Will Insurance Companies Die Off? I Don’t Think So.

Today’s Managing Health Care Costs Indicator is $55.2 billion

Click image to enlarge.  Source 

Ezekiel Emanuel and Jeffrey Liebman have a post in the New York Times this evening asserting that:

By 2020, the American health insurance industry will be extinct. Insurance companies will be replaced by accountable care organizations — groups of doctors, hospitals and other health care providers who come together to provide the full range of medical care for patients.

 I don’t believe it for a minute.

About the indicator above – it’s the market capitalization of United Health Group.  Here are the market capitalizations of the other major for-profit health plans:

$22.4 billion
$24.6 billion
$15.8 billion
$12.1 billion
$4.3 billion

From this link you can see the rise in United Health Group’s stock price over the last year.  There were similar increases at Humana and Aetna.  $134 billion in market capitalization doesn’t get erased in a mere 8 years – and that kind of market capitalization doesn’t ever go away without a fight.

There are many functions that health plans currently perform that would be better carried out by health care providers.  This is true of almost all medical management programs.  However, health plans perform some critical functions that won’t go away overnight. Here's why I don't agree with Emanuel's conclusions.

1)     Fee for service is not going away anytime soon, and health plans have the transactional engines that make fee for service possible.
a.      Many procedures will not fit well into capitation – and these will need to continue to be paid fee for service.   
b.      Many providers, both physicians and hospitals, are in rural areas where there is little competition.  It’s likely that ACO development in those communities will lag – and the population might be too small to pay anything other than fee for service
c.      Many patients are likely to travel among different accountable care organizations for their care. Someone will have to transact claims to assure payment of all parties
2)     The authors suggest that once ACOs are prevalent, we won’t any longer have to pay all those pesky claims. Au contraire.  Successful capitated groups need to track resource use as carefully as fee for service health care providers – so we’ll be completing claims for a long time to come.
3)     Health plans are aggressively diversifying.  Emanuel mentions that Wellpoint purchased a large Medicare outpatient practice, CareMore, in CaliforniaAetna is investing millions in its efforts to be the “back office” for providers establishing accountable care organizations. Cigna has also invested in a number of delivery systems, and most of the major national health plans have purchased boutique health plans that take risk on Medicare Advantage plans.
4)     There’s a long history of provider-owned health plans – and it’s not pretty.   Provider-owned health plans have generally failed in the past because they’ve had a hard time keeping their costs down.  Hopefully, ACOs will be different.  However, it’s too early to see how ACOs will perform in the real world.
5)     Emanuel and Liebman note that insurance plans are barely offering insurance even now – since most of their members are in self-insured employer sponsored health plans.  The insurance companies have figured out how to make these “administrative services only” accounts profitable – and some have actually migrated away from offering fully-insured plans in many markets
6)     The authors suggest that with 15,000 members an accountable care organization will be big enough to accept financial responsibility for its entire population.  In a non-Medicare population, that number is not actuarially stable, so the ACOs will need to buy some (perhaps expensive) reinsurance to be sure they will not go bankrupt providing care.

The state health exchanges could be a huge boost for local and regional health plans, which in the past have been locked out of a substantial portion of the market. These plans are more likely to be nonprofit, and the Affordable Care Act offers some advantages to nonprofits as well.

The health insurance industry will continue to evolve.  The Accountable Care Organization movement could mean a tectonic shift for insurers – but I don’t see them disappearing any time soon.

Capitation advances in Massachusetts

Today’s Managing Health Care Cost Indicator is 1.2 million

Click image to enlarge.  Source 

Yesterday’s Boston Globe reviews the advance of capitation in Masachusetts, pointing out that 1.2 million residents are now in “cost controlled” health coverage. Strikingly, the word “capitation” appears nowhere in the story.

The initial evaluation of the largest capitation arrangement, Blue Cross Blue Shield of Massachusetts’ “Alternative Quality Contract,” showed improvement in quality measures and a net increase in cost in year one.  This is no surprise given that BCBSMA has had to induce reluctant providers to join.  Capitated Medicare Advantage plans have been in place for almost two decades, and have been successful at lowering health care resource costs while maintaining high rates of patient satisfaction.

Governor Deval Patrick has called for a transition away from fee for service payment.   It looks like this is happening even absent legislative action. Hopefully, other payers will be as diligent as BCBSMA at reporting the results of this payment reform.

2-2-12 Addendum: Nathan Punwani has pointed out that Medicare Advantage plans have not generally saved money.  I should have said that groups accepting capitation in Medicare Advantage plans have been able to save money and lower costs.  See this post for an example. 


I'm proud that my haiku was published in today's Kaiser Health News


Premium support
Sounds good to policy wonks
Until they get old
-Jeff Levin-Scherz

Here's a link to a more substantive post on cost shifting, rather than cost saving.

GAO: Diagnosis Code “Creep” Leads To Medicare Advantage Windfall

Today’s Managing Health Care Costs Indicator is $5.8 billion

Click on image to enlarge. Source

The General Accounting Office reported last week that Medicare Advantage (MA) plans, the private health plans that care for one in five Medicare beneficiaries, receive a windfall because of their effectiveness at coding member illnesses.  This is a quandary – capitation for Medicare members is only reasonable if there is careful risk adjustment. The Deficit Reduction Act of 2005 required risk adjustment to be phased in by 2010. 

Physicians in Medicare Advantage plans have a strong incentive to use coding to maximize the apparent illness of their patients.  Physicians in traditional Medicare are paid only based on services provided, so they have little incentive to aggressively code diagnoses.  As a result, the apparent severity of illness of Medicare beneficiaries who have chosen the private plans has increased dramatically faster than the severity of illness of Medicare beneficiaries on traditional Medicare.

It’s actually a bit worse than that. The Medicare Advantage plans put an enormous amount of energy into coaxing their participating physicians to aggressively code comorbidities during 2007-2009.  Here’s an example of how much it’s worth.  The Medicare payment goes up by 16% for diabetics, but goes up by over 50% for those who also have evidence of kidney or blood vessel involvement.   Mild diabetic kidney disease is quite common, but was rarely coded before risk adjustment.  Now, physicians participating in Medicare Advantage know that they must use the ICD9 code for diabetes with renal manifestations (250.4) at least every other year, or they will not get the maximum Medicare budget.   

Here are Medicare risk adjustment factors associated with diabetes. (See HCC_Coefficients_2009-2012)   Note that multiple comorbidities allow an additional upward adjustment, further encouraging more aggressive coding.
Click on image to enlarge.  Source 

CMS has been aware of this for some time, and as a result the agency has lowered all reimbursement to MA plans by 3.4% ($2.7 billion).  However, the GAO analysis suggests that the increased costs associated with aggressive coding are between 4.8% ($3.9 billion) and 7.1% ($5.8 billion).  

Across-the-board cuts to reimbursement to counteract differential coding aggressiveness means that all physicians associated with MA plans have to work even harder to be the most aggressive at coding complications.  If they merely code the same way as physicians participating in traditional Medicare, their reimbursement will fall each year.

The conclusion from a recent FTC analysis of gaming of risk adjustment:

Before risk adjustment, MA plans had an incentive to enroll individuals who were low cost, both along dimensions that will later be included in the formula and those that will not. Because risk adjustment increases payments for individuals with the conditions included in the formula and decreases payments for those with few or no conditions, risk adjustment lowers the payments MA plans would receive for these individuals, as they were selected to have low risk scores.

But in response to the new incentives created by risk adjustment, selection patterns into
MA change. After risk adjustment, MA plans have less incentive to avoid individuals with
the conditions included in the formula but have a greater return to enroll individuals who
have low costs conditional on their risk score. Indeed, relative to individuals who remain in FFS…MA enrollees' risk scores increase after risk adjustment, but their costs conditional on their risk score fall so much that, if anything, MA enrollees have lower total costs after risk adjustment.

There is no easy answer to this problem.  MA plans would seek the lowest risk Medicare beneficiaries if there were no risk adjustment.  However, they will seek to maximize the proceeds of risk adjustment when it is in place, and seek to select low-risk beneficiaries based on measures that are not included in the risk adjustment.  At a minimum, CMS should rebalance the risk adjustment “code creep” factor each year.  Further, CMS should consider applying this factor differentially to groups that have a high level of apparent “code creep.”  It’s possible that this could be done using ceilings on annual adjustments by group, exempting groups with very small or much-changed membership.  

The sad fact is that it’s easier to code aggressively than perform more effective medical management on the Medicare population.

CBO Report on Value Based Payment Demonstration Projects

Today’s Managing Health Care Costs Indicator is 10%

I blogged on Tuesday about the Congressional Budget Office report on disease management and care coordination. Today, I’d like to talk about the CBO reporton four demonstration projects on value based payment.

The headline is that these demonstration projects were not very successful.  That’s no surprise – the CMS payment demonstration projects violated basic fundamentals of effective extrinsic incentives.

-        The incentive system should be transparent and easy to understand
-        The goals would be clear and achievable
-        The incentive should be available soon after the desired behavior
-        The target of the incentive should clearly be able to influence the outcome
-        The incentive should be presented independently from other payments

CMS wasn’t able to build incentives that fulfilled any of these criteria.  The demonstration projects were long, there was little feedback along the way.  None of the surgeons or hospital administrators felt abiding confidence that they could influence the outcomes. Payments were made years after savings were realized. These programs were inadvertently designed to fail.

The real surprise is that not all of them failed!

The big news is that one of these projects actually saved money!  The Medicare Heart Bypass Bundled Payment project saved 10% of the cost of bypass surgery without any sacrifice in quality.  (David Cutler’s 2010 review says 15%).  Two of the other demonstration projects showed small improvements in quality-based process measures, and one of the projects showed no significant change in either cost or quality.

Here is a description of this project from Health Affairs in 2008:

…under Medicare’s Participating Heart Bypass Center Demonstration, four hospitals in the 1990s were paid a single amount covering both hospital and physician services for CABG surgery. An evaluation showed that Medicare paid 10–37 percent less, physicians identified ways to reduce length-of-stay and unnecessary hospital costs, and patients preferred the single copayment, with no cost shifting to outpatient care.

Gail Wilensky, a former CMS Administrator, asserts that further projects of bundling payment were stymied by regulatory findings that prohibited hospitals from gain-sharing with their physicians.  That’s possible. Clearly, an incentive for the hospital that cannot be transmitted to the cardiac surgeon making decisions isn’t very promising.  Also, the demonstration project was small – and it’s possible that it wouldn’t scale.

Still, it’s a surprise that CMS has not tried to replicate this!  I suspect that hospitals weren’t especially enthusiastic for expansions of this demonstration project. Through the late 2000s cardiac surgery was a reliable profit center, and lowering revenue from this service line looked very unattractive to hospitals.  .

The CBO conclusion is that we need to move away from fee for service. The writer concludes that it’s hard to have an impact with payment reforms that leave the underlying fee for service system untouched. I agree that fee for service is highly inflationary, and bundled or capitated payment systems can help bring us more value.  See a series of posts from 2009 on this topic: Part One Part Two, Part Three

But transitioning from the fee for service will require many changes in the provider system, and is unlikely to be successful in rural areas and medical communities with little competition.  Furthermore, fee for service is likely the best way to pay for some rare or unusual conditions.   Therefore, we need to develop payment reform that is compatible with the existing fee for service system. Here’s a link to a Catalyst for Payment Reform issue brief on this topic.  

Medicare showed us through this early 1990s demonstration project how to effectively implement bundled payment for selected services in the context of overall fee for service payment.  It’s time to put that knowledge to use.
Click image to enlarge.  Source 

Health Absent from State of the Union Speech

Today’s Managing Health Care Costs Indicator is 5

I listened to the State of the Union address last night (transcript) and I was worried my attention had wandered when Obama discussed health care reform – the signature achievement of a very productive first Congress of this presidency.

Turns out I didn’t miss it at all – there was virtually no mention of health care reform in the speech.  Here are the five times he used the word “health.”

Today, the discoveries taking place in our federally financed labs and universities could lead to new treatments that kill cancer cells but leave healthy ones untouched. 
 Because America will develop this resource [gas]without putting the health and safety of our citizens at risk.
 I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny your coverage, or charge women differently than men.
 Now, I recognize that people watching tonight have differing views about taxes and debt, energy and health care.
 That’s why our health care law relies on a reformed private market, not a government program.

In fairness, there were two mentions of “medical” in the speech, too.  One was about “faulty medical devices,” and the other regarding “medical research.”  It’s hard not to be against one of these and for the other!
There were a lot of opportunities to celebrate in health care over this past year.   Health care premium increases were lower this year, and those of us with young adult children can leave them on our health plan as they weather this terrible job market.  The National Institute of Medicine has confirmed that birth control is an essential benefit.  Massachusetts  continues to retain a high rate of insurance and premiums and costs have leveled out here, too.  Health plans in Texas with low medical loss ratios will have to offer big refunds.  Providers are coalescing to participate in accountable care organizations, and electronic records are proliferating. Public reporting continues to improve, and we’ve discovered that proper treatment of HIV positive patients doesn’t just prolong their high quality lives, but prevents transmission, too.
There’s a lot to worry about too.   Many states are getting nowhere in developing their exchanges, and the Supremes are getting ready to hear oral arguments about the constitutionality of the individual mandate and of federal requirements to maintain future Medicaid funding. EMRs don’t talk to each other, and health care has not become especially patient-centric. The Accountable Care Organizations haven't yet saved money, and there's always a danger they will lead to higher costs through market consolidation.  Health care still costs too much, and advances often lead to very slightly higher quality for a few in exchange for massive increases in cost for all.
Perhaps when all of these issues are resolved health care will feature more prominently in a future state of the union address.
(My post on the CBO “pay for value” demonstration projects isn’t yet complete – hopefully tomorrow)

The Congressional Budget Office Weighs in (Again) on Disease Management

Today’s Managing Health Care Costs Indicator is 34

The Congressional Budget Office released two important reviews of Medicare demonstration projects last week.  The first report is on disease management and care coordination, and the second is on value based pricing.   

I’ll cover the disease management and care coordination findings in today’s post, and will comment on the value based pricing demonstration projects in the next post.

There were a total of 34 different trials – enrolling almost 290,000 patients.  The first started in 2002 and the last was completed 2009.   A single project (at Mass General Hospital) showed significant savings, and a handful of projects showed lower inpatient utilization.  The programs were expensive; the CBO reports that the programs would have had to lower overall costs by 13% to break even.  You can get a sense of the financial results of these demonstration projects from the graphic below.  (Go to Page 22 of the working paper to see more details)

There are caveats, of course.  Medicare often wasn’t able to transmit timely data to the participating providers.   It’s hard to run a randomized or quasi-randomized trial in the real world; and providers could not make changes “on the fly” because of the study designs.  But these issues don’t change the headline.  The Medicare demonstration projects didn’t save the money that advocates promised.

My conclusions from this report

1)     There were many different trials targeting different patients using diverse approaches. All of the patients were Medicare beneficiaries who are old and are often ill – so the opportunity to improve care was large.  If it’s this hard to demonstrate impressive savings in this population – it will be harder still to show savings from similar interventions on a younger and healthier population. 
2)     The interventions were expensive.  Medical management efforts either have to be very tightly focused (but predictive modeling is notoriously unreliable) or the interventions have to be low-priced.  The CMS demonstration projects were neither
3)     The success of interventions had at least some relationship to proximity to care delivery.  It’s better for a medical management intervention to be delivered by (or with ) the health care system than by a third party on its own. Here’s an essay I wrote about this in 2005)
4) Surprising to me, "at risk" programs were no more likely to lower overall Medicare costs than programs where the program would not have to repay management fees if costs were not reduced.

My recommendations based on this report:

1)     CMS should continue to do demonstration projects.  Careful measurement is crucial to our making the right investments in the right care management.  
2)     CMS and private payers and employers should carefully measure the results of their   medical management programs.  Just because a program seems like it should work doesn’t mean it will! 
3)     Medical management programs need the engagement of patients, their families, and physicians.  Programs that are designed without connection to the provider community and engagement strategies for patients are unlikely to succeed.
Click on image to enlarge.  Source 

Next post: Value Based Payment Demonstration Project 

It's STILL the Prices

The New York Times has an editorial today again reminding us that the prices of care in the US are the major reason why costs are so much higher here than in other developed countries.

Here's the accompanying graphic:

Click image to enlarge.   Source 

A Plethora of Good News?

Today’s Managing Health Care Costs Indicator is $275 billion

Click on image to enlarge.  Source 
I wrote earlier this month that health care costs are rising less quickly than anticipated – due largely to the effects of the recession and substantially less generous insurance plans that leave patients shouldering a much higher portion of the total health care bill.  The CMS Office of the Actuary published data in the January Health Affairs that documents this.

Today’s Boston Globe (subscription required) reinforces this:

State regulators have approved premium increases averaging 2.3 percent for health insurance covering hundreds of thousands of residents, the most modest hikes in at least a decade and a sign that years of efforts to control costs may be working.

The Commonwealth Fund has calculated that the recent changes in the CMS estimate of total health care costs indicate that total health care costs will be $275 billion less in 2020 than estimated previously this year.   Health care costs are now estimated to be 19.8% of GDP in 2020; they were estimated to be 21.1% before health care reform was passed (and before we knew the depths of the Great Recession.

These pieces of good news are the direct result of the grim economy.  However, Austin Frakt of The Incidental Economist had an optimistic commentary last Wednesday entitled “How a health care efficiency revolution could make the next century even greater than the last.”

I’ve started a comment string with 5 factors that make it more likely we’ll welcome disruptive innovation in health care in the coming years, which can lower health care costs and increase value.  Austin added 6 more – and the list is now up to 16.  Go to this link to read the initial commentary and please add additional reasons (or object to those already posted.)  

Internists Step Up to the Plate and Identify Low Value Tests

Today’s Managing Care Indicator is 37

Last May, a group of intrepid oncologists identified five behavior changes and five attitude changes that could allow oncologists to increase the value of health care, largely by not performing certain tests and not administering chemotherapy in certain circumstances.  This is an important effort, encouraged by the Institute of Medicine.

The American College of Physicians, the professional society of internists, has followed suit with an expert panel that identified 37 diagnostic tests that should not be provided to patients.  Each of these tests does little to decrease uncertainty, and many of them are likely to lead to false positives which induce further unnecessary tests.   

The list is at this URL, which is unfortunately behind a paywall. That’s especially unfortunate, because ACP also announced that it would invite physicians and the public to comment on this list.  This is a great example of how to improve a document through crowdsourcing and leveraging the “wisdom of the crowds,” but it will only work if ACP puts the article and the survey outside of the paywall!

Examples of tests that should be avoided:
-       Annual lipid profile for those at low risk and not on therapy
-       Screening tumor marker tests for ovarian cancer in those at low risk
-       Screening for colon and prostate cancer in those over 75
-       Repeating colonoscopy in less than five years for those with benign adenomas
-       Doing too many tests on people who faint but have a normal neurologic exam or patients with migraine headaches
-       Echocardiography for those with innocent-sounding murmurs
-       Many preoperative tests on those at low risk
-       “Screening” EKGs for those at low risk

Some tests that require more judgment:
-       If risk of heart disease is high, go directly to cardiac catheterization with angiography (more invasive.) If risk is low, instead do exercise stress tests. In all instances, do nuclear imaging with the stress test only if the patient cannot exercise or if his/her EKG is sufficiently abnormal that the EKG alone would not give a clear reading.  If the risk is very, very low –don’t do any test at all!
-       For patients with suspected blood clots, do a sensitive blood test for those at low risk, and do an ultrasound test for those at higher risk

Physicians must estimate the pre-test likelihood of a diagnosis before ordering a test. If the pre-test probability is very low, the likelihood of a false positive is often unacceptably high.  If the pre-test probability of a test is very low, the likelihood of a false negative is high, and the physician should often go directly to a more invasive test.   This makes it even more  important to take a careful history and understand underlying risks.  Physicians must be more conversant with the mathematics of test results – and the likelihood of false positives and false negatives based on pre-test probability. See a post from last year on our misguided quest for ‘certainty.’

This kind of evidence-based medicine is anything but a “cookbook.” It takes considerably more meaningful decision-making to follow these rules than to simply do an EKG on every adult.   Exerting this kind of decision-making can lower the cost of health care, and can also increase the meaning of physicians’ work.

An accompanying editorial in the Annals suggests these decision-making rules for physicians to consider before ordering tests (slightly condensed)

·      Did the patient have the test previously?  (If so, is the result likely to be different and can I get the result instead of repeating the test?)
·      Will the test change my care of the patient?
·      What are the probability and consequences of a false positive?
·      Is there short-term danger of not ordering the test right away?
·      Is this primarily for patient reassurance (and if so, is there a better way to reassure the patient?)

This work to identify tests often ordered unnecessarily is an excellent follow-on to the new ACP Ethics Manual, which states:

Physicians have a responsibility to practice effective and efficient health care and to use health care resources responsibly. Parsimonious care that utilizes the most efficient means to effectively diagnose a condition and treat a patient respects the need to use resources wisely and to help ensure that resources are equitably available.

Following these decision-making rules and eliminating these unindicated tests can help lower costs and improve the quality (and value) of health care delivery in the US.

Available at URL -but behind paywall. Click image to enlarge.

$1 Office Visits

Today’s Managing Health Care Costs Indicator is $1

I’m a fan of Planet Money, an NPR project that includes podcasts, a blog, and co-reporting with This American Life and other journalistic endeavors.  The “Managing Health Care Costs Indicator” is clearly modeled on (or shamelessly stolen from) Planet Money.

Reporter Adam Davidson has an article in the January-February Atlantic Monthly (and some related reporting on Morning Edition last week) about Greenville, South Carolina. He investigates how manufacturing has changed in the US over the last 20 years.  It’s an amazing picture in terms of quality and cost – American manufacturers make exceptionally high quality goods, and make them at costs that are often not a lot more than the cost of manufacturing in China where wages are a tiny fraction of those here. 

The new American manufacturing is great for consumers (we get high quality American made replacement fuel injectors for cars for under $200 each), and it’s pretty good for highly skilled workers, who can make better than a living wage.   But it’s not a pretty picture for unskilled workers though, who will lose their jobs the moment that a robotic arm costs less than twice a worker’s annual income

American manufacturing companies watch every penny of resources they spend – because they know that the brutal market will insist on cost-effectiveness.   Standard Motor Products, the subject of Davidson’s reporting, must watch every penny, which means firing its unskilled workers when it becomes more cost effective to invest in a robotic arm, or when the work could be done in China or Mexico or Poland for much lower cost including transportation.  If Standard Auto Parts didn’t do this, it would be out of business.  Quickly.

From Davidson’s article:

Across America, many factory floors look radically different than they did 20 years ago: far fewer people, far more high-tech machines, and entirely different demands on the workers who remain. The still-unfolding story of manufacturing’s transformation is, in many respects, that of our economic age
A few decades ago, “turning machines” like these were operated by hand; a machinist would spin one dial to move the cutting tool large distances and another dial for smaller, more precise positioning. A good machinist didn’t need a lot of book smarts, just a steady, confident hand and lots of experience. Today, the computer moves the cutting tool and the operator needs to know how to talk to the computer
To keep the business of the giant auto-parts retailers, Standard has to constantly lower costs while maintaining quality. High quality is impossible without good raw materials, which Standard has to buy at market rates. The massive global conglomerates, like Bosch, might be able to command discounts when buying, say, specially formulated metals; but Standard has to pay the prevailing price, and for years now, that price has been rising. That places an even higher imperative on reducing the cost of labor. If Standard paid unskilled workers like Maddie more or hired more of them, Larry says, the company would have to charge its customers more or accept lower profits. Either way, Standard would collapse fairly soon

I keep on thinking about how this relates to health care.  At first I though that no one was thinking about health care like the CEO of Standard Motor Parts. 

But it turns out I’m wrong.  The NYTimes had a blog last week about the $1 office visit (often delivered virtually) in India.  We have little or no price sensitivity for the cost of health care in the US –so we deliver exceptionally expensive health care services.   In India, there is little insurance, income is low and most people have to pay out of pocket for health care. That’s a recipe for extreme price sensitivity – and that price sensitivity leads to innovation – and slashed prices -- in care delivery. 

The inexpensive and virtual visit in India represents much better care than the alternative.  In the US, though, such a visit would be profoundly disruptive.  We’ve had a hard time embracing disruptive innovation in the US with the current health care financing system.   There are no such barriers elsewhere in the world.

Office visits are a service – they are not a product like Standard Motors’ fuel injectors that can be manufactured and assembled anywhere in the world.  We won’t see those $1 office visits from India in Manhattan anytime soon.  But we are likely to see models that are far less physician-centric, and offer far better value to patients. 

We can continue to learn from the developing world about how to more effectively use resources.

Disparities and Health Care Costs

Today’s Managing Health Care Costs Index is 41%

The Kaiser Family Foundation, an exceptionally good resource on almost anything in health care policy, publishes a summary of research and articles on health care disparities each month.   For MLK Day, a few of the articles from January.

The toll of diabetes on Hispanics near the Mexico border continues to increase.  41% of Hispanic children in Arizona are overweight, compared to 22% of Arizona white children. More teens and young adults have Type II diabetes – which will subject them to a lifetime of poorer health.

African Americans have higher BMI, eat more poorly and exercise less than whites. However, researchers have shown that these differences are strongly correlated to socioeconomic status (SES).  When SES is adjusted for, the differences vanish.

Living in decaying neighborhoods was strongly related to risk of premature birth – more strongly than race

Uninsured and minority patients get less appropriate discharge instructions and post-hospital care after hospitalizations for trauma.

Those with low SES and racial minorities were more likely to be exposed to high levels of air pollution in the US Northeast.

Black women were more likely to get diabetes after having gestational diabetes, even after adjusting for BMI and other characteristics.

The differences in prescribing of Highly Active Antiretroviral Therapy (HAART) between whites and blacks disappeared by 2006.

My summary – the health outcomes and ultimate health care costs of children still have more to do with where they live and the color of their skin than the content of their character.   There is plenty of work left to do.

2011 Redux

Today’s Managing Health Care Costs Indicator is 162

I posted 162 times in 2011, and for the New Years (OK, for Martin Luther King Day weekend),  I’ve selected a small sample of these posts that either seem more relevant now than when I wrote them, or that I’m especially proud of.

Why positive early trials fade to mediocre results later (a review of a Jonah Lehrer December, 2010 New Yorker article). Note that an April post showed how Tamiflu demonstrates this concept.

High Cost California Hospitals Have Lower Mortality, although by my back-of-the-envelope calculations it looked like it would cost over $2 million per Quality Adjusted Life Year to move patients from lower to higher quality hospitals.

The IOM provides data showing huge variation, but refuting the idea that higher quality is reliably associated with lower cost.


High deductible health plans lower utilization and cost, but also lower preventive care even if it's fully covered. 



Summary of 2010 Managing Health Care Cost class at Harvard School of Public Health.  Note that the 2011 list is a bit expanded; I’ll publish that in the near future


Courageous oncologists list what they could do to lower health care costs


How genomics is upending our understanding of what is evidence based medicine, and how to assess quality


More on cost-shifting vs. cost saving, with states deciding not to cover influenza vaccine


A knock-down of an influential article projecting huge savings from a country-wide obesity reduction program. 


Paul Starr’s take on approaches to constraining the growth of health care costs

One of many posts on the problem of health care unit costs


Vaccines save money through herd immunity as well as disease prevention in those vaccinated.   It turns out the same is true of HIV therapy.


Sometimes I worry that I focus too much on purported silver bullets and modern-day snake oil, and I worry I don’t emphasize what really works to control health care costs.  Therefore, I ended the year (and began 2012) with a series on things that really work, including

I think 2012 will be another great year for policy wonks, as the Supremes consider various elements of health care reform, the 2012 presidential race heats up even further,  and we get closer to the 2014 Affordable Care Act provisions to mandate and subsidize health insurance coverage.  Happy MLK weekend, and thanks for reading.

Doctors Going Broke?

Today’s Managing Health Care Costs Indicator is $1.6 million

A story from cnn.com last week has been getting  a lot of attention, especially among physcians in private practice. 

NEW YORK (CNNMoney) -- Doctors in America are harboring an embarrassing secret: Many of them are going broke.
This quiet reality, which is spreading nationwide, is claiming a wide range of casualties, including family physicians, cardiologists and oncologists.

H/T to Shimul Shah for pointing this article out.

One oncologist profiled says that he was ‘stuck’ with $1.6 million of oncology medications that Medicare wouldn’t reimburse after chemotherapy reimbursement rules were changed.  The article goes on to point out that steep cuts in reimbursement for noninvasive cardiac tests have taken a bite out of cardiologist income, too.  The potential Medicare 27.4% SGR is said to be a Damocles sword hanging over the heads of practicing physicians.

Reimbursement cuts are tough for physicians with office practices.  Overhead often runs 50%, so a 10% fee cut yields a 20% reduction in physician take-home pay. 

Some of the reimbursements that have been cut by both Medicare and private payers represented excess margin, often from self-referred procedures.  Cardiologists who own nuclear imaging machinery order more stress tests, and orthopedists who own MRIs do more imaging test. That’s simply not a good idea.   I don’t want an oncologist to depend upon margin from chemotherapy to pay for a mortgage or a her child’s college tuition.  

There are some jolting changes going on among physician practices, and solo physicians and small groups are becoming increasingly endangered. 

-        Electronic medical records require scale, capital investment and support infrastructure. Small practices are at a huge disadvantage.
-        Hospitals and large groups are scurrying to coalesce to form accountable care organizations and accept bundled or capitated payment. This requires meaningful financial integration of many physicians.
-        The President of the American College of Cardiology estimated in 2010 that the portion of cardiologists who owned their own practices dropped by half.
-        The Medical Group Management Association (MGMA) estimated that the portion of physician practices owned by hospitals exceeded those owned by physicians in 2008.
-        Kaiser Permanente has been a hiring powerhouse in Northern California, and physician groups there report difficulty recruiting new grads.

Payment changes and the disruption of small, nonscalable, “cottage industry” practices is jarring –especially for physicians close to retirement.  The practice community will indeed look very different in ten years than it does today.  But the current office practice arrangements meet patient needs poorly if at all.  Patients have little access to their own medical records, and getting advice often means losing a half day by coming into a fee-for-service oriented office that doesn’t want to ‘give away’ free service on the phone or by email.   We expect to be able to do banking 24 hours a day from our mobile phones, but I can’t even set up an appointment with a physician except during regular business hours. We spend far too much on imaging, specialty diagnostics, and emergency department visits, and far too little on primary care and public health.

We should expect compensation changes aimed at increasing health care value will be hated by many practicing physicians.  But we’re not meeting patient needs especially well now, and there is a real opportunity to improve this through the coming payment reform.

By the way - I can't say how scary I find it that a single oncologist had purchased that much chemotherapy medication when it was associated with high profit margins. 

Health Growth Slows – Will We Lose Our Burning Platform?

Today’s Managing Health Care Costs Indicator is 3.9%

Click image to enlarge. Source 
Health Affairs just published the annual review of health care spending (from 2010) as calculated by the CMS Office of the Actuary.   The headline in the New York Times is “Recession Holds Down Health Spending,” and the Wall Street Journal says “Weak Economy Curbs Health Spending.” Total health care spending was up only 3.9% - and reached about $2.6 trillion. Overall increase in GDP was 4.2% - making this the first year overall GDP increased more than health care spending in my memory.

The study showed:
-        The effect of the Affordable Care Act on overall health care costs was 0.1-0.2% (by increasing access)
-        Hospital spending up only 4.9% (despite the aging of the population)
-        Professional services (mostly physicians) were up only 2.6%
-        Prescription drugs were up a measly 1.2% - reflecting more generic usage

Out of pocket medical spending was up only 2.8% - a surprise to me given that so many more families are covered by high deductible health plans. That’s an indication that many Americans have been deferring or foregoing health care that they would have received just a few years ago.

Increases by source of health care spending:
-        Employer Premiums: 6.3%
-        Out of pocket: 2.8%
-        Medicare: 7.0%
-        Medicaid: 9.2%

Government spending on health care is up – but don’t assume this means that government is less efficient. Rather, the Medicaid rolls went way up, and Medicare enrollment has increased as well as we continue to live longer and the baby boom ages in to Medicare. Ezra Klein had this graphic yesterday showing that effective inflation rate in government programs is considerably lower than that for private insurance plans.

We know separately that maternity rates are dramatically down as a result of the recession. These are likely to return to prerecession levels in the future – which will lead to increases in hospital and professional costs.
Source Click Image to Enlarge 

It’s heartening to see health care costs leveling off – but I hope that the sense of urgency in redesigning our health care system will not recede.  Health care still costs far too much, and we must make meaningful efforts to be sure we get more value from the health care system.  Health care is crowding out other important public investments, including education – which can have a larger long-term impact on population health and life than many of our health care system expenditures. And even if Medicare is relatively “efficient,” we can’t afford this program as my generation becomes eligible.

2010 was a good year in terms of health care cost increases.  However, this wasn’t the payoff from great efforts on health care reform; it was rather the consequence of a grim economy.  We’ll have to redouble our efforts to control costs in the environment of economic growth we hope for in the future.