Specter's Party Change and Health Care Reform

Some have concluded that Arlen Specter’s party change means smooth sailing for the Obama administration’s proposed health care reform.  I’m more skeptical – Specter got only a one page mention in The System, Johnson and Broder’s excellent book cataloging the failure of the Clinton Health plan in 1993-4. There were a half dozen Republican Senators eager to work with the Democrats to craft a bipartisan bill, and Specter was not among them.


Images matter, and there were two images influential in sinking the proposed Clinton health care plan.  One is the “Harry and Louise” television commercial made by the health insurance industry, where two “ordinary Americans” worried that the new health plan would take away their choices and put health care under government control.


The second image that helped sink “Hillarycare”  was a complicated, Rube Goldberg-esque diagram of the interactions among dozens of government agencies required to administer the Clinton health plan, as imagined in the 1342 page proposed legislation.  (Ironically, I can't find the image of this to attach to this post.  Please let me know if you find it and I will revise this post)


This diagram was attributed to Arlen Specter.

(Ironically, I can't find the image of this diagram to attach to this post.  Please let me know if you find it and I will revise this post)



Physician Shortage and Doctor Income

Today’s New York Times front page trumpets  Shortage of Doctors an Obstacle to Obama Goals.” 


The article recounts the concern that there are not enough primary care physicians to meet our future needs – nothing new there.    There is an alternative point of view – David Goodman and Elliot Fisher of Dartmouth look at variation data and suggest that if we could treat the urban population with the same physician-patient ratio in rural areas, the shortage would vanish. 


Here’s a quote I really enjoyed from today’s Times article:

Dr. Peter J. Mandell, a spokesman for the American Association of Orthopaedic Surgeons, said: “We have no problem with financial incentives for primary care. We do have a problem with doing it in a budget neutral way. If there’s less money for hip and knee replacements, fewer of them will be done for people who need them”



The evidence suggests that lowering prices actually causes an increase in utilization – not a decrease.  So – if there are too few knee and hip replacements, decreasing the price in a fee for service environment might actually help!


Seriously, there is a lot in the news about the high income of bankers and other financial wizards – Paul Krugman  today suggests that they are adding no value at all.  Doctors are clearly providing a valuable service, and should be paid well.  But physician income in the US is very high compared to the rest of the world.  Primary care might look a lot more attractive to some medical students if the income of many specialists wasn’t so high.


Of course, physicians will not accept decreases in their incomes without a substantial political fight.



Pay for Performance Comes to Ambulatory Pharmaceuticals

The New York Times reports today that two pharmaceutical companies are entering the “pay for performance” market to preserve lower patient copayments for their expensive brand name medicines and maintain or grow market share. This is modeled after a Johnson and Johnson deal with the British NHS to offer refunds for an expensive oncology medicine if it did not shrink an individual patients’ tumor(s). See an earlier blog on how the British comparative effectiveness program led to this discount offer.

Merck will give discounts to the insurer Cigna on its diabetes medicine Januvia (and combination pill Janumet) if Cigna patients in the aggregate have lower blood sugars, and the makers of Actonel, an osteoporosis medication, will give a small insurer cash payments for adherent patients on this medication who have osteoporosis-related fractures. There are alternative far cheaper generic medications that can readily substitute for Actonel and Januvia/Janumet.

The Times does not mention that drug companies are subject to a “most favored nation” clause which guarantees Medicaid programs the lowest price – so that any price concession to even a small insurer can lead to large rebate checks for every state Medicaid programs. In general (and counterintuitively), this most favored nation arrangement keeps prices unnecessarily high – since it enforces price discipline among the pharmaceutical companies. My sense is that a refund for nonperformance would not “count” as a discount, and therefore this approach allows the pharmas to offer lower rates to the most price-sensitive health plans without jeopardizing Medicaid rates.

On one hand, this is a good move. Pharmaceutical companies are selling a result (lower blood sugars and fewer nonspine fractures) rather than selling a pill.

Will this lead to lower health care costs? My guess is “no,” since these are very expensive drugs, and even discounts or refunds are not likely to bring them down to the true cost of generic alternatives. There is a better argument that Januvia represents a real advance over other oral diabetes medicines. However, I doubt that the incremental value of Januvia, even with the discounts Cigna will obtain, will be cost-saving, as opposed to cost-effective. This also leads to some opacity in the pharmaceutical market, which will allow for more price discrimination and likely yield higher pharma margins. Even if this yields higher overall costs and higher pharma margins, though, it might lead to increased value in the health care delivery system.

It's the Prices, Stupid

That’s the provocative headline of a Uwe Reinhardt essay in Health Affairs from 2003, explaining why health care costs in the United States are so much higher than they are elsewhere. In the US, we have fewer office visits, fewer prescriptions, fewer hospital admissions and shorter lengths of stay than other OECD countries. We have more imaging than some, although others (such asJapan) have much higher rates of MRI scans, but they are valued at a fraction of the cost allowed in the United States.

Our prices support innovation – and they support wide patient choice. They also support substantially higher physician income and substantially higher executive income than seen in health care systems of other countries. Our prices seem high compared to the rest of the world, but hospital CEOs don’t feel like they are wallowing in profit. Rather, many hospitals are on the edge financially. Folks running medical groups don’t feel like they are being paid too much – and usually have very small reserves. Physicians don’t feel rich either; until recently, they looked at their colleagues in the financial services industries and felt a sense of despair.

(From the WSJ, see link below)
Pharmaceutical companies, device makers and all health care providers are worried about the pressure on prices going forward, and many are preparing for the worst by boosting their prices now. The WSJ reported that hospitals and drug companies are raising their prices despite the economic slump. .
It’s looking like these high US prices are going to be seriously threatened over the coming months and years. Bob Lasiewicz has a great commentary this weekend in the Health Care Policy and Marketplace Review Blog recounting conversations with two nonprofit health plan CEOs who predicted that if a public health plan insisted on Medicare rates they would have to cut their provider rates by 20-30%. This is why the public health plan is one of the few interventions listed by health care economists that could substantially lower costs. It’s also why the fight against a public plan competing with existing health plans will be a big one that is likely to see unusual alliances - where business and government might each support the public plan, while providers and health plans could find themselves together on the opposing side.

Hospital Readmissions

One in five Medicare beneficiaries are rehospitalized within 30 days, and one in three are inpatients within 90 days. 90% of these rehospitalizations are unplanned, and a shocking half of those readmitted within 30 days had no outpatient visit billed between hospital discharge and readmission. The cost of these readmissions is estimated at over $17 billion annually. These are findings from a thoughtful article in the New England Journal earlier this month.

Some caveats are important to note. These admissions are by no means all preventable – although it’s striking that the rate of readmission is as high as 23.2% (Washington DC) and as low as 13.3% (Idaho). This variation suggests that we could see big improvements, with substantial cost savings. Outpatient postoperative visits with surgeons are included in global fees, so total visits are understated, although most readmissions of surgical patients were actually for medical, not surgical, problems. This is a Medicare population – so employers thinking about their soaring costs for patients under age 65 need to remember that the mix of disease and the level of social support is different in a non-elderly population. For instance, readmissions for congestive heart failure represented 9.4% of all readmissions, but this diagnosis is relatively rare in the non-Medicare population. The authors note that readmissions can be profitable for hospitals with spare capacity in the Medicare fee for service system.

There is ample evidence we bear a terrible clinical, financial, and social cost from poor transitions in care. This article starts quantifying that cost. There is already a HEDIS quality measure around outpatient visits following mental health inpatient discharges. Maybe we need such a measure for medical and surgical discharges as well.

Health Care Reform and Cost Control: Two Articles Of Caution

I recommend reading “The Obama Administration's Options for Health Care Cost Control: Hope Versus Reality" in the early April Annals of Internal Medicine.

The authors review the literature on how improving the quality of care often does not lower the cost of care. The authors favor of more emphasis on prevention, wider adoption of HIT, better management of chronic diseases, payment reforms that would pay providers on the basis of outcomes, and research on comparative effectiveness to identify preferred diagnostic and treatment options. But they point out that none of these has been shown unequivocally to lower health care costs. They turn to international examples, noting that concentration of purchasing power, lower prices, and decreasing administrative costs are key to controlling health care costs.

This article represents a trifecta for Jonathan Oberlander, who has published thoughtful pieces on health care reform in Health Affairs, New England Journal, and Annals over the past few months.

The front page of today’s NY Times has an article about growing opposition to the Obama administration’s attempts to save $94 billion from the student loan program over the next decade. Obama’s plan would have the federal government give all loans directly to students, and use the savings to sponsor additional loans and other educational efforts. The banks count on these student loans for billions of profit without much risk, as the loans are federally guaranteed. Obama can’t save the billions without taking it from someone, and the banks aren’t rolling over even though they’ve gotten a federal bailout and bankers have lost substantial public trust .

I read this article and just kept on thinking about health care. Instead of the banks – imagine this article about the angry physicians whose fees would be curtailed as part of health care reform – or the hospitals that face limited bundles for payment -- or the pharmaceutical companies that will face higher price sensitivity – or the health insurers who will face pressure to deliver more value for each administrative dollar.

In health care, as in student loans, if we want to invest, we’ll either spend more or take an uncomfortable chunk out of current spending. And that will leave a trail of angry stakeholders.

Health Care Costs and Income Disparity

The McKinsey Global Institute recently published an analysis of the impact of health care costs on income disparity. (Registration Required) The study shows that only 11% of those with high income (over $130K) are not covered by employer health insurance, while this rises to 19% for high middle income ($58-130K), 43% for low middle income ($27-58K), and 78% with low income (<$27K). This does not include government-provided health insurance, such as Medicaid, for which only very low income individuals qualify.

Furthermore, employers pay twice as much for health insurance for their high income workers (top 10%) compared to their low income workers (bottom 30%). This means that high income individuals are more likely to have health insurance plans that provide robust coverage. Low income individuals, even if they have coverage, are more likely to have higher deductibles and coinsurance and copayments, while they are least likely to be able to afford these out of pocket payments. This is especially important since health care costs were reported to be a major cause of bankruptcy, even before the current “great recession.” (Comment on initial article)

The McKinsey analysis reminds us that employer coverage of health care is almost universal for those with high incomes, and it is increasingly rare for those of low income. Furthermore, employers pay twice as much for health insurance for their high income workers (top 10%) compared to their low income workers (bottom 30%). This means that high income individuals are more likely to have health insurance plans that provide robust coverage. Low income individuals, even if they have coverage, are more likely to have higher deductibles and coinsurance and copayments, while they are least likely to be able to affort these out of pocket payments. This is especially important since health care costs were reported to be a major cause of bankruptcy, even before the current “great recession.”

See http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.63

Recession Health Care

Today’s newspapers bring more evidence that the recession is causing substantial changes in the health care delivery system – which is not as “recession-proof” as some believed.  The Los Angeles Times  reports that mammography, colonoscopy, and dental screening are down.  This American Life  reports that dentists are seeing many cracked teeth – reflecting a lot of tooth-gnashing.  The Wall Street Journalreports that patients are not filling 6.8% of brand name prescriptions and 4.1% of generic prescriptions.


Factors that lead patients to be more likely to skip care which is recommended, according to a study by the California HealthCare Foundation:

1)      Those in worse health (fair or worse health reported skipping preventive care for financial reasons 47% of the time, compared to 26% of those who reported their health as good or better)

2)      Poorer folks (51% of those earning under $20k reported skipping preventive care, compared to 34% between $20 and $50K, and 21% for those with over $50K in family income)

3)      Hispanics (46% compared to 25% for whites)

4)      Uninsured (66% compared to 27% for those with insurance)

I expect in the future high deductible health plans will also be a reason why patients fail to follow through on their physicians’ recommendations in the future. Aetna had a recent press release touting high rates of preventive care and low overall costs , and there was a glowing article about Cigna’s high deductible health planin this month’s Managed Care Magazine.   I’ll be blogging more on this data in the coming days. 

Bloggers for the Boston Globe

There is a movement of bloggers supporting the Boston Globe, led by Paul Levy of Beth Israel Deaconess and Charlie Baker of Harvard Pilgrim Health Care. 

I'm a devotee of the newspaper.  We subscribe to two daily papers, and bookmark others.   I love the internet and blogs - but newspapers do much of the original reporting, and they do a good job holding government, health plans, and providers accountable.   The Boston Globe recently won an award for its health care coverage --  and an indication of its importance to my blog is that 15 of the 94 posts over these past 6 months have a direct reference or a hyperlink to a Boston Globe article. 

* Buy a newspaper when you can - don't just share
* Subscribe if you're a frequent reader
* Don't cancel your subscription when you realize the stories are on the web site in a more timely matter - or pretty soon they won't exist at all!
* Be nice to a reporter, or editor, or printer or driver.  I was horrified on Friday evening when I saw the nasty comments on the boston.com web site accompanying the first news of the threatened closure.   The reporters I know are hard-working and sincere -and they are increasingly endangered. 

I don't have an answer to the business model problem facing newspapers today. The Washington Post makes more money from Stanley Kaplan than its news organization, and the New York Times makes more from About.com than from the Boston Globe.  If you do have a good business model idea, there is a forum at Blue Mass Group (a blog frequented by Massachusetts Democrats). 

PBS Frontline, and more on "Medicare for All"

PBS aired a provocative Frontline program  last week detailing many of the woes of patients with serious illnesses under the current employer-based health insurance system.   A talented college senior gives up on engineering and settles for a job selling lamps because it offers good coverage.  A middle age man loses his house, declares bankruptcy and has to move in with his mother after he lost his job and required bypass surgery. A self-employed woman finds her high-deductible high-premium insurance plan revoked retroactively based on a technicality, after she has a severely premature baby with very expensive medical needs.  The CEO of a health plan which insures millions reveals that because of his history of heart disease, he himself could not qualify to purchase health insurance as an individual.  The Kaiser Family Foundation,  one of the most savvy health care policy groups, had to shop its insurance to another health plan when one of its employees had a sick baby and premiums skyrocketed!


The program does a good job of focusing attention on the equity issues of underwriting in our current health care finance system.  On one hand, it’s not fair for a health plan (or the other subscribers to a health plan) to have to provide full coverage for a patient who signed up after they already knew about their illness.  On the other hand – illness is already a substantial punishment, and it doesn’t seem right to also saddle the sick with enormous bills. It’s also not practical, because those with substantial illness are least able to pay such bills.   Clearly, coupling a mandate to have health insurance with the elimination of medical underwriting is an attractive solution.  It spreads the risk among many healthy people (critical to the “insurance” nature of health insurance), while dramatically decreasing the rate of uninsured patients.  This is what the health insurance industry is currently advocating, and is incorporated into health care reform in Massachusetts.

The PBS show also quotes Uwe Reinhart, an economist at Princeton, who states that total administrative costs in the American system is 24% - substantially higher than other countries.  Most observers think that the cost of administration of health care is the cost of administering health plans (administrative services plus profit).  In fact, the administrative cost is a combination of the health plan administrative costs AND administrative costs on the provider side – and it seems perfectly possible that providers spend as much on billing as health plans spend on paying those bills.   Since little of this administration adds value for patients, administrative simplification will be critical.  I’m hopeful that bundling payments will allow for some degree of administrative simplification, although even in capitation it’s important to have a “claims-like” process to facilitate for quality control and health services research.


There continues to be a call for a public insurance plan (see today’s NYTimes editorial)  I continue to worry that the main reason a government-sponsored plan is less expensive is cost-shifting to other plans – which would become impossible if we had “Medicare for all.”   See previous post on how health plans can add value, and a podcast on this subject. 






Transparency in Massachusetts: A Success and a Challenge

Today, Massachusetts Health Quality Partners releases its fifth annual report on quality of medical groups across the state.   The quality data is derived from claims data from most of the health insurers in the state (not including Medicare or Medicaid).  MHQP also reports on patient experience data based on an annual survey.  MHQP’s database is searchable by name and zip code. 


Patients in Massachusetts can see quality and patient experience metrics for medical groups. This makes the data more likely to be statistically significant, although some critics would rather see this data at the individual physician level.  The value of a report at the group level is especially high for practices with high levels of integration and cross-coverage.  MHQP has established dialog with physicians, health plans, and other stakeholders, and gives providers a cycle to review and comment on data before it is publicly released. This takes time and energy – but increased “buy-in” from the provider community makes it more likely that the public disclosure will actually change practice. 


MHQP will be developing and implementing the state’s quality and cost website over the coming months.  Data on cost of care will be an important complement to the current public disclosure.


The Boston Globe had a front page article yesterday suggesting that cardiologists in Massachusetts avoid the “tough” cases of heart vessel blockage for fear that these cases would adversely impact their reported mortality rates.   (In an ideal world risk adjustment would fully address this concern – but we don’t live in an ideal world!)   The article was illustrated with a photograph of a man who had an angioplasty despite the fact that he was in a coma – he recovered and is shown with his wife walking the family’s three dogs.


This is a tough public policy issue.  There is very ample evidence that public reporting helps ease “bad quality” providers out of the system, and lowers the risk of death or morbidity for the “average” patient.  However, there is also evidence that public reporting makes physicians at tertiary centers ambivalent about performing at the “cutting edge.”  Many feel that some heroic care offered at academic medical centers is wasteful and seems cruel to dying patients and their families.  However, the “frontier” of medical treatment really does move based on this “cowboy” medicine.  When I was in medical school, treatment of premature newborns under 2 pounds seemed futile; now, such babies are routinely saved, and many go on to lives that are not even marred by severe disability.  Great essay on this by Tom Lee and others "Is Zero The Ideal Death Rate?"


Since public reporting of cardiac surgery, the mortality and morbidity of that surgery has plummeted.  I’m hopeful that the cardiologists will get behind improved risk adjustment and support public reporting of outcomes from angioplasties.   Perhaps in the end we'll have to just remove the highest risk cases from reporting - rather than pinning our hopes on risk adjustment. 


Prostate Cancer Screening: Rough Estimate of the Cost

Two studies in last week’s  New England Journal Of Medicine showed disappointing results from prostate cancer screening. This is a reminder that investments in preventive care are not always a good idea.  The United States study, completed in 10 centers, included 77,000 patients and showed a nonsignificant increase in death rates among those patients who were randomly assigned to screening.  The European study, an amalgam of seven different studies which had different designs, included 182,000 patients, and did show a decrease in death from prostate cancer of 7 per 10,000. However, 49 men were treated for prostate cancer for each life saved – leading to an enormous amount of incontinence and impotence. 


I’ll turn 50 next year – and it’s not looking like I’ll be getting my first PSA test!


The morbidity from all prostate cancer treatment is considerable – whether prostate removal (radical prostatectomy) or radiation (either external beam or implantation of radiation ‘seeds’).  There is has been little written about the cost of the increased cancer diagnosis from  prostate cancer screening – so I figured I would provide some “back of the envelope” guesstimates of the cost of our prostate cancer screening.


Population:  18.7 million  ages 50-59 (United States)

Increased Cancer Diagnoses: 3.4% (8.2% in the screening group and 4.8% in the control group)

è Increased Cancer diagnoses: 638,542 for this population over about a decade


Distribution of Treatment (and associated cost)

Wilson, et al Cumulative cost pattern comparison of prostate cancer treatments, Cancer 109: 18-527

Note that this is Medicare data, so this understates the cost compared to a population under 65.


è Total excess cost over 10 years for this population: $27 billion


That’s not a trivial figure even in these days of massive corporate bailouts.







Radical Prostatectomy


 $        36,888


 $  12,912,828,840



 $        43,108


 $        816,163,764



 $        35,143


 $    3,292,336,812

External Beam


 $        59,455


 $    3,410,338,800



 $        69,244


 $    5,894,672,476

Watchful Wait


 $        32,135


 $    1,072,602,030





 $  27,398,942,722