Tell Me the Good News Again

By Kim Bellard, February 13, 2013

This just in from CBO: federal health care spending has slowed dramatically, easing its impact on the federal deficit.  They are now projecting federal Medicare and Medicaid spending will be $200 billion lower in 2020 than they did three years ago.  And it is not just federal health spending:  according to CMS, 2011 marked the third consecutive year of relatively slow grow, increasing by 3.9%, which is modest for health care. 

Should we be breaking out the champagne to toast the victory?  Maybe not just yet. 

Economists aren’t sure if structural changes are finally taking place, or if much of the slowdown can be attributed to the recession and to consumers being more reluctant to spend any discretionary cash on health care.  There are some signs that the slowdown started before the recession, but there are conflicting signs that some portions of health spending are accelerating. 

For example, the CMS report cited increases in out-of-pocket payments as an area where spending was rising faster, but the Washington Post notes a contrary analysis by NPR’s Planet Money which suggests that the share of spending from consumer out-of-pocket payments is actually decreasing, dropping by nearly half over the last forty years.  Of course, that share is of a much large dollar amount, so the lower percentage may be of scant comfort.  Consumers probably don’t have the perception that their share is getting smaller, not with rise of high deductible plans, and some researchers, like Deloitte, would argue that the official numbers understate direct consumer spending by a wide margin.  So we don’t really know.

What everyone is waiting to see is what 2014 brings us, as several of the most significant ACA provisions – Medicaid expansion, health insurance exchanges, guaranteed issue health coverage, essential benefits, and federal subsidies for health insurance, to name a few – kick in.  None is without its problems. 

Medicaid expansion seemed like a no-brainer.  It promised to make eligibility for Medicaid much more uniform across states and between different pockets of the population, and it minimized the fiscal impact on states by the federal government picking up all the costs of the expansion in the first few years.  Some states are skeptical that the federal government is a reliable partner, and others oppose ACA on general principle, with the net effect that we still don’t have even a majority of states who have agreed to the expansion.  Without the expansion, some people won’t qualify for either Medicaid or subsidized coverage through the exchanges.  In other words, if you are the wrong kind of poor person, you may still be out of luck.

As for the exchanges (excuse me – “marketplaces,” as newly rebranded by HHS), according to Kaiser Family Foundation, as of February 12, only 18 states are planning to run their own exchange, another 6 are planning to run one in partnership with the federal government, and the remaining 27 are defaulting to a federally-run exchange.  Whether state, federal, or jointly run, if they are not already deep in the planning/building process, it’s worrisome as to whether they will be able to start online shopping for all those consumers beginning this October.  I’m not betting on a wonderful, Amazon-like experience come October.

The biggest problem with guaranteed issue and essential benefits is not the much debated controversy over contraception coverage, with its weird proposed compromise for “contraception-only” coverage, but rather is the concern that premiums could skyrocket, especially for younger people.  The combination of generally richer coverage and inclusion of people who previously could not obtain insurance, along with tighter age rating bands, may lead to doubling or even tripling of premiums for some consumers, report Politico and The Wall Street Journal.  Supporters of ACA note that the subsidies will largely offset most or even all of these increases, but disguising the true cost of things from consumers is a big part of the reason our health care system is in the mess it is in.  We should be aiming to bring down the cost of health care and health insurance, not simply offset it with other federal spending.

Last but not least, there are the subsidies themselves, which are the key to success in improving the number of people with coverage (not, as many think, the infamous mandate, which is probably too weak to force people to buy coverage they don’t want or don’t think they can afford).  The subsidies are already running into problems.  Unions fear that their health plans may become disadvantaged relative to subsidized coverage in the exchanges, and have asked the Administration to be eligible for similar subsidies, thus reopening the spending spigot.  Of course, there are a number of employer plans who could make the same request, although their political clout may not be as great as the unions. 

Employer plans face enough problems as it is, and the recent IRS rules that base “affordability under ACA guidelines solely on the cost for single coverage, not family coverage, are likely to complicate things further.  The IRS ruling spares employers from the nightmare of having to guess at a worker’s total family income, but also opens the door to employers contributing ever smaller portions towards family coverage.  We could end up with a Catch-22: rapidly shrinking employer contributions for dependent coverage make that coverage too expensive for many families, yet those same families would not be not eligible for the subsidies in the exchanges because of their eligibility for employer coverage.  I can already see the tear-jerking stories in Congressional hearings, although I’m not sure who Congress will try to pin the blame on.  Not themselves, of course.

And, of course, the sheer size of the subsidies – over $1 trillion through 2022 -- will become a tempting target for budget cuts should Congress and the Administration ever get serious about the deficit.  At the same time CBO delivered the good news about lower Medicare/Medicaid spending, they also disclosed that they were raising the estimates of the cost of the subsidy by over $200 billion over 10 years.  They also estimated that twice as many people – 7 million – will move from employer coverage to individual coverage through the exchanges.  Oh, and they also think fewer people will gain coverage through ACA at all, reducing their estimate to 27 million from their initial estimate of 32 to 34 million.  So there.

We have a long way to go before we can feel comfortable about how the health care system is changing.  The disturbing but, sadly, not surprising results of the recent study by Jaime Rosenthal and Peter Cram on the inability of consumers to obtain prices of hip replacement illustrate both the difficulty of obtaining prices for even a common surgical procedure, as well as the shockingly wide range of the prices they might be able to find.  If anyone thinks ACOs will make this better, I suggest they think again – assuming consumers will be able even find multiple ACOs near them from whom to seek competing prices, due to increasing provider consolidation.

And meanwhile we face the spectre of an explosion of health spending as baby boomers begin hitting peak health expense years, especially since they are already in worse health than their parent were at the same age, according to a recent study.  Living longer but in worse health and more demanding – not exactly a recipe for reduced health care spending in the years ahead.

I’ll go back to something I wrote a couple years ago: all health care spending ends up as revenue for someone.  Even care we might categorize as waste, unnecessary, or inappropriate counts towards some entity’s revenue.  We can make the health care system more efficient, more transparent, and more patient-centered, but at the end of the day controlling spending will mean controlling providers’ income.  To do that, one of three things has to happen: all providers end up getting less, some categories of providers fare worse than others (e.g., hospitals gain while nursing homes lose), or we start paying specific providers drastically less, or not at all. 

Personally, I think the fairest – although not the easiest -- way to control spending, and to improve the quality of care for patients, is to weed out underperforming providers, those who are delivering sub-par care (and we’re kidding ourselves if we think they don’t exist).  When we get serious about that, then maybe it will be time to start the celebration.

But Which Half?

By Kim Bellard, January 30, 2013

Advertising lore credits John Wanamaker, the department store magnate and marketing pioneer, with the famous quote: “Half the money I spend on advertising is wasted; the trouble is I don't know which half.”  It turns out he could have been talking about spending on health care.

The British Medical Journal, through their Clinical Evidence initiative, recently reported that they’d analyzed 3,000 medical treatments that had been studied in controlled, randomized studies.  It turns out that for half of those treatments, we have no idea how well they work.  Indeed, only about a third of the treatments were found to actually be beneficial or likely to be beneficial.  The rest are likely to be harmful.

Sadly, this does not come as a surprise.

We know we don’t know enough.  The vast number of medical treatments have never even been studied in a true clinical trial.  Worse yet, sometimes even when there is clear empirical evidence about which treatments are most effective, that information does not always sway physician behavior, or does so only very slowly (for example, see this study on the use of heart stents versus medication therapy).

There is no shortage of reports of unnecessary or even harmful care.  It’s even scarier when that care is associated with high costs.  In no particular order, one could cite recent controversies with spinal fusions, hip replacements, or chemotherapy drugs.   There can be lots of money at stake for manufacturers, drug companies, and health care providers.  That kind of money can distort the question of what is truly in the best interests of the patient.

Many employers, payors, and researchers have been pushing for “evidence-based medicine” for many years now.  EBM focuses on making sure that treatments have appropriate research to support their effectiveness, and in getting the word out about such treatments.  One of the many initiatives from ACA was the Patient-Centered Outcomes Research Institute, which is charged with conducting research to provide such evidence and funded by a $1 head tax on people covered by insurers.  And, of course, AHRQ probably is wondering why we need a new organization to focus on EBM, given their many efforts on effectiveness.

In time, this may all become much easier, as more patient data become electronic and more connected, and we can make more use of computing power to track what truly happens to patients under various courses of treatments.  I mentioned a couple examples of this in my last blog, citing Optum/Mayo’s new initiative and meta-research studies in lieu of clinical trials.  Another example comes from Archimedes Inc., a firm founded by David Eddy, who was one of the early pioneers of evidenced-based medicine.  Archimedes claims to use its advanced mathematics and computing prowess “to run clinically realistic virtual trials on any population and create compelling evidence to make decisions in health and economic outcomes research, policy creation, clinical trial design, and performance improvement.”  Apparently HHS thinks they can, as it hired Archimedes last year.

Most physicians I know are very bright, care very much about their patients, and work hard to stay current on the medical literature.  Unfortunately, the latter is virtually impossible to do, given the sheer volume of that literature.  Even when there are clear results about which treatment is truly the most effective, the research doesn’t usually come with a guide as to how physicians can implement the associated changes to their practice routines.  It’s as much of a question of change management as it is the evidence to make the change.

It would seem that the situation is tailor-made for clinical decision support tools, which seek to provide clinicians with information on treatment options, potential outcomes, and possible contra-indications at point-of-care.  Unfortunately, we may not quite be ready for them.

Last summer The Annals of Internal Medicine published a study on clinical decision support systems by Bright, et. al.  They did a meta-analysis of studies on CDSSs, and found ample evidence of their efficacy in improving process measures, but sparse results on their impact on clinical or economic outcomes.  Whether this is due to the limitations of the underlying studies, the CDSSs themselves, or how they were used by clinicians is unclear. 

Similarly, KLAS Research recently released results of their survey of health care providers on their satisfaction with clinical decision support tools.  The results cited a general level of frustration, especially due to lack of integration with EHRs and “alert fatigue” caused by ineffective targeting of alerts. 

Worst yet, according to new research from the University of Missouri, patients don’t seem to trust treatment recommendations from physicians who use CDSSs, believing them to be less capable than physicians who make decisions unaided.  Patients don’t even like it when physicians consult with other physicians before making a recommendation!  They think their doctor should know everything.  I blame television for this – on medical shows like Grey’s Anatomy or House physicians pull up the most obscure diagnoses and treatments strictly from memory, without ever having to consult any reference materials.  Nobody’s memory is that good. 

Clinical decision support systems aren’t going to replace doctors; they are simply tools to aid health care professionals, much as a stethoscope or a thermometer does.  One can imagine a future where CDSSs -- and EHRs -- fit seamlessly into patient visits, providing real-time, interactive information while with the patient.  The line between evaluation, documentation, and clinical decision support should blur, in order to more accurately diagnosis patients and determine the best course of treatment.  

In the meantime, it’s somewhat of a crapshoot.

A recent study by Deloitte indicates that 62% of Americans believe that, in fact, over 50% of U.S. health spending is wasted, which is up from the already high 51% in 2009.  The message about necessary spending may be getting out, but consumers may be getting the wrong idea – only 18% thought the problem was not using evidence-based treatments, versus 69% who blame fraud and abuse in the payment system.  In other words, the problem can be blamed on greedy crooks, not on well-meaning health care providers.  Defensive medicine and unnecessary paperwork were each also cited by about a third of respondents. 

I agree that fraud, defensive medicine, and inefficient administration contribute cause us to spend money we shouldn’t, and each should be addressed, but I suspect more of unnecessary spending comes from well-intentioned treatments that aren’t really best for the patients.  As professionals, health care providers should be more stringent about basing their treatment recommendations on evidence that truly supports them.  More importantly, as the people whose health is going to be impacted by those treatments, it’s incumbent on us to demand that evidence.

Maybe one day we’ll have Star Trek’s tricorder to non-invasively diagnosis or even Star Trek Voyager’s holographic doctor to treat.  Maybe someday nanobots will fix all our ills without our even being aware of their work.  All that is in the future.  For right now I’d settle for simply being able to know the odds that a recommended treatment will actually benefit me.

Mercer Weighs in on Employer Health Benefit Cost Projections

By Clive Riddle, November 16, 2012

Here’s what Mercer has to say about the rise in  health benefit costs:  “growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012. Large employers – those with 500 or more employees – experienced both a higher increase (5.4%) and higher average cost…. Employers expect another relatively low increase of 5.0% for 2013. However, this increase reflects changes they plan to make to reduce cost; if they made no changes, cost would rise by an average of 7.4%.”

This is based on results from Mercer’s annual National Survey of Employer-Sponsored Health Plans, which includes public and private organizations with 10 or more employees; with 2,809 employers responding in 2012. The full survey results will be released in April 2013.

 How does this compare to what other major human resources/benefits consulting firms are estimating? Here's what we reported in our Tidbits column in the October 6th edition of MCOL weekend:

Aon Hewitt reports that "the average health care premium rate increase for large employers in 2012 was 4.9 percent, down from 8.5 percent in 2011 and 6.2 percent in 2010. In 2013, however, average health care premium increases are projected to jump up to 6.3 percent."  Towers Watson's survey "projects a 5.3% net increase in total health benefit plan costs after any plan changes are taken into account, increasing the average cost per active employee from $10,925 in 2012 to $11,507 in 2013. Of the 2013 total, employees will pay an average of $2,596, or 22.6%, up from $2,436 in 2012." The Segal Company  projects 8.8% increases in 2013 for open access PPOs (10.0% in 2012; 8.2% increases in 2013 for HMOs (9.6% for 2012) and 9.1% increases in 2013 for HDHPs (10.4% in 2012.)

Mercer makes particular note of the impact of CDHPs in the employer benefit arena. They state that “with a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan – or even their only plan – employee enrollment jumped from 13% to 16% of all covered employees in 2012. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers, and from 23% to 36% of employers with 500 or more employees. Well over half (59%) of very large organizations (20,000 or more employees), which typically offer employees a choice of medical plans, now offer a CDHP. With the cost of coverage in a CDHP with a health savings account is about 20% lower, on average, than the cost of PPO coverage – $7,833 per employee compared to $10,007 -- employers are increasing willing to make the CDHP their primary or even their only plan. Among large employers that offer an HSA-based CDHP, average enrollment rose from 25% to 32% in 2012. And, when asked if they expect to offer a CDHP five years from now, 18% of large employers say they expect to offer it as the only plan, up from 11% in 2011.”

Round Up the Usual Suspects

By Kim Bellard, September 11, 2012

Two recent reports have added more empirical support to the widely held belief that our health care system wastes significant amounts of money.  I’m shocked, shocked!  As Captain Renauld said in Casablanca, round up the usual suspects. 

The first report, published in Health Affairs, was from UnitedHealth Group.  The authors examined data from 250,000 physicians around the country, focusing on the privately insured population.  Consistent with the years of data from the Dartmouth Atlas on the Medicare population, it showed widespread variation.  The authors report episode costs for procedures vary 2.5 times, while episode costs for chronic conditions vary 15-fold.  Overall, the report concludes that costs could be 14% lower if delivered by physicians meeting certain quality and cost-efficiency designations. 

An even more assertive claim was made by the prestigious Institute of Medicine (IOM).  Their report, Best Care at Lower Cost, believes that as much as a third of spending is wasted – some $750 billion based on 2009 health spending.  The IOM is no stranger to big claims, including the oft-quoted 98,000 deaths annually due to medical error in their landmark report To Err is Human.  In their new report, they conclude that 75,000 deaths could be avoided if every state delivered care as well as the best performing state.  The IOM was more granular than simply claiming the waste is all unnecessary care: $210 billion in unnecessary services, $190 billion in excessive administrative costs, $130 billion from inefficiently delivered services, $105 billion due to prices that are too high, $75 billion in fraud, and $55 billion in missed prevention opportunities.  That’s a lot of targets of opportunity.

The IOM notes some lessons from other industries, and believe significant improvement is possible, on a variety of fronts: using information technology more effectively, creating systems to manage complexity, more focus on making health care safer, improving transparency of costs, quality and outcomes, promoting teamwork and communication between providers, partnering with patients, and decreasing waste/improving efficiency. They believe that the technology is here to support all these, and the problem is better application of it to health care systems and processes.  No mention was made of “death panels” (!), although I’m waiting for someone to bring up that specter.

There are too many examples that illustrate the flaws in the current system.  For example, Johns Hopkins recently reported that as many as a quarter of adult patients in ICUs may die as a result of missed or incorrect diagnoses, resulting in some 40,500 deaths annually.  The authors note that is more people who die each year from breast cancer.  One would think that ICU patients are getting pretty close attention, more than other patients, which make these results all the more troubling (to be fair, of course, they likely have complicated sets of conditions, making diagnosis harder).

More troubling are recent allegations and lawsuits about unnecessary heart surgeries aimed at increasing hospital revenue/physician income, including HCA and St. Joseph-London in Kentucky.  If these allegations are shown to be valid, these practices may just be the tip of the iceberg.  Throw in recent warnings about the overuse of well-intended but over-used diagnostic tests like screenings for ovarian cancer or prostate cancer, or the cost-benefits from increased exposure to radiation via increased imaging, and it makes one wonder if treatment recommendations should come with a warning label. 

The IOM cited technology as a tool to help support improvement in how the health system performs, and there is data which suggest this hope is not in vain.  The CDC reports that 55% of physicians had an electronic health record in 2011, and half of the remaining physicians expected to be using one in the next year.  Clearly, HITECH has helped spur this adoption, as has the trend of health systems purchasing physician practices.  Solo practitioners significantly lag in adoption (29%), and CDC reports a statistically significant difference in adoption from physicians over 50: 49% versus 64%.  More importantly, about three-quarters of adopters believe that the EHR both enhances patient care and meets Meaningful Use criteria. 

Also encouraging is a report from Medpage Today on physician technology use.  They report 9 out of 10 physicians experienced an increase in the use of the Internet in their practice: 71% spend 3 or more hours a day on a computer, 24% use a mobile device 3+ hours a day, and 18% use a tablet 3+ hours per days, all in support of their practice.  Unlike the CDC results, though, they see very little impact of age on technology adoption, except in use of a smartphone.  The Medpage respondents are a stressed bunch, seeing more patients each day and, as a result, seeing fewer drug reps, spending less time with each patient, and reading fewer medical journals/attending fewer conferences.  The last point is particularly concerning to build the nimble “learning” culture that the IOM advocates, which helps account for the finding that almost all respondents are using their devices to keep up-to-date on clinical news and medical education. 

I’ve often been critical of physicians’ reluctance to adopt technology solutions, but I’m increasingly coming to the point of view that it is technology that is failing them.  We’ve laboriously endeavored to get medical records into an electronic state, when the real challenge is deciding what health data we want tracked, and what views/inputs are needed by different types of users – including patients.   I’ll point to a nice column by Shahid Shah that details some of the kind of patient-centered forward thinking we need, as well as to a recent study by Hripcsak and Albers that reminds us that poorly designed data going in has damaging effects on the usefulness of that data. 

Maybe we need to scrap all those legacy practice management systems and EMRs and study what modern CRM systems in other industries can teach us about tracking and knowing patients, as well as take advantage of lessons learned from just-in-time manufacturing to improve care delivery efficiencies.  Add to those all the real-time data that mobile tracking apps and other monitoring devices can provide on patients’ health and we have a shot at disruptive innovation. 

Job number one in improving our health system has to be measuring who is doing what to which patients, and what impact it is having on those patients’ health.  Without better data on those, we’ll still just be rounding up those usual suspects.  

Too Bad About Your Coverage

By Kim Bellard, July 30 2012

There’s more data that shows health coverage is good for people.  Too bad fewer people than expected will have it. 

The New England Journal of Medicine recently reported on a study by Sommers et. alia which showed that Medicaid expansions can be linked to lower mortality rates in the impacted populations, along with better access to care and improved self-reported health status.  Not surprising, really, especially on top of last year’s study from the Oregon Medicaid program, that also showed that those lucky enough to win their coverage “lottery” did fare better. 

ACA was supposed to greatly increase the population covered by Medicaid, but with the Supreme Court ruling’s loophole on states adapting the expansion, that picture no longer looks quite as rosy.  The Congressional Budget now estimates that 6 million fewer people will get coverage through Medicaid and CHIP, although they obviously do not yet know which states will elect not to expand their programs.  CBO believes that half of those 6 million people will get coverage via the insurance exchanges – although I’m not clear why someone who would have gotten coverage in the Medicaid expansion would have income above the magic 133% of poverty level – leaving a net increase of 3 million more uninsured than under the original ACA estimates. 

CBO also believes those 3 million additional enrollees in the insurance exchanges will cost more than average, and as a result add about 2% to the cost of individual insurance in the exchanges.  That is another hidden “tax” on the private sector.

Whenever I think about the injustice of millions of poor people not having access to coverage while middle class people get subsidies, I remind myself that this is nothing new.  We’ve been doing that with the tax preference for employer health coverage for decades, so this latest indignity merely makes things quantitatively worse, but is not qualitatively new. 

Speaking of employer health benefits, Deloitte’s recent survey of employers forecasts 9% of employers will drop their health coverage, with another 10% uncertain what they will do.  This compares to the GfK study estimate from last winter of 12% drop/32% uncertain, and the now infamous McKinsey estimate from last summer that 30% of employers would drop coverage.  Deloitte’s survey, though, was only of employers with more than 50 employees; if smaller employers were included, the number would no doubt be higher than the 9%.

Reasonable experts can probably agree that the estimate of employers initially dropping coverage is somewhere in that 10-20% range, recognizing that many employers have not yet made up their minds.  The trouble I see is that once this ball starts rolling downhill, it won’t stop; it’s only going to pick up speed.  No one is going to want to be the last one in the benefits pool.

A little history lesson might be helpful.  Health insurance used to be virtually all fully insured and community rated.  That worked for a while, until some employers and insurers figured out that both could benefit by offering lower rates to employers with lower cost populations.  That gradually led to the demise of community rating – HMOs were the last to give up the ghost – in the group market, as fewer and fewer employers were willing to subsidize their higher cost fellow employers.  Use of employer-specific claims experience became the norm, especially for larger employers.  In the early 1970s, spurred by the passage of ERISA, employers also realized even with experience rating, being part of the insurance pool at all still had limitations they wanted to avoid, and they began to adopt various forms of self-funding.  It initially was only for very large employers, but, again, gradually became adopted by employers or more and more sizes – some of whom were/are really too small from an actuarial point of view to justify it.  Again, once some employers escaped being insured, other employers became more uneasy about still being part of the insurance pool.

Self-funding had the specific advantage of escaping state benefit mandates, although recent federal mandates, including ACA’s, are rapidly eroding this advantage of self-insurance.  The ACA requirements have added costs to most employer plans – e.g., coverage dependents, unlimited maximums, no coinsurance on preventive services – and the government’s involvement in their benefit design is probably not sitting well with many employers who thought they had escaped it.

At this point in time, most group business is self-funded.  Kaiser Family Foundations’ 2011 Employer Health Benefits survey found 60% of employees were in self-funded plans, up from 49% in 2000.  Over 80% of employees in firms with 200 or more employees are in self-funded plans.   I.e., to the extent they can, employers have made rational business decisions not to subsidize anyone they don’t have to.

Why anyone would believe employers would not act the same way once some employers start dropping their health plans is beyond me. 

Employers have invested a lot in their current health plans.  They have shown much thought leadership in driving changes to both insurers and providers, but the auto and steel industries, to pick two, have shown us how legacy health costs can hamper domestic and local competitiveness.  Right now, not offering health plans is a huge disadvantage in attracting and retaining employees; Deloitte’s survey shows over 80% of employers cite attracting/retaining employees as a key reason for offering health benefits.  However, it would only take a few bellwether employers to start dropping coverage to start a rush by other employers for a similar exit.

Employer coverage still has the advantage of the tax preference, plus the fact is that the health insurance exchanges are not up and running and the individual market is not yet reformed or robust.  Come 2014 or 2015, though, the exchanges may be a more appealing option, especially for smaller employers, and if anyone believes the tax preference will survive as is in the coming deficit reduction wars, well, good luck with that.

People aren’t going to keep their current health plan.  Many poor people will still not be protected by Medicaid.  We will still have some 30 million uninsured.  And we’re still not getting good value for our exorbitant health care spending.  Until that problem is solved, everyone’s coverage is in danger.

The Role of Pharmaceuticals in Value-Based Healthcare

by Clive Riddle, July 19, 2012

Who is the “Working Group on Optimizing Medication Therapy in Value-Based Healthcare” you ask? They consist of National Pharmaceutical Council (NPC), the American Medical Group Association (AMGA) and the Premier health care alliance, along with seven provider organizations, formed to develop a “framework for considering the role of pharmaceuticals in achieving value-based success.”

It could seem somewhat self-serving, given the National Pharmaceutical Council was a driving force in the initiative and issued the press release about their newly published framework. However the group does say some interesting things. Their entire thoughts on the matter are published in a web article,  Role of Pharmaceuticals in Value-Based Healthcare: A Framework for Success, in the American Journal of Managed Care.

NPC Chief Science Officer Robert Dubois, MD, PhD tell us “Providers are shifting to value-based care models to provide better care for individuals, improve population health and slow cost growth. Many of these models, such as the Centers for Medicare & Medicaid Services' Medicare Shared Savings Program, include quality benchmarks and incentives for reducing costs. As providers evaluate optimal care for their patient populations in these new models, prescription medications should be thoughtfully integrated into the process.”

Here’s the components of the framework they have constructed:

1.  Success in a value-based environment will depend on understanding the unique contribution of medications and utilizing them optimally across conditions and populations.
2. Medications cannot be viewed as a siloed expense item in a value-based environment. They need to be integrated so that the cost offsets and quality benefits resulting from optimized pharmaceutical use can be recognized and calculated.
3. Services meant to optimize patient outcomes cannot be undertaken as a one-size-fits-all approach; the role, impact and characteristics of these services will vary by a patient's condition.
4. Overall risk factors can be used to identify patients who are candidates for medication therapy management strategies to watch for drug-drug, drug-disease, or polypharmacy concerns.
5. In each circumstance where there are condition-specific incentives to achieve cost savings, there should also be a quality metric to detect under-use of pharmaceuticals.

The group views ACOs as a centerpiece of value based programs. Doctor Dubois leaves us with this thought: "It is crucial for ACOs to view prescription drugs as a tool, not simply an expense.”

The Emerging Pharmaceutical Pendulum

By Clive Riddle, July 12, 2012

Conventional wisdom tells us that pharmaceutical growth is not the beast it once was. Growth has decelerated and been tamed to the point of 3-4 percent this year, due to a variety of factors including the lingering economic downturn, patent expirations with the corresponding conversion to generics, and a dip in patient demand due to increased cost sharing requirements and coverage concerns.

The IMS Institute for Healthcare Informatics now tells us the pendulum is poised to swing back the other way, and they are forecasting 5-7 percent growth in 2016. However, this resurgence is significantly projected to be driven by emerging versus developed markets.

Their just released report: The Global Use of Medicines: Outlook through 2016, “found that annual global spending on medicines will rise from $956 billion in 2011 to nearly $1.2 trillion in 2016, representing a compound annual growth rate of 3-6 percent. Growth in annual global spending is forecast to more than double by 2016 to as much as $70 billion, up from a $30 billion pace this year, driven by volume increases in the pharmerging markets and an uptick in spending in developed nations.”

Murray Aitken, the Executive Director of the IMS Institute for Healthcare Informatics tells us, “as health systems around the world grapple with macroeconomic pressures and the demand for expanded access and improved outcomes, medicines will play an even more vital role in patient care over the next five years. The trillion-dollar spending on medicines we forecast for 2016 represents a rebound in growth that will accentuate the challenges of access and affordability facing those who consume and pay for healthcare around the world.”

Their report also projects that around the globe:

• Spending on medicines in developed nations will increase by a total of $60-70 billion from 2011 to 2016, following an increase of $104 billion between 2006 and 2011.
• Spending in the U.S. will grow by $35-45 billion over the next five years, representing an average annual growth rate of 1-4 percent
• In Europe, growth will be in the -1 to 2 percent range due to significant austerity programs and healthcare cost-containment initiatives.
• The Japanese market for medicines is forecast to grow 1-4 percent annually through 2016, slightly lower than the rate during the prior five years and reflecting biennial price cuts scheduled for 2012, 2014 and 2016.
• Overall, patent expiries in developed markets will yield a five-year “patent dividend” of $106 billion, reflecting reduced brand spending of $127 billion offset by $21 billion in higher generics spending
• Annual spending on medicines in the pharmerging markets will increase from $194 billion last year to $345-375 billion by 2016, or $91 in drug spending per capita. Generics and other products, including over-the-counter medicines, diagnostics and non-therapeutics, will account for approximately 83 percent of the increase.
• Pharma manufacturers will see minimal growth in their branded products through 2016. The market for branded medicines will experience flat to 3 percent annual growth through 2016 to $615-645 billion, up from $596 billion in 2011.
• In the major developed markets, branded medicine growth will be severely constrained at only $10 billion over the five-year period due to patent expiries, increased cost-containment actions by payers and modest spending on newly launched products.
• The pharmerging markets are expected to contribute $25-30 billion in branded product growth over the same period. Off-invoice discounts and rebates will offset about $5 billion of global branded medicine growth.
• Global generic spending is expected to increase from $242 billion in 2011 to $400-430 billion by 2016, fueled by volume growth in pharmerging markets and the ongoing transition to generics in developed nations.
• Global launches for New Molecular Entities (NMEs) will rebound during the next five years, as 32-37 NMEs are expected to be launched per year through 2016. Between 2011-16, 160-185 NMEs are expected to launch, compared with 142 between 2007-11.
• Biologics are expected to account for about 17 percent of total global spending on medicines by 2016, as important clinical advances continue to emerge from research.

A Practical Roadmap for the Perilous Journey from a Culture of Entitlement to a Culture of Accountability

By Nate Kaufman, May 4, 2012

In a culture of entitlement there is the belief that one deserves certain rewards, rights and privileges based on tradition or past achievements. In contrast, in a culture of accountability rewards, rights and privileges are only earned based on the merits of one’s current behaviors and actions. The transition from a culture of entitlement to a culture of accountability is a perilous journey for rights and privileges are no longer automatic, the ‘entitled party’ usually feels disappointed, angry, or mistreated.

A culture of entitlement is deeply embedded in the US healthcare system: patients believe they are entitled to state of the art care regardless of their unhealthy lifestyle; physicians believe they are entitled to a high degree of clinical autonomy and historical levels of compensation; hospitals believe they are entitled to be reimbursed at the highest rates in the world regardless of their inefficiencies or the results they produce; and suppliers e.g., insurance and pharmaceutical companies believe they are entitled to high margins regardless of the value they provide to the system.

This culture of entitlement has driven per capita healthcare spending in the US to twice what our “peer countries spend on healthcare (commonwealth fund.) It has driven healthcare costs to a point where neither the public nor private sectors can continue to absorb the historical rate of cost growth. And it has called the question as to whether the U.S. healthcare system is creating sufficient value, i.e., outputs per unit cost.

In recent years, data on the value created by the US healthcare system has become more available and the early numbers are not good. According to McKinsey, “In 2006, the United States spent $2.1 Trillion on healthcare, more than twice what the nation spent on food and more than China’s citizens consumed for all goods and services. In addition, adjusting for economics, health status etc, the US spent $650 Billion more on health care than expected base on comparison to peer countries.  Hospital and physician care accounted for almost 85% of the spending above expected levels, with drugs, health administration and insurance comprising the remained components of excess spending.

The primary driver of this excessive cost appears to be the salaries and revenues of providers and suppliers. For example, McKinsey estimates that for inpatient care, “Revenue per equivalent admission” accounts for $54 Billion in excess costs compared to peer countries. This is driven in part by the cost of nurses who are paid 36% more than their peers in other countries. Drug prices are 50% higher in the US than in other developed countries. Based on a multiple of per capita GDP, primary care physicians in the US are paid 46% more than physicians in peer countries and US specialists are paid 67% more than their peers. It is no wonder that the global fee for a normal delivery in the US is twice that of most peer countries (international federation of health plans 2010)

Given the relatively high investment in “input costs” one would expect a commensurate benefit in outcomes; however this does not appear to be the case. According to the Commonwealth Fund Study:

The U.S. health system is the most expensive in the world, but comparative analyses consistently show the United States underperforms relative to other countries on most dimensions of performance.

Data on life expectancy vs. cost by country is further evidence that the outcomes produced by the US healthcare system are not commensurate with the investment.

Finally, the high variability in care raises questions as to whether everyone is getting appropriate care:

1. The rate of mastectomy vs. lumpectomy in North Carolina varied from .4 per 1000 Medicare Beneficiaries in the Wilson HSA to 2.7 in the Goldsboro HSA (Dartmouth)
2. The rate of Coronary Artery Bypass Surgery ranged from 8.9 per 1000 in McAllen to 1.9 per 1000 in Pueblo CO. (Dartmouth)
3. Non-radiologist self referrers of medical imaging are 2.48 times more likely to order imaging than clinicians with no financial interest in imaging equipment
4. 53 percent of the heart attack patients underwent a procedure to restore blood flow to the heart through a blocked artery that caused a heart attack more than 24 hours earlier despite clinical practice guidelines recommending against it.

The often quoted disparity in the per capita cost of care of Medicare patients in McAllen vs. El Paso has raised many eyebrows. Recent research from Franzini et. Al. shows that while per capita Medicare spending was 86% higher in McAllen than in El Paso, the per capita  spending for Blue Cross patients in McAllen was actually 7% less than in McAllen. The authors concluded that their study is “consistent with Gawande’s finding that our healthcare system can create a “culture of money, – increasing the use of profitable Medicare services when there is [unconstrained] diagnostic and procedural discretion and clinical latitude.” 

In a recent study of ‘value’ of healthcare services in Massachusetts conducted by the Attorney General, it was found that the difference in prices paid by insurers to its lowest paid physician group vs. highest paid exceeded 145% and the difference in hospital payments exceeded 170%.  The Attorney concluded that this wide variation in the payments made by health insurers to providers is not adequately explained by differences in quality, complexity of services or their characteristics that might justify variation in prices. “Instead prices reflect the relative market leverage of health insurers and health care providers.”

In his recent speech to the American College of Surgeons, Senator Mark Kirk (R-Ill) summarized the government’s position on the current healthcare system when he stated that “every group that relies on federal funding should expect a 10% to 20% drop in that funding.”  When Dr. L.D. Britt, President of the ACS, warned that such cuts could send some healthcare providers into a "tailspin," Kirk replied that “the tailspin is the U.S. economy. There is a new audience at play," Kirk said, referring to U.S. creditors. "The judgments they render, they are swift and severe.”

Shifts in culture are painful but if not recognized, and managed they can be terminal for an organization. Through the implementation of value based purchasing, reduced reimbursement, data transparency health systems are being steered on a perilous journey from entitlement to accountability. The healthcare literature is overflowing with tactics and strategies that sound great on paper and/or may be working in Cleveland or Chicago or Rochester MN after decades of trial and error, however there is little evidence that these proposed solutions will work in most healthcare communities in a reasonably short time frame. Michael Porter provides excellent advice on how to increase the value of the healthcare. He notes that:

“Improving performance and accountability depends on having shared goals that unite stakeholders

In healthcare, the absence of clarity about goals has led to divergent approaches, gaming the system and slow progress in performance improvement

Rigorous, disciplined measurement is the best way to drive progress”

The following are practical steps that a health system can implement to begin the long journey of transformation.

1) Conduct regular briefings for the board members, physicians, employees and the community on the structural changes in healthcare occurring at the local, state and federal level

2) Designate a group of physician leader to be the clinical transformation task force. Use this group as a sounding board and to lead implementation efforts

3) Develop accountability measures for every specialty and hospital department. Initially this data should be blinded but designate a time in the future when all results will be transparent. Note: the health plans and the government have already begun publishing an ever increasing amount of un-blinded outcome data by hospital and physician.

4) The Chief Medical Officer or his/her should actively manage the performance of hospital-based physicians.

5) Select a few high volume Medicare DRGs and initiate a process for designing care to improve cost and quality and reduce readmissions. Pick a redesign methodology health systems are using LEAN. Consider a bundled payment demonstration if the health system and physicians share a common vision for decreasing cost and improving quality (and probably getting paid less per unit of service than under fee for service)

6) ACO-Caveat Emptor --buyer beware. Webster defines ‘risk’ as “hazard, danger, peril; exposure to loss, injury or destruction.” While it is true that there is a theoretical opportunity to make more money by doing less, we learned in the mid-nineties that organizations that take the financial risk for the health of the population can end up much worse off than if they did nothing. After decades of successfully taking risk in California it is clear that the critical competencies needed to successfully take risk include:

a.  Physicians that share a common electronic health record system,
b. A culture focused on reducing utilization of hospitals and high end interventions,
c. A strong base of primary care physicians,
d. Selective use of specialists based on the efficiency of the care they provide, and
e. Robust, mature infrastructure.

Since most of the health systems do not possess these competencies they should limit their exposure to risk and test these competencies on the employee population of the health system. If a health system wants to be in the Medicare risk business consider joint venturing a Medicare Advantage Plan with a local payer.

7)      Finally, every journey requires a roadmap and every health system needs to define its strategic direction, a.k.a. “true north.” To maximize performance under the traditional model most health systems strategic behavior can be  characterized as:

Operating a financially strong health system by maximizing revenues through pricing and volume growth, the provision of a broad range of services and meeting the individual clinical and financial needs of each physician

                The new “true north” is clear:

To operate a financially strong, high functioning health system that consistently achieves optimal measureable value, i.e., outcomes/cost, for every patient.

                Define your ‘true north,’ and begin the journey by taking practical, incremental steps described above. Enjoy the ride! 

Guest Blog from Sander Domaszewicz on Decline in Utilization Metrics

By Clive Riddle, April 30, 2012

Sander Domaszewicz is a Principal with Mercer well-versed in employer and employee health benefit issues, and is a noted national speaker on topics related to this arena. Recently, MCOL’s ThoughtLeaders publication asked it’s panel about the recently observed trends regarding a dip in various utilization metrics. We didn’t connect with Sander in time to ask him this question for the current issue of ThoughtLeaders, but I asked him if he wouldn’t mind doing a short guest blog with his thoughts on the issue.

Question: A number of recent studies have indicated a modest decline in several key patient utilization metrics since the onset of the great recession. Will a long-term change result, or will utilization increase as the economy improves – and what are the implications?

Sander Domaszewicz, Principal, Mercer:

Many of the plan sponsors we work with are busy moving forward with strategies that will right-size utilization now and in the future, making sure that their workforce gets the care they need at a good value, and no more.  Some of the most powerful efforts in this area started to blossom during the great recession, and our expectation is that long-term change will result. 

Employers' focus has shifted to almost equal attention now being given to both the Demand-side and the Supply-side of the care consumption equation.  On the Demand-side, employers are investing in keeping healthy folks healthy and keeping illnesses well-managed for those that have chronic conditions.  This Demand-side aligns with "wellness" or "health management" initiatives and is trying to reduce the demand for health care services in the first place.  If the Demand-side of the intervention breaks down, employers are also addressing the Supply-side of the care utilization equation.  So if people do need to seek health care services, let's make sure we get them the right care, at the right time, from the right provider, for the right price, with the right outcome.  In other words, how can we get the most total value for the health dollar spent.  Consumer-directed health plans, centers of excellence, narrow networks, patient-centered medical homes, ACOs, medical travel, telemedicine, retail/onsite clinics, and other interventions all have Supply-side impact.

Both the private and the public sector purchasers of health services are working diligently to optimize necessary utilization and prevent unnecessary utilization, so better control over time may be more achievable now than at any time in the past.

DME: A Modest Proposal

By Laurie Gelb, April 18, 2012

What's a "convenience item?"

For most plans, it's anything from the elevation feature of a wheelchair seat to a motorized patient lift to a track to move a shower chair into a traditional stall. In other words, it's features, equipment or supplies that you don't want to reimburse.

The rationale for non-reimbursable DME is most often that in and of itself, the "convenient" add-on or gadget doesn't treat a disorder or isn't essential for ADLs. A power wheelchair's tilt and recline functions, for example, are reimbursed because without them a chair-bound patient is more likely to acquire pressure ulcers, which are costly to treat. But vertical elevation -- that's just patients trying to belly up to bars and kitchen counters, right?

Not only.

Often, the elevation feature is used to prolong the time until a passive lift is necessary for transfers. The same is true of hi/lo beds.

So what?

Watch an assisted standing transfer with a confident patient and assistant. Then watch a lift transfer as the patient dangles from a sling, often scraping body parts against a metal frame and risking already-fragile joints and skin. Which one do you prefer from a cost standpoint?

Taking the whole wheelchair higher may also enable use of a urinal or bedpan (supplies that you don’t pay for, whereas you do pay for catheters + the infections they cause), to make it easier for tall helpers to place a lift sling (or to do pivot transfers with more agile patients), for dressing, feeding and many other purposes. If you think about those specific activities, it’s evident that neither tilt (angled seat) nor recline (angled back) can substitute for elevation in those situations.

Now back to reimbursement. Not only is elevation per se often considered a “convenience, but often it’s not even submitted for reimbursement. Many patients don't even ask for it, even if they are aware it exists, because their DMEs tell them not to bother. Sit-to-stand lifts and chairs are another example of usually-unreimbursable items that yield huge health outcomes for appropriate patients, from avoiding hospital stays for impaction to improved respiratory function.

Much very pricey DME, from mobility to respiratory aids, is never submitted for reimbursement because of time pressure (quicker to buy from the Internet or as self-pay); complexity of the reimbursement process; pressure from a DME to file the easy part; a required preauth wasn't filed in time; DME annual limits and/or specific exclusions.

Is all the DME being bought and sold via the Internet (whether Craigslist or DOTmed) or donated by others good or bad for MCOs? To the extent that it's not reimbursed, you might think that it's just fine. But then turn full circle for the sequelae of obsolete, inappropriate and/or flat-out dangerous equipment and you'll see plenty of potential costs.

Ill-considered Internet purchases and donations aren't the only threat to DME safety; wheelchair-bound/NIV patients who "give up" on or wait forever for unresponsive DME firms who avoid service visits (in part because reimbursement is so uncertain) are practically a cliché.

Visit the homes of the chronically ill, even those comparatively well off and with private coverage, and you'll see fraying slings holding patients whose fall would mean a final hospital stay; rusty equipment with unpredictable steering; BiPAP and even vents being used improperly because no one in the household knows how to titrate them and can't get anyone to help; family members (likely in your network as well) risking severe back injuries because the right equipment for transfers/showering/toileting isn't available.

Some paras and quads "eat like dogs" (often choking in the process) out of bowls because they don't have access to a helper to feed them, and of course wheelchair trays and special utensils aren't covered. Nonetheless, your budget will take a hit at some point, and nutritional status compromised by illness comes under the heading of medical need in most textbooks.

Undeniably, your DME charges for lease months and sales for what you do cover, are way more than patients can pay on the Internet or elsewhere. And this goes back to inflated manufacturer pricing, often in expectation of contracted discounts but also in some cases, simple greed.

The root cause: contracted prices and often suboptimal product quality/selection deplete your DME budget to the point that you can't see a business case for the simple items that would pay for themselves and support your case for "caring" as well. Moreover, DME caps basically tell patients to go anywhere but the traditional system to access equipment. How predictable are the outcomes of back alley DME acquisition?

To put it another way, how much do you know about Helen Jones' fall because the eight-year-old walker passed on from her great-aunt wasn't gripping the sidewalk any longer? You paid for her hospital stay and rehab for a broken hip, and she may need home health on discharge. She didn't know that her walker needed new feet (nor would she have known where to get them), because she has low vision and no one she knows has any familiarity with checking walker feet.

No one teaches us about DME; the provider/plan Web sites so thick with rich media ignore it, so the major sources of information on DME are patient forums and YouTube videos, neither of which Mrs. Jones, 82, is likely to access.

The reciprocal of DME providers’ natural desire to remain profitable, is patients who don't know the system, who don't know when/how to use network benefits and when/how not to; how to access help with equipment that they need to have, or that doesn't work how they need it to; and a system that seems massively disinterested in the change that everyone "agrees" is needed. We obsess about medication errors that leveraging IT and FMEA can fix, but don't touch a larger, increasingly relevant (checked the age trend of your membership lately?) issue.

Beyond medical costs, MCOs incur the cost of fraud. I’ve seen recent drastically upcoded invoices to MCOs from DMEs that patients and family members, exhausted from the calls needed to obtain a facsimile of necessary equipment, not to mention the burden of care, didn't even perceive, or when they did perceive them, didn't blink. Why should they care if the MCO pays more than its contract stipulates, for something they never received, when they perceive that the MCO is depriving them of needed equipment and help?

From the other side, I've seen invoices with incorrect patient names, provider names, equipment codes and diagnosis mismatches sail through (as with home health, but that's another story). The DME claims processing burden is great on the payor side as well. The complexity of regulations for the sake of cost control are only getting worse.

The US managed care maze has also kept many highly-rated European manufacturers out of the US market entirely, except for authorized facility-only distributors, who don’t want the hassle of selling to home care.

Does US access to European products matter? Well, only if you’d like your members to have access to options like wool and fleece lining for slings to protect delicate skin; smaller patient electric lifts and tracks to use in apartments, as opposed to relatives’ [insured by you?] backs; freestanding track systems to reduce mobile lift risk, better repositioning aids, etc. Oh, but wait --none of these are usually covered items, anyway. Well, therein lies part of the problem.

Now imagine that DME was reimbursed like an office visit or injection. Provider in network? Check. Correct coding? Check. Eligible patient? Check. No duplication within six months (just as we don't reimburse two fills for the same med if dose is available or two right leg amputations)? Check. Not experimental? Check. Medical/ADL use (like, not a scooter flag or strobe light)? Check. Then you process the claim.

• How much would you lose?
• How much would you and patients gain?
• How much admin cost would you save?

Sure, you'd cap coverage at one power chair per interval, and other obvious constraints. But a track to get quads into a shower, yes, you'd pay (paid for any skin infections or UTIs lately?). Or an elevator on a power chair. Or a new sling to replace the one that’s frayed past safety.

And on this planet, reputable Internet suppliers could be in-network, too. Yes, certain manufacturers would be upset by this. But, down the road, how long can you continue the game? We’re not in Kansas any more.

Could you pilot a low-complexity DME program for certain dx? Patients at risk and/or high utilizers? Maybe in conjunction with existing disease management? Of course you could. Medicare, Medicaid or private plan, everyone’s feeling the pain (quite literally).

And why would you make the effort? Because the next patient held hostage to inadequate equipment and support may be someone you know.

The Current Facts on Alzheimer's

By Clive Riddle, March 8, 2012

The Alzheimer's Association this week released their 2012 Alzheimer's Disease Facts and Figures, with the full report available from their web site.

Harry Johns, President and CEO of the Alzheimer's Association, tells us "Alzheimer's is already a crisis and it's growing worse with every year. While lives affected and care costs soar, the cost of doing nothing is far greater than acting now. Alzheimer's is a tremendous cost driver for families and for Medicare and Medicaid. This crisis simply cannot be allowed to reach its maximum scale because it will overwhelm an already overburdened system."

Johns goes on to say "this disease must be addressed on parallel tracks: supporting research to find treatments that cure, delay or prevent the disease, and offering assistance and support to the more than 5 million Americans now living with Alzheimer's and their more than 15 million caregivers. This is what the National Alzheimer's Plan is all about. Caring for people with Alzheimer's and other dementias costs America $200 billion in just one year. By committing just one percent of that cost, $2 billion, to research it could begin to put the nation on a path to effective treatments and, ultimately, a cure. Given the human and economic costs of this epidemic, the potential returns on this one percent solution are extremely high."

Here's a selection from the boatload of information provided in their 72 page report on Alzheimer's and other dementias:

• $140 billion will be paid by Medicare and Medicaid in 2012 for care and treatment
• Total costs by payer for 2012 will be $200 billion, broken down as follows: Medicare $104.5B; Medicaid $33.5B; Out-of-pocket payments $33.8B; Other $26.2B
• Medicare payments for an older person with Alzheimer's and other dementias are nearly three times higher and Medicaid payments 19 times higher than for seniors without Alzheimer's and other dementias.
• A senior with Alzheimer's and diabetes costs Medicare 81 percent more than a senior with diabetes but no Alzheimer's.
• An older individual with cancer and Alzheimer's costs Medicare 53 percent more than a beneficiary with cancer and no Alzheimer's.
• An estimated 800,000 individuals have Alzheimer's and live alone, and up to half of these individuals do not have an identifiable caregiver.
• The 15.2 million friends and family members of the 5.4 million individuals with Alzheimer's and other dementias provide 17.4 billion hours of unpaid care valued at more than $210 billion.
• 200,000 of the Alzheimer's population are under age 65 with “younger-onset Alzheimer's”
• 45% of seniors over age 85 have Alzheimer's
• 16 percent of women age 71 and older have Alzheimer’s disease or other dementias compared with 11% of men
• Someone develops the disease every 68 seconds
• Alzheimer's is the sixth-leading cause of death in the country and the only cause of death among the top 10 in the United States that cannot be prevented, cured or even slowed.
• Based on final mortality data from 2000-2008, death rates have declined for most major diseases – heart disease (-13 percent), breast cancer (-3 percent), prostate cancer (-8 percent), stroke (-20 percent) and HIV/AIDS (-29) − while deaths from Alzheimer's disease have risen 66 percent during the same period.
• Alzheimer's accounts for somewhere between 60-80% of all dementia cases

Midwest Business Group on Health’s Quest to Reduce Elective Preterm Deliveries

By Clive Riddle, March 2, 2012

Last week,  Larry S. Boress, President & CEO of the Midwest Business Group on Health was one of three featured speakers in the HealthcareWebSummit event: Managing an Increasing Trend of Elective Preterm Deliveries.

MBGH has taken a keen interest in facilitating a reduction in elective preterm deliveries, and Larry shared why purchasers have gotten involved, and what they are doing about it.

Larry’s opening arguments were:

• Maternity care is the number one reason for hospitalization among employee populations
• The highest cost for maternity care is when underdeveloped infants are treated in the neonatal intensive care units of hospitals
• Preterm infants are less likely to survive to their first birthday than infants delivered at full term
• Those preterm babies who do survive are more likely to suffer long-term costly disabilities than infants born at term

He shared 2009 Data compiled by Thomson Reuters for the March of Dimes, which compared average expenditures for newborn care yielding $4,551 for uncomplicated cases vs. $49,033  for premature/ low birth weight cases.

So what exactly is an early elective delivery. Larry offered these characteristics:

• The newborns delivered with a gestational age between the 37th and 39thcompleted week, that were delivered electively
• Early elective deliveries are performed on women of all backgrounds and incomes.
• These are distinct from early deliveries performed due to clinically-appropriate reasons to avoid health problems facing the mother or the infant

And what is the scope of early elective deliveries? We learned that the national average is up to a rate of 17% of deliveries, while the Leapfrog group has set a current target at 12%. Minnesota, South Carolina, Indiana and Arizona all have rates above 25%. Virginia, Florida, and New York exceed 20%. While 53% of hospitals are at or below the Leapfrog target of 12%, 33% of hospitals have rates of 20% or higher (6% of hospitals have rates of 45% or higher.)

What are the motivations to have an elective preterm delivery, despite the dangers and costs? Larry cites these delivering physician convenience factors: (A) Guarantee attendance at birth;  (B) Avoid potential scheduling conflicts; (C)  Reduce being woken at night; and (D) the NICU can handle it. Furthermore, Larry offered these motivations for the mothers:

• Prior bad pregnancy
• Desire to deliver on special date or holiday
• Special circumstances
• Cultural factors
• Ability to  plan in advance for birth
•  Convenience
• Ability to be delivered by her doctor
• Maternal intolerance to late pregnancy
• Excess edema, backache, indigestion, insomnia

But there are serious quality implications of non-medically indicated early deliveries beyond cost that Larry cited:

• Increased NICU admissions (and separation from mother)
• Increased respiratory illness
• Increased jaundice and readmissions
• Increased suspected or proven sepsis
• Increased newborn feeding problems and other transition issues
• Under developed brain and lungs
• Potential development of cerebral palsy

The good news is this is now a national quality measure for the National Quality Forum (NQF); Leapfrog Group; The Joint Commission; and AMA Physician Performance Consortium Measure.

Larry closed by noting that in the twelve months since MBGH made its initial Call to Action to reduce elective preterm deliveries, over 70% of hospitals reduced their early elective delivery rates below previous levels, and many have set 5% as their goal.

Thought Leaders Thoughts on Readmissions

By Clive Riddle, January 20, 2012

Health Policy Publishing LLC this week launched its inaugural issue of Readmissions News, which is targeted at stakeholders interested in the management of hospital readmissions. One of the features of the new monthly newsletters is a Thought Leaders corner, and in this issue, experts were asked "Do you feel significant potential savings and improvements from further reductions in hospital readmissions can be achieved through the current set of public and private initiatives, or are expectations too high?"

Here are excerpts of what they had to say in response:

Randall Krakauer, MD, FACP, FACR; Aetna’s National Medical Director, Consumer Segment said in part “….The potential for impact has been demonstrated with several different programs under different conditions.  However, there is still a significant opportunity to broaden these efforts and create additional improvements in quality and savings.  Aetna has partnered with Dr. Mary Naylor at the University of Pennsylvania School of Nursing in developing and implementing a transitional care model that has resulted in improved quality and reduced costs for our Medicare Advantage members.  The demonstrated potential creates an imperative that public and private organizations work together to continue to expand these initiatives.  We should expect these types of programs to be as much a part of health care delivery as any other public health measure with demonstrated and accepted value.”

 Jeff Lemieux, AHIP’s Senior Vice President, Research, gave a response that included:  “The 20 percent reduction in readmission rates proposed in the Partnership for Patients Initiative sets an initial target for all stakeholders.  However, preliminary studies of variation in readmission rates across regions and plan types – and the measured success of certain transitional care programs – suggest that larger reductions may be possible.  We should aim for across-the-board improvements in all hospitals and for all patients, whether coverage is through public programs or employer sponsored insurance.  We should track progress on readmissions in the context of overall hospitalization rates….”

William J DeMarco, MA, CMC, President & CEO, Pendulum Healthcare Development Corporation, included in his response:  “…Hospitals that dropped their home health agencies need to rethink how they can realign the existing home health system or expand their own to take the pressure off of doctors by having these agencies step in with skilled nursing and custodial care.  This may include cross training people to come to the aid of those with chronic conditions early instead of having these patients filling the ER.  Several HMOs and some hospitals are building ‘navigator’ programs to attract and train people who are not professional RNs or LPNs but can be trained to watch for signs of a chronic care patient losing their way on the path to improved health status….”

Brian Jack MD, Professor and Vice Chair, Department of Family Medicine, Boston University School of Medicine / Boston Medical Center;  concluded his remarks with:  “….A variety of implementation demonstrations for hospital based transition programs such as RED, BOOST, STARR, and H2H are gaining momentum and allowing researchers to study what works and what does not.  Across the country there is now a long list ‘early adopter’ hospitals that have demonstrated remarkable reductions in readmission rates.  All this effort is forcing hospitals and communities to work together as partners, a necessary ingredient for successful ACOs.  However, safe readmission reduction can only happen if hospitals have well developed community-based partners, particularly primary care partners, willing and able to care for patients in the community.  We need to ensure that this primary care safety net is available for patients.”

Alexander Domaszewicz, Principal, Mercer, concluded  “…. real, sustainable improvements that don't require constant oversight, monitoring, and effort will likely take a shift in marketplace practices driven by payment practices. HHS not paying for readmissions caused by ‘never events’ and guarantees like Geisinger's pledge to not charge for readmissions after heart surgery within ninety days are key examples of how to get every facility and practitioner keenly focused on eliminating readmissions.”

Benjamin Isgur, Director, PricewaterhouseCoopers LLP's Health Research Institute, continued his discussion, asking  “….How responsible should hospitals be when community doctors or patients fail to follow discharge instructions?  Can hospitals realistically cut readmissions when so much is out of their control?  However, it is possible to reduce preventable readmissions if hospitals address three major issues: discharge planning, length of stay, and closer alignment to physicians.  All of these issues relate to focusing on the total health of a patient instead of performing a procedure. ….”

Peter Kongstvedt, MD, FACP, Principal, P.R. Kongstvedt Co., LLC , opened his reply with “We’re going to see modest improvements at best until we address the lack of coordination and follow up in both the transition from inpatient to outpatient and coordinated outpatient management of patients with multiple chronic diseases. Many of the approaches to managing patients with multiple complex diseases are able to demonstrate improvements in quality, but few demonstrate improvements in overall costs.  The exception is nurse-led teams involving multiple clinical disciplines and access to physician support…..”

Finally, Martin S. Kohn, MD, MS, FACEP, FACPE, Chief Medical Scientist, Care Delivery Systems

IBM Research;   concluded his remarks by saying  “….Many organizations have substantially reduced re-admissions using current technology. The greater challenge will be reducing all admissions, over longer periods for more patients.  A patient will not view a re-admission on the 31st day differently from an admission on the 29th day.   Keeping more patients safely out of the hospital will require enhanced population and predictive analytics to personalize the prevention programs to make them economically efficient with improved outcomes.”

A complimentary copy of the inaugural issue of Readmissions News can be obtained by visiting http://www.readmissionsnews.com/sample_issue.php

Health Net Said: ACEP Said – A Dustup Over Emergency Room Use

By Clive Riddle, September 9, 2011

Yesterday Health Net released what they thought was a benign media statement on Emergency Room use, entitled “Know When the ER is the Right Choice for Care.” The health plan opened by stating “with flu season waiting in the wings, emergency rooms nationwide will likely soon be crowded with those who’ve been bit by the annual bug and who are mistakenly seeking treatment in the ER instead of in their primary care physician’s office or in an urgent care setting. In advance of these yearly throngs, Health Net, Inc. (NYSE:HNT) is working to increase awareness regarding when it’s appropriate to visit an emergency room.”

Jonathan Scheff, MD, Health Net’s Chief Medical Officer tells us “while emergency rooms play a vital role in our communities by providing lifesaving services, many ER visits are unnecessary” and goes on to say   “because the most serious cases are treated first in emergency rooms, those with non-emergency needs can expect extended waits.”

This wouldn’t seem like controversial stuff to most, but Health Net then goes on to state “the American College of Emergency Physicians (ACEP) points out that it’s in everyone’s best interest to reserve emergency rooms for those who are seriously ill or injured” and cites the ACEP’s list of warning signs for adults and for children a medical emergency that should demand immediate attention.

And it would seem Health Net might not have consulted and collaborated with the ACEP on their release.

ACEP fired back a media release the same day:  “ACEP Takes Issue with Statements Made Today by Insurance Giant Health Net, Inc. Regarding Emergency Visits.”  Dr. Sandra Schneider, President of ACEP tells us “the nation’s emergency physicians take issue with the efforts of health insurance companies to prevent emergency visits. It may save some money for them, but it’s bad for patient health and potentially life threatening. It also violates the spirit of the prudent lawperson law, which requires insurance plans to pay for emergency care based on whether an average person would believe they have the symptoms of a medical emergency.  In addition, emergency care represents less than 2 percent of the nation’s health care dollar, so preventing emergency visits will never put a significant dent in the nation’s soaring health care costs.”

The two organizations have different takes on using National Center for Health Statistics data. Health Net states  “according to the National Center for Health Statistics, of the more than 300,000 Americans who are treated in our nation’s ERs each day, the majority don’t require emergency care.”  ACEP cites “less than 8 percent of emergency visits are classified as nonurgent by the National Center for Health Statistics, which also says “nonurgent” does not mean unnecessary. Nonurgent visits can include broken bones and kidney infections that require treatment within two to 24 hours.”

Doctor Schneider closes with “these health plan tactics are dangerous because it puts people in situations of having to self-diagnose their medical conditions — out of fear the plans won’t pay, for example, when their chest pain turns out to be heart burn. Health plans send messages to their beneficiaries not to make any “unnecessary” emergency visits. But it’s not that simple — I’ve seen people with mild symptoms turn out to have life-threatening emergencies. ….This is a very simple message we want to share with all Americans — if you think you’re having a medical emergency, go to an ER immediately. Leave the diagnosis to the experts: emergency physicians.’”

Health Net, in its defense, closes with the tip: “for more information about when emergency care is needed, as well as about injury prevention, visit http://www.emergencycareforyou.org .” This web site, by the way, is operated by the ACEP Foundation.

Big Bump in Emergency Department Use of CT Scans

By Clive Riddle, August 11, 2011

Keith Kocher, M.D., M.P.H., a clinical lecturer in U-M Department of Emergency Medicine, was lead author for a 14 page paper just published in the August issue of Annals of Emergency Medicine:  “National Trends in Use of Computed Tomography in the Emergency Department” [doi:10.1016/j.annemergmed.2011.05.020]. They examined national data for CT Scan use in EDs from 1996 to 2007, using CDC’s National Hospital Ambulatory Medical Care Survey, that involved 1.29 billion weighted records of emergency visits , 97.1 million of which included patients who received a CT scan.

Kocher’s team found that the “rate of CT use grew 11 times faster than the rate of ED visits during the study period. The study also showed that the use of CT scans was less common early in the study period, but rose significantly over time. Just 3.2 percent of emergency patients received CT scans in 1996, while 13.9 percent of emergency patients seen in 2007 received them.”

Doctor Kocher tells us "this means that by 2007, 1 in 7 ED patients got a CT scan. It also means that about 25 percent of all the CT scans done in the United States are performed in the ED. There are risks to overuse of CT scans, because each scan involves radiation -- so if they’re done for marginal reasons you have to question why. For example, patients who complained of flank pain [pain in the side] had an almost 1 in 2 chance of getting a CT scan by the end of the study period. Usually most physicians are doing that to look for a kidney stone, but it’s not clear if it’s necessary to use a CT scan for that purpose. I think a lot of the increase is related to changes in how doctors practice medicine and the availability of CT scanners. They provide lots of information quickly and so doctors and patients see CTs as a means of arriving at diagnoses efficiently and conveniently. Couple that with the fact that CT scanners are commonly housed in or near the ED itself, and the barriers to getting the test done are lower than in the past."

On the other hand, they note that “patients who received a CT scan in the beginning of the study had a 25 percent chance of being admitted to the hospital directly from the ED, while by 2007, this rate had been cut in half…[and that] this difference suggests that CT use may also prevent ICU admissions, perhaps shifting these hospitalizations toward a non-ICU bed. In general, however, the effect of CT use in the ED and hospitalization or transfer appeared to diminish after 2003 when the adjusted rate flattened and stabilized between 10.8% and 12.8% despite a continuing increase in overall CT use.”

They also note that “for all of the 20 most common reasons patients came to the ER for treatment, the study found that CT use increased during the study period. However, CT use was particularly high for the following complaints” [% of visits with CT scans indicated] impairments of nerve, spinal cord or brain function (50.7%); flank pain (43.3%); convulsions (38.9%); vertigo, dizziness or light-headedness (36.3%); headache (32.5%); abdominal pain (31.7%); and general weakness (25.6%).

Health Insurance is Good For You (?)

Kim Bellard, July 11, 2011

Finally, a study that indicates health insurance is good for you! 

Granted, the study looked at Medicaid, for a low-income population, in a specific state, but in a time when health insurers are commonly castigated as villains, perhaps they can take some comfort in the findings.  Or perhaps not.

A brief recap of the study.  In 2008 Oregon realized it had funds to expand their Medicaid rolls (having substantially dropped them several years earlier).  They knew demand would exceed the number of slots available, so they set up a lottery that allowed potentially eligible consumers to enter; almost 80,000 did.  Researchers realized they finally had a classic study design – populations randomly selected into those who got health insurance and those who remained uninsured.  This appears to be the first such ever done when it comes to health insurance. 

The results from the first year indicate that those with health insurance did appear to benefit.  I won’t recap all the results, but some examples include that the newly insured saw doctors 35% more often, went to the hospital 30% more often, got mammograms 60% more often, and were 25 percentage points more likely to say their health was good or excellent.

Not surprisingly, they also cost 25% more.

The increased utilization may be partly an artifact of the so-called “woodwork” effect, i.e., people tend to use benefits more when they first get them (or, conversely, are about to lose them).  The researchers are continuing to mine the data, looking in particular at longer term impacts on health results.  Those extra doctor or hospital visits may or may not actually be improving health; several of my previous blogs (e.g., here) have discussed some of the overuse and errors that appear to be prevalent in the health care system. 

Earlier studies have tried to quantify the impact of health insurance, or lack thereof, have on health outcomes, such as those by the IOM or Mathematica.  Numbers like 44,000 deaths annually attributable to lack of health insurance have been claimed.  It’s not even only a matter of the uninsured not receiving services; even when they obtain services they may have worse outcomes.  Another recently released study indicates that payor status impacts mortality and morbidity for patients undergoing cardiac value operations, with privately insured patients faring better than either the uninsured or those with Medicaid.  So, any way you cut it, having insurance seems like a good thing. 

Clive Riddle recently posted a blog that reminded us how disproportionate health expenditures are distributed, with 5% of the population accounting for about half of the spending.  The fifty percent of the population with the lowest spending accounted for only 3% of all spending.  And that, for insurance purposes, is good.  Historically, and still true in other sectors, insurance is supposed to protect against unpredictable and catastrophic losses.  Anyone can get hit by lightening, catch a rare virus, or develop cancer.  Protection for the high expenses caused by relatively rare events that are outside of the individual’s control is what insurance does best. 

Insurance doesn’t work well at all when the insureds either already are incurring expenses or know they soon will be; for example, persons with chronic conditions.  People in this situation are basically depending on the other insured people to subsidize their expenses.  The data that Clive cited in his blog also noted the persistence of high spending for persons with chronic conditions; high spenders are no longer primarily one-time catastrophic cases, but more often now involve ongoing situations.  At some point, low cost people may balk at continuing to subsidize higher cost persons who have ongoing expenses; many would argue that this is exactly what is happening already in the individual market.

Don’t get me wrong; I am all in favor of reducing financial barriers to care for low-income people.  I’m all in favor of ensuring that health expenses don’t bankrupt families.  Medicaid has many, many flaws, but in any health care system we’re likely to get there will need to be some kind of special consideration for populations on whom financial burdens of health care fall hardest.  Where I start to scratch my head is how far those special considerations need to apply.

A common perception seems to be that without essentially full or low cost coverage for services, people will not get them.  The antipathy towards high deductible or consumer-directed health plans reflect this, with critics fearful that consumers will not behave responsibly when they are accountable for the initial deductible of a few thousand dollars.  PPACA similarly added requirements for coverage without cost-sharing of various preventive services, on the premise that consumers are too irresponsible to obtain services if they bear any financial burden when obtaining them.

A little Insurance 101 might be helpful.  If 100 people are covered, and one of them is likely to incur a $100 charge, then charging an annual premium of $1 per person (plus an add-on for administrative overhead) suffices.  However, if every person was going to get, say, an annual preventive visit that cost $70, then each person will have to pay a $70 annual premium (plus the add-on for administrative overhead) to pay for that visit.   There is no insurance, simply dollar trading with a mark-up. 

For skeptics who say people are irresponsible and won’t obtain appropriate services if there is cost-sharing for them, then I would argue (and have, here) that we have a far bigger problem.  Rather than waiving any financial involvement from patients, we’d be better off figuring out how to motivate patients to take better care of themselves and how to motivate physicians to ensure their patients are doing so. 

I.e., it’s not the coverage; it’s the behavior.  Coverage is necessary but not sufficient.  Sadly, we’ve built our delivery system and much of our health behavior around what insurance pays for rather than around makes the most sense from a health outcomes standpoint.  Or perhaps we’ve built our coverage around what is easy to pay for rather than what we should pay for.   Either way, it’s a problem.

An Extreme Concentration of Expenditures

by Clive Riddle, June 30, 2011

NIHCM Foundation has released a new data brief: Understanding U.S. Health Care Spending – a fifteen page report based on analysis of data from the National Health Expenditure Accounts from CMS and the Medical Expenditure Panel Survey from AHRQ.

NICHM emphasizes that their “analyses document the extreme concentration of expenditures, with just 5 percent of the population responsible for almost half of all spending, and demonstrate the importance of rising spending for hospital and physician services as the primary drivers of expenditure growth.”

Here’s some selected data making these and other points, from their report:

• National Health Expenditures in 2009 annually averaged $8,086 and 17.6% of the GDP, compared to $4,599 and 13.8% ten years earlier in 1999.


• 84% of this spending covers personal health care services and products, including $2,471 annually for hospital care; $1,646 for physicians & clinical services;  $548 for dental & other professional services; $1,066 for home health and long term care; and $1,066 for prescription drugs and DME


• The remaining 16% ($1,289 annually) of national health spending is for public program administration, public health and investment.


• Analyzing portions of the population (civilian, non-institutionalized) and the percentage of health care expenditures they represent (using 2008 data): 15.6% of the population had no health care spending; 50% with the lowest spending accounted for only 3.1% of expenditures; while 63.6% of all spending was incurred by the top 10% of the population with the highest spending; 47.5% of spending by the top 5%; and 20.2% of spending by the top 1%.


• Put another way, the lowest 50% of the population for health care spending averaged $233 annually, while the top 50% average $7,317. The top 30% averaged $11,196; the top 10% averaged $23,992; the top 5% averaged $35,820; and the top 1% averaged $76,476


• Considering proportions of spending by age, those age 65 and up account for 3.6% of the population in the lowest 50% of spending; but 45.1% of the population in the top 5% of spending


• Regarding drivers of the change in healthcare spending from 2005 to 2009 (which totaled an average increase of $1,259 per capita during that time): hospitals accounted for 34% of the increase; physician & clinical services accounted for 18%;  home health and long term care accounted for 16%; prescription drugs and DME accounted for 14%; other spending accounted for 12%; and dental and other professional services accounted for 6%

The report concludes that “these systemic factors affect growth in both public and private health spending:”

• new medical technology


• growing rates of obesity


• fee-for-service payment incentives


• growing economic prosperity (remember the timeframe starts in 2005 and ends in 2009)


• expanding insurance coverage (Medicaid – not commercial)


• defensive medicine and more intensive use of diagnostic testing


• an aging population

Fidelity on Retiree Future Health Care Costs and HSA Participation

By Clive Riddle, April 1, 2011

Fidelity Investments tells us that the total amount a couple just entering retirement needs to have saved for their future health care costs dropped this year from past estimates, due to one-time savings from health reform. Fidelity also tells us that HSAs are a recommended vehicle to help fund these required costs, and almost all their HSA account holders rolled over some account balance from 2010 to 2011 to save for these costs.

Fideltiy this week released their annual estimate of future health care costs for retired couples. Last week, Fidelity released findings on their study on how Fidelity HSA participants are using their accounts. The two topics overlap, as HSA participation is of course, a recommended strategy by Fidelity for persons preparing for retirement.

Fidelity cited their recent survey that indicated 68% of pre-retirees “said the cost of medical care in retirement is one of their three biggest financial concerns (outliving savings and inflation were the other worries).”

Fidelity now estimates “a 65-year-old couple retiring this year will need $230,0001  to pay for medical expenses throughout retirement, not including nursing-home care.  This represents an 8 percent decline from last year, when the estimate was $250,000” and costs increased 4.2% over 2009 costs.

Previously, the estimate has increased an average of 6 percent annually since the initial calculation of $160,000 in 2002. Fidelity indicates the “$20,000 decline in the estimate from last year was driven by Medicare changes contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, both signed into law in 2010.  These changes, which reduced out-of -pocket expenses for prescription drugs for many seniors, resulted in the reduced estimate.” The health reform changes include a required 50% discount on brand name drugs that are applied to beneficiaries “donut hole” benefit level, and ultimately phases out the donut hole by 2020.

Brad Kimler, EVP of Fidelity’s Benefits Consulting business tells us “while the savings generated through the health care reform laws is a welcome relief to many seniors, it should be considered a one-time adjustment, at least for the time being. Today’s workers still face the prospect of significant medical expenses in retirement and must begin to include those costs in their retirement plan strategies. Looking forward over the next few years, Americans should expect health care expenses to continue to increase annually due to a number of factors including higher costs for medical services, the introduction of new technology and an increased utilization of health care services like diagnostic testing,”

The Fidelity Retiree Health Care Costs Estimate “assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program Medicare.  The calculation takes into account cost sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance).  It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare.  The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.”

Fidelity, in commenting on their retiree health benefit cost estimate, hold out HSAs as a recommended savings tool. William Applegate, VP, HSA products for Fidelity Investments tells us “the continuing rise of health care costs combined with health care reform really drove the adoption of HSA-qualified health plans  by employers last year and thus the growth of HSAs. As for participants, it is clear that many are using the health-savings product to help manage not only their current medical expenses but also plan for future expenses, with nearly all participants carrying some balance over to the following year.”

Fidelity’s analysis of their 74,000 HSA participant accounts indicated the following patterns and behaviors:

• On average, HSA participants had contributions of $2,620 made to their accounts in 2010  including their own contributions and employer contributions.  
• 17% of  participants contributed, through both their own and employer contributions, more than $5,000 to their account in 2010
• 46% of participants had contributions of $2,500 or more in 2010
• 36% of participants used more than 90 percent of their annual HSA contribution on qualified medical expense reimbursements,
• 40% of participants used between 10 percent and 90 percent of their HSA contributions and carried over the rest.
• 24% of participants used less than 10 percent of their annual contributions and invested the balances for future health expenses.
• Overall, 95% of participants carried over some balance from year to year

Gore Someone Else’s Ox, Please

By Kim Bellard, March 24, 2011

News flash: health care spending is out of control. 

Sadly, this is nothing new.  It’s been “out of control” for decades.  If we are serious about controlling health care spending -- and I’m not sure we are yet -- we may need to think not just about on what services the money is spent but also about to whom it is paid.

The facts are fairly well known.  U.S. national health expenditures were estimated to be $2.5 trillion in 2009, which consumed 17.6% of Gross Domestic Product (GDP).  Another decade and health spending may account for one-fifth of the national economy.  The spending is a source of concern in itself, but it is especially so when compared to other industrialized nations.  We spend over double per capita of the average of the other OECD countries, and the country with the next highest percentage of its economy devoted to health care is France, which looks miserly by comparison at 11%.

The truly scary thing is that, despite our runaway health spending, there is ample data that we are often not getting all the services we should, and that the tens of millions of uninsured do not get as much health care as insured persons do.  Just think how much worse the spending problem might be if those problems were solved.

Last year’s federal health care reform vowed to slow the increase in spending, although the specific mechanisms for this remain murky.  Several states are taking the lead in trying to attack the problem.  For example, the state of Washington is using a Health Technology Assessment Program (HTA) to determine which services the state will cover in its program for state employees, as well as for Medicaid and worker’s compensation.  HTA tries to use effectiveness research to determine which services are cost-effective, and it is the “cost” portion of that which has raised some controversy.   Meanwhile, Arizona has eliminated coverage for several types of transplants as one of its efforts to control Medicaid spending; two patients are reported to have died as a result.   Of course, many other states are following the more typical pattern of simply slashing Medicaid reimbursement rates further.

The problem is a hard one, and it is not at all obvious what the solution might be.  In 2007 the Congressional Research Service did an in-depth study of our health care spending relative to other countries, and the report had some counter-intuitive results.  It’s not that we have too many hospital beds, nor spend too many days in the hospital.  It’s not even that we have too many doctors nor visit them too often.  On all those measures, we rank fairly low compared to other OECD countries, despite spending much more per capita on hospital and physician services.  About the only area where the U.S. seemed to clearly use more services than other OECD countries was in imaging, specifically for CT scanners and MRI…but even then we are lower than Japan, which still manages to spend much less than we do. 

CRS concluded much as Gerry Anderson and his colleagues did a few years earlier in their well known Health Affairs article: “It’s the Prices, Stupid.”  Simply put, we pay much more per unit of service, and health care professionals – at least physicians – earn much more in the U.S. than almost anywhere else. 

Many pundits point to fixing our costly malpractice system, reducing administrative overhead, and generally cutting out “waste” as the way forward.  Indeed, PwC estimated that $1.2 trillion of the $2.4 trillion in spending was wasteful.  As evidenced above in Washington and Arizona, though, “waste” is not so easy to identify.  Reformers are forgetting one key truth: one person’s waste is another person’s income.

Let’s think about spending.  The money spent on health care goes somewhere, to someone.  It doesn’t disappear down a black hole and vanish.  It ends up as revenue for a variety of entities in the complex health system ecosystem, such as doctors, hospitals, pharmacies, nursing homes, home health agencies, labs, imaging centers, and health insurers/administrators.  Controlling health care spending means some of those entities will collect less revenue than they would have collected otherwise, and that’s the rub. 

Maybe we don’t need as many specialists, or maybe don’t need to pay them as much.  Maybe more generic drugs could be used, or maybe we could pay less for brand drugs.  Maybe insurers’ medical loss ratios should be higher, or maybe we could curtail their premium increases.  Maybe spending on diabetes and bariatric surgery would go down if we identified people at risk earlier.  Maybe.  But none of the entities currently receiving the money for any of these examples will be keen to have their revenue go down.

To be sure, reduced revenue does not necessarily mean reduced income/profit.  There certainly are huge inefficiencies in our health care system, and pressure on revenues should, in a capitalism system, result in more efficient competitors.  But those pressures in that capitalism system should also result in some of the affected entities not surviving, and when it comes to health care, we don’t seem too keen on that. 

Competition should spur innovation and better value for consumers, but those are hard to accomplish.  It’s easier for at-risk organizations to fight for the status quo, at least for oneself.  It seems that every type of health care entity has its own trade association which vociferously advocates for its interests, including payment rates and eligibility of its services.  And the threat of reducing services usually alarms current recipients of those services, who are sure they not only need them but are entitled to them.  No one wants to have the dreaded R-word invoked, and yet no health care provider wants to take a pay cut.  It’s the irresistible force of health care demand against the immoveable limit of health care budgets. 

The hard fact is that whenever health care spending finally gets under control, as it inevitably must, there will either be fewer health care providers or those providers will be getting less money – or both.  The danger we face is that the reductions will be arbitrary and/or across the board.  We should be able to do better than that.  There’s nothing inherently wrong with specific health care providers making a lot of money.  One would want health care providers who deliver high quality, effective care to their patients to do well financially.  On the other hand, though, it is ludicrous to be paying the same to providers who are not doing well for their patients, whether that is not delivering appropriate treatment, making medical errors, or simply not getting good results.  It’s even silly to be paying “average” providers the same as high performing ones, yet we do this millions of times every day.  Right now, of course, it’s virtually impossible to tell which providers are which.  Where’s the data, where is the proof, and why don’t they – or we – seem to care?

Reform should mean making sure competition is based on delivering demonstrably better care and services, not on factors like geographic dominance, better lobbyists, or the simple inertia of not wanting to harm “my” doctor/hospital/pharmacy/etc.  Face it: there is going to have to be some goring, so we better make sure it is done to the right metaphorical oxen.

Diabetes by the Numbers

by Clive Riddle, January 28, 2011

The CDC this week released significant updated data on diabetes in the United States, incorporated into their National Diabetes Fact Sheet 2011. The CDC has announced that 25.8 million American now have diabetes and another 79 million have prediabetes, up from 23.6 million with diabetes and 57 million with prediabetes in 2008.

Ann Albright, Ph.D, R.D., CDC Director of Division of Diabetes Translation tell us "these distressing numbers show how important it is to prevent type 2 diabetes and to help those who have diabetes manage the disease to prevent serious complications such as kidney failure and blindness. We know that a structured lifestyle program that includes losing weight and increasing physical activity can prevent or delay type 2 diabetes."

Here’s a laundry list of diabetes by the numbers from the CDC Fact Sheet and related documents:

• 8.3% of the U.S. population now has diabetes
• 27% of those with diabetes are currently undiagnosed
• About 215,000 Americans younger than age 20 have diabetes. 
• Percentage of adults with diabetes by age group: age 20-44: 3.7%; age 45-64: 13.7%; age 65+ 26.9%
• An estimated 1.9 million Americans were diagnosed with diabetes in 2010, 24% of them age 20-44; 55% of them age 45-64 and 21% age 65+
• 11.8% of men age 20 and older have diabetes, compared to 10.8% of women
• By race, diabetes rates were 16.1 percent for American Indians/Alaska Natives, 12.6 percent for blacks, 11.8 percent for Hispanics, 8.4 percent for Asian-Americans, and 7.1 percent for non-Hispanic whites.
• Reported rates of gestational diabetes range from 2% to 10% of pregnancies. Immediately after pregnancy, 5% to 10% of women with gestational diabetes are found to have diabetes, usually type 2.
• Women who have had gestational diabetes have a 35% to 60% chance of developing diabetes in the next 10–20 years.
• 58% of adults diagnosed with diabetes receive oral medications only; 12% receive insulin only; 14% receive oral meds and insulin; and 16% receive no medications
• Diabetes accounts for 44% of all new cases of kidney failure
• More than 60% of nontraumatic lower-limb amputations occur in people with diabetes
• About 60% to 70% of people with diabetes have mild to severe forms of nervous system damage. 
• Almost 30% of people with diabetes aged 40 years or older have impaired sensation in the feet
• Diabetes is the seventh leading cause of death in the United States. 
• Diabetes costs $174 billion annually, including $116 billion in direct medical expenses

Citation: Centers for Disease Control and Prevention. National diabetes fact sheet: national estimates and general information on diabetes and prediabetes in the United States, 2011. Atlanta, GA: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, 2011.