as rapacious profiteers making "immoral" and "obscene" returns while "the bodies pile up."  But in pillorying insurers over profits, the critics are on shaky ground. Ledgers tell a different reality.  More.....

2.2B on vaccine that will arrive too late, an imperfect plan? Smart power?

We have known about the H1N1 (Swine Flu), risk for many months now.  We knew that last spring's outbreak would turn into a more virulent strain by this fall.  That is all basic science.  Concerned for our citizens, the government recognized the need to produce substantial volumes of vaccine.  We have spent more than $2.2B for H1N1 Swine flu.  To date, only a minor amount of this vaccine has been delivered, but concern seems muted.  Despite new vaccine manufacturing technologies, we persist in using outdated methods and to spend huge sums of money in a wasteful manner.  Why? 

Here is a bit of background....

• Clinton (HRC) pushed the Vaccines for Children policy in 1993, which caused most manufactures to exit the industry
• In early part of Bush administration R&D in vaccine research was dramatically increased
• 2004 season: a combination of fewer manufactures and accusations of Bush incompetence resulted in ~40M dose short fall vs. plan of 100M doses for season flu
• Fear of Bird flu and other emerging pandemics led Democrats to accuse Bush administration of multiple failings.  Budgets for pandemic research and preparedness were increased substantially (more than $4B over 2005-2007 time frame) 
• Additional $1.5B was authorized in Spring of 2009 to produce H1N1 vaccine.  Total spend for H1N1 Vaccine of approximately $2.2B 
• By Fall of 2009, only 11.3M doses of a planned 250M doses have been delivered.  HHS claims there have been minor "glitches", DHS claims all is per plan
• Critical study shows vaccine will arrive too late for impact on H1N1
• 1,000  3,900 people have died so far in US (if you recall 1,494 died in Katrina apparently because of Bush's failing and global warming, which is also Bush's fault)
• Main Stream Media is mum on whole issue, Fox (non) News is not

My frustration comes from a few issues.  The historic process of making vaccines in egg shells is arcane and subject to numerous production risks that can result in last minute issues like contamination (cause of 40M dose shortage in 2004).  Liability clauses discourage drug manufactures from manufacturing vaccine, and Government is unwilling to wave terms.  Companies like Novavax (www.novavax.com) have had a novel technique, using virus like particles to make large volumes of vaccine, for many years, but government continues to buy from companies using old egg technique.  Per the time line below, Democrats have put huge amount of effort and money into realigning national efforts for pandemic response (and ridicule of the past administration for its failures) but seem to deliver worse results.

So, we are spending dramatically more money.  We have all the best minds focused on the subject.  Every resources of government is focused on success.  Obama has every resource he has requested.  We have been spending the last 4 years realigning efforts for pandemic. And, we are 210M doses short of plan for H1N1.  When the vaccine does become available, the pandemic will likely have run its course killing more people than died in the (supposed) last government lead disaster (Katrina).  Is this smart government?

Frankly, had government instead focused less than a $1 billion on new production techniques like those of innovative companies (Novavax, etc), we would have all the vaccine we would ever need.  Where are the hearings?  Where is the outrage?  Where is our money?  Is this how stimulus is being spent?  Does anyone in Congress actually think about a problem, look at the fundamentals, and perhaps question why we are still building vaccine the way we did in 1940?  Great innovation guys, where are our coffins?  

Timeline

1993

HRC (Clinton) implements Vaccines for Children program gutting profitability in the vaccine industry and imposing government control over a large share of revenue.  Major players exit industry in response.

2001-2004

Bush administration raises vaccine funding from $39 million in 2001 to a proposed budget of $283 million in fiscal year 2005. The National Institutes of Health has increased its spending on new ways to make vaccines to $60 million from $20 million. (NY Times) 

2004

January:Senators Bayh, Landrieu and Durbin introduced the Flu Protection Act (S. 2038) to strengthen the nation’s vaccine supply and establish a plan to prevent, prepare for, and respond to an influenza pandemic.

October:Vaccine production for 2004 season falls short ~40M of a planned 100M doses.  Bush was accused of incompetence and insensitivity.  The 40M  dose shortage was associated with a contaminant found late in the manufacturing process.  Senator Kennedy requested from Acting Commissioner of Food and Drugs Lester Crawford a complete record of all contact between FDA and Chiron Corporation, a major supplier of influenza vaccine to the United States.  While Chiron had announced problems with vaccine production back in August 2004, FDA claimed to be surprised by the early October announcement that Chiron’s Liverpool facility had lost its license to produce vaccine.  Kennedy expressed the great importance of a stable, effective vaccine supply to protect Americans from seasonal flu, which is also necessary to respond to a pandemic influenza outbreak.

2005

March 2005: Senator Obama successfully amended the Foreign Relations Committee Authorization Act to authorize $25 million for international efforts to combat avian influenza and called on then-President Bush to create an inter-agency task force composed of representatives of the Department of State, Department of Health and Human Services, Department of Agriculture, and other appropriate agencies.   

April: then-Senator Obama introduced the AVIAN Act (S. 969), the first comprehensive bill addressing the threat of pandemic influenza.

May: Senate Democrats secured $58 million in the Supplemental Appropriations bill (P.L. 109-13)to purchase more antiviral medication for the Strategic National Stockpile to better prepare for pandemic influenza.  This law also directed $25 million to USAID for programs to control the global spread of the avian flu. 

August:1,464 people die in Hurricane Katrina

September:Senator Reid took to the Senate floor urging immediate action to prepare for the threat of pandemic influenza and expressing the importance of immediately committing the resources necessary to protect Americans.  Senator Reid stated that the nation could not wait any longer for the Bush Administration to finalize its pandemic influenza preparedness plan and announced that Democrats would offer a pandemic preparedness amendment to the Department of Defense Appropriations bill.  Senate Democrats, led by Senators Harkin, Obama, Reid, Durbin, Bayh, and Dodd, successfully amended the Fiscal Year (FY) 2006 defense and emergency supplemental appropriations bill (P.L. 109-141) $3.9 billion to the Centers for Disease Control and Prevention to fund pandemic flu preparedness.

October:the Senate approved an amendment by Senator Harkin to the Labor-HHS-Education appropriations bill adding $8 billion to prepare for and protect against the threat of an avian flu pandemic. 

November: President Bush released a final pandemic influenza preparedness plan and requested $7.1 billion in emergency supplemental funding for pandemic flu preparedness, almost a billion dollars less than what Senate Democrats had successfully included in the Labor-HHS-Education appropriations bill.

December: the Republican-controlled Congress approved only $3.8 billion to prepare for a flu pandemic in the emergency supplemental appropriations bill (P.L. 109-148) – less than half of the $8 billion the Senate had passed through the Harkin amendment.

2006

February:Democrats fought to include $2.3 billion in additional funding for HHS in a second emergency supplemental appropriations bill passed during FY2006 (P.L. 109-234).  32 Senate Democrats sent a letter to President Bush, calling on him to make pandemic flu preparedness a priority in his Fiscal Year 2007 budget.  President Bush released his budget proposal for Fiscal Year 2007, including a $2.3 billion allowance for pandemic influenza activities.  The President did not include the $2.3 billion in pandemic flu funding in his emergency supplemental budget request to Congress.  Fortunately, during the Appropriations Committee markup of the supplemental in early April, an amendment offered by Senator Harkin to add $2.3 billion in pandemic flu funding was approved by voice vote, and the funding was included in the version of the supplemental signed into law on June 15, 2006 (P.L. 109-234).

May: Senator Kennedy released a report entitled, “Too Little Too Late: The Bush Administration’s Record of Failure in Preparing for Pandemic Flu.”  The report detailed failures of the Bush Administration and Republican-led Congress to adequately prepare the United States for pandemic influenza, due to limited appropriations, lack of coordination among government entities, and an overly narrow focus on only a few of the actions necessary to prepare the nation for pandemic influenza.

2007

May: President Bush vetoed legislation passed by the Democratic-led Congress which would have provided $625 million for pandemic flu preparedness at HHS (H.R. 1591). 

November: President Bush vetoed the FY2008 Labor, Health and Human Services, and Education Appropriations bill (H.R. 3043).  This legislation would have provided $870 million to prepare for and respond to an influenza pandemic, including funds for vaccines, antiviral medications, medical supplies, diagnostics and surveillance tools.  In order to pass a bill the President would sign, pandemic flu funding was reduced to $302 million in P.L. 110-161.

December: Senator Clinton introduced the Influenza Vaccine Security Act (S. 2456) to improve and secure our nation’s supply of influenza vaccine, improve vaccine distribution, and improve stockpiling of supplies to prevent and treat pandemic influenza.

2009

January: the Senate Appropriations Committee approved the American Recovery and Reinvestment Act, which included $870 million for pandemic flu preparedness activities.  Unfortunately, this funding was removed as a condition for final passage and, therefore, was not included in the final version of the legislation signed into law by President Obama (P.L. 111-5).

Spring:Major outbreak of H1N1 Swine flu suggests pandemic will emerge, stronger in Fall 2009

March: the Senate approved the Fiscal Year 2009 Omnibus Appropriations bill.  Led by Democrats, this legislation (P.L. 111-8) included $818 million for pandemic flu preparedness.

April:President Obama requested $1.5 billion in emergency appropriations to respond to the H1N1 influenza virus, and Senate Democrats, including Majority Leader Reid and Labor-HHS-Education Appropriations Subcommittee Chairman Harkin, indicated the Senate was poised to comply with the President’s request.

May: President Obama’s Fiscal Year 2010 Budget Request included $584 million for pandemic flu preparedness.  This funding is in addition to the $1.5 billion requested in April as part of the emergency supplemental appropriations. The Senate Appropriations Committee approved the Fiscal Year 2009 Supplemental Appropriationsbill, including $1.5 billion to prepare for and respond to a global disease pandemic, including the H1N1 influenza virus.

Orders for Bulk Supply of H1N1 Influenza Vaccine Antigen and Adjuvant: May 22, 2009

Manufacturer	Bulk Vaccine Antigen	Oil-In-Water Bulk Adjuvant
Novartis	$150 million	$139 million
GlaxoSmithKline	$ 38 million	$144 million
Sanofi Pasteur	$191 million
CSL Biotherapies	$180 million
MedImmune	$ 90 million
Total	$649 million	$283 million

Orders for Bulk Supply of H1N1 Influenza Vaccine Antigen and Adjuvant: July 9, 2009

Manufacturer	Bulk Vaccine Antigen	Bulk Virus Concentrate/FFF	Oil-In-Water Bulk Adjuvant
Sanofi Pasteur	$61,425,000	0	0
GSK	$0	0	$71,400,000
Novartis	$346,334,450	0	$343,810,470
CSL	$0	0	0
MedImmune	$0	$61,008,000	0
Total	$407,759,450	$61,008,000	$415,210,470

September: With vaccine shortage becoming apparent, Government releases study showing less vaccine is required than orginally expected.  This changes dosing requirment from 2 shots to 1 shot.  Essentially doubling the expected capacity and eliminating major forecasted shortfall.

HHS orders an additional 56 million doses of vaccine: September 21, 2009

Manufacturer	Total Cost
MedImmune	$295,660,000
Sanofi Pasteur	$143,483,025
Total	$438,143,025

October: CDC Defends Reliance on "Antiquated" H1N1 Vaccine Production Despite Shortage.  Government's original modified order of 251M doses, expected to receive 40M by this point actually has yield only 11.3 M doses.  1000 have died and 20K hospitalized so far due to H1N1 (and presumably lack of vaccine).

Siebeus "Blamed the vaccine shortage on lower than predicted yields from vaccine manufacturers and on some manufacturing 'glitches' that have occurred since May. ....the yields are now more in line with original predictions and that any glitches have been corrected." 

Napolitano said "federal officials had assumed there would be a lag in vaccine availability and a spike in the flu, so officials are not surprised that H1N1 has spiked at a time when there is not enough vaccine available."

Study shows vaccine will be too late to have impact on H1N1

Lieberman holds hearing on Vaccine shortage, but only Fox News reports  MSM ignores (WH Embargo?)

> 1000 people in US have died due to H1N1

Captialism a Love Story

 

I don't need Michael Moore to tell me people are greedy. Capitalism is not greed. Greed is a lack of morals. Morals can't be regulated. Immoral behavior will always find the cracks in regulations, but moral people will not. "In Go...d we trust" and "Under god" are observations that our democracy works best if we come to the table equipped with a moral compass.

Death panels by another name: Obama taxes pacemakers, heart valves

The rule in economics is tax that which you want to curtail. So tax cigarettes but not innovation (Cap gains). This tax on devices is economically speaking, will curtail procurement of medical devices. It has been called an innovation tax. Medica...l devices extend life, often in an affordable manner vs. other life saving measures. I will catch hell for saying this, but economically speaking, taxing devices/drugs at a higher rate is a back door way to curtailing treatment towards the end of life, though this death panel never convenes it just happens as a market function! QED - Let them eat cake.....

 

By Dick Morris and Eileen McGann The more the fiscal details of the healthcare bills emerge, the more appalling they seem. The Senate Finance Committee bill includes a broad provision taxing all manner of medical devices. 

http://thehill.com/blogs/pundits-blog/healthcare/64493-obama-taxes-pacemakers-heart-valves

 

A Layman's plan for Health Care

I am not a health care expert, congressman or a brilliant inspirational president.  I really have no credentials on politics.  Practically, my skills as a graduate of a tier 1 business school with a concentration on innovation, years of technology investment, years of operating new successful innovative businesses and other business success probably has no applicability to markets, innovation and health care.  Really, what could I understand if I have not been on the cover of Time or Newsweek?  Given my ignorance, I do have some thoughts....

That given, perhaps we should concentrate on some fundamental principles:

• Tax bad behavior (pre-existing, tort, free rider, fat, receivables)
• Encourage good behavior (wellness, cost innovation, direct pay, savings)
• With respect to national policy, only implement successful strategies
• If a third party is paying, doctors won't innovate to meet needs of the patient
• Innovation is the only way to truly reduce cost of an item of care
• If people don't take care of themselves, the cumulative cost of health care will be high

There are many ideas and issues within the overall health care discussion, many misdirected:

Universal coverage: I am not a lawyer, but it seems that if Federal Law mandates universal coverage, that constitution then requires universal application/availability to all persons (not just citizens).  That is a back door path for any plan that is heterogeneous or does not cover illegals/non citizens (I think SCOTUS is Obama’s back door for illegals, which he has to get in so he can maintain perpetual democrat majority).  So, it would be best if any federal plan was constrained in its offering to avoid opening Pandora’s box.

DNR: Just like someone can sign a Do Not Resuscitate order, so should they also be allowed to sign an opt out order (Do Not Save – DNS).  The opt out would basically say, “I understand I will not get care unless I can prove I have means to pay”.  People could self insure and certify ahead of time, perhaps validated through some credit worthiness service.  If you no longer are credit worthy then perhaps you fall under a mandate penalty provision given your imposed burden on society.

Tort: I don’t love the lawsuits, but seems freedom of speech trumps tort reform.  However, in an effort to reduce the cost of one's policy, a patient should be allowed to opt out of tort, or allow form of arbitration.  Sort of like how workman’s comp limit claims.  As you get a discount on homeowners insurance if you have a burglar alarm, you will get a premium discount if you sign a tort limitation clause.

Catastrophic: A underlying issue in insurance is that your costs go up as you get older, because your likely care costs go up.  Everyone, except those that die suddenly like my father, impose some level of big cost towards the end.  But no one who is young fears this cost.  Thus, the right instrument is an annuity, in which you are compelled to pay in to a catastrophic pool which would not pay in until you reach a very high level of burden, like $100K.  This could perhaps be an extension of Medicare of social security, preferably a 401K/IRA/HSA.

Low Cost Transactions (HSA): All low cost high volume transactions (wellness visit) should be direct pay.   Most doctors offices operate with 180-240 days of aging for receivables.  That means there is a bunch of profit wasted in the payables process (i.e. interest on 500K of average receivables).  Though direct pay seems like a burden (out of pocket), it would eliminate the cost of a lot of oversight and receivables management.  A transparent process at the front end (i.e. I know what my doctor visit costs) would impose proper price dynamic currently missing because of third party pay.  So, everyone should be motivated to buy a high deductible plan, like an HSA.

Taxes: Do not introduce new special taxes on those that innovate (Drug companies, device manufactures, etc).  We need the innovation to improve quality/cost of care.  Either Eliminate deductibility of corporate plans, or permit deductibility of all health care plans (i.e. self employed).  Maybe only allow tax deductibility for elements of a basic plan for plan costs associated with wellness, insurance for first 100K, retroactively pays back portion of premium for reducing weight, or motivates direct pay (i.e. the portion of an insurance plan that allows third party pay for initial costs below $5000 would be taxable).

High Cost of Healthcare: That we pay more for healthcare is irrelevant.  We pay more for media content should we regulate revenue in that market?  U.S. market prefers to pay more than other countries for care because we like to be fat and eat at McDonalds.  Promote tax deductions for those practicing wellness (actually don’t, I am a libertarian).  Remove any restrictions on insurance plan penalties for obesity, weight, high blood pressure, etc.

Pre Existing Condition: If someone goes off insurance or never has it, they should take responsibility for their pre-existing condition.  The catastrophic insurance (govt plan) should impose no limitation on pre-existing condition, but it will only cover costs above 100K.  Practically I think the market will overtime accept pre-existing conditions, it already has on some policies – basic concept is a business will offer a service (insurance) until marginal revenue = marginal cost.  Alternately there could again be a form of government re-insurance in which a portion of Medicare fee is put into a pre-existing condition re-insurance pool.  Any insurance plan that eliminates a pre-existing condition test would have access to that pool.  Fundamentally though, we need to use the market to motivate free riders to join a plan.  Some plans offer retroactive discounts for wellness behavior – so if you have high blood pressure  and reduce it, you get paid back the premium delta for the last couple of years from a normal vs. high risk plan.

Health Savings Accounts: There should be a tax code preference offered to forms of HSA, in which consumers pay in pre tax to a savings account (IRA like) to help eliminate front end costs.  Savings account can be used for wellness efforts and all healthcare co-pays bellow deductable cap.

Poor: For people that cannot afford healthcare, they should be put on a HSA.  The deductable portion should be paid in via welfare with some form of lifetime cap on govt. funded portion of savings account (i.e. 50K).  Participants should be means tested, and their portion of payment should be in relation to their salary.  Perhaps work this a bit like the micro loans in India/Africa in which a portion of the money paid into the savings account can be used to pay premiums.

Innovation: Innovation occurs when there is a market for early adopters.  The best innovations (balance of technology and price) are always best incubated through market pressures.  Public has been served well by Judge Green (Telco rulling in 1980).  Universal coverage would force universal solutions (equal to all).  The federal proposals would substantially constrain the right of end-users to buy what they want.  Seems like an antitrust situation.  If Government wants to apply the commerce clause, it would seem government would need to stay in the regulate role rather than “I am also in the services” role.  It would also seem that government should not be allowed to take action that inhibits federalism (in as much as federalism is a principle of differential approaches to governance).

So the summary of the plan would be

• Everything above $100K will be covered by a universal plan administered or authorized by government. Private plans could be made compliant under the government plan, to act as agent on governments behalf.
• Private insurance plans for everything below $100K
• Government pays for premium (COOP, Private or Govt) if person is on Public assistance
• Do Not Save – DNS: anyone who opts out of private must sign a DNS order or pay a penalty (as a libertarian I would actually prefer that hospitals just did not care for those who have not bought insurance or committed to a financial obligation.

I need to think more about this approach.  I am trying to avoid government having to serve a direct regulatory role for service level.  I don’t think I mind them in the guarantor or re-insurance role.  For innovation to thrive, government needs to be on the sideline.  We cant have innovation if changes to care require congressional approval.  Waxman and others are into the minutia which will halt innovation.