Monday, February 28, 2011

The Thorny Issue of 'Essential' Benefits

The health reform law (PPACA) outlines 'essential benefits' that plans must offer after January 1, 2014. These benefits break down into ten broad categories, from hospitalization, to prescription drugs, to rehabilitative and habilitative services. Under the law, the Secretary of Health and Human Services will decide how detailed to make the essential benefits package and what exactly to put in it.

Keep in mind:
  • Insurance policies must cover these benefits in order to be certified and offered in Exchanges, and all Medicaid State plans must cover these services.
  • Individual and small group plans offered outside the exchanges must include the essential health benefits package.
  • All new group health plans must adjust cost-sharing and deductibles to the limits specified for the essential health benefits package.
  • The benefits directive does not apply to large group plans.
Focus questions:
  • How long will the process of defining essential benefits play out?
  • To what extent will the directive, regardless of details specified or not, impact the political process? Will any meaningful resolution occur prior to the 2012 election?
  • To what extent does the law permit states to administer their own benefits irrespective of federal guidelines? Will they take advantage of this?
Relevant articles:

Wednesday, February 23, 2011

"Why Isn't Wall Street in Jail?"

Matt Taibbi of Rolling Stone Magazine asks: “Why isn’t Wall Street in Jail?”

His answer: "a closed and corrupt system, a timeless circle of friends that virtually guarantees a collegial approach to the policing of high finance."

For the select few on Wall Street who destroyed billions—if not trillions—of dollars in wealth, their own fortunes (and, for many, their reputations) remain largely intact.

But political winds are variable.  A populist shift could blow hard against an entrenched system that intertwines big banks and big government.

Wall Street has sinned, notes the latest Perspectives article; investors and the capital markets have not. Fixing the Wall Street problem must not come at the expense of a system that retirees will need to replenish savings, nor compound damages to the capital allocation and price discovery process.

Fix it. But, this time, fix it right.

Thursday, February 17, 2011

Turning Back 'The Great Stagnation'

Tyler Cowen's The Great Stagnation just might challenge Amy Chua and her shock parenting manual, Battle Hymn of the Tiger Mother, for most-discussed book of 2011. Just as Ms. Chua has us reconsidering—or reaffirming—how we raise our children, Mr. Cowen's observations on the dramatic slowdown in U.S. economic growth, life expectancy, and technological change likewise force us to re-evaluate some deeply-ingrained views.

Folks are already weighing in with vigor. New York Times columnist David Brooks recently introduced a social context to Mr. Cowen's thesis in his article "The Experience Economy", a thought-provoking piece if there ever was one.

Mr. Brooks proposes that Mr. Cowen's thesis—our country, having exhausted its economic low-hanging fruit, is now stuck on a technological plateau—"can also be used to tell a related story". Rather than focus on the technological change causing the slowdown, Mr. Brooks suggests it could be a shift in values.

He presents the economic choices of two hypothetical people, a man and his grandson. The first is born in 1900 and dies in 1974, the year from which growth rates continuously erode according to Mr. Cowen. The second is born in 1978, and is currently living the Facebook life to its max. The first, an entrepreneur, built a brake system company. His life begins with horse-drawn buggies and ends with the Moon landings. He "understood that if he wanted to create a secure life for his family he had to create wealth".

The grandson, on the other hand, works for a company that organizes conferences. (Okay, a little close to the bone for this writer.) He lives a "much more intellectually diverse life" than person number one. Moreover, he consumes products that are mostly produced for free, and don't create many jobs.

Most important, this person is more interested in living standards than wealth creation. He possesses a postmaterialist mindset in an affluent information-driven world.

There's a lot to chew on here, and particularly the economic connection of the individual to society.

Does the pursuit of wealth create a more secure life experience, not just for the individual and his immediate family but for larger groups of people?

Can someone pursue better living standards and avoid wealth creation at the same time?

Is the promise of information technology over-hyped?

For which type of firm does the Internet contribute a bigger slice of GDP growth: a long-standing bricks-and-mortar business or a cloud-based start-up?

Do conventional economic gauges (for example, GDP, CPI and employment) truly capture the full extent of economic activity, by either overstating or understating it?

The key difference between the two individuals is that the first person is an entrepreneur and the second is not. We're led to assume the second person feels entitled to a better lifestyle, while not actually having earned it. The first, having devoted his entire life to earning a better standing, has also helped others improve their own standings.

Although the grandson may believe that his way of life is improving as well, when compared with his grandfather and his predecessors, his gains are smaller to start with and progressively shrinking.

Big societal gains begin in small increments. The Internet may not be forming jobs on the scale of the auto industry in its heyday, but at least it provides an expanded opportunity for individuals to become entrepreneurs, however small.

Over the past 30-plus years, as the rate of progress has slowed, our economy, Mr. Cowen points out, has increasingly coalesced around three large systems: government, eduction, and health care. Within these systems, we can further argue that a handful of dominant players have emerged at the expense of smaller ones: for example, consolidation trends in health care are overrunning regional insurers and private practices; major well-funded universities are absorbing educational dollars that might otherwise go to primary and secondary schools; and even the federal government is usurping greater legislative and economic share from states and communities.

If the Internet and information technology can produce an entrepreneurial class that does not automatically sell out to bigger players (and which, for that matter, doesn't actually operate with an 'exit strategy'), then we might recapture the prior generation's growth.

Think of this in terms of the equity funding sources available today: the public and private capital markets. The public markets measure success in terms of quarterly earnings. Private equity, at five years or so, utilizes a considerably longer timeframe, but hardly the full term of a person's working career, the length of time to which early entrepreneurs aspired.

Perhaps the greatest lesson of a persistently languid economy is that real wealth in most cases does not come easily—nor does it come quickly.

Even now, after nearly two years of nine percent unemployment, it would seem that too few folks fear they won't have the independence that comes with having created their own wealth. In contrast to the generations of the first half of the twentieth century, that fearlessness stands out as a crucial difference.

As for Lyceum and its contribution to economic growth, I'll defer to our members and their judgment. Let's just say, few firms offer the idea factory that we do for difference makers to convene in a trusted environment, and explore changing business models.

Commerce, after all, is more than just a transaction. Commerce requires careful strategic planning and a thorough awareness of how a complex world is evolving.

Ms. Chua, who bases her controversial book on self-reliance, would probably agree: True entrepreneurial drive is an undying commitment to a more independent life.

More like an essay, Mr. Cowen's work is about 15,000 words in length, and is available in electronic form only.

Friday, February 11, 2011

Health Care Consulting Survey

Myriad legislative and economic challenges confront the $2.5 trillion health care industry, and for its components, hardly enough time and resources. Consultancies, large and small, will play a critical role in meeting these challenges.

Please take a moment to complete our brief survey assessing the health care consulting marketplace.

The survey, developed by Lyceum Associates and Ready Consultant (a web-based consultant management platform), supports our goal of providing buyers and sellers of health care consulting services unique access to efficient information and effective project engagement and management.

Many thanks!

Friday, February 4, 2011

How ACOs Become Accountable

One of the most discussed provisions in the Patient Protection and Affordable Care Act is the establishment of Accountable Care Organizations (ACOs). Often labeled a unicorn, something everyone can visualize but nothing anyone's actually seen, the ACO is conceived as a vehicle for more efficient care.

Where the current care delivery model emphasizes utilization and minimizes patient-physician interaction, the ACO—or integrated care delivery—model embraces care coordination, quality outcomes and risk-sharing. It features many different providers seamlessly integrated, and collectively compensated for producing a continuum of care.

For hardened veterans of the health care industry, the ACO is simply a reincarnation of the HMO; true enough, except for one critical difference. The HMO model features primary care physicians in a gatekeeper role. A patient, or member in the HMO, cannot utilize the health care system without prior approval from his personal gatekeeper.

No surprise HMOs collapsed. Consumers opted instead for plans offering choice and unrestricted use of the health care system.

By not establishing gatekeepers in the HMO sense, ACOs allow members considerable flexibility.

But here's the rub, ACOs, despite member flexibility, still hold providers accountable for member performance. Any members running rampantly over the system would directly penalize providers in the ACO.

Therefore, for providers to believe that they have a fighting chance at enhanced compensation (and for the ACO to succeed), the question of which patients join—or are assigned to—the ACO becomes vitally important.

Our latest newsletter article tackles this critical dynamic called patient attribution, and considers different methodologies ACOs might employ.

Not all ACOs will be alike. In large part, the patient populations they serve will determine how they differ.

Read "ACOs and the Importance of Patient Attribution" here.