A jobs bill will go first, but then Congress will return to health care legislation, according to the Prescriptions blog on the New York Times website. David Herszenhorn writes:

Congressional Democratic leaders and the White House have been groping for a way forward on the health care legislation. Their main strategy seems to be to work on devising changes to the Senate-passed health care bill that could be attached to a budget measure, which would allow it to be approved by a simple majority. The House could then approve both the Senate bill and the changes and send them in tandem to Mr. Obama for his signature.

Jon Cohn on the New Republic's Treatment blog outlines what he thinks will be in the budget reconciliation compromise:

• Further reducing the benefits tax, either by further delaying its implementation or raising the threshold at which it begins;
• Replacing that money by increasing the Medicare tax on unearned income and bigger reductions in subsidies to private insurers that serve Medicare patients;
• Slightly improving the affordability protections and filling in part of the Medicare drug benefit gap, by further reducing payments to the drug industry;
• Eliminating special deals like the government's agreement to cover Nebraska's expansion.

A little off the usual topics of this blog, but this caught my eye and depressed the hell out of me today (from the Wall Street Journal):

During 2009, the nation's capacity to produce motor vehicles and chemicals fell 4.4% and 1.7%, respectively, the largest such declines since at least 1949, according to Federal Reserve estimates. Its capacity to produce semiconductors, by contrast, grew an estimated 10.4%. Overall, U.S. industrial capacity fell by an estimated 1% in 2009, the largest year-to-year decline on record, while goods-producing businesses shed more than 2.3 million jobs.

As a result, economists expect unemployment to remain high for many years as millions of American workers in the hardest-hit sectors struggle to find new jobs. And while some economists see the restructuring as necessary to make U.S. industry leaner and more profitable, others worry that the sheer scope of the cutbacks could doom companies that ought to survive.

"The earthquake that we felt was so big, and the aftershocks so strong, that we could easily destroy perfectly good manufacturers that are crucial in the supply chain," such as auto-parts makers that supply the entire industry, said Diane Swonk, chief economist at Mesirow Financial in Chicago. "That's the great danger, and it's still a risk."

If health care reform fails, what will the insurance industry do for an encore?

Nearly two decades ago, after insurers successfully campaigned to deep-six President Bill Clinton's health care reform effort, the industry moved tens of millions of Americans with employer-based coverage into health maintenance organizations (HMOs). The shift succeeded in holding down costs for a while. But by the late 1990s, their ham-handed strategy of using HMOs to deny coverage in an irrational manner provoked a patient rights backlash. Faced with the probability of tough new rules regulating their behavior, the insurers backed off and near double-digit health spending growth rates quickly returned.

If their current campaign to defeat reform succeeds, the insurance industry will once again be faced with major decisions about how to curb skyrocketing costs. In recent weeks, there has been renewed attention on two strategies that will probably see much more emphasis in the years ahead. Both would be encouraged by reform, but are not dependent on it. They involve moving people into health plans that 1) use value-based insurance design (VBID), which adjusts co-pays to encourage greater use of and better compliance with high-value health services; and 2) place more emphasis on wellness programs, which reward employees who work to improve their own health (or, in some cases, penalize those who fail).

What's notable about both approaches is that they seek to hold down costs by using economic incentives to change the choices made by millions of patients, who are viewed as health care "consumers." While they claim to borrow a page from the burgeoning field of behavioral economics, which asserts that carefully designed incentive programs can nudge people to do the right thing, the main argument in favor of their eventual success is the expectation that individuals seeking health care will behave like other consumers and gravitate to the least costly alternatives.

What's not expressed, but is equally notable, is that they both absolve health care professionals and the institutions that deliver care from adjusting their own practices, such as the overuse of high technology imaging or invasive procedures, which are the major drivers of skyrocketing health care costs. The architects of VBID and wellness programs assume that it is easier to lower demand that restrict supply. Suppliers, as Elliott Fisher and colleagues at Dartmouth have repeatedly shown, have the uncanny ability to create their own demand and the political acumen to get politicians and patient advocacy groups to scream "rationing" whenever anyone attempts to stand in their way.

But can VBID and greater use of wellness programs actually succeed in bending the cost curve down? And can they do it without triggering a new backlash from patients and the insured public?

Dartmouth scholars have revisited their analysis of regional variation in health  care spending and found contrary to the assertions of some critics that cost-of-living differentials do not account for much of the difference. However, they confirmed that some big cities with high poverty concentrations that also serve as training grounds for future physicians may have been unfairly lumped in with areas that overuse health care services.

The new study in Health Affairs showed after adjusting for price differences that Miami, Florida and McAllen, Texas still led the pack in terms of how much Medicare spent on each beneficiary. Both areas still spent nearly three times more than the lowest spending regions of the country, which remained Honolulu, Hawaii and LaCrosse, Wisconsin. 

There were a few areas of the country where the adjustments made a big difference, and they were mostly big cities. The Bronx and Manhattan in New York City fell 39 and 33 percent, respectively, from the adjustments. But price was only a minor factor, according to the researchers, who were led by Daniel Gottlieb of the Dartmouth Institute for Health Policy and Clinical Practice.

Much of the reason why the New York metropolitan area is so costly is not because of the wage index per se (what we usually think of as "cost-of-living" adjustments), but because the CMS pays hospitals in the New York area so much to reimburse them for graduate medical education and caring for disproportionate shares of low-income patients.

Other high-spending areas frequently targeted by critics did not do so well under the adjustments. Los Angeles, for instance, dropped just 14 percent after adjusting for cost-of-living, graduate education and disproportionate share payments for low-income residents.

The Medicare Payment Advisory Commission issued a report late last year that suggested regional variation in use patterns were less than the Dartmouth Atlas of Health scholars had previously estimated. This latest study says regional variation still matter -- a lot. The debate clearly isn't over.

Here's the list of the ten highest and ten lowest spending areas in the country both before and after adjustments for price, graduate medical education and disproportionate share payments:

10 high-spending hospital regions:

                            BEFORE        AFTER    % CHG.

FL-Miami               $15,909     $14,966      6%
TX-McAllen              13,633       13,881      -2
NY-Bronx                12,004         8,653      39
NY-Manhattan          11,744         8,861      33
TX-Harlingen            11,489       11,324      1
CA-Los Angeles        10,674         9,325      14
NY-Long Island        10,608         8,740      21
MI-Dearborn            10,460         9,791        7
LA-Monroe               10,226       11,385     -10
MI-Detroit                 9,954         9,541       4

10 low-spending hospital regions:
ND-Minot                   6,033         6,711     -10
VA-Lynchburg             6,022         6,524      -8
CO-Grand Junction      5,983         6,075      -2
OR-Eugene                5,968         5,798       3
IA-Iowa City               5,902         6,254      -6
SD-Rapid City             5,854         6,176      -5
OR-Salem                  5,810         5,642       3
IA-Dubuque               5,799         6,219      -7
WI-La Crosse             5,715         5,757      -1
HI-Honolulu               5,293         5,212       2

5 hospital regions with biggest drop due to price and other factors:

NY-Bronx                   12,004         8,653     39
NY-Manhattan            11,744         8,861     33
CA-Alameda County     9,251         7,094     30
CA-San Francisco         8,140          6,278    30
CA-San Mateo County  7,878          6,104     29