Hospitals and Labs Pay for the Doc Fix

Today’s Managing Health Care Costs Indicator is 19%

It’s good news is that Congress is actually working – and has fast-tracked reauthorizing the Social Security tax break,   unemployment insurance, and the “doc fix” to prevent 27.4% decreases in Medicare physician payment.  Providing relief to those who are unemployed in this terrible economy, avoiding a middle income tax hike, and avoiding a catastrophic decrease in physician fees are all important.  Doing these together makes it harder to defeat the effort.

Doctors are the health care winners in this, at least for 2012.  Let’s look at who are the losers.  Kaiser Health News has links to a number of articles on this topic.  

·          Hospitals are the biggest losers.   They’ve already given back substantial future increases as part of the Affordable Care Act, and the current legislation will remove federal payment for bad debt and decrease payment for disproportionate share hospitals – those which take care of a large share of the most impoverished Americans.   Safety net hospitals in Massachusetts have fared poorly under health care reform, and this legislation makes it likely that this will be repeated across the country.  Rural hospitals maintained their enhanced fees.

·         There will be a $5 billion clawback from the public health funding promised in the Affordable Care Act.   It’s public health efforts that have the highest return on investment – and it’s disheartening to see us lower this investment.  However, many Republicans opposed this public health funding – and it’s easier to stop paying for education to prevent future disease than to make it difficult for Grandma to find a physician

·         Laboratories are big losers as well. Their fees will be shaved another 2%; The Affordable Care Act had already lowered laboratory fees by as much as 19%.

·         Louisiana is a surprise loser.  Senator Mary Landreiu had obtained an additional $2.5 billion in Medicaid payments for her state.  This is being rescinded.

The “doc fix” only cost $20 billion – since it is only for the rest of 2012. This means we’ll be back to this issue again at the end of the year, and by that time the cut to be averted will be even larger than 27.4%.          

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Mercury Regulation – Good News and Real Cost Savings

Today’s Managing Health Care Costs Indicator is $90 billion

These are power plants likely to be closed by the new EPA regulations.  Click image to enlarge.  Source 

It’s a light week – and in the spirit of the holiday season, the rest of my posts this year will be positive. No more blogging about pharmaceutical company price yields or insurance plan positive selection. No more greedy self-interested physicians or businessmen. No more hopelessly flawed studies that purport to show the magic solution to our health care cost crisis – but really just show data manipulation. 

Just five full days of stories about things that are working!

First up is news from last week, when Washington Post reported that new EPA regulations to limit future mercury emissions will provide between $37 and $90 billion in health benefits by 2016 – and will cost a bit under $10 billion to implement.  The regulations will also save 11,000 lives and prevent 4,700 heart attacks, and 130,000 asthma attacks each year. 

I often talk about how most of the best health care interventions give us QALYs (quality adjusted life years) for a reasonable price, but it’s rare to get QALYs AND actual cost savings.  But this intervention –forcing utilities to shut or substantially renovate some of the oldest and dirtiest coal-fired power plants- -saves money AND saves lives.

And there’s more.  These regulations save money even without quantifying the value of saving children from mercury-related brain damage, or decreasing the carbon dioxide emissions from the exceptionally inefficient plants that will be closed.  The actual societal benefits are even larger than the stated billions of savings.

The stated savings from this regulation:

Avoided Outcome	Savings Range (3% discount rate)
IQ loss from mercury	$4-6 million per year
Adult premature death	$34-87 billion per year
Infant premature death	$1.4 billion per year
Heart attacks	$900 million per year
Hospitalization for respiratory or heart disease	$40 million per year

It is typical that public health efforts – even those which have a high initial cost – are often cost-saving, while interventions within the medical sphere tend to be cost effective rather than cost saving.   Hoorah for preventing 11,000 deaths per year AND saving money at the same time.


The EPA has an exceptionally good web site explaining savings - and segmenting these by state. 

Four more days of positive news on the way.  Stay tuned.

Avoided Outcome

Savings Range (3% discount rate)

IQ loss from mercury                

$4-6 million per year

Adult premature death

$34-87 billion per year

Infant premature death

$1.4 billion per year

Heart attacks

$900 million per year

Hospitalization for respiratory or heart disease

$40 million per year

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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.

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Public Health Spending Saves Lives

Today’s Managing Health Care Costs Indicator is 5%

Click to enlarge; * statistically significant  Source 

This week, Health Affairs  e-published research correlating higher local spending on public health with lower mortality.  The article points out that the US spends less than 5% of health care costs on pubic health initiatives, less than we spend on administrative overhead in health benefit claims.

Public health spending, which can include anti-smoking education, childhood and influenza vaccines, and sexually transmitted disease and prenatal education, increased in about 2/3 of communities from 1993 to 2005, and decreased in the remaining communities studied.   

From the article:

Communities with larger increases in public health spending experienced larger reductions in mortality from leading preventable causes of death over a thirteen-year period. This relationship was consistent across several different mortality measures, and it persisted after accounting for differences in demographic and socioeconomic characteristics, medical resources, and unobserved community characteristics that jointly influence spending and health. These findings are consistent with recent time-series studies estimating that, nationally, as much as 50 percent of the gains in life expectancy experienced in the United States since 1950 are attributable to public health attention to diet, tobacco exposure, and other measures

This study validates one of the elements of the Affordable Care Act, which includes an additional $15 billion in public health spending.  It also suggests that improving health of communities can lengthen life, and perhaps lower medical claims costs.

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Obesity: The Problem is Clearer than the Solution

Today’s Managing Health Care Costs Indicator is 42%

We all know America is getting more obese, and Ezra Klein had a post yesterday pointing out that while cigarettes kill, obesity often doesn’t kill –but causes disability, chronic disease, and expenses that are 42% higher than the nonobese.  

So – we could save a lot if obese people would lose a lot of weight.

However, moving from this conclusion to practical steps to skinny down the population isn’t easy.   It’s a challenge to figure out how to get people to lose weight. 

June’s Journal of Occupational and Environmental Medicine has a careful study from the Netherlands where construction workers at high risk for heart disease were randomized to either an intervention, an average of 5 visits with a health coach over 6 months, or a control group.   (Groeneveld, et al, JOEM 2011 53:610 .  I’ll post a link in the future – the article isn’t yet indexed in pubmed)

The good news – the construction workers lost weight.  On average, they lost 2 kg (4.4 lbs). 

The unsurprising bad news – the intervention wasn’t cheap, and the cost of the intervention group exceeded the cost for the control group. The cost for each pound of weight loss was 145 euros ($210). The cost over 12 months of the intervened workers, including all health care costs, work productivity, and any costs of lifestyle related expenses, was 254 euros more ($369) than the control group. 

There are a lot of programs out there promising to deliver lower weight and short-term decrease in health care costs.  Some of them give statistics on average weight loss of those who lost weight, utterly ignoring any participants who gain weight. Most assess weight loss over a very short period of time, ignoring the fact that many who initially lose weight gain it right back again.  Most programs impute savings based on the fact that skinnier people have lower health care costs.

However, those who were overweight don’t necessarily cost less immediately after successful weight loss.  Further, there are precious few programs that help patients lose weight and keep it off.  In fact, the evidence for bariatric surgery is good, and the evidence of sustained effectiveness for all other interventions is modest to nonexistent.  

Treating the obese is not the way to address this major public health and health care cost crisis. 

What we need is public health interventions to make it easier to exercise and easier to get filling, nutritious, and healthy food – even in the hurried lifestyle we lead.  Many efforts, like zoning laws to encourage dense housing in close proximity to public transit, could take more than a generation to bear fruit.   Bike lanes, bike racks, and walking paths can take years to plan and build.   Other initiatives, like posting of calories, or employers offering healthy frozen dinners to take home,  could have an impact much sooner. 

None of these interventions will save health care dollars today - they can decrease obesity and prevent health care expenses much later.   

Preventing obesity won’t be easy – but it’s more likely to be successful and affordable than merely treating those who are already obese.

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EPA Study Shows Health and Financial Benefits of Clean Air Act

Today’s Managing Health Care Costs Indicator is 160,000

That’s how many lives the EPA calculates will be saved in 2010 by the Clean Air Act of 1990.  The costs of the Act ware around $65 billion, and the financial benefits are calculated to be $2 trillion – an ROI of 90:1. In fairness, these are all the economic benefits - not just health care claims cost savings. 

I bring this up in a blog on health care costs to emphasize the point that public health efforts really work –and they cost very little compared to medical interventions. 

Another happy note – the CDC  reports that 25 states have outlawed smoking in restaurants, bars and workplaces since 2000 -  and predicts that smoking could be banned in restaurants, bars and workplaces in all 50 states by 2020.  This is another no-brainer public health move that can continue to lower health care costs, prevent premature death, and improve overall societal health.   Total cost: close to zero.

Finally, Meredith Rosenthal has an article on the NEJM website comparing the Ryan and the Obama approaches to lowering Medicare costs.  My summary: The Ryan plan shifts costs and counts on patients facing larger bills to lower their utilization, and the Obama plan lowers provider payments.  The Obama plan better addresses the underlying causes of high health care costs, as we have high cost per unit and low utilization compared to most of the developed world. Her summary is below:

Image from NEJM.org.  Click to enlarge 

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Some Little-Noticed Health Care Cost Triumphs

Today’s Managing Health Care Costs Indicator is $230,000

Some weeks, it seems like this blog is about nothing but waste, greed and misaligned incentives.   In contrast, I wanted to point out two optimistic news items from last week.

The first is that the number of dollars retirees need to put away to pay  for their post-retirement health care went down this year – for the first year in ten years that this indicator has declined, according to Fidelity Investments.  The required savings are still $230,000 per person - which is substantially more than the average retiree has socked away - so many near elderly are likely to be pauperized by their medical expenses. 

The second is that that the epidemic of lung cancer among women is finally receding (a little bit).  According to a report in the Washington Post.      The rate of lung cancer in women peaked in 2002, and has been decreasing since 2007, although this is the first year that decline reached statistical significance. 

The decrease in retiree health care costs is because of the Affordable Care Act, which is gradually removing the “donut hole” which forced retirees had to pay 100% of costs of prescriptions between about $900 and $4300.   Care isn’t getting less expensive – it’s just being paid for by the government rather than retirees.  Still - good news is good news.

The decline in lung cancer among women is unabashed good news.  Public health measures work – and when it comes to saving lives, prevention and decreasing risks are as important as miracle treatment breakthroughs.

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Salt Reduction and Cost Savings

(click on image to enlarge)

The New England Journal of Medicine published a computer simulation online late this week showing that salt reduction would reduce new onset of heart disease by 1/3 and stroke by almost half -- saving between $10 and $24 billion dollars of health care costs annually.

As we've seen, changes to the payment system are complicated and difficult to implement - since there is always a loser as we move to lower unit prices, or insist on more accountability from various parties in  the health care system.  Changes to the delivery system are even more difficult.

This is another example of a public health intervention being cost saving -not merely cost effective. The intervention is not free. Regulatory effort is necessary, since a large portion of the sodium in the American diet comes from processed food.  The authors estimate that salt reduction would yield between 200,000 and 400,000 QALYs annually - with cost saving as opposed to incremental costs.  The authors note that this is substantially better value than antihypertensive therapy for those with hypertension -which at between $6,000 and $26,000 per QALY is also a very good value!

We need to reform health care payment and health care delivery - but that seems further away today than last week.  Let's not forget the value of public health interventions as we contemplate making health care more affordable .  I'll be skipping salt from now on, too.

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