Silver Lining

There is a lot of sniping at Massachusetts’ health care reform. The fact that the sniping comes from both the right and the left probably means that we’ve done something right in our state, although the combination of continuing health care inflation and the declining economy will make it hard to sustain the increased rate of coverage of Massachusetts residents. In this post, I’ll review some of the critiques of the Massachusetts plan, and offer some optimistic musings about how the “Great Recession” could make it easier to make health care affordable.

This weekend, the Boston Globe offered an op-ed by Susanne King, a western Massachusetts psychiatrist who complained that health care reform failed to meet five critical tests posed by the Institute of Medicine. She noted that health coverage in Massachusetts is

- - Not universal (but we’ve cut the uninsured rate by more than half)

- - Still tied to employment (not clear where the money will come from if employers are out of the picture),

- - Not affordable for patients (admittedly, we have a long way to go – but reform of the individual market is real progress here)

- - Not affordable by society (I agree with the author here)

- - Doesn’t guarantee access (But it takes years or decades to train additional physicians in fields like psychiatry and primary care, and our problems in Massachusetts are not worse than those elsewhere in the country).

On the right, the National Center For Policy Analysis continues its tirade against the Massachusetts law –and ironically cites researchers including Steffie Woolhandler and David Himmelstein, ardent supporters of a single payer system. The complaints from the right and left are eerily similar.

For Massachusetts’ health care reform to be sustainable, the overall rate of medical inflation must come down considerably. I’ve pointed out before that all that medical inflation is someone’s income; therefore, doctors, hospitals, pharmaceutical companies, and others will fight aggressively to avoid losing income. That’s why despite real efforts at reform we usually end up with the status quo.

On the optimistic side, here are some reasons why this might not be as hard as we’ve all been worrying to lower health care inflation. I know that the “Great Recession” has already led to very significant pain and financial and personal losses; I also believe that it will offer a chance to lower medical inflation. Talk about a silver lining!

1) Volume Decreases in Medical Care:

- Informally, my colleagues say that they have seen dramatic declines in elective diagnostic and therapeutic procedures and hospitalizations, though Thompson Reuters doesn't see things as quite so dire. These declines will lead to lower overall medical costs. I wouldn’t be surprised to see some health plans reporting outsized earnings on insured business, too, because actuaries had counted on higher utilization.

- Americans are not only having second thoughts about buying a new car – they’re also thinking twice about their copayments for medications and for office visits. The increased consumer copayments and deductibles will lead to more self-editing of care in 2009 than it did in past years as our perception of wealth declines precipitously. Since most medical interventions are NOT cost saving, foregone medical care will general result in health care savings, although it might also lead to worse clinical outcomes.

- Decreased medical procedures could also lead to increased surplus capacity in the medical system, which is likely to lead to decreased prices

2) Sin Taxes

The Congressional Budget Office doesn’t think that raising taxes on tobacco or on sweetened drinks will decrease the federal budget deficit – but I think that this will have a measurable impact on the total cost of medical care. Tobacco taxes are on the way up, and the relationship between tobacco cost and initiating smoking is irrefutable. A recent study in Colorado Springs showed that acute myocardial infarction in the community went down in just a single year after an indoor tobacco ban. Now that’s medical cost savings! Although I don’t know of a study that shows that raising the price of soda lowers use, I do know that the relative decrease in the price of soda over my lifetime is strongly associated with increased use of corn-syrup sweetened beverages. . We don’t have a great medical answer for obesity besides for bariatric surgery, so any public health approach to decrease caloric intake is welcome.

3) Evidence Based Medicine

- This will take longer, but investing $1.1 billion of the stimulus on effectiveness research could have a substantial impact on medical costs. New drugs and devices are priced based on perceived value, so explicit studies of comparative effectiveness might lower asking prices even before the studies are complete. This is because manufacturers will want positive results from comparative effectiveness studies, and positive results are more likely with lower prices.

4) Decreased Expectation of Fee for Service Revenue

- Many commentators have pointed out that paying fee for service leads to higher utilization, but the health care delivery system is not optimized to pay for meaningful bundles or capitation at this point. The deflationary pressure on prices in general could make fee for service less attractive, which could lead to better opportunities to bundle payments. Of course, much of the delivery system is not at this point especially well positioned to accept capitation or bundled payments.