Relevant and even prescient commentary on news, politics and the economy.

Healthcare reform op-ed

The current uptick in ‘medical inflation’ in private sector health industry is worth a separate post. The Standard and Poor Healthcare Economic Indices can be found here.
Lifted from a note from Run 75441 on the link I sent on healthcare reform.

Recently, Matt Stoller claimed Obama had a 61 vote majority in the Senate and enough to secure either Universal or Single Payer Healthcare. We all forget the one Senator from Aetna stand which killed any other options an Medicare for those starting at 55. President Obama did not have a filibuter proof 61 votes in the Senate for any other healthcare options muchless the ACA. The Blue Dogs (Nelson(s), Bacus, Bayh, Cantwell, Feinstein, Lincoln, Pryor, Widen, Conrad, etc) wouldn’t move for any healthcare plan unless they brought home the bacon as Nelson attempted to do for Nebraska. Just plain ordinary obstructionism to block whatever this President would attempt to do. Senator Lieberman killed anything beyond the ACA. 

Former Editor of the New England Journal of Medicine and others should be sorry if the entire ACA is struck down or dismembered as we will go another decade before a President and a Congress take up the issue again and heathcare costs (for which healthacre insurance is a reflection) will again rise faster than inflation. Because of the power of Medicare, it has been able to rein in rising healthcare costs so far at less than 3% than that of the commercial market at about 9% %. Standard and Poors Healthcare Economic Indices .

The last time healthcare reform was attempted was under Clinton and costs have increased multiple times. A failure to allow the ACA to go forward will allow the overall Healthcare Industry to again implement inflationary costs in a market which has no restraints. Certainly, I can not conjur up what SCOTUS will do. The kings in black robes will decide what is best for us as Congress lacks the will power to represent those who placed them there with the exception of ALEC, Koch(s), and Norquist.

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Free market mechanics and healthcare…

by Michael Halasey

Free market mechanics and healthcare…

Now, I hear something all the time in my work in the health policy realm, and that is that the “free market” could lower prices.

I even recently had someone approach me after I mentioned that the PPACA had resulted in an extra million people aged 18-25 having health coverage this year. His statement? “That’s exactly the wrong direction, we need to have less people, far less people with health insurance.” I asked him his reasoning…of course, already knowing what his response would be. He reasoned that it would force people to compare prices, shop around, and would dramatically lower prices through the mythical, magical “free market”….

Of course, this ignores some rather real problems with this line of thinking. For starters, healthcare does not behave like normal commodities for a variety of reasons.

To start with, healthcare does not lend itself to price comparisons, and comparison shopping. The high costs are often related to trauma and emergency care/hospitalizations. It is simply not practical to ask which hospital in the area offers the best rates on cardiac catheterizations while you are being rushed to the hospital in the midst of an MI.

This impracticality also lends itself to probably the biggest problem. That is irrational behavior. Any of us who have taken even undergraduate economics remember the discussions of rational actors, and how prices were sensitive to rational behavior. Much of health care involves emotionally charged, heated, and oftentimes difficult decisions. Most patients and families can hardly be expected to act in a rational fashion about receiving the news of a terrible diagnosis such as cancer. Real world experience reveals this to be true. I wish I could count how many times I have presented various treatment options to patients, only to hear “Do whatever it takes”.

Hayek once wrote that spontaneous order was a result of market economies, and that it was “a more efficient allocation of societal resources than any design could achieve.” This of course, assumes rational behavior, and assumes that a market can be symmetric.

Because of this behavior, and because people view healthcare not as optional, but as a necessity, price elasticity scores generally trend around 0 or -1. This indicates an inelastic market.

Of course, the next time I have a 21 year old kid who comes in after a farm accident without insurance, and is badly injured, I’ll make sure to tell him that perhaps he should have shopped around.

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Negotiations, Not Love Songs

My wife had knee surgery recently.* One of the great things about our then-current health insurer is that they provide complete data—list price, what they negotiated, what they paid, what you owe. Since we’re in the “doughnut hole,” I’m tracking more frequently than I usually would.

And the bills—possibly because we were moving to a new provider—were processed quickly. So what you see below is, in percent form, the amount of the list price (in relation to the whole) and the net benefit to the provider (ibid.).


As you can see, the surgeon’s list price isn’t even close to the level he received, while the hospital and, especially, the anesthesiologist, did relatively better.

There are multiple possible reasons for this, and I don’t pretend this is representative of what everyone—or even everyone with my now-sadly-former Insurance Provider—would receive. The key finding is that all of these contracts and negotiations were carried on by a single entity (my insurance carrier) with each provider. Promises were made—volumes, volume discounts, speed of processing, and whatever else was agreed—and contracts agreed between parties.

All before I get involved.

Which means that the final figures are set in stone. I don’t get to negotiate them. Maybe I get to negotiate a payment schedule, but the levels themselves are set. So even if I believe that the pie should be distributed differently—that the hospital (and maybe the anesthesiologist my wife didn’t want in the first place) should get a little less while the surgeon gets a bit more, for instance—I don’t get a say in that.

Nor do I get the information before choosing an insurer. (If I even get to choose, which I do not in the case of employer-provided health insurance.)

Short version: my choices have no direct effect. There is a “market” for health care, but patient usage and expenditures has no direct effect on it.

*This occurred just as the company was being acquired and therefore our health plan was being transferred from one provider to another, but that’s another story for another time.

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Medical Tourism, separating facts from fiction

by Michael Halasy Practicing Emergency Medicine PA, Health Policy Analyst, and Health Services Researcher

Medical Tourism, separating facts from fiction

One of the greatest myths that I hear on a somewhat regular basis, centers around the belief that the US must have one of the greatest health systems in the world, because everyone comes here for their care. Well, let’s examine that shall we?

As with many things, reality is a little different from the mythology.

According to the Deloitte Center for Health Solutions and, there will be roughly 561,000 inbound medical tourists to the United States by 2017….Conversely, 750,000 Americans traveled to foreign countries in 2007, and this grew to between 1.1 and 1.3 million outbound tourists in 2008. Spending on healthcare in foreign countries was estimated to be 20 billion dollars in 2008.

Estimates for growth demonstrate a consistent 35% growth in outbound medical tourism annually. Projections indicate that roughly 1.6-2.5 million Americans will travel abroad in 2012, and spending could reach 100 billion dollars. That’s right, 100 billion US dollars being spent in foreign countries for healthcare such as elective surgeries, complicated dental surgery, plastic surgery, and even coronary bypass surgery.

Where are they going?

According to survey results:

Thailand, with one hospital in Bangkok taking care of 64,000 US patients in 2006.
Latin America

Of these, India has the greatest potential for growth.

A legitimate question revolves around what reasons these patients are traveling for. Predictably, a lack of health insurance had a high correlation with travel for services. Surprisingly though, only 9% of patients who were surveyed listed price as the primary factor in their decision.

An entire industry is springing up to support this, and companies are now offering packages, and entering into arrangements with foreign hospitals.

What may or may not come as a surprise to many, is that, as the Deloitte report lists, there are many American Health Insurance companies that are entering into pilot studies sending American patients to foreign hospitals for treatment.

Some examples include:

Anthem BC/BS in Wisconsin (700 group members initially, being sent to India for treatment)

United Group in Florida (Promoting tourism to India and Thailand to 200,000 members)

BC/BS of South Carolina (Promoting tourism to Thailand)

So while there are foreign citizens who come to the US for treatment every year, it pales in comparison to the number of American citizens traveling elsewhere.

(Rdan here…One of the throw away lines about the where US Healthcare stood in the scheme of things is that Canadians come over the boarder for treatment, which is characterized as a comment on the Canadian healthcare system. No numbers are ever provided even when requested…maybe it is more complex than many are willing to deal with)

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Guest post: Massachussetts leads the way!

Guest post by Michael Halasy Practicing Emergency Medicine PA, Health Policy Analyst, and Health Services Researcher

Massachussetts leads the way

We have talked about bundled payments here, and getting rid of the antiquated and inefficient fee for service model. It looks like Massachussetts is on board suggests The Washington Post.

Blue Cross is not alone. At Partners HealthCare, the famous Boston-based medical system that dominates health care here, Massachusetts General Hospital has been conducting a Medicare experiment in which nurses are assigned to coordinate care for about 2,500 older patients with multiple ailments. The experiment, which began five years ago, so far has reduced hospital re-admissions by one-fifth and cut medical spending by 7 percent.

They will be the first to implement integrated care organizations (really, a version of ACO’s) and a new bundled payment mechanism.

With 98% of the population insured, Massachussetts saw their costs soaring, at about 15% above the national average. The markets have already begun to respond, and some, like Partners, are already ahead of the curve.

At Partners HealthCare, the famous Boston-based medical system that dominates health care here, Massachusetts General Hospital has been conducting a Medicare experiment in which nurses are assigned to coordinate care for about 2,500 older patients with multiple ailments. The experiment, which began five years ago, so far has reduced hospital re-admissions by one-fifth and cut medical spending by 7 percent.

Massachussetts was bracing for this for some time. Last year, the insurance commissioner took on the health insurance companies for raising rates too rapidly. He rejected many of them outright. This was an important political maneuver, that really set the stage for the current willingness and cooperation of the insurers, providers, and hospitals.

As he says:
“We are preparing ourselves to grapple with a certain amount of constructive disruption in the industry,” Patrick said in a lengthy interview. “It’s a journey.”
Clayton Christensen would argue that it is JUST that disruption which is so sorely needed.

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Guest post: Prometheus and Bundled Payments

As an extension of one of my posts, Global payment system, as the current buzz in healthcare reform, Michael Halasy points us to one of his choices for a plan.

Guest post by Michael Halasy, Practicing Emergency Medicine PA, Health Policy Analyst, and Health Services Researcher

Prometheus and Bundled Payments

So, one of the more intriguing propositions in the midst of health reform is to reform payments. Make no mistake this has been tried before, and many physicians and hospital administrators remember the days of capitation and DRG’s with Medicare.

I attend a lot of health policy meetings and symposia, and the common theme on the priorities coming out of these meetings centers around bundled payments, and payment reform. The thought of course being, that as you change the payment system, other changes will be more palatable, and easier to enact. We’ve had some discussion of the ACO concept here, and make no mistake, bundled payments tied to outcome measurements will be one of the chief indicators of the ACO model success, and/or, it’s demise.

The problem is, that the current fee for service model is broken. Almost everyone knows this. It encourages fragmentation, volume over value, and quantity over quality. This is not sustainable, and is one of the main drivers in some respects of healthcare cost increases.

Prometheus happens to be one of the most studied, and well known of the new payment models (and yes, also a Titan who was condemned to watch his liver being eaten every day by an eagle).

Prometheus was first developed under a Robert Wood Johnson grant in 2006 in Rockford, Illinois, but has shown a great deal of promise for expansion. The initial premise behind it was to hold physicians and hospitals accountable for the care that they provide, but only for those outcomes that were within their control. They termed these PAC’s, or Potentially Avoidable Complications.

There has been some work that shows that these PAC’s may account for about 22% of all private sector expenditures. Reducing not only the occurrence of these incidents through incentives, but also through payment mechanisms has the potential to save a lot of money.

This data on Prometheus was retrieved from this article

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Medical Malpractice Reform: Truth in Advertising Needed (Part Two of Three)

by Michael Halasy

Medical Malpractice Reform: Truth in Advertising Needed (Part Two of Three)

So in the first article, we discussed the historical implications of tort reform by examining Texas. The take home message being that tort reform failed to curb health care spending, and/or control costs (outside of malpractice premiums which did fall). Proponents of tort reform claim that by enacting aggressive tort reform measures, so called defensive medicine practices could be reigned in. Estimates about the costs of defensive medicine vary, and I have seen estimates in the literature as low as 4%, and as high as 14% of total health care spending. As with most things, the truth is probably somewhere in the middle, with a realistic estimate of 8-9% likely being the real integer. Recently, several studies have attempted to assess two of the most important questions about this topic:

A: Does a reduction in defensive medicine practices occur with the implementation of tort reform measures?


B: If it does cause a reduction in defensive medicine practices, will this affect patient outcomes or mortality?

Three more recent studies are likely the most pertinent, and we will briefly review those. To start with, Currie and MacLeod (go ahead, I had the Highlander flashback too) (2006) reviewed national data on childbirths to examine whether or not a cap on non economic damages would change the types of procedures performed at childbirth. They found that nationally, in those states with tort reform, the rate of C-Sections increased, and the rate of preventable complications secondary to childbirth increased by 6%. They also found, that a change in the “deep pockets rule”, actually decreased them. The paper is HERE (gated article).

Then Sloan and Shadle in 2009 examined this same issue, using Medicare payments as an index. Their premise was, that if tort reform truly changed physician practices with regards to additional testing and/or defensive medicine, they would find a reduction in Medicare payment rates per beneficiary. They found that tort reform did not alter defensive medicine practices, with one exception. They did find that so called “indirect” reforms (mandatory periodic payments, Joint and Severability reform, and patient compensation funds) may reduce spending when applied to “any hospitalization”, but inexplicably, these indirect reforms did not affect any of the four diagnoses included in the study. Their paper is HERE.

There have been others, and the final one we will discuss is the NBER report done in 2009 by Darius Lakdawalla and Seth Seabury, Working Paper No. 15383. Found HERE (gated article). Essentially, Lakdawalla and Seabury found that while targeted reforms may be effective, there could be an associated, and this is key… a 0.2% associated increase in mortality for every 10% reduction in medical malpractice liability costs. Why? Because defensive medicine practices DO FIND things. Any physician who has been in practice for any length of time, and who is being honest with you, will admit that they have done a test presuming it would be negative, and “perhaps the patient doesn’t need it”, only to be surprised by the results. We can argue whether or not 0.2% is a significant number, but even we look at the sickest 5% of Americans who are responsible for 47% of healthcare spending, than this group could have an increase of 30,000 deaths annually with a reduction of 10% spending on medical malpractice. I am not going to pass moral judgment on this fact. I will leave that up to the reader. The reason I bring this up, is that this is an important, and poignant discussion, but we need to be honest about the data that is out there now. Let’s have a discussion, but let it be an honest, and fact based one.

I tend to think that the Sloan and Shadle findings are important in the fact that I don’t think that physician practices are going to “magically” change overnight. The Texas evidence from the last article, would suggest that testing expenditures may actually increase. Yet, in the face of overwhelming evidence, proponents continue to cling to a disproven ideology regarding direct malpractice cost containment, IE; Non economic caps.

[edited for ease of link usage only – klh 24 feb 2011]

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United Health Foundation report 2010

Via Forbes the new report by United Health Foundation notes that the health of the population of each state are:

…published by the United Health Foundation and funded by insurer UnitedHealth Group ( UNH – news – people ), measures residents of all 50 U.S. states on 22 activities that can predict future health, such as smoking and exercising, and events that have already occurred, like death or violent crime. Scores for each state are determined by gathering data from a variety of public and private databases, and calculating how much each state performs against the national average for each measure.

The report is here. (pdf file)

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Lest we forget healthcare…a few notes and links

Health care reform blog reminds us both complexity of costs:

Thus, areas with high medical spending do not have offsetting lower pharmaceutical spending; in fact, if the coding practices in different regions are not too dissimilar, the substantial variation in pharmaceutical spending does not seem to be strongly associated with variations in medical spending at all. Spending on pharmaceuticals itself is variable and thus warrants scrutiny similar to that given to medical spending, in order to glean lessons about optimal prescribing, insurance characteristics, and resource allocation. Our findings reinforce the importance of understanding the drivers of geographic variation, since increases in medical spending or pharmaceutical spending do not appear to be associated with offsetting savings in the other realm. Using this more complete measure of spending reveals that area-level variation in total spending is not driven primarily by patient characteristics. These data may offer us an opportunity to gain insight into the underlying causes of the intensity of use of health care resources and the potential for public policy actions to improve the value of the health care delivered in the United States.

(Bolding is mine)

Good health care less money

Advocates for health care reform (including yours truly) have frequently argued that it is possible to reduce the amount of care without reducing the quality–or, to put it more simply, that less care doesn’t have to equal worse care.

Several other links point to information to quality and costs:

Is more care better?

The Cost Conundrum

What a Texas town can teach us about health care.
by Atul Gawande

Massachussett is still wrestling with cost:

The Mass Hospital Association did not offer access to their membership white papers when I asked, just public positions. These are the latest on the website. If represzentative. the two suggested are disappointedly indicative of the inability of insurance companies and the big hospitals to come to terms with cost despite promises of cooperation in MA.

Mass Hospital Association points to wage increases as problem:
Lots of data, but the end result appears to epmphasize the idea that higher costs of the private sector subsidizes the public sector, but cost reduction strategies appear limited. Global payment system billed as a cost savior of major proportions.

Mass Hospital Association primary recommendation to cost reduction appears to be through insurance plans:

“Employer/employee cost reduction through reduction of services and at least increased co-pay… plans are ‘rich’, premiums high because insurance mix is too rich.”

In the deficit atmosphere in MA, the public sector ‘too rich’ insurance plans will come under attack through a change in law on making health plans part of wage negotitions mandatory…towns will be able to change terms unilaterally is my bet.

Martha Coakley, Attorney General for MA, has a report showing utilizationhas not increased nearly as fast as prices over the last 3-4 years.

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American Exceptionalism Strikes Again

This chart from National Geographic combines several data sets which require a little bit of puzzling out, but which come together in one whopper of an illustration.

The parameters are:

Cost per capita – lefthand scale, and lifespan — righthand scale, which together give a sloped line for each nation showing dollars per year of lifespan.

Thickness of each nation’s line indicates number of doctor’s visits per year.

Line colour indicates whether the nation has universal health coverage (blue) or not (red.) There are only two red lines — Mexico and the USA.

Looking at these, you would hope to achieve a low lefthand starting point (low cost), a high righthand point (high longevity), and a thick line (lots of doctor visits.)

The USA line looks like it was drawn by someone who got the instructions backwards — a very high lefthand starting point (huge cost), a mediocre righthand point (middlin’ longevity), and a hairlike line thickness (scanty doctor visits, less than 4 per year.)

Who gets the healthcare bargain on this chart? Japan is the most striking, with the highest lifespan (almost 83 years), and a visit a month or more to the doctor, at a cost of about $2,600 per capita — one-third the US cost.

Fifteen of the 21 nations shown achieve longer lifespans than the USA, at roughly half the US price.

Nuts, just nuts.

h/t to “fatster” in the comments over on Emptywheel.

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