Commonwealth Fund Sees Medicare Savings From PCP Fee Increases

Today’s Managing Health Care Costs Indicator is 2%

                     

The Commonwealth Fund  projects that Medicare investing through maintaining the Affordable Care Act’s 10% primary care physician increase beyond expiration in 2016, Medicare could save almost two percent of total costs.  In this simulation, primary care costs would go up by $89 per person per year (about equally distributed between increased unit costs and increased utilization), while total costs would decrease by $539 – a whopping 6:1 return on investment.

The authors posit that savings would come from hospitals and outpatient hospital facility fees and specialist care. Imaging and diagnostic costs increase in this simulation, which seems unlikely, as specialists seem as happy to order tests as primary care physicians. Outpatient medications and other Part B services also increase.

The authors make a powerful case to make more investments in primary care. The savings could presumably increase further if the primary method of payment was not fee for service.

Click on image to enlarge. Source link above

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The Continued Decline of Employer-Sponsored Health Insurance

Today’s Managing Health Care Cost Indicator is 53.5%

Click on image to enlarge. Source http://hschange.org/CONTENT/1280/

A report from the National Institute for Health Care Reform this week reports that 53.5% of Americans under 65 were covered by employer-sponsored health insurance in 2010 – a startling 10 point drop over only four years.  This continues a long term trend – almost 70% of Americans were covered by employer-sponsored health insurance in 2001. 

Employer-sponsored health insurance can decline for three reasons

1.      Fewer people have been employed.
2.      Fewer employers might offer health insurance.
3.      More employees might decline employer-sponsored insurance, usually due to high employee premiums.

The Great Recession has reshaped all three elements of the employer health insurance market.  It will take us years (or decades) of growth to get back to employment levels that would have been predicted pre-Recession – and fewer jobs for applicants has meant a labor market where employees have more readily accepted poorer benefits – grateful just to have a job.   

More employees are working as independent contractors rather than full employees – and therefore ineligible for employer benefits.  Further, employers have felt enormous pressure to lower their costs –and with benefits (largely health insurance) often running an additional 30% of payroll, many employers have offered plans with lower benefits and higher employer premiums.  The higher premiums mean that more employees will opt-out –and be uninsured.

Government-sponsored insurance has picked up a substantial portion of the slack. Medicaid has increased from 9.5% of the population to 17.6% from 2001-2010, and even Medicare coverage has increased from 1.6% to 3% of the population (presumably more Americans who qualify for disability).    Still, the uninsured went from 14.1% to 19.5% of the population. (The 15% usually cited includes the elderly, who are nearly universally covered by Medicare).

Employers are advantaged purchasers of health insurance. They have a ready-made and stable group (sothey can spread risk across the population, and  it’s easier for actuaries to estimate future costs.)  They can enroll employees and families easily – lowering transactional costs compared to health plans enrolling individuals and small groups.

But employer-sponsored health insurance also causes “job lock,” where those with serious illness in their family are unwilling to change jobs for fear of insurance interruption.  This decreases labor flexibility – lowering overall growth and productivity. 

The decline in employer-sponsored health insurance illustrates the importance of establishing other ways to obtain health insurance.  These alternative means should have low transactional costs, and should allow substantial spreading of risk over the population.  That’s why we need health insurance exchanges to maintain access to health insurance and health care, and an individual mandate (or something close) to discourage the healthy from opting out.  

The nature of employment in the US has changed substantially, and the ACA allows the insurance market to effectively respond to these changes.  We’ll see what happens this week during Supreme Court arguments over the constitutionality of the Affordable Care Act.

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Medicare Growth Slows

Today’s Managing Health Care Costs Indicator is $69 billion

Click on image to enlarge. Source 

The New England Journal of Medicine reported last week that the Congressional Budget Office lowered its estimate of Medicare costs over the next decade by $69 billion in January.   The trend rate for Medicare is estimated to be below changes in GDP per capita for the next decade – which is unprecedented since Medicare’s inception.

Why?

For starters, authors White and Ginsburg are using costs per capita – thereby adjusting for Medicare’s growth in enrollment with aging of the baby boomers.  That’s the only fair comparison –but there will still be some who will point to higher overall costs.  In fact, with a smaller base of workers paying for most of Medicare, the total cost is important, too.

There are some important forces which can help lower Medicare costs during this decade.

1)      Baby boomers are accustomed to (or perhaps resigned to) some elements of managed care, and are less likely to resent some restrictions on the care that they receive. It’s not as difficult to accept prior authorization for high cost imaging when you’ve been subject to this for over a decade!

2)      The PCORI ( Patient Centered Outcome Research Institute) has stated that it will focus on the triple aim:  better quality, better patient experience, and lower cost.  This can provide evidence that will increase the hurdle for incremental innovations with high costs and minimal clinical improvement.   3/14 ADDENDUM:  PCORI is prohibited from considering cost. It's the CMS Innovation Center that is focused on the triple aim.  See comment from Nathan Punwani below.  
3)      The Independent Payment Advisory Board (IPAB) will make recommendations about how to lower costs if spending targets are exceeded.  The IPAB will force Congress’ hand – it must vote up or down recommendations in their entirety, much like military base closings.  A bill to abolish the IPAB is close to House passage, though, and some of the Board’s 2012 funding was rescinded.

4)      Increasingly effective anti-fraud efforts, including better use of software to detect early fraud patterns before millions of dollars in claims are “out the door.” 

5)      Increasing out of pocket costs for those with employer-sponsored health insurance promotes disruptive innovation, which can lower the costs of health care for all, including those on Medicare.

It’s reassuring that as the Medicare growth rate has tumbled the rate of growth of spending in commercial (employer-sponsored) health plans has fallen as well.  Many worry that any dollar saved in Medicare or Medicare is “shifted” to nonpublic payers. That doesn’t seem to be true at the moment.

There are a series of market forces, however,  that threaten to make Medicare costs escalate beyond current projections

1)      Move toward increasingly individualized care.  While some advocates point out that genetic tests can prevent giving an expensive toxic medicine to a patient who won’t benefit, individualized medicine is bound to increase costs because the tests will be done on a large group of patients, including those who might have otherwise gotten little or no care.  Tests which can prevent the use of a drug that will cost tens of thousands of dollars will have a high market value.

2)      “The new 55.”  Aging baby boomers increasingly expect high levels of physical activity into their 70s, 80s, 90s and beyond. Stanford physician and author Walter Bortz continues to run marathons into his 80s, and has written that with the right diet and exercise humans can live to be 120.  We’ll need to be doing total joint replacements for people who a generation ago would have accepted loss of mobility (or even died).  This is a good thing – but it won’t be cheap!

3)      Market consolidation.  Hospitals increasingly “own” their physician staffs, and there has been huge consolidation in the health care market space.   Provider competition is more likely to lower overall costs, and that might be diminishing

4)      Decreasing undertreatment.   Most health care is at best cost –effective, not cost-saving.  Many interventions that are now underutilized (colonoscopies for instance) are likely to increase over the next decade, especially as electronic medical records with robust patient portals take hold.   Again, this is good, but these cost-effective interventions will give us extra quality-adjusted life years, but at a significant price.

5)      Increasing adherence to medications.   While some suggest that we can save billions if patients just listen to their physicians’ advice and take their medicines, most medicines are cost-effective, not cost-saving.  See note above. This is great – but we’ll get QALYs for a price.

It’s hard to predict the future, at least prospectively, and it’s heartening that experts see an end to the rapid cost spiral in Medicare.  I think achieving these projections will require substantial effort.  Sara Kliff of Wonkblog has pointed out that if these projections are right we won’t need the IPAB.  I wouldn’t bet on that.

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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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Medicare: A Deal Too Good (Or Too Misunderstood) to Last

Today’s Managing Health Care Costs Indicator is 3:1

 Click to enlarge. Source

The New York Times had a thoughtful article on Sunday about our conflicted view toward government programs.  The reporters interviewed citizens of the exurbs northeast of Minneapolis, where a Tea Party candidate unseated a senior Democratic congressman in 2010.   The government safety net is helping many cling to middle class status – but many citizens think the government should do less, even if it’s painful today, to lower the future deficit.

One thing there is little disagreement about is that Medicare is a good idea.   The current Congressman suggested that Medicare be dismantled for those (like him) under 55 – but most of the interviewees were quite happy with Medicare. Most of them counted on it too.   That’s why most don’t worry too much about the Ryan plan to privatize Medicare becoming law.

Although most Americans think they will pay more in Medicare premiums and taxes than they will get in benefits, Americans get $3 in benefits for every $1 they pay into the system. The rest is paid for out of general tax revenue.  Medicare represents the most rapidly-rising governmental expense, and we baby boomers will be continuing to retire for   years to come.

Medicare clearly needs to either lower its spending, increase premiums for beneficiaries, or increase its draw on general tax revenue.  Medicare has been more successful at holding down costs than commercial health insurance plans – but revenue of only a third of its costs isn’t financially sustainable. Medicare might also be politically unsustainable if its current and future beneficiaries don’t realize what a good deal they’re getting.

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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.

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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.

Source 

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. 

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Cost shifting vs. Cost Saving

Ezekiel Emanuel has a commentary in the New York Times criticizing plans to convert Medicare to vouchers (aka ‘premium support.’ He reminds us that we really need to control costs – not merely shift them. Austin Frakt of The Incidental Economist has also just wrapped up a series on Medicare premium support – which points out that premium support could be designed so that it didn’t cost shift (although that seems unlikely given political realities).


We have a multi-payer system, and there are many opportunities to shift costs from one party to another. No value is created in the system by cost shifting. Private health plans and the government both practice robust cost-shifting in our system. They do this because it is far easier to shift costs than to genuinely lower costs.

The Affordable Care Act takes aim at some of the cost shifting in the current health care market. However, it does not do nearly enough. It’s possible that regulatory action alone won’t be the cure for cost shifting.

Let me review some additional examples of cost shifting in the US health care system:


Medicaid Underpayment

Medicaid pays quite low rates in many states to most providers – rate that are below the real cost of providing care. Providers bill extra to private insurers to make up this shortfall. The state balances its budget by cutting Medicaid provider payments, but this makes private health insurance in the state even more expensive. Employers who might benefit from a tax subsidy that forces budget cutbacks pay for the health care of the uninsured through a nontransparent extra fee added to their health care premiums. Voila. Costs are shifted.


The Affordable Care Act addressed a very small segment of this problem by fixing Medicaid primary care payments and Medicare rates for a limited period of time with full federal funding.

However, states continue to ratchet down Medicaid fees to address their current budget shortfalls. More cost shifting is in the wind.


Dependent Audits

Many employers have been performing audits to be sure that their employees are not enrolling ineligible dependents. That makes sense – why should the employer pay for an uncle or a godchild that is not an actual dependent? On the other hand, when ineligible dependents are removed, there is no cost saving in the health care system unless they no longer access care. The cost is merely shifted to another party – in some cases to ‘free care’ which is an invisible surcharge on all health care charges.


The Affordable Care Act specifies that children up to age 26 can stay on their parents’ health plan regardless of college status, work status, and even their own marital status. This is not very expensive – since the average cost of those between 18-26 is very low. It gets rid of a whole series of administrative hurtles to coverage – so that parents don’t have to get paperwork from their children’s college.


Medicaid Funding

Many states have developed ingenious ways to get the Federal government to pay for a larger portion of total medical care. Massachusetts managed to get Medicaid to fund replacement of a University of Massachusetts hospital fascade based on some fancy legislative dance in 2001.  In some instances, states agreeing to pay providers a higher fee (with the feds picking up more than half of the cost). Then, the states tax the providers to recoup some (but not all) of the excess costs. http://www.washingtonpolicy.org/publications/legislative/state-lawmakers-propose-using-phony-bed-tax-and-provider-tax-secure-more-fe The total cost of medical care goes up, but the state has constrained its own outlays.


Lifetime Limits


One thing that’s certain about hemophiliacs is that without blood factor concentrates they will have bleeding episodes, which can threaten their lives and cripple their joints. Many hemophiliacs require over $100,000 in biopharmaceuticals each year – so it’s easy to hit lifetime limits very quickly. This is a cost shift either to patients (few of whom could afford this) or more likely to state Medicaid programs, for which some hemophiliacs qualify if they hit the lifetime maximum in their employer-sponsored plan. The Affordable Care Act eliminated lifetime maximums as of this year – although there are still some employers who are “grandfathered” and will be allowed to maintain
Mini-Med Plans


These are health plans with very low premiums which pay benefits up to a very low total limit – as little as $5000 or even $1000. They are marketed to low-wage employees –often in retail or service industries, and often by companies that for competitive reasons simply can’t afford to pay the employer share of a more conventional health plan. The problem is that this is “upside down” insurance, which max out if a member has any significant illness at all. If a member gets leukemia – costs are not “controlled,” but are shifted to the patient, or again to state Medicaid plans if the member qualifies after hitting the employer plan maximum.



Raising Eligibility Age for Medicare

Austin Frakt has previously published data showing that raising Medicare eligibility age would save the federal government $5.7 billion, while it would cost individuals and businesses $11.4 million. A bad deal indeed.



Not all cost shifting is necessarily evil – and there are some examples which seek to change behavior by making health plan members responsible for a larger share of the costs.
For instance, reference pricing requires that health plan beneficiaries pay for any excess cost if they get elective care from providers who charge more than an allowed amount. These can save money for employers by shifting costs to the employees – but can also save money in the system by encouraging beneficiaries to choose lower cost providers. Reference pricing thus saves money for health plan sponsors through a mixture of cost shifting and actual cost saving.


Advocates also suggest that high deductible health plans save money through encouraging more responsible resource use. Studies have shown consistently that these plans do overall reduce utilization, but recent studies also suggest that these plans reduce both unnecessary and beneficial care.
Cost shifting will be a continued reality in our fragmented, multipayer system. Shifting costs to others is almost always easier than genuinely lowering health care costs, so we’ll need to continue to develop regulations to discourage cost-shifting. The Affordable Care Act is at least a start.

The managed care indicator will return with the next post. 

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Affordable Care Act and Pharmacy Savings

Today’s Managing Health Care Costs Indicator is $1.5 billion

I’ve been on the road early this week – where I see a lot more of USA Today. The top of the fold Tuesday trumpeted “Health Care Law Changing Behavior.”    The article itself mostly recounts pharmacy savings from the ACA, and briefly mentions full coverage for preventive care in some of the last paragraphs.

The article states that Medicare beneficiaries saved $1.5 billion this year (through August) because of the 50% discount on brand name drugs that are purchased within the “donut hole,” where cost of outpatient drugs are entirely the patient’s responsibility. The donut hole is between $2700 and $6154.  CMS states that the average saving was $569 per person.

Where did these savings come from?   The ACA included mandatory price cuts for seniors who are in the “donut hole,” and thus the funding for this comes from the brand name pharmaceutical industry.   This isn’t all a giveaway, though, by any means.   Lower priced brand name drugs for those on multiple prescriptions is a great deal if there are no generic equivalent.  However, generics tend to be 90% less expensive than brand names – so a 50% discount on a brand name remains a bad deal for seniors.

I suspect the $569 is the average savings for those who had any savings – because a bit over half of Medicare beneficiaries does not hit the $2700 in eligible outpatient pharmacy expenses.

The pharmaceutical industry made a deal early to support what became the Affordable Care Act.  PHaRMA agreed to some price concessions, but gained many more elderly with meaningful drug coverage. Out of pocket costs went down by more than 20% for seniors, leading to a bit over a 5% increase in overall drug utilization.    Marginal costs to produce drugs are very low- so these extra customers are very important to industry profitability.

Has there been behavior change?  Perhaps.  But the USA Today reporter didn’t probe very hard. Catch this quote.  

“Seniors are becoming more engaged in their care, [CMS director Jonathan] Blum said, citing the hundreds of forums Medicare has conducted about the changes.”

I’m guessing the benefit design of full coverage for preventive care might change behavior more than the hundreds of forums!

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“Government Study Debunks Stroke Treatment”

Today’s Managing Health Care Cost Indicator is $20 million

It’s not often you see such a headline in the New York Times.  The paper is reporting on a paper published in JAMA that showed those with history of “prestroke” with proven blocked neck arteries who received surgery to increase brain blood flow had no fewer strokes than those who were treated without surgery.  The study was stopped early when there was not even a trend of improvement among those treated, and far more early strokes.

A JAMA editorial writer wrote that “doctors liked new technology, were paid well to use it and tended to believe in what they were doing, even without data.”

The thing is –the procedure worked!  Those who had the bypass surgery did have greater brain blood flow.  Unfortunately, the intermediate outcome measure (more brain blood flow) was not especially correlated with the desired outcome measure (fewer strokes.)

This is the kind of effectiveness research we need so that we spend precious health care dollars on services that genuinely improve health,  and the kind of research that only the government is likely to fund.  It’s a small investment –since if 24,000 Medicare recipients a year would have been candidates for this operation, the total cost if it was widely adopted would have approached a billion dollars.   But who besides government would spend $20 million to study this?  Alas, funds for the NIH are being cut,  and this kind of important research will be threatened.

There were two reports in the NEJM this past week also reflecting the importance of large, multi-year, government-funded studies of interventions that seem like a good idea, but had never been rigorously studied.  Alas, both also showed little of the financial savings promised by boosters.

RTI reported on the Medicare Health Support trial, which was terminated in 2008 when none of the disease management companies appeared to be on target to save as much money as their interventions cost.   The study is flawed, of course, since the information available to those companies about the “at risk” Medicare beneficiaries was often available far too late.  Still, most of us deeply believed that these programs would be more successful at preventing hospitalizations in the Medicare population, a target-rich environment.   


The other is a commentary about the Physician Group Practice Medicare demonstration project.  The groups improved quality substantially.  However,  high hopes of dramatic declines in health care spending were not realized.  2 of the 10 groups had savings of over 2% at one year, and half had savings of over 2% at five years.  These were all groups with robust infrastructure, committed leadership, and cultures of prudent use of resources.   This shows that creating Accountable Care Organizations from physicians in practices that are currently fragmented and disorganized will be very hard indeed.  

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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. 

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Readmission Prevention: A Work in Progress

Today’s Managing Health Care Cost Indicator is 19.6%

Source

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.

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Bring Back the Mystery Shopper Survey

Today’s Managing Health Care Cost Indicator is $8.76 billion

The Obama Administration announced yesterday that it would halt its “mystery shopper” survey,  which would have assessed potential primary care access problems.  Under the program, a survey company would have called physician offices three times – posing as a new patient with an urgent problem (coughing up blood) or a routine need (annual physical exam).   The mystery shopper survey would have sampled just under 5000 physicians in 9 states, and about 500 of them would have gotten a third call,  asking on behalf of the Department of Health and Human Services if the office accepted private insurance, public insurance, and self-pay patients. 

Physicians expressed anger at the proposed mystery shopper survey – likening it to “snooping” and “Big Brother.”  One physician said

Is this a good use of tax money? Probably not. Everybody with a brain knows we do not have enough doctors.

The survey was to have cost $347,370.  

Although there is a general sense that there is a shortage of primary care physicians, not everyone agrees that we have a physician shortage. 

The senior researchers of the Dartmouth Atlas,   for instance, point out that newly trained physicians often don’t choose primary care, and they mostly settle in areas that already appear to have adequate or excess supply.   Without question, training more physicians costs more federal dollars (Medicare paid $8.76 billion toward graduate medical education in 2008.)  Furthermore, new physicians will generate more bills for their own services, and will order tests and drugs and other physician referrals, leading to still more expenses.

I know it's hard to find a primary care physician in metro Boston, but I’m not sure of the right answer about whether we need more physicians.  I believe that we need a differential way to drive new physicians toward primary care rather than specialties.  Further, I believe we need to get physicians out of doing work that can be done by nonphysicians, and increase use and supply of nurse practitioners and physician assistants.

The mystery shopper survey appears to me to be a well-designed and much-needed study. How can we be sure we have the right diagnosis if we don’t collect the right information?  The Obama Administration should not have backed down.

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