The U.S Government has today again raised the estimate of the amount of oil spilling into the Gulf of Mexico.  The estimated rate now stands at 60,000 barrels per day.  As of yet, there are no estimates of the cost of the flood of litigation to follow.

Perhaps in an effort to stave off some claims, BP has declared on its website that:

Appointing an Independent Mediator is a recognized practice to strengthen claims processes and resolve disputes. BP is working to appoint the best possible person to fill this important role.

In those cases in which a claimant and BP cannot agree on resolution of a claim, the claimant can seek review from the Independent Mediator.  The Independent Mediator then will make an advisory decision on the claim.

My Op-Ed on Pennsylvania Attorney General Tom Corbett's participation in the frivolous constitutional challenge to health care reform is in today's Pittsburgh Post-Gazette. Corbett is running for governer and his sole proposal for addressing the problems in health has been a vague reference to malpractice reform on his website.  His concern over frivolous lawsuits though, apparently does not extend to his use of public funds to garner rightest support for his campaign.

As I noted in the piece, Charles Fried, former solicitor general for President Ronald Reagan and Harvard professor, has called the case "truly silly" and suggested that its proponents are "deeply ignorant or just grandstanding in a preposterous way."  The article explains why the 3 claims in the case are baseless.

I have an article in this month's Directors & Boards, E-Briefing. The article discusses the benefits of ADR for business and how Directors can facilitate adoption of efficient dispute management programs.

I was interviewed on a syndicated radio show, Issues Today, about the benefits of mediation.  Here is the link.

In response to my Op Ed on health reform in this past week's Post Gazette and during a talk I gave on health reform last week, I received a number of questions expressing concerns about the bill.  In light of all the rhetoric from both sides, I think many, if not most people, simply want clearer answers about the proposals.  My stab at providing some answers is below:

Question 1: Does the current bill still call for a 40% surcharge/tax on "Cadillac" health insurance plans?  My wife and I are self-employed and we have chosen to have the best health insurance available. That cost has risen to nearly $1,800 per month...high, but we can still afford the plan and we LOVE the plan...but 1 40% tax on this would add $540 a month to my costs. I would have to look for a lesser plan. Why should we be punished for making our choice and paying for it ourselves? Is not The American Dream to be for the individual not the group or the state?

My Response: There would be an excise tax on employer sponsored health plans valued in excess of $10,200 for individuals and $27,500 for families (close to $2300 per month).  The tax would not go into effect until 2018 and it would not tax the full value of the plan but the amount above the threshold.  For example, if a plan's value was $2500 per month, the tax (which would be paid by the insurer not the business) would be 40% of $200 not of $2500--or $80 per month.  To the extent insurers pass along the increase to a small business, it would be deductible like other such expenses, so the net increase would be closer to $60.

Personally, I'm in the same situation as you.  My insurance now costs nearly $20,000 per year, and rates have not been announced for next year.  Because of concern about pre-existing conditions, I'm not able even to consider switching to an alternative or lower cost plan (if one were available). On balance though, I believe that unless the health care system is revamped, in a few years insurance will be out of reach in any event, and there won't be much left of the economy  when my kids grow up.  We are currently spending $2,700,000,000,000 a year on health care (over 17% of the economy).  In 15 years, this percentage is expected to double.  One of the reasons the auto industry failed is because each car included about $1500 in health care costs v. about $500 for japanese Cars).

One goal of the tax is to encourage the creation of lower costs options.  It's also notable that the tax, at least to some extent, is directed at overly rich union sponsored plans that arose historically after World War II, when Congress allowed companies to offer health insurance as a non-taxed benefits.  In other words, if a company increased wages the workers would be taxed, but if it put money into benefits, the workers would not be taxed.

On balance, I don't see the reform as an attack on the American Dream but a step toward trying to preserve it.

Question 2: Does the current health care bill require ALL companies of 25 employees or more to provide health care benefits to their employees or face an 8% payroll tax per employee? I know small business owners who say the 8% payroll tax penalty would be cheaper, but it will put such a squeeze on their business that they will have to cut employees. Is losing jobs a good idea? Why are we going to be forced into these situations by a demanding federal government? Do you see this as fair?

My Response: The President's plan exempts employers with less than 50 employees from any penalties, and rather than punish small businesses, it would provide a tax credit for small businesses with less 25 employees and average wages of less than $50,000 to encourage purchases of health insurance.  The credit would be 35% of the employer's contribution, if it contributes at least 50% of the cost.

Question 3: Is this health care bill addressing the inability to have portability with your health insurance and purchase health insurance across state lines?

My Response: The most important thing about the plan, is that it eliminates the ability of health insurers to deny coverage because of pre-existing conditions or to impose lifetime limits on coverage.  This make portability less of a problem, because if you move, there will always be an insurer that must provide coverage.  In addition, the law authorizes states to reach agreements that will allow insurers to provide coverage in multiple states (with a goal of increasing competition).  It is not clear whether the interstate health plan ideas will take hold, however.

Question 4: Is there anything in this bill to provide any type of tort reform? Some of the awards you read about for malpractice seem to be really exorbitant when it comes to the 2nd award or the punitive damages award. Would this help to reduce insurance costs or not? I really don't know

My Response: The plan does not directly provide for national tort reform, but it would provide funding for states to develop their own tort reform and dispute resolution programs.  I agree that tort reform is needed, but the problem is not unique to health care.  The studies that have looked at the issue have concluded that malpractice suits account for around 2 to 3 percent of total costs, and changing  he law would affect only part of that amount.    In short, tort reform might help a little bit, but it does not really address the biggest problems.

Question 5: Why can't the government do with pharmaceutical advertisements on TV that they did with cigarette ads? I find these ads to be ridiculous. They are being shown to the general public and we have no way to disseminate or use that knowledge...seems like a large waste of money that go into reducing the cost of the drugs themselves.

My Response: Although there is not good information, most people believe that the pharmaceutical industry now spends much more on advertising than on research.  The industry, though, spends a boat load of money on politicians/lobbying so it is very difficult to make significant changes that the industry doesn't like. 

Question 6: I'm worried that the President's plan is going to cut my Medicare benefits.  That isn't right.

My Response: The proposed bill will not cut Medicare benefits.  In fact, the bill specifically prohibits cuts. The bill would, however, reduce payments to insurance companies that offer  Medicare Advantage programs.  (These are Medicare HMOs that were created under Medicare Part C in the 1990s).  Those programs have been receiving payments that are 14% more for the same level of benefits that are provided under traditional Medicare Part A.   Much of that additional 14 percent has gone into the pockets of the insurance companies.  About 25% of Medicare recipients are covered under Medicare Advantage, instead of Part A (traditional fee for service payments).  Because of the overpayment, people under medicare part A are actually subsidizing Medicare Advantage.

If some change is not made, the Medicare Trust fund that covers Part A will go broke in about 9 years.    With the change (which does not affect benefits), it will still go broke, but not for 23 to 25 years.

Question 7: Does the plan do anything to control costs?

My Response: There is no single mechanism for controlling costs in the bill, and none is realistic.  The bill, however, would strive to control costs in a number of significant ways.

First, by eliminating pre-existing condition exclusions from health insurance, much of the time and money spent weeding out high-risk insured can be reduced.  The corollary to this change is the individual mandate -- i.e., a requirement that most people get insurance coverage.  The individual mandate may help reduce individuals costs by spreading healthcare costs over a larger base that includes more healthy people (who might otherwise wait to buy insurance until they thought they would need it).

Second, the plan including funding for pilot programs to change how providers are paid under government programs.  The new payment methods, which may involve paying a lump sum for a course of care rather than per procedure payments, are directed at both improving outcomes and reducing costs.  Although critics argue that such plans are not spelled out in detail, I don't think it would either be realistic or sensible to do so.  There is still much to learn about the types of payment methods that would be effective--it would not make sense to change make national changes to payment methods without first testing them out to see how well (or if) they work.

Third, investments in health information technology are intended to allow for better coordination of care and outcomes.  The plan would continue to promote standards for allowing providers to exchange information with each other more efficiently.

Fourth, the bill includes significant funding for states to develop or improve dispute resolution programs that could reduce defensive medicine.

Fifth, the bill would increase resources directed at reducing fraud.

Sixth, the bill would include funding for programs directed at "evidence based medicine,"--i.e., trying to find out what treatments actually work (as opposed to just cost a lot of money).

Seventh, the bill would impose controls over insurance price increases.  In the absence of a public option to serve as a ceiling on insurance costs, some means of reviewing and controlling price increases is essential.

Question 8: Isn't this a government take-over of health care?

By 2012, the government will pay for more than 1/2 of all health care costs in the country.  The industry is already regulated more than any other field with the possible exception of nuclear power.  Any concern about a government takeover is about 50 years too late.  And no, the plan will not require people to give up their current insurance.

Some additional Comments:

It really is pretty disturbing how all of these issues are handled in Congress.  There are legitimate concerns about the proposal--for example, not all of the proposal are clearly spelled out--but much of the opposition is based on fear mongering rather serious discussion.  The best example is the talk of death panels and the like, which were completely ridiculous but believed by many.  Similarly, anyone who thinks reform is a good idea is instantly called a socialist etc.  For what it's worth, I think I'm pretty moderate and disagree with democrats on many issues.  One of the reasons that I wrote the piece for the Post Gazette is that I think there a difference between being moderate, as Congressman Altmire claims to be, and refusing to take a stand on important issues.

The other thing that I think is important about the bill, but which is often overlooked, is that it would not be like flipping a switch and changing everything over night.  Some of the proposals would work, some would not, and if Congress could actually get over its gridlock, it could make changes over time.  Social Security is a good example.  It was much more limited when it was originally adopted, and changed significantly over time.  Health reform would need to work the same way, but I'm afraid if we don't get started soon, it will be too late.

My Op-Ed on Health Reform and "Blue Dog" Democrat Congressman Altmire's political posturing in is today's Pittsburgh Post Gazette.

GM has announced that it will reinstate 660 of 1100 dealerships that were slated to close.  Last month, Congress passed legislation giving terminated dealers the "right" to appeal their termination through binding arbitration to be overseen by the American Arbitration Association.  Although, as discussed in my book, I'm all in favor of arbitration and I am an arbitrator for the AAA, the special treatment afforded by this law strikes me as both undermining the credibility of arbitration as a contract-based means of resolving disputes agreed upon in advance by the parties and confirming Tip O'Neill's famous admonition that "all politics is local."  The diffuse national interest in restoring the competitiveness of the auto industry is simply no match for the influence that can be asserted by local car dealerships over their congressional representatives.

Although, on the surface, there seems nothing wrong with a business a chance to go on, consider the implications of granting a similar right to all business or to all terminated workers.  The law does not ask the arbitrators to review the propriety of the termination under the contracts entered by the dealers with the automakers, or to decide based upon any discernible principle of law, but instead to decide as follows:

The arbitrator shall balance the economic interest of the covered dealership, the economic interest of the covered manufacturer, and the economic interest of the public at large and shall decide, based on that balancing, whether or not the covered dealership should be added to the dealer network of the covered manufacturer.

The factors considered by the arbitrator shall include (1) the covered dealership’s profitability in 2006, 2007, 2008, and 2009, (2) the covered manufacturer’s overall business plan, (3) the covered dealership’s current economic viability, (4) the covered dealership’s satisfaction of the performance objectives established pursuant to the applicable franchise agreement, (5) the demographic and geographic characteristics of the covered dealership’s market territory, (6) the covered dealership’s performance in relation to the criteria used by the covered manufacturer to terminate, not renew, not assume or not assign the covered dealership’s franchise agreement, and (7) the length of experience of the covered dealership. The arbitrator shall issue a written determination no later than 7 business days after the arbitrator determines that case has been fully submitted. At a minimum, the written determination shall include (1) a description of the covered dealership, (2) a clear statement indicating whether the franchise agreement at issue is to be renewed, continued, assigned or assumed by the covered manufacturer, (3) the key facts relied upon by the arbitrator in making the determination, and (4) an explanation of how the balance of economic interests supports the arbitrator’s determination.

This supposed "balancing" test is pure fantasy:  is the arbitrator supposed to decide whether the close is more important to the dealer, the maker, or the public?  This is like asking whether $1000 is more important to a laid-off worker, a multi-national company, or the public at large.

Perhaps not surprisingly, GM has decided against playing this game.  According to the Washington Times

" GM said it would not have enough time to negotiate with all 1,100 dealerships that appealed the automaker's decision to close them within a four-month window imposed by the federal government.  "By doing this we save a lot of time, energy and dollars," said Jim Bunnell, GM general manager of network support, saying the company wished to avoid a "very large arbitration process."

Don't get me wrong.  Many local dealers have made significant contributions to their local communities and deserve a fair opportunity to continuing doing so.  Special treatment with a law of dubious constitutionality, though, says far more about political influence than justice,  sets a bad precedent, and does nothing to advance arbitration as a fair and cost effective alternative to wasteful litigation.  I suspect that GM has, thus far, opted against challenging the constitutionality of the law in favor of giving in, because it owns political bailout might make is less than ideal challenger.

In his blog, The Frontal Cortex, Jonal Lehrer (author of How We Decide and Proust Was a Neuroscientist) describes the "ultimatum game," which is often used in teaching Negotiations to demonstrate how important a sense of "fairness" may be to reaching an agreement.  The game has two players.  The first player is given $10 and told that he or she must offer part of it to the second player.  The first player can offer any amount, if the second player accepts the offer, both players keep their share, but if the second player rejects the offer, then both players get nothing.  Almost invariably, if the first player offers much less than $5, the second player will reject the offer--even though rejecting the offer makes the second player worse off.  (A purely rational player would accept any offer above zero, because regardless of how much player one keeps, a non-zero propeal would be a gain).    This phenomenon has been shown in a variety of contexts.  For example, given a choice of a job that will pay $80,000 in a company in which everyone else makes $80,000 or less, and a job paying $90,000 in a company in which everyone else is paid $120,000 or more, most people would prefer the first job.

Lehrer describes additional research (using brain scanners) that shows concerns over fairness or equality may not be purely selfish--that people sometimes prefer someone else be given a gift to receiving a gift themself, if it will balance out a unfair starting point.

In a nutshell, when someone says "its the principle, not the money," they may actually mean it, and it would be a mistake for a mediator or negotiator to dismiss the such non-monetary motives.  In litigation, though, the issue is complicated by other psychological tendencies, such as the tendency to underestimate the time and cost of the lawsuit and overestimate the likelihood of success.  Further, even successful litigants often come away from a lawsuit feeling beaten down by the process and without the expected satisfaction derived from vindication.  Consequently, and perhaps counter-intuitively, negotiation or mediation of a settlement may require putting "fairness" aside, because the price of fairness is simply too high.  While I don't think a negotiator or mediator can, or should, discredit or diminish the importance of fairness to the parties, I do think he or she can make a significant contribution by helping them  more accurately assess both the cost of pursuing "fairness" and the potential for disappointment.

President Obama has sent a letter to Congressional Leadership identifying Republican proposals that he may include in a final reform package later this week, including increased funding pilot tort reform projects that may include health courts.  It's worth recalling that Obama (along with then Senator Clinton) sponsored a bill (MEDIC) in 2006 that sought funding for such programs.

This is nice example for negotiation 101--it never hurts to package something you are willing to do anyway as a "concession."

In truth, this seems all about PR, reiterating Republican obstinancy in opposing any meaningful reform, and attempting to provide some cover for supporters.  The Republican objective, as made clear in the health care summit, is to do nothing start over.  Adding "republican" ideas to the reform package doesn't really change anything. Although tort reform is necessary to eliminate waste, it is not (as posited by the Republican) a substitute for comprehensive reform.

The text of the President's letter follows:

March 2, 2010

Dear Speaker Pelosi, Senator Reid, Senator McConnell, and Representative Boehner:

Thank you again for the time, energy, and preparation you invested in last Thursday’s bipartisan meeting on health insurance reform. I have always believed that our legislative process works best when both sides can discuss our differences and common goals openly and honestly, and I’m very pleased that our meeting at Blair House offered the American people and their elected representatives a rare opportunity to explore different health reform proposals in extraordinary depth.

The meeting was a good opportunity to move past the usual rhetoric and sound-bites that have come to characterize this debate and identify areas on which we agree and disagree. And one point on which everyone expressed agreement was that the cost of health care is a large and growing problem that, left untended, threatens families, businesses and the solvency of our government itself.

I also left convinced that the Republican and Democratic approaches to health care have more in common than most people think.

For example, we agree on the need to reform our insurance markets. We agree on the idea of allowing small businesses and individuals who lack insurance to join together to increase their purchasing power so they can enjoy greater choices and lower prices. And we agree on the dire need to wring out waste, fraud and abuse and get control of skyrocketing health care costs.

But there were also important areas of disagreement. There was a fundamental disagreement about what role the oversight of the health insurance industry should play in reform.I believe we must insist on some common-sense rules of the road to hold insurance
companies accountable for the decisions they make to raise premiums and deny coverage. I don’t believe we can afford to leave life-and-death decisions about health care for America’s families to the discretion of insurance company executives alone.

No matter how we move forward, there are at least four policy priorities identified by Republican Members at the meeting that I am exploring. I said throughout this process that I’d continue to draw on the best ideas from both parties, and I’m open to these proposals in that spirit:

1. Although the proposal I released last week included a comprehensive set of initiatives to combat fraud, waste, and abuse, Senator Coburn had an interesting suggestion that we engage medical professionals to conduct random undercover investigations of health care providers that receive reimbursements from Medicare, Medicaid, and other Federal programs.
2. My proposal also included a provision from the Senate health reform bill that authorizes funding to states for demonstrations of alternatives to resolving medical malpractice disputes, including health courts. Last Thursday, we discussed the provision in the bills cosponsored by Senators Coburn and Burr and Representatives Ryan and Nunes (S. 1099) that provides a similar program of grants to states for demonstration projects. Senator Enzi offered a similar proposal in a health insurance reform bill he sponsored in the last Congress. As we discussed, my Administration is already moving forward in funding demonstration projects through the Department of Health and Human Services, and Secretary Sebelius will be awarding $23 million for these grants in the near future. However, in order to advance our shared interest in incentivizing states to explore what works in this arena, I am open to including an appropriation of $50 million in my proposal for additional grants. Currently there is only an authorization, which does not guarantee that the grants will be funded.
3. At the meeting, Senator Grassley raised a concern, shared by many Democrats, that Medicaid reimbursements to doctors are inadequate in many states, and that if Medicaid is expanded to cover more people, we should consider increasing doctor reimbursement. I’m open to exploring ways to address this issue in a fiscally responsible manner.
4. Senator Barrasso raised a suggestion that we expand Health Savings Accounts (HSAs). I know many Republicans believe that HSAs, when used in conjunction with high-deductible health plans, are a good vehicle to encourage more cost-consciousness in consumers’ use of health care services. I believe that high-deductible health plans could be offered in the exchange under my proposal, and I’m open to including language to ensure that is clear. This could help to encourage more people to take advantage of HSAs.

There are provisions that were added to the legislation that shouldn’t have been. That’s why my proposal does not include the Medicare Advantage provision, mentioned by Senator McCain at the meeting, which provided transitional extra benefits for Florida and other states. My proposal eliminates those payments, gradually reducing Medicare Advantage payments across the country relative to fee-for service Medicare in an equitable fashion (page 8).  My proposal rewards high-quality and high-performing plans.

In addition, my proposal eliminates the Nebraska FMAP provision, replacing it with additional federal financing to all states for the expansion of Medicaid.

Admittedly, there are areas on which Republicans and Democrats don’t agree. While we all believe that reform must be built around our existing private health insurance system, I believe that we must hold the insurance industry to clear rules, so they can’t arbitrarily raise rates or reduce or eliminate coverage. That must be a part of any serious reform to make it work for the many Americans who have insurance coverage today, as well as those who don’t.

I also believe that piecemeal reform is not the best way to effectively reduce premiums, end the exclusion of people with pre-existing conditions or offer Americans the security of knowing that they will never lose coverage, even if they lose or change jobs.

My ideas have been informed by discussions with Republicans and Democrats, doctors and nurses, health care experts, and everyday Americans – not just last Thursday, but over the course of a yearlong dialogue. Both parties agree that the health care status quo is unsustainable. And both should agree that it’s just not an option to walk away from the millions of American families and business owners counting on reform.

After decades of trying, we’re closer than we’ve ever been to making health insurance reform a reality. I look forward to working with you to complete what would be a truly historic achievement.
Sincerely,

In article by Mike Cronin on independent hospitals in Western PA.