Paul Starr on the “Medicare Bind”

Today’s Managing Health Care Costs Indicator is 17.4%

Paul Starr, the sociologist whose “The Social Transformation of American Medicine” helped many of us understand the history behind the financing and delivery of our health care system, has a long thoughtful piece about the “Medicare Bind” in the November American Prospect.  

Starr is a liberal, and American Prospect tilts left, but he’s pretty clear that the status quo will be unsustainable over time.  He points out that Medicare would be 17.4% of the federal budget in 2020, assuming that there is no fix of the SGR 29.4% physician pay schedule cuts, which is dubious.  Medicare will continue to crowd out other programs – so figuring out how to purchase better value with Medicare is key to our future economic well-being. 

Starr challenges Democratic orthodoxy, and states that Medicare had a fatal flaw from when it was established.

Ultimately, however, we need to recognize that establishing a separate health-insurance program for seniors was not a good idea in the first place, and the fairest and most effective way to control Medicare’s costs will be to bring health insurance for seniors under the same rules and policies that govern health insurance for everyone else—though, as the varied systems of other countries show, there is more than one way to achieve that goal.

He points out that the initial program paid providers too generously, offered stingy coverage (no drug coverage, no catastrophic coverage, no limits to out of pocket payment) and was dizzyingly complex (four programs, Medicare Part A with the hospital trust fund for inpatient care, Medicare B funded by premiums and tax revenue for outpatient care, Medicaid for the poor and those with disabilities, and private Medigap plans to cover the plethora of holes.)

Medicare has also increased the cost of health care by paying for hospital capital expenses, leading to overbuilding, and by making medical education payments an entitlement, leading to oversupply of some specialties.  He says

Most people see Medicare as a program serving the elderly; what they miss is that Medicare has also been a program serving the health-care industry, financing its expansion.

But it’s been hard to reform the system. Starr’s explanation:

Yet by protecting the larger part of the public, concealing the system’s true costs, and enriching the health-care industry, the nation’s policies have made every attempt at reform politically treacherous. The United States has cleverly ensnared itself in a policy trap: an increasingly expensive, complex, and dysfunctional system that has nonetheless resisted fundamental change.

Medicare has created a large bloc of voters who do not realize how great a public subsidy they receive and who think that other people shouldn’t expect government to help pay for their health care.

He points out that there are many elements of potential future cost saving built into the Affordable Care Act, including the the Payment Advisory Board, comparative effectiveness research, bundled payment pilots, accountable care organizations,

Starr on patient cost-sharing:

The evidence is that increased patient cost-sharing does reduce health costs to some extent. But as a general remedy for rising health costs, this approach has much less to recommend it than many people assume. Americans already pay a higher percentage of health-care costs out of pocket than do people in the other rich democracies, yet total costs are much higher in the United States than anywhere else. In the United States, health-care spending tends to be highly concentrated in a small proportion of high-cost cases; during the course of a year, the most costly 5 percent of people typically account for more than 50 percent of health-care costs, and the top 10 percent of people account for 70 percent of costs. These high-cost cases are little affected by cost-sharing; once a patient is in the system, physicians make most of the decisions affecting costs.  Rather than expecting patients to economize, much less to bargain over prices when they’re ill, we should focus incentives on physicians and providers—to try to influence the “supply” rather than the “demand” side of the market, because in health care, unlike other markets, the suppliers drive so much of the demand.

He notes there are a few options to address health care access and cost:

On the right: Moving to vouchers, as proposed by Paul Ryan and passed by the House of Representatives earlier this year.    This would be untenable without health care exchanges.

On the left:   Single tax supported universal coverage system

The first will lead to much higher patient costs (the CBO suggested the Ryan plan would double the cost of health care for the elderly).  The second is politically untenable, and probably not compatible with American culture.   Some hybrids could include a public option plan to compete with existing private plans, or allowing 55-65 year-olds to buy into Medicare.   He notes that either such a plan would need to be wary of adverse selection. 

Starr’s conclusion:

Health policy is not like a mathematical problem that has only one correct solution. The many countries that provide good health care at a reasonable cost do so in a variety of ways that reflect their distinctive institutions and history. The United States could yet evolve a distinctive, rational solution of its own even though the poisonous air of American politics today gives little reason for hope. 

Cap and Trade to Improve Dietary Habits

Kristina Lewis and Meredith Rosenthal have a provocative suggestion in this week's New England Journal of Medicine.  Instead of taxing non-nutritious food -- new taxes face seemingly insurmountable political opposition -- they propose establishing a "cap and trade" regime that depends on the free market, much as we have done for sulfur dioxide emissions.  Cap and trade has allowed us to decrease sulfur dioxide emissions by about half, and it's cost far less than standard emission-lowering regulations would have.

The idea is straightforward -- create a target for the total amount of harmful food products, and allow individual manufacturers or marketers to sell to each other the right to incorporate more fat, more calories, or more salt in their products.  That would allow full, free consumer choice, but would tend to increase the prices of unhealthy food while decreasing the prices of healthier alternatives.

Some will consider this a back-door attempt to tax unhealthy food - but it's not.  Obesity and diabetes caused by poor dietary habits have real social consequences and costs; this proposal would be an innovative way for the government to structure a market to improve our health and lower our health care bills.

Overused MRIs

Today’s Managing Health Care Costs Indicator is 90%

Orthopedist James Andrews thought there was an epidemic of improbable injuries among his patients –and the common denominator was that magnetic resonance imaging (MRI) appeared to be discovering  apparent injuries that just would never matter.   So he scanned the shoulders of 31 major league baseball pitchers who were all pain-free and apparently healthy, and he found that 90% of them had abnormal cartilage, and 87% of them had an abnormal rotator cuff.  Most of us don't use our shoulders like pitchers do - so the 'false positive' rate of MRIs in mortals is probably lower.  But if major league pitchers can pitch with these apparent MRI abnormalities, I can probably do my daily activities without a surgical intervention even if I have a sore shoulder.

Gina Kolata reported this story in today’s New York Times; I’ve looked through PubMed and can’t find reference to the published article.

Other orthopedists quoted said that they virtually never saw a “normal” shoulder or knee MRI – and one patient narrowly averted knee surgery because an orthopedist felt that the diagnosis from the first MRI was too serious based on the patient’s symptoms.  So that orthopedist did a second MRI.

The US has lower utilization of almost every type of service compared to  other developed countries (fewer hospitalizations, office visits, and prescriptions per thousand).   However, high tech imaging is a place where we have both high prices and high utilization. (The only country with higher MRI and CT scan utilization than the US is Japan, where MRIs cost under $100).

We clearly need to start showing more restraint – and not ordering imaging tests where we could answer the question with a clinical exam. We also need to refrain from ordering tests where the pretest probability is so low that the posttest probability that a positive finding was true would still be low.  (See this post for an explanation of this concept)

Unnecessary MRIs are not harmless – and they can often lead to additional invasive therapy (and incremental cost).

Readmission Prevention: A Work in Progress

Today’s Managing Health Care Cost Indicator is 19.6%

There’s been a lot of talk about preventing hospital readmissions  -- and the Affordable Care Act has some early incentives for hospitals that can lower readmission rates, and some painful later penalties for those which continue to have higher readmission rates. 

One in five Medicare beneficiaries discharged from a hospital is readmitted within 30 days. (It’s 24% among the disabled under 65, and 19% among those over 65).   MedPAC suggested that the cost of preventable Medicare hospitalizations could be $12 billion per year. There are innumerable demonstration projects to lower hospital readmission rates. They often include better discharge planning and patient education, medication reconciliation, post-discharge phone calls and appointments, and home visits.  Some of the more innovative include home visits by pharmacists, since improper use of medication is a frequent cause of readmissions.

There’s a disappointing review of the published literature in the late October Annals of Internal Medicine.  The authors examined over 4000 articles, and did in depth review of about a tenth of them.   43 articles met inclusion criteria because they and compared outcomes between an intervention group and a control group. Even so, most of the studies met less than half of the Cochrane Collaborative criteria regarding unbiased clinical trial reports.

Of the 43 trials reported, only 7 were randomized, and most were quite small. 

The authors’ conclusion:

We did not identify a discrete intervention or bundle of interventions that appears to reliably reduce re-hospitalization.

Hospital readmissions are the largest opportunity in Medicare and in disabled populations, and those with chronic disease. In employer-insured populations under age 65, many of the readmissions are either related to mental health, or are planned (scheduled chemotherapy) or desirable (organs becoming available for those requiring transplants).

The special sauce to substantially reduce hospitalizations still hasn’t been identified.

Nice to see that health care isn't always # 1

I can't resist posting this chart - from the Washington Post.  It's so rare that there is any cost line with a slope higher than health care!  (It would be easier to celebrate, of course, if our two children weren't heading eventually to grad school).

Capital Expenditure as a Cause of Future Health Care Costs

Today’s Managing Health Care Costs Indicator is $3.2 billion

I attended the Connected Health Symposium sponsored by Partners HealthCare at the end of last week.  It’s a great mix of futurists, gizmo-geeks, and health policy wonks – with more keynotes than seem possible in a two day conference.  The twitter hashtag was #chs11 to see comments that were posted by participants during the conference.

Most of the companies exhibiting at the Symposium aren’t ready to reinvent health care – they are looking to add another layer onto an already expensive and fragmented system.  For instance, one company had an elegant portal that it hopes insurance companies will sponsor to let patients track many biometrics and communicate with their physicians.   But there are no connections built to any electronic medical record.  What would make physicians use this tool?   I have no idea.

As I head into a new semester of teaching Managing Health Care Costs, the comments that caught my attention were from Kevin Shulman, MD MBA of Duke. During the closing panel, he pointed out that while we’re focused on the variable costs of health care – growing fixed costs are driving future health care costs.

Kevin said that when he talks to medical students, he asks them to look out the window at the construction cranes – and points out that when they graduate they will be variable costs in the future, while the gleaming new building will be a fixed cost.  When the finances go awry, the variable costs get cut first.  

Capital expenditure limits (such as certificates of need) have never been especially effective, perhaps in part because of ‘regulatory capture,’ where the government is so heavily influenced by providers that it doesn’t adequately restrict new investments.   Hospitals were paid on a ‘cost plus’ basis by Medicare until 1982 –and Hill Burton and other funding further encouraged overcapacity.   Hospitals that are successful tend to make capital investments in technology associated with high margins, and this helps promote the cycle of ever-increasing costs. 

How expensive is it to build a new hospital bed? 

Assuming that it costs $2 million for a new hospital bed, and a hospital is able to sell tax-exempt bonds at 5% for 25 years, the interest cost for each new hospital bed is over $150,000 a year.    That’s $150,000 regardless of whether that bed is needed or not.  Partners Health Care will be making $3.2 billion in capital investment through 2013.  The cost of servicing this debt will be over $20 million a month – costs that are locked in for 25 years.   

New investment in hospitals is certainly necessary.   Old 4-bed “semiprivate” rooms are not only undesirable, but it’s hard to maneuver new equipment in them, and these rooms compromise privacy and can spread hospital-acquired infections. Infusion pumps that prevent medical errors cost tens of thousands of dollars, and are worth it.   Hospitals will always be capital intensive, as the existing physical plans depreciate and new technology including IT doesn’t come cheap.

What can be done?

·        Hospitals can reengineer their processes to remove steps. Virginia Mason discovered that by decreasing distances traveled, wait times and downtimes for ambulatory cancer patients, it could build fewer square feet of clinical space, and even avoid building new parking garages. 
·        Collaborations among providers can avoid the need to create excess capacity.  Many cities have a plethora of cardiovascular surgery programs competing to perform a shrinking number of bypass surgeries.  Of course, the line between collaboration and collusion is often hard to draw.  Competition should lower prices in a functioning market – but duplicative services in a community force excess capital investment increase our health care costs
·        Payment reform to bundle payments encourages hospital CEOs and CFOs to think about how to lower resource costs, rather than how to crank up the revenue.  Fee for service is a substantial cause of the cap-ex arms race – and even the threat of moving to bundled payments can help decrease counterproductive investment

Hospitals that over-invest and create unsustainable future fixed costs, will ultimately need to fail. This will be painful for the community, for patients, and for clinicians – and for hospital bondholders.  In many instances, state agencies are insuring these bonds, so it won’t be cheap for government either.

Electronic Medical Records: Podiatrists Lead in “Meaningful Use”

Today’s Managing Health Care Costs Indicator is 12%

Many have suggested that electronic medical record adoption will help physicians lower medical costs. The hypotheses about how EMRs will lower medical costs include:
·        Better coordination, so that physicians won’t inadvertently prescribe conflicting medications or order duplicate tests
·        Better decision support, with fewer medical errors and adverse drug reactions
·        Better patient communication, with portals to allow for questions and some self-service requests.

EMRs could lead to lower drug costs, fewer hospital admissions and readmissions, and even decreased use of the emergency department.   Of course, EMRs will only accomplish this if they are fully functional and actually used! 

Electronic medical records are likely to have the most impact when they are implemented by physicians who take care of complex patients – those who are cared for by multiple different physicians in different specialties, who are often on polypharmacy as well.

So what specialty is leading the race to adopt electronic medical records and meet federal “meaningful use” guidelines.  Here’s a disappointment.  It’s foot doctors, who make up 1.5% of Medicare clinicians, but had 12% of the federal ‘meaningful use’ payments.

Podiatrists often take care of especially sick people. Their practices tend to have many frail elderly patients, and many of these have diabetes or vascular disease.  However, podiatrists don’t prescribe an especially broad range of pharmaceuticals, and the level of coordination required between podiatrists and other clinicians is on the low side. 

It’s great that podiatrists are implementing EMRs and doing it well.  However, we’ll get the most value from EMRs when internal medicine specialists such as cardiologists and nephrologists are adopting EMRs at this kind of level.

Physician Group Lowers Cost While Improving Quality

Today’s Managing Health Care Cost Indicator is $16,000

Click image to enlarge.  Source

November’s Atlantic Monthly profiles Caremore, the California-based physician practice purchased this spring for $800 million by Wellpoint, the nation’s largest health insurance plan.  The practice cares for about 50,000 Medicare beneficiaries, and is paid through capitation via the Medicare Advantage (Part C) program.

The practice is about 20 years old, and has an impressive record of improving care while lowering overall costs.  Much of what the practice does is invest in improved care – by paying for taxi rides, doing home visits to assess risks of falls, seeing diabetics with small foot injuries every few days, and electronic monitoring of those at risk for hospitalization from congestive heart failure.

The article is heartening – the practice appears to be doing well by doing good.  These techniques have been used by groups paid capitation by Medicare for years – I remember our group in Cambridge setting up home physical therapy visits to do assessment for fall risks in the early 1990s.   Wellpoint’s purchase of this group (at an eye-popping $16,000 per patient) is market validation that this model works to improve quality and lower cost for the elderly.  Some of these lessons are applicable to those under 65, although there are far fewer very sick people in the younger population who would benefit from many of these approaches.  For instance, 30 day hospital readmission rates are 20% in the Medicare population, but only 9% for a privately insured younger population.  Remember that many of these readmissions are for planned chemotherapy or staged surgery, too.

This provides a good example that providers given a budget can manage to make health care more affordable.   That’s good news for policymakers in Massachusetts, who are pushing toward legislation to expand global payment to control health care costs.  However, expanding this approach from a niche group of providers to an entire state will be no small challenge.

Does the AMA Have Red Green Colorblindness?

Today’s Managing Health Care Cost Indicator is 13


Source  Click on image to enlarge  

Thirteen states currently have laws on the books that prohibit laboratories from releasing results directly to patients, and insist that all laboratory results are “sent only to the physician or authorized health entity.”

The AMA is opposing new proposed federal regulations that will mandate that laboratories disclose results directly to patients – which will allow downloading of data to personal health records that are not associated with the patient’s physician.   Hence, the red states on this map are those where lab results can be “sent to the patient without physician approval.”  

I believe that patient engagement can improve the quality of care, as well as ultimately lower the cost.  Patients should see their laboratory results, and they should feel comfortable asking questions if they don’t understand them.  In my own clinical practice, patients seeing their own test results occasionally asked a question that helped me avoid making an error.  They often asked me a question that let me address their real underlying concern.

Some physicians are worried that patients will ask questions about all sorts of irrelevant tiny abnormalities – leading to a clogged switchboard, wasted time, and unnecessary follow-up tests. However, when we gave our patients access to their laboratory data at Harvard Vanguard through a secure portal – we heard absolutely no complaints about this.

Malpractice suits for “delay in diagnosis” for breast cancer with abnormal mammogram declined substantially after a federal regulation required that radiologists communicate the results of mammography directly to the patient.   (Note I have not successfully found a good reference for this – but this was reported by CRICO, the Harvard medical malpractice carrier).    

I think the AMA is doing us a favor by providing this map.  It’s time to empower patients and give them access to their own information, which will help improve the quality of care.   Let’s just be certain to get the ‘red states’ and the ‘green states’ right.  The green states should be those that insist that as a patient you have the right to receive your own laboratory data!

Health Care Suffers from Declining Labor Productivity

Today’s Managing Health Care Costs Indicator is -0.6%

Click image to enlarge.  Source 

Many of us wonder, rhetorically, why the smartphone I wear on my belt costs a fraction of my first (1986) Macintosh computer, yet has so much greater capacity, while improvements in health care seem to always come with very high price increases. 

Yesterday’s New England Journal  answers the question. Labor productivity in most industries has increased dramatically over the last 20 years. The glaring exception is health care, where labor represents over half of all costs, but we produce less health care “product” with this increasingly expensive labor.  While labor productivity in manufacturing went up by 4.7% annually, labor productivity in health care declined by 0.6%.  While incomes were in general stagnant during the Great Recession, health care incomes continued to climb.

The authors say:
Improving the labor structure in health care can be achieved in three ways: reducing the number of workers, lowering wages, or increasing productivity. The first option is a crude approach generally reserved for recessions, though employment in the health care sector continued to increase during the most recent recession. Wages can be lowered by either reducing current wages or replacing current workers with lower-cost (less skilled or more narrowly skilled) workers who can produce the same output. The field of law has gone through such a transition, with the number of jobs for paralegals and legal assistants growing 2.5 times as quickly as that for attorneys in the 2000s

They also point out that we need payment reform to encourage more effective use of resources (another vote against fee for service), and we need regulatory reform to eliminate rules that currently force us to use higher skilled professionals to perform functions that could be “downshifted” to those with less training who have lower incomes. Both reforms could substantially increase the attractiveness of disruptive innovation in health care.  

Increased jobs in health care look good to policymakers struggling with our current unemployment rate.   They look exceptionally good to local officials, who gain the benefit of good jobs funded largely from outside the community.  However, increased employment in health care without substantial increases in the social value of health care output lead to the situation we’re in now, with unsustainable health care inflation coupled with outcomes that are far from the best in the world. 

Our current approach to health care labor shows we are willing to pay an iPhone price for a clamshell phone that barely sends text messages.

Reprise of an image from a summer post:

Click image to enlarge Source 

Arnold Relman: Doctors Can Fix Health Care

Today’s Managing Health Care Cost Indicator is $152 billion

Arnold Relman, a former editor of the New England Journal of Medicine, has a long piece on health care in this week’s New York Review of Books.  I especially liked the title:  “How Doctors Can Rescue Health Care.”   I was hoping that he would emphasize that even in our system riddled with administrative waste and resource-consuming middle men, most health care dollars are spent in the delivery system, and physicians determine how much health care is going to be delivered in many or even most instances.

Relman diagnoses three main problems with current efforts at health care reform

·         The Affordable Care Act increases our reliance on private health plans. He states the overhead and profits of private health plans add $152 billion to our annual health care bill.
·        The Affordable Care Act doesn’t change fee for service, which encourages higher utilization
·        The Affordable Care Act does not decrease the fragmentation of health care, and he is skeptical that the Accountable Care Organizations will take off based on provider pushback.

He also notes that the prospect of the Independent Patient Advisory Board helping to bring more evidence to health care decision-making is dim, concluding that the constraints on the IPAB will lead it to suggest price cuts and benefit reductions rather than ways to actually improve care.

Relman doesn’t spare opponents of the Affordable Care Act, either, stating that “Republicans in Congress have pretty much limited their health policy to an unyielding opposition to “Obamacare,” to calls for reform of malpractice litigation, and to their traditional reliance on “market forces.”  He notes that Paul Ryan’s Medicare plan would substantially increase patient cost sharing.

Relman finds hope in the consolidation of provider systems with physicians increasingly salaried employees.  He notes that surveys from the American Medical Group Association and the American Hospital Association suggest that as many as a quarter of American physicians are now employed in multispecialty groups.  However, he states that the current payment system limits how many costs will be saved even in these systems without intrinsic incentives to overutilize care.

He suggests, with more than a whiff of magical thinking, that as more people see the value of these integrated systems, we’ll start having a real discussion about payment reform, and he states

…    It might become easier to pass legislation that created a system based on a tax-supported single-payer system, with prepaid comprehensive care for all. Obviously, there is no guarantee this would happen. Indeed, the odds would still be against it. But if most physicians were to be employed in multispecialty groups, the growing number of practitioners now supporting major reform would probably become a strong majority. This could well change the climate of opinion enough to influence legislation.

I’m not convinced.   I like multispecialty groups because I think they can deliver tightly integrated care, use teams that include robust roles for nonphysicians, and think about an entire population, rather than just the patients in that day’s schedule.   But tightly-integrated multispecialty groups require large capital investment, and there are few markets (San Francisco, Minneapolis) where such groups are dominant.   Kaiser and the clinics in the upper Midwest and the Pacific Northwest have cultures that have been built over many decades, and current physicians who highly value autonomy are not going to coalesce into Kaiser-like groups across the country in just a few years.    Further, there is good evidence that provider consolidation is actually raising costs.

Relman deeply dislikes health plans, especially for-profit health plans.  However, even Medicare is largely administered by private (for-profit) claims administration companies.  Further, health plans are big businesses. The top five have market capitalization of almost $120 billion and United Health Care alone says it employs over 70,000. They are not going away any time soon!
I think Arnold Relman got the headline right, though.  Physician bills represent less than 20% of all medical costs – but physicians play a pretty substantial role in determining how much we’ll spend on everything else. We spend too much on

·        Drugs (we use too many brand name drugs when generics would do just as well)
·        Hospitalizations (we have too many readmissions among the elderly, and use expensive academic medical centers when community hospitals would be just fine)
·        Medical devices (don’t get me started on the overuse of implantable defibrillators)
·        Dialysis (with worse results than the rest of the developed world)

Physicians can rescue health care – and many around the country are working hard to implement Toyota or Lean techniques – others are doing process reengineering to eliminate unnecessary steps, and some are learning from Disney and other great retail and consumer products companies about how to better meet the needs of the customer, aka patient.

But I don’t think physicians being more discrete in their use of medical resources will lead to the collapse of the current health care finance system, as dysfunctional as it is. 

USPSTF Recommends Against Prostate Cancer Screening

Today’s Managing Health Care Costs Indicator is $3 billion

Word leaked late last week that the US Preventive Services Task Force (USPSTF) will recommend against prostate cancer screening with the prostate specific antigen.  The evidence has been piling up for years that routine PSA screening doesn’t save lives – and the cost, morbidity and early death from treatment, and incontinence and erectile function problems caused by this screening are enormous.  This is the link to the USPSTF draft recommendation, which rates prostate cancer screening a “D” (moderate or high certainty that the intervention harms, has no benefit, or harms outweigh the benefits). 

The problem with prostate cancer screening is not only that there are many false positives.  More importantly, there are many true positives that find cancer that would have had no impact on the patient’s life span or quality of life.  A man whose prostate cancer would never have hurt him who has this treated is always worse off!   The scientist who discovered PSA, Richard Ablin, editorialized against its use in screening in 2010.

Prostate cancer treatment is big business, too.  Urologists and radiation therapists make a substantial portion of their income from prostate cancer treatment, and hospitals and physician groups have made huge capital investments in IMRT (intensity modulated radiation therapy) and even proton beam therapy centers. 

Shannon Brownlee, author of “Overtreated” (see bottom of web page for book description) has a thoughtful and well-timed article in the New York Times Magazine today about this difficult issue.  She asks “Can Cancer Ever Be Ignored?”  She reports that the USPSTF was ready to release its finding on PSA screening in 2009 – but the blowback from the suggestion that year that mammography should not be routinely recommended for women between 40-50 delayed the recommendation. It was again delayed before the 2010 midterm elections – and even now the report was put out in draft form only after the content was leaked in the press.  

This draft recommendation is finally published even as a separate investigation suggests that 40% of the cancer screening ($1.9 billion)  services paid for by Medicare are medically inappropriate.  This report only considered PSA screening inappropriate in men over 75. If all PSA screening was considered in appropriate, the portion of cancer screening that is inappropriate would be substantially higher. 

There are some screening tests that improve the quality of health care – including pap smears and mammograms for women between 50 and 69.  There is evolving evidence that CT scans might appropriate for screening those at high risk of lung cancer, although the literature on this is not yet fully settled. 

It’s reassuring to think we can save lives (and money) by screening.  This is true less often than we would wish. 

PSA Scorecard

$3 billion spent on PSA screening annually
1 million men treated with surgery, radiation therapy or both who would not have been treated without PSA testing
5000 deaths shortly after surgery
10-70,000 major complications
200-300,000 cases of impotence, incontinence, or both

Frequency of Overused Ambulatory Clinical Activity

Today’s Managing Health Care Costs Indicator is $6.8 billion

Click image to enlarge

The Archives of Internal Medicine published a report this weekend of researchers who reviewed data from two standard national databases to ascertain how often physicians offered the top overused clinical activities in primary care. They then extrapolated the incremental cost of this low-value care across the entire population.

A disturbing percentage of office visits included inappropriate care.  Blood counts were not indicated more than half of the time they were performed, and four in ten kids prescribed antibiotics for sore throats probably didn’t need them.  A third of the time physicians prescribed expensive brand name statins when generics would have saved substantial money. How much money? I’ve truncated the ‘y’ axis here – the brand name statin use is responsible $5.8 billion in excess cost, for the overwhelming majority of excess cost in this study.

The researchers used the Medicare fee schedule and prices, so this underestimates the actual cost of excess office-based care and overestimates drug costs, as pharmacy benefit managers get lower prices.  This is a study based on claims only.  Researchers did not review charts to find subtle reasons for these clinical activities, so this could overstate excess care.
Click on image to enlarge 
The $6.8 billion in excess cost is nothing to sneeze at – but removing all of these costs wouldn’t make much of a dent in our $2.3 trillion total health bill.   The generic statin issue will be largely solved, as Lipitor becomes available generically as early as next month and will presumable drop dramatically in price by mid 2012. The resource cost to do an extra blood count, blood chemistry, or EKG is only a tiny fraction of the allowable charge.  

There is a lot of room to improve clinical practice in this country. However, we continue to face mainly a price issue – and eliminating all the overutilization identified in this study would only lower the cost of health care by a quarter of a percent.

Thanks to Eyal Zimlichman, MD for pointing out this article.

California to Mandate Maternity Coverage

Today’s Managing Health Care Costs Indicator is $12,320 to $17,093

The Los Angeles Times reports that the California Legislature has just passed a bill that would mandate that individual health insurance cover pregnancy-related expenses. 

California already mandates maternity coverage for health maintenance organizations and for state-regulated employer insurance, but until now insurers have been able to write individual policies that exclude coverage for pregnancy.

The $12,320 to $17,093 is the range of estimates of hospital and obstetrician costs is from the International Federation of Health plans in 2009.  This data is not trended forward from 2009, and does not include costs of anesthesia.  This is also for a vaginal delivery; cost is higher for Caesarian Section, which represents about 35% of deliveries in the US at this point.

Governor Jerry Brown has not yet announced whether he will sign the bill. Should he?

Pregnancy is often planned – so theoretically prospective moms could plan their finances to account for this expense.  However, delivery is just too expensive for most people to be able to pay this out of pocket.  It seems to me that pregnancy is exactly why we should have social insurance and share the cost burden across the larger population.

On the other hand, voluntary individual health insurance premiums will rise substantially if  pregnancy is covered.  Women could sign up after their positive pregnancy test – and thus deprive the insurance pool of their pre-pregnancy premiums.   Hence, the cost of the health insurance premium would need to be very high, to account for adverse selection, the selective recruitment of those likely to have the highest medical bills.  Health insurance which is unattractive to the healthy is unsustainable.

This is the problem of voluntary, ‘guarantee issue’ individual health insurance – it’s in each person’s individual best interest to sign up only when she needs benefits, but this limits the ability of the healthy to subsidize those with health care needs. 

The Affordable Care Act’s individual mandate addresses this issue, although it’s wildly politically unpopular to require that Americans purchase private health insurance to avoid a penalty.

Jerry Brown will find it difficult to veto this bill.  He’ll want to show solidarity with pregnant women, and make it easier for them to obtain proper prenatal care.  The maternity care needs to be paid for one way or another – we’re not going to force women to have their children on kitchen tables.   If Brown  does sign the bill, premiums will rise rapidly in the individual market, making it difficult for many to afford the health care insurance they currently have.  

It’s easy to see why policy experts are much more enthusiastic about the individual mandate than Americans filling out public opinion surveys!

Addendum: LA Times editorial supporting mandate
Today’s Managing Health Care Cost Quote is
"A blog isn't writing. It's graffiti with punctuation"

I went to see Contagion, the newish Steven Soderbergh film, last night.   The story of the film is dreadful – an executive returns from Hong Kong with a new epidemic virus, which kills millions across the world, and threatens to kill a billion people.  The virus kills a quarter of those infected, and is highly transmissible.  It doesn’t spare kids, medical workers, or epidemiologists, although Matt Damon is immune.

A deadly worldwide epidemic brings out the worst in many (looting, rioting, favoritism, and profiteering), although it brings out the best in others (virologists toiling day and night, and testing a potential vaccine on themselves).   A virologist fires the quote above at the Jude Law character, a blogger with terrible teeth who earns millions pitching conspiracy theory and a useless nostrum for the epidemic .

Contagion is scary – an apocalyptic tale where governors seal borders of their states in the vain hope of preventing viral spread, while public health officials in China kidnap World Health Organization officials to gain preferential access to the vaccine for their villages.

I’m reminded by the scrum at the University of Minnesota Hospital about the need for surge capacity within our health care system.  As much as we want health care to be “lean,” we also want to have enough hospital beds to care for the unexpected –whether it is natural disaster, terrorist attack, or infectious disease.

It’s hard for hospitals and provider organizations to justify huge disaster preparedness expenditures in tight budgets – and this will get more difficult still as providers face reimbursement cuts in the coming years.  We’ll be wise to put most disaster preparedness dollars into public health budgets rather than indepedent institution budgets- which can allow flexibility to set up temporary facilities and even structures wherever they are needed.

The movie shows the heroism of the high-tech virologists who are able to get a vaccine to market in just over 4 months, and the public health officials who quickly convert stadiums into hospitals.  Contagion also notes that the best way to save lives is decidedly low tech.  Hand sanitizers, quarantines, and keeping more personal distance are critical weapons in the battle against this harrowing new epidemic.