humani nil a me alienum puto

random rants about news, the law, healthcare law, economics and anything I find amusing

A Hodgepodge Bends the Curve?

In the health care reform season, this seems to be another necessary read.  As I have posted before, I think that Dr. Gawande is channeling many of the administration’s views — or at least those views of Mr. Orzag (see December 7, 2009 post).  I don’t mean, at all, that Dr. Gawande is taking a lead from the administration or that he is not the intellectual owner of many of the ideas in this article — particularly the analogy in this article with the U.S.D.A.   I mean that it seems that he is simpatico with at least some of the administration’s views on health care reform and deserves thoughtful review for that reason.

The article can be summed up with this paragraph:

There are, in human affairs, two kinds of problems: those which are amenable to a technical solution and those which are not. Universal health-care coverage belongs to the first category: you can pick one of several possible solutions, pass a bill, and (allowing for some tinkering around the edges) it will happen. Problems of the second kind [e.g., bending the health care cost curve], by contrast, are never solved, exactly; they are managed. Reforming the agricultural system so that it serves the country’s needs has been a process, involving millions of farmers pursuing their individual interests. This could not happen by fiat. There was no one-time fix. The same goes for reforming the health-care system so that it serves the country’s needs. No nation has escaped the cost problem: the expenditure curves have outpaced inflation around the world. Nobody has found a master switch that you can flip to make the problem go away. If we want to start solving it, we first need to recognize that there is no technical solution.

via How the Senate bill would contain the cost of health care : The New Yorker.

He’s saying that to bend the curve, significant but micro/local involvement and almost ‘federal’ (in the political sense – giving great authority to subunits to find better solutions) problem solving is necessary.  There is no elegant single panacea by legislative fiat to address the problem of escalating health care costs .   Ergo, the Senate bill’s reliance on a ‘hodgepodge’ of pilot programs coupled with an agency, the new Medicare advisory commission, that can expand pilots that work, may be an organic and evolving mechanism to ‘manage’ the challenge.  This, at least, is the thesis.

Dr. Gawande believes that the U.S.A.D.’s experience is a good analogy to the current health care industry challenges.  I’m not convinced of the analogy made here to the U.S.A.D.’s initiatives of early last century (and on to today).  It does seem to have some merits, while simplifying the unique economic distortions in the health care market.  Individual farmers, once they experienced the production benefits that modern techniques (and access to capital machinery) could yield, had every economic incentive to pursue these.   First, because they could make much more crop; second, that if they did not do what their neighbors did, they’d soon be unable to compete as market prices declined.  He does make the point that continuing government ‘help’ – particularly to individual farmers with limited resources, continues today.

To make my own metaphor, the farmers’ trucks were stuck in the mud on a downhill slope with the government giving them some assistance to get them out.  Once out of the mud’s inertia, the market took over.  But query what type of mud the ambulance of health care is stuck in and what’s the grade of the health care market’s hill?

But in any event, given the number of pilot programs and experiments in health care payment and quality measures in both the Senate (see recent amendments proposed by Warner – D Virginia – BNA access only) and the House’s bills, we’re in for an interesting period of experimentation in health care payment systems.  As always, those that can quickly react to this change will be in a far better position than their competitor organizations.  It will be particularly important, if Dr. Gawande’s vision is correct, for organizations not participating in these pilots to closely monitor them, identifying what seems to be working and plan how to adapt to them if they are put more widely into use.

In any event, a necessary read.

Filed under: Health Law, Reform, ,

Potpourri of Links (Mostly Healthcare Reform Related)

Health Affairs has a  blog post that integrates  recent Atlantic and New Yorker articles and challenges the wider applicability of a recent study’s finding of of a forward-looking coorelation between spending/utilization and quality…

And Atul Gawande (author of the New Yorker article above) has another New Yorker article worth a look at.

A post on possible gender bias in scientific writing anthology by Richard Dawkins.

Health Wonk Review with sausage.

A discussion (from October) of the Medicare buy-in now being proposed; Insurers, AMA and AHA oppose.

Big money in pharmaceutical sales data.  Will it be restricted?

Behavioral intervention to bring about a positive change in cortico-cortical white matter tracts.

Filed under: Health Law, Personal Posts, Reform, ,

Health Care Reform

The one good thing about the debate thus far has been my ability to procrastinate.  Frankly, I’ve been happy that nothing definitive has passed either the House or the Senate.  Not for any particular partisan or ideological reason, but simply because once it does, I, and a lot of attorneys I know, will have a lot of primary source reading to do.   Summaries suffice until laws are passed and language must be parsed.  That time may be about here with the vote yesterday on H.R. 3962.

Recently a client, who is also taking an MBA course, asked if I had any useful information about the health care reform debate.   She wanted less highly technical materials; she wanted materials she could use to understand the debate and that were not completely uninteresting.   I told her I had a few decent links of materials I’d read over the last six months or so.  Some I’ve highlighted here.

  • This American Life.   In two programs, “More Is Less” and “Someone Else’s Money”  they spend a couple hours, in TAL’s original ‘explain it through an anecdote’ kind of way, exploring factors influencing health care inflation and how our employer driven health insurance system evolved into what it is today.   They did the programs with NPR News and specifically the Planet Money folks that helped with their amazing programs on the financial crisis — “The Great Pool of Money” and “Bad Bank.”
  • How American Health Care Killed my Father, by David Goldhill (Atlantic, September 2009).  A very readable and personalized discussion of distortions in the American healthcare system.  Final argument is that health care insurance reform should look at forcing more financial obligations on patients and move toward catastrophic coverage.   David Brooks mentioned this article in an op-ed piece he wrote.
  • The Cost Conundrum, Atul Gawande (New Yorker, June 2009).   I discuss the article here.  This is important since it was very widely discussed and it’s themes regarding variations in health care spending (many arguing as necessary to fix to “bend the curve”), has gotten a lot of attention.  I also noted a recent HHS-OIG settlement in McAllen; of interest due to my discussion.
  • Health Care Inflation Trends.  Since one major component of health care reform is ‘bending the curve’, what of health care inflation?  I pointed out one post from a blog I follow that succinctly summarizes Medicare, Medicaid projections.  I also suggest a private analysis discussing health care spending inflation and the impact on reform concluding “given that the current path of GDP and consumption appears to be sustainable for only another decade, reform of the federal health care programs and a realignment of the health care sector will occur soon.”

If I were giving to her today, I’d probably add:

 

Filed under: Health Law, Reform, , ,

Brooks on Healthcare Reform

David Brooks recently added a couple editorials on health care reform.  While still remaining carefully agnostic on this issue, I enjoy the way he turns a phrase and his moderate to slightly right vantage.  In one of these editorials, he recommends to the President a recent Atlantic article (that I mentioned in an earlier post as necessary reading in this health care reform season).

From “The Obama Slide,” August 31, 2009

The administration…has joined itself at the hip to the liberal leadership in Congress… The result is the Obama slide…. The public has soured on Obama’s policy proposals. Driven by this geneneral anxiety, and by specific concerns, public opposition to health care reform is now steady and stable…Amazingly, some liberals are now lashing out at Obama Some now argue that the administration should just ignore the the ignorant masses and ram health care through using reconciliation…This would be suicidal. You can’t pass the most important domestic reform in a generation when the majority of voters think you are on the wrong path…The second liberal response has been to attack the budget director, Peter Orszag. It was a mistake to put cost control at the center of the health reform sales job, many now argue. The president shouldn’t worry about the deficit. Just pass the spending parts. But fiscal restraint is now the animating issue for moderate Americans. To take the looming $9 trillion in debt and balloon it further would be to enrage a giant part of the electorate…This is a country that has always been suspicious of centralized government. This is a country that has just lived through an economic trauma caused by excessive spending and debt. Most Americans still admire Obama and want him to succeed. But if he doesn’t proceed in a manner consistent with the spirit of the nation and the times, voters will find a way to stop him…  The president’s challenge now is to halt the slide. That doesn’t mean giving up his goals. It means he has to align his proposals to the values of the political center: fiscal responsibility, individual choice and decentralized authority.” via Op-Ed Columnist – The Obama Slide – NYTimes.com.

From “Let’s Get Fundamental,” September 3, 2009

If I were magically given an hour to help Barack Obama prepare for his health care speech next week, the first thing I’d do is ask him to read David Goldhill’s essay, “How American Health Care Killed My Father,” in the current issue of The Atlantic. That essay would lift Obama out of the distracting sideshows about this public plan or that cooperative option. It would remind him why he got into this issue in the first place.The essay is about the real problem: the insane incentives…Goldhill is especially good on the way the voracious health care system soaks up money that could go to education, the environment, economic development and a thousand other priorities. Health care, he writes, “simply keeps gobbling up national resources, seemingly without regard to other societal needs.” Then I’d ask Obama to go to the Brookings Institution Web site and read a report called “Bending the Curve: Effective Steps to Address Long-Term Health Care Spending Growth.” …This report also focuses on the key issue: perverse incentives. It’s got a series of proposals on how to restructure insurance markets, reorganize provider payments, change the way effectiveness-research findings are implemented and cap the employee tax deduction…If I had a magic hour with the president, I’d tell him he can shift back to the core issue: the perverse incentives that make this system such a mess. He can embrace proposals—like the Brookings proposals or, more comprehensively, the Wyden-Bennett bill — that address the structural problems instead of simply papering over them…There are many people telling him to go incremental. They’re telling him to just enlarge the current system a bit and pay for it by pounding down a few Medicare fees. But did Barack Obama really get elected so he could pass the Status Quo Sanctification and Extension Act?  This is not the time to get incremental. It’s the time to get fundamental. Reform the incentives. Make consumers accountable for spending. Make price information transparent. Reward health care, not health services. Do what you set out to do. Bring change.  via Op-Ed Columnist – Let’s Get Fundamental – NYTimes.com.

Filed under: Health Law, Reform,

Another View – Get Rid of Comprehensive Healthcare Insurance?

Thanks to Paul Levy’s Running a Hospital blog for putting me onto this article.  I started reading this too late but could not pull myself away from it.

If you are pondering health care reform this season, “How American Health Care Killed My Father” by David Goldhill should be something you read.  He’s an outsider to health care finance and delivery and a consumer that has had the healthcare system profoundly (and negatively) affect his family.

With this personal interest, he’s become quite focused on the question: how can a technically advanced, high cost, reputable, New York area hospital with caring, highly educated and highly skilled physicians and nurses allow his father to die from a facility acquired infection avoidable (probably) by adequate hand-washing protocols?  The experience has led him to an “obsession with [the] health-care system” and to start asking how could it possibly be structured the way that it is.   With this background, he asks whether today’s proposed reforms actually fix what he understands to be wrong with the American health care system?  His conclusion is no:

The most important single step we can take toward truly reforming our system is to move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system. I believe if the government took on the goal of better supporting consumers—by bringing greater transparency and competition to the health-care industry, and by directly subsidizing those who can’t afford care—we’d find that consumers could buy much more of their care directly than we might initially think, and that over time we’d see better care and better service, at lower cost, as a result.

A more consumer-centered health-care system would not rely on a single form of financing for health-care purchases; it would make use of different sorts of financing for different elements of care—with routine care funded largely out of our incomes; major, predictable expenses (including much end-of-life care) funded by savings and credit; and massive, unpredictable expenses funded by insurance.

I take issue with some of what he writes, particularly about hospitals.  Nonetheless, it is worth a read and some serious thought, whether you agree or not with all of his statements, conclusions and his solution.

via How American Health Care Killed My Father – The Atlantic (September 2009).

Filed under: Health Law, Reform, , , ,

potpourri podcasts & links

A few noteworthy podcasts/links of the week:

Diane Rehm Show.  On Thursday, hosted Jill Tarter, Director of the Search for Extraterrestrial Intelligence Institute’s Center for SETI Research.  Jill Tarter also has a neat little presentation when she recently received the TED prize.  I’ve posted on TED talks before.  Discussion around SETI @ 50 years!

Diane Rehm Show.  On Wednesday, hosted Maxwell Mehlman, professor of law and bioethics at Case Western Reserve University and the author of “Wondergenes”; “The Encyclopedia of Ethical, Legal, and Policy Issues in Biotechnology”; and “Access to the Genome” and one of my old professors.  The conversation is about his recent book, Price of Perfection.

The Lost Decade.  What’s been the economic growth rate over 1999 – 2009 and how does it compare to others during the modern post-War period.  Ouch.

Co-Ops.  What are they and are they a bridge to bipartisan healthcare reform?

Recession bottoming out?  One of the two steel blast furnaces in Cleveland are finally firing up again.  “[W]e are restarting C-5 blast furnace, a steel shop, hot mill, pickle line, tandem mill and galvanizing line at ArcelorMittal Cleveland…However, we do not expect demand to return to the levels seen in 2008 for sometime yet and remain cautiously optimistic for a low and progressive recovery.”  When both furnaces were turned off (I think late last year), it was a signal of the unusual depth of this ‘Great Recession.’  I’ve been watching to see when they’d fire up again.  This is a good sign.

Filed under: Personal Posts, , , , ,

Healthcare Economic – Supply/Demand Side Goals to Reform

Over the years Uwe E. Reinhardt has written, lectured and testified extensively on health care economics, alternative health care financing and delivery systems (e.g., here and here) and health care financing and delivery reform in the United States.  He’s one of those guys I recall studying back in undergraduate health care economics classes (who can forget a name like Uwe).

In a recent NYT Economix blog post he provides succinct economics supply side/demand side breakdown of what the general economic goals are for health care financing and delivery reform as currently evisioned.  I thought was a useful way of looking at the (rational) parts of the current debate.   I emphatically take no position on health care reform policy initiatives, but in light of so much of the rather less than civil polemics I see around the policy debate, this seems a return to basic analytics of what might be accomplished through reform.

1. Financial barriers should not stand between Americans and preventive or acute health care that they sincerely believe will address concerns over a troubling medical condition, in a timely manner, before that condition grows into a critically serious illness.

2. Having received needed health care, no American family should be so financially devastated by medical bills that it cannot meet routine daily living expenses — for example, make utility or mortgage payments on time or finance the education of the family’s children.

3. The future growth in national health spending should be constrained to fall significantly below currently projected spending growth, which has the United States devoting about 40 percent of its G.D.P. to health care by midcentury.All other goals are subordinate to these three overarching goals, as are the means to reach them.

He breaks it down into into one slide — which I think, again, fairly succinctly states the targeted supply/demand side areas:

I found it natural to categorize these components into those aimed mainly at reforming the demand side of the health sector, those aimed mainly at the supply side, and those cutting across both sides — e.g., payment reform and overall cost control.health care delivery

He then discusses the time frame for reform.   He feels with good reason that the supply side fix (top left box), while incredibly challenging, would be achievable through current legislation.   He indicates, however, that it would not be particularly successful unless certain core requirements are met to address the adverse selection/moral hazard problems inherent in the fix.

He notes, however, that the right box and the cross-cutting payment reform (bottom boxes) can only be accomplished over a much extended period due to their complexity, lack of current infrastructure (e.g., systemic and cross-functional EHR systems, solid quality measurement systems, systems whereby health care providers can assume and manage financial risk for populations) and a public policy and business driven process of how to actually move from FFS systems to some form of bundled payment or capitation.

If 1) either private or public health insurers must accept all comers and may not base premiums on the applicant’s health status, then 2)  individuals must be mandated to purchase at least a basic package of health insurance, lest they freeload on the system. Such a mandate, in turn, requires that 3) families be publicly subsidized to make the cost of that basic package affordable to them. A sound reform of the health insurance market cannot have just two of these features. It must have all three.

****

Designing and implementing the rest of the reform agenda in the chart — reforming the supply side, payment reform and cost control — is a much longer-run effort that may take an entire decade or more. It is more challenging than was landing a man on the moon, as no moneyed lunar interest groups sought to prevent man’s visit there.

The delema should be obvious.  Given Dr. Reinhardt’s core requirements for supply side reform, the ability to subsidize #1 (preventative intervention) and #2 (insurance against catostrophic financial loss due to illness) universally is going to be extraordinarily costly to public fisc.  Without management of #3 (which isn’t going to come without significant challenge) the money must come from somewhere.  And, of course, if #3 is not achievable for some unspecified extended period, gap financing is necessary.   Richard Posner recently has a post on just this point.

Filed under: Health Law, Personal Posts, Reform, , , ,

Health Policy Pro/Con Summary of a “Public Plan”

I was catching up on reading and spotted this pretty good (and pretty short) summary from Health Affairs of some of the pro/con arguments concerning a publicly administered health insurance option as part of health care reform.  It’s worth a read and I think fairly and intelligently gives a high level summary of the debate.

For another view of the public plan option, which argues that a public plan option is necessary due to significant consolidation in the health insurance and hospital markets, see the Urban Institute’s paper entitled Is the Public Plan Option a Necessary Part of Health Reform? http://www.urban.org/UploadedPDF/411915_public_plan_option.pdf This is one of the prominent arguments that I have heard the Obama administration make. This might seem a paradoxical argument — i.e., you need direct government participation in the insurance market to make it more competitive.   Query, given this line of argument and whatever else occurs, if it forbodes future antitrust enforcement in the healthcare insurance and delivery sectors.

PostScript 7/27/2009:  Saw this Modern Healthcare discussion of healthcare antitrust enforcement giving some additional color on how healthcare reform and antitrust enforcement may tie together.

Filed under: Health Law, Reform, , ,

No Country for the Public Plan Option

In today’s The Health Care Blog, Jeff Goldsmith provides remarks in an article entitle No Country for Old Men, which, perhaps, should be called “No Country for the Public Plan Option.”  An interesting read with some observations about the systemic risks for a public plan option and the challenges its proposal presents to political success for healthcare reform this time around.  After significant discussion, Mr. Goldsmith concludes “[r]ather than wasting scarce political capital on the public plan, health reformers need to focus on hospital and primary care physician payment reform, expanding Medicare coverage for the almost 11 million uninsured boomers and sensible design of a federal health insurance exchange.   It isn’t going to take a miracle to get this important public task done, just focus and discipline.” The Health Care Blog: No Country for Old Men.

Filed under: Health Law, Payment, Reform, ,

Reform Moves Stir Talk of Bundled Payments | BNET Healthcare Blog | BNET

A BNet article, Reform Moves Stir Talk of Bundled Payments, discusses healthcare reformers’ conceptualizing bundling payments to align physician and health system/hospital outcome interests.  The article has a number of cites to other reports, discussions and administration statements.  It also points out what I find facinating about the trend — what did not occur in the 1990s may be coming through healthcare payment reform today.   But are today’s integrated delivery systems (and the regulatory environment) prepared for risk in any format other than PPS payments?

All of this reminds some observers of the rapid formation of integrated delivery systems during the ‘90s, when many hospitals and physicians were circling the wagons to fend off the expected onslaught of capitated managed care plans. That never materialized in most places, but many systems retained all or some of their employed primary-care physicians. Now, partly in expectation of healthcare reform, they’re also stepping up their hiring of specialists.

“The handwriting is on the wall,” Bill Jessee, MD, president and CEO of the Medical Group Management Association, tells BNET. “The push is going to be towards more integration of physicians, hospitals, home health, and other services. And Medicare or a private insurer may put the provider at risk, instead of the insurer being at risk. It’s not explicit, but it’s implicit in a lot of the reform discussions that that’s the direction they’d like to move. The bundled payment demonstrations are a manifestation of that.”

via Reform Moves Stir Talk of Bundled Payments | BNET Healthcare Blog | BNET.

Filed under: Comparative Effectiveness Rearch, Health Law, Payment, Reform, , , ,

Who are the Uninsured?

Back in 2005, I co-authored an article with Richard Stuhan, a partner at Jones Day.  The article was primarily about the concerted and misguided  efforts to sue non-profit hospitals for their alleged failure to provide charity care.  The plaintiffs contended that such provision of charity care was a legal obligations of 501(c)(3) tax exempt entities.   These suits, while striking the public policy cord concerning the plight of the uninsured and the inflation of health care costs and charges, were based upon ill conceived legal theories and, accordingly,  failed miserably.  But they probably were a precursor of congressional interest in charity care provided by non-profit hospitals and health systems — which is currently playing out and has resulted in some significant changes, most notably the new Form 990s.

One of the items we briefly discussed in that article, an issue that should be a major large part of the health care reform debate, is the scope of the health care insurance (or, more particularly, uninsured) problem in the United States.  Who accounts for the uninsured figures and why are they uninsured is critical to forming the debate about solutions.  The debate, I would think, is fundamentally different if a substantial portion of the uninsured could afford insurance or could access other forms of insurance (SCHIP, Medicaid, etc.), but decide for personal reasons not to obtain insurance or face administrative, educational or transactional barriers to signing-up for federal or state-sponsored insurance programs for which they would otherwise be eligible.   Circa 2003, the uninsured level was approximately 45 million, but a very significant portion of this populations was either eligible for federal or state programs or were from households that were significantly above the federal poverty level and could, technically, afford insurance.

Periodically, this issue has popped up with one study or another discussing the scope of the uninsured problem — addressing who are they, why are they not insured.   Of course, with this new round of health care reform, the issue of the uninsured should be front in center in the debate.  Recently, a report was issued entitled WHO ARE THE UNINSURED? An Analysis of the Characteristics of Americans Without Health Insurance by the Employment Policies Institute.   This seems to be a fairly politicized organization that has written studies before that have been scorned by some.   So, with that disclaimer and taking the study with a grain of salt, its conclusions are still notable. Assuming its numbers are correct, approximately 43% of the 2006 18-64 year-old uninsured are in households at greater than 2.5x the federal poverty limit.  This is not inconsistent with previous studies I had seen and I would think could be fact checked.

By no means does this take away from the significant and troubling 47% who are involuntarily uninsured.   But the number of individuals and households that have the means to, but choose not to, purchase health care insurance is important to the current debate.  What impact does this very significant portion of the uninsured have for risks of adverse selection, individual/employer mandatory coverage requirements, the level FPL subsidies and other components of healthcare reform bills being proposed.

Filed under: Health Law, Reform, , , , ,

Variations in Healthcare Spending – Anchor-Tenant Theory and Fraud and Abuse?

The New Yorker recently had a very interesting expose discussing one of the fundamental economic challenges of healthcare reform.  (Gawande, Atul, The Cost Conundrum: What a Texas town can teach us about health care, June 1, 2009).  Peter Orszag gave a presentation last year at the American Health Lawyers meeting in San Franscisco that I was able to hear.  Mr. Orszag, President Obama’s budget director and formerly head of the Congressional Budget Office, has observed repeatedly (and is quoted in this article as saying) that “[n]early thirty per cent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas.”  He, and many healthcare economists’ observe, that there is a tremendous amount of variation in healthcare spending throughout various regions of the country that simply cannot be explained after controling for demographics, illness indexes/cases mixes, cost indexes and other similar factors.  And, most importantly, outcomes are no better in higher spending areas.

This New Yorker article paints a narrative story surrounding this frequent observations by looking at case of McAllen, Texas.  McAllen has the particular notoriety of having the highest per capital Medicare spending in the nation.   I think it is an important read for healthcare counsel because of some of the author’s tangential commentary linking McAllen’s higher per capita spending with a culture that could have support higher incidents of fraud and abuse.

According to the article, McAllen spends (using 2006 data) approximately $15,000 per Medicare enrollee.  This is more than twice of what El Paso, Texas, with very similar demographics and population factors, pays.  It is also more than twice what the region surrounding the Mayo Clinic spends.  Ironically, the per capital Medicare spending is more than McAllen’s per capita income.

The New Yorker author discusses this fact with some local physicians who have no idea of this distinction for their community:

One night, I went to dinner with six McAllen doctors. All were what you would call bread-and-butter physicians: busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review.  Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person. “Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.  Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said. “It’s malpractice,” a family physician who had practiced here for thirty-three years said. “McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere. That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down? “Practically to zero,” the cardiologist admitted. “Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures.  The surgeon came to McAllen in the mid-nineties, and since then, he said, “the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you benefit?’ ”

via Annals of Medicine: The Cost Conundrum: Reporting & Essays: The New Yorker.

What is the basis for the higher per capita Medicare spending?

To determine whether overuse of medical care was really the problem in McAllen, I turned to Jonathan Skinner, an economist at Dartmouth’s Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data. I also turned to two private firms—D2Hawkeye, an independent company, and Ingenix, UnitedHealthcare’s data-analysis company—to analyze commercial insurance data for McAllen. The answer was yes. Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything—more diagnostic testing, more hospital treatment, more surgery, more home care.  The Medicare payment data provided the most detail. Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits.

The author discusses the high utilization and costs with various hospital executives, who, like the physicians interviewed, also do not know that McAllen is the most expensive place in the country for Medicare beneficiaries.  The executives of the hospitals, to the author’s belief, authentically did not know their peculiar notariety and, not even recognizing it as an issue, had no truly thoughtful responses as to why it might be.

Local executives for hospitals and clinics and home-health agencies understand their growth rate and their market share; they know whether they are losing money or making money. They know that if their doctors bring in enough business—surgery, imaging, home-nursing referrals—they make money; and if they get the doctors to bring in more, they make more. But they have only the vaguest notion of whether the doctors are making their communities as healthy as they can, or whether they are more or less efficient than their counterparts elsewhere. A doctor sees a patient in clinic, and has her check into a McAllen hospital for a CT scan, an ultrasound, three rounds of blood tests, another ultrasound, and then surgery to have her gallbladder removed. How [are the hospital executives] to know whether all that is essential, let alone the best possible treatment for the patient? It isn’t what they are responsible or accountable for.  Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.

The article suggests, with only a little explanation, that the variation between communities such as McAllen and, in contrast, El Paso or other lower cost regions (with at least the same if not better quality institutions) might be due to an  “anchor tenant theory of economic development.”  Certain markets develop their own economic character, similar to how a mall may be defined by its anchor tenant.  So, the theory goes, certain “anchor tenants” in a market may allow, for example, the development of regional specialization (e.g., biotechnology development in certain cities – Boston, San Franscisco and not in others with similar apparent resources).   Twisting this model a bit, the author posits that the entrepenurial focus of physician medicine in McAllen, changing from the 1990s to present, may be a significant part of the increase in costs.  McAllen was near the median in per capita spending a decade ago.  Importantly, the author then goes on to point out anecdotal evidence of some serious antikickback statute violations — solicitation by certain unnamed physicians of medical directorships in exchange for referrals to hospitals and home health agencies.

This linkage — which is not well developed by the author — is nonetheless a beware moment.   If higher per capita Medicare spending is linked by government enforcement agencies as a proxy for potential higher rates of fraud and abuse behavior, one might see a new horizon for focusing fraud enforcement .  Perhaps this is a stretch – but an interesting linkage is being made here by the author.  It is all the more important due to the prestige of the publication and that the fundamentals of this story find their genesis in the economic theory of healthcare inflation that is the focus of leaders within the current administration.

The author goes on to make a fairly classical example of the challenges of asymetical information in healthcare coupled with the fee-for-service basis of physician payments:

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

The author aruges that changing the payor (i.e., government plan competitor, single payor system) will not change this problem.  Even putting the consumer on the hook through medical savings accounts or high deductible plans won’t solve it (if a physician recommends a cardiac bypass, is the patient going to negotiate with the cardiologist, radiologist, anesthesiologist, cardiothoracic surgeon and hospital over expense or the scope of the procedure?).

Then the author suggest that only flipping the economic model might fix this.  The author isn’t quite specific in how this might be accomplished, although he goes to length to contrast the McAllen “anchor-tenant” model with other “anchor-tenant” models of healthcare (e.g., Mayo), suggesting this is the crux of the problem – what kind of medical care provision culture the United States will be developing based upon the economic incentives that are established by insurance payor systems we perpetuate or change through reform.  Not by who cuts the check.

This is worth the read because it sets a story narrative for the harder data Mr. Orszag and others have frequently discussed as healthcare reform is debated.

Filed under: AKS, Comparative Effectiveness Rearch, Health Law, Reform, , , , ,

The Future is Here; Just Not Evenly Distributed

Interesting presentation by Futurist Jim Carol.  He asks, what will we learn if we look back to today’s health care system from the vantage point of 2020?  Many of these concepts are not completely novel, so it reminds me of the science fiction writer William Gibson who observed that “the future is here; it’s just not evenly distributed yet.”

From Jim Carol’s presentation “It’s January 15, 2020: What Have We Learned About Healthcare in the Last Decade?”, he discusses a number of trends that he thinks will reshape health care.  A few:

  • Focus on preventive medicine reshapes healthcare delivery and finance, and by 2020 patients are treated for the conditions we know they are likely to develop, rather than principally for those that they already have.
  • Focus on “customer service” as job #2 (#1 always the efficient and effective delivery of care) reshapes healthcare delivery and rebuilds the entire philosophical underpinning of the system, so that “customer focused, friendly, fast, subject to expectation metrics makes it more consistent with other economic industries.”
  • “When Silicon Valley got involved in a big way, everything changed” launching “new products, new business models, scientic discovery tools, bio-informatics platforms that provided the foundation for diagnostic medicine, and many other incredible items.”
  • “Bio-connected devices — home health care medical monitoring, diagnosis and treatment devices — [will] provid[] … a renaissance” in the modality of care.  “A good proportion of both critical and non-critical care patients [will] receive …at home… [causing a] transition[] to a virtual community oriented caregiving strategy which has resulted in cost reductions and a refocus of critical health care spending” away from inpatient services.
  • “[T]he role of medical packaging [will] transition[] from being a passive protector of the product, to becoming an active component of the overall effectiveness of the particular medication” — prescription bottles will have internet enabled RFID tags with bio-sensors, providing specific information to patient’s provider and general information to pharmecutical clinical trials about patient’s current condition and the efficacy and interactions of the drug.
  • By 2020, “the average doctor and nurse [will need to] refresh[] their entire knowledge base every 18 months [due to the velocity of innovation, knowledge growth and change].  The result [will be] that the relationship between medical colleges and students [will] change[], from a period of short term, concentrated knowledge delivery, to one of lifelong, ongoing replenishment and rejuvenation of knowledge.”

via It’s January 15, 2020: Do you know where your healthcare system is? | WorldHealthCareBlog.org.

Filed under: Health Law, Reform, ,

The Human Analog to a Pet or a Public Resource?

Uwe Reinhardt has a piece on the Economix blog arguing for universal coverage and public financing of children’s health insurance through age 22.  Dr. Reinhardt is a professor of economics at Princeton University and a leading health policy expert.

What’s most notable about his post is his provocative start.  He asks the question:  do we in the United States view children as the “human analogs of pets … or…, as most European and Asians, as precious national treasures.”  Kind of  a disturbing question, when you think about it.  What’s he getting at?

He believes that answering this question “informs the nation’s health policy.”

If …the human analog of their parents’ pets, then … children’s health care is primarily the parents’ financial responsibility [and]…it is just and proper that, of two households with identical incomes, the one with children will have substantially less discretionary income …than does the childless household.  [I]f …national treasures — and the nation’s economic future — then …health care of children [is] the financial responsibility of society as a whole, just as is the financing of public elementary and secondary education.

Aside from remarking about S-chip and the 9 million children that are estimated to be uninsured, he also observes that Americans “seem to impute different social values to the health care of children, depending on their socioeconomic status, even if they have insurance.”  In other words, there can be a hundred dollar or more swing in basic primary care reimbursement depending whether a child is insured through private payors or public public programs.  And this price signal has real effects – many physicians, including many in Reinhardt’s New Jersey, will simply refuse to see Medicaid patients.

He then goes on to argue that a system similar to our public school system — but with vouchers for parents who would opt out of the public system — should be established for all American children under 22:

The purchasing function under this public program, that is organizing and managing care, could be delegated to private for-profit or nonprofit insurers, as in Medicaid Managed Care. Private insurers would then compete over the quality of their disease-management programs, not through judicious risk selection…[T]he fees paid providers under the public program would be set equal to the average of fees paid by the largest two or three private insurers in the state, lest the professional work of physicians caring for poor children continue to be relatively undervalued.

I think this is interesting reading in light of the McKinsey Study that I posted on recently.  If suboptimal health care is a contributing factor to sub-standard educational attainment of differing racial groups or social/economic classes in the United States, how much does our current health care financing system contribute?  How much, if any, lost GDP opportunity are we leaving on the table due to suboptimal financing of health care for children K-12?   If, as Dr. Reinhardt argues, health care for this cohort should be a public good, what’s the real GDP return on investment to Dr. Reinhardt’s program?  To me, asking and answering these questions are critically important to advance the policy debate.

via Seriously, What Is a Child? – Economix Blog – NYTimes.com.

Filed under: Bioethics, Health Law, Reform, , , ,

Republicans And Universal Health Care (Only Nixon Could Go to China)

Regina Herzlinger (the McPherson Chair at Harvard Business School and author of Who Killed Health Care? (McGraw Hill, 2007); a health care adviser to John McCain’s presidential campaign) writes an interesting op-ed in the Atlantic.  She argues that the Republicans need to seize the moment, realize that the “time for universal health insurance coverage has come” and that they should go to China, figuratively speaking.  “Republicans should…seize the lesson of Nixon’s trip to China”, where in one swoop Nixon brought the middle Kingdom out of isolation and removed the issue from his political adversaries.  [As Spock says in Star Trek VI, there’s an old Vulcan proverb that ‘only Nixon could go to China’ — perhaps only the Republicans can get sustainable health care reform passed?].

Ms. Herzlinger argues that there is a “a massive constituency behind [a potential Republican] policy” and her fellow republicans can do a “better version of universal coverage.”  She highlights challenges with what appears to be the current Democratic plan to rely “on universal coverage through a government-controlled system like Medicare”: (i) distrust government’s ability to apply fiscal controls needed so that any plan would not bankrupt us as Medicare is appearing to do; (ii) concern that the government will control costs by rationing health care to the sick (citing the UK experience with cancer rate survival due to UK’s pathetic approval of new cancer drugs and therapies); (iii) government as a monopolistic buyer of health care could negatively affect the supply of doctors; and (vi) government-controlled system would likely impair the medically and economically important private investment — particularly in the emerging genomic sector.

The Republicans, she argues, should instead offer a “consumer-controlled universal coverage system, like that in Switzerland in which the people, not the government, control how much they spend on health.”  The Swiss choose from 85 private health insurers.  [I believe that the Swiss government causes a degree of plan standardization so that consumers can compare “apples to apples.”]  In Switzerland, the poor shop for health insurance like everyone else, using funds transferred to them by the government.  Rather than the “degraded” Medicaid program, the Swiss poor get the same insurance options that everyone else get.  The Swiss taxing authority, according to Ms. Herzlinger, enforce the mandatory system and achieve 99% enrollment.

This consumer-driven, universal coverage system provides excellent health care for the sick, tops the world in consumer satisfaction, and costs 40 percent less, as a percentage of GDP, than the system in the US. The Swiss could spend even less by choosing cheaper, high deductible health insurance policies, but they have opted against doing so. Swiss consumers reward insurers that offer the best value for the money. These competitive pressures cause Swiss insurers to spend only about 5 percent on general and administrative expenses, as compared to 12-15 percent in the US. And unlike Medicare, the private Swiss firms must function without incurring massive unfunded liabilities. Competition has also pushed Swiss providers to be more efficient than those in the US. Yet they remain well-compensated.

She cautions that the Swiss system is not perfect, we can learn from it.  It maintains some of the same problems we have with fragmented care and poor integration of payments between vertical provider groups for episodes of care.

She concludes by observing that movement to this model will have real economic impacts:

Republicans could enact Swiss-style universal coverage by enabling employees to cash out of their employer-sponsored health insurance. (Although many view employer-sponsored health insurance as a” free” benefit, it is money that would otherwise be paid as income.) The substantial sums involved would command attention and gratitude: a 2006 cash out would have yielded $12,000 — the average cost of employer-sponsored health insurance — thus raising the income of joint filers who earn less than $73,000 (90 percent of all filers) by at least 16 percent. Employees could remain in with an employer’s plan or use this new income to buy their own health insurance.

via Why Republicans Should Back Universal Health Care – The Atlantic Business Channel.

Filed under: Health Law, Reform, , ,

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