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Everything you always wanted to know about the Health Care system. But were afraid to ask.
Updated: 1 day 21 hours ago

Watch the Recorded Repeal & Replace: Impact on Health Tech Webinar

Thu, 03/23/2017 - 17:33

In case you missed the Repeal & Replace webinar this morning, click here or the image above to watch Health 2.0’s Indu Subaiya and Matthew Holt tackle questions with policy expert Josh Seidman from Avalere Health.

Jill Merrigan is the Marketing Manager at Health 2.0.

Categories: OIG Advisory Opinions

In the Land of the Health Care Experts

Thu, 03/23/2017 - 13:00

Arguably, the most consequential moment of the nascent Trump administration will take place later today when Congress Votes on the first iteration of the bill known as the American Health Care Act (AHCA). If the success or failure of the bill to this point is to be judged by its reception from policy thinkers on most sides of the political spectrum, it is already an unmitigated failure.

It should be worth noting, however, that healthcare in America is a massive business accounting for 3 trillion dollars in spending with powerful stakeholders. Any real attempt at reform is bound to be opposed by those who would naturally resist attempts to dam the river of dollars that flows to them. The resistance from these parties always comes in the form of entreaties to think about patients harmed by whatever change is trying to be made.

Figuring out which stakeholder actually has the patients best interests at heart is akin to playing a shell game. All the cups look the same and its entirely possible the marble is underneath none of the cups. As a physician, I am of course, another stakeholder with inherent bias but I would submit that practicing physicians, among all the players at the table, have their interests most aligned with the patients they must directly answer to every day.

Of course the actual language of legislative bills defies understanding by mere physicians, and while my grand wish would be to leave it to the healthcare policy experts to hash out, the last eight years suggests that it is folly for the practicing physician to pay no attention to these machinations. While it may seem obvious that all parties at the table would seek to ensure the primacy of the physician-patient relationship, one can never underestimate how deep health care policy experts have their heads buried in the sand.


Understanding the AHCA requires understanding the context in which it was created, its intent, and its ultimate effect. Discerning context is easy because these events have already happened an are a matter of record. Grasping the intent of the bill is a matter of some faith, but also manageable. But intuiting the effect of the AHCA if the bill passed is most certainly an act of God. The current hyperpartisan media coverage, with some notable exceptions, fails miserably at providing consumers anything but slogans to be used to deepen the divide the country and marshall outrage. Watching the current coverage, one is left with the very distinct impression that the Republicans have chosen to gut the ACA in order to give a tax cut to the rich and bankrupt the elderly and the poor. While I understand that Satan himself is said to have given birth to the Grand Old Party, this does seem to be an odd tactic for any political party that needs votes beyond the 1% Wall Street demographic to stay in power. Certainly, gutting Obamacare does make for poor optics. It was, after all, the program that valiantly attempted to both provide health insurance to the uninsured and lower the spiraling cost of health care. I know this because I cheered these words as they left the former President’s lips a long eight years ago.

The reality of Obamacare was a far cry from the vision. I have written a fair amount about mandates buried in Obamacare that made life challenging for physicians, but from a patient standpoint, the major complaint was that it was just too darn expensive. A nurse I work with has a Obamacare bronze plan with a very high deductible and and a premium that he could buy an iphone a month with. He hasn’t seen a primary care physician since he has had the plan, because the deductible ensures that he will be responsible for the entire cost of the visit as well as any routine bloodwork at chargemaster inflated hospital prices.

There are many lessons so to learn from the last eight years of health care policy making, but a particularly salient one is that insurance turns out to be a complicated business better left to professionals than politicians. Insurance is expensive for a variety of reasons that certainly relates to band-aids in hospitals being worth their weight in gold, but beyond the high dollar unit cost of health care, fundamental problems with policies that regulate the insurance plans were baked in to Obamacare.

The major problem relates to a paucity of young, healthy members enrolling in the marketplace. Health insurance needs a large pool of healthy patients to pay for those that are sick. Unfortunately, getting young healthy folks to buy insurance is challenging. Healthy patients are young invincibles with thin bank accounts who prioritize data plans, smartphones, and cable plans that include ESPN and the Kardashians over health care. Getting someone to choose health insurance over the Kardashians is a tall order, and in the case of Obamacare, the plan was to use a stick in the form of a mandate to buy health insurance. Starting in 2010, all Americans choosing to gamble and not buy insurance were subject to a dollar penalty.

With the mandate in place, the Congressional Budget Office (CBO) – responsible for predicting the actual effect of legislation – estimated that by 2016, 21 million people would be enrolled in the Obamacare exchanges. The CBO, in this case, wildly overestimated. The actual number was around 10 million. The 10 million that were signing up were also disproportionately sick and poor. The prized young and healthy stayed out of the exchanges, instead choosing to pay a penalty ($695 or 2.5% of income) that was much smaller than the yearly cost of paying for health insurance. As a result, premiums in the exchanges rose year over year as insurance companies scrambled to cover losses in the marketplace.

Obamacare had a partial answer for this – subsidies from the federal government kicked in at 400% of the Federal Poverty Level (96k for family of 4 in 2017) to insulate relatively poor patients from these premium hikes. Of course, using subsidies in this manner is good for the patients who qualify and insurance companies, but not so good for the american taxpayer. In no small part because of significantly increased federal outlays for healthcare, national health care expenditures in 2014, and 2015 accelerated faster than the 10 years prior.

Many blamed the insurance companies for rising premiums, and while it is true that insurance companies bear blame, they had complaints that appear valid with regards to well intentioned regulations within the ACA that made buying insurance so expensive

  1.   Plans under the ACA were required to provide certain Essential Health Benefits which included prescription drug plans, mental health and addiction services, as well as rehabilitation services.  If you’re a 27 year old with a few hundred dollars a month who wants to buy a skinny plan that doesn’t cover prescription drugs or mental health benefits – you’re out of luck.
  2. The individual mandate itself was more like swiss cheese than the Hoover Dam.  Even at its most expensive, the penalty for not complying with the mandate was $695 or 2.5% of your income. So the penalty may certainly have been a deterrent to high income earners, but it did little to dissuade the less well off, young and healthy from choosing not to buy $400/month insurance plans that they saw little chance of using.
  3. There were exemptions galore from the mandate for hardships such as ‘experiencing the death of a family member’ (no documentation needed) that could be used to avoid the penalty altogether.
  4. Gaming the insurance market was easy.  You could choose to stay out of the marketplace until you got sick.  A 90 day non payment grace period meant you could go three months without paying your premium.  Get sick in those 3 months? Just pay the missed premiums and reenroll without any gap in coverage.
  5. An age rating band of 3:1,  attempted to ensure that older, and sicker patients would pay no more than 3 times young, and healthy patients.  In reality, this ratio was used to define the floor for premiums of the young and healthy as opposed to providing a ceiling for the old and sick.

Donald Trump, having promised cheaper health insurance for more people very publicly met with insurance executives in the White House.  While there isn’t much more than a photo-op of the visit, I am certain the conversations between the Tweeter-in-chief and insurance executives revolved around trying to deliver on the Trump promise to make health insurance cheaper by decreasing premiums.

Little surprise then that many of the changes most vilified publicly are designed to help insurance companies who, at the end of the day, want nothing more than a large working profitable marketplace. Now, I’m not terribly sympathetic to the words profit and insurance company, but even I find the treatment of the changes proposed as pure political theater.   Doing away with the essential health benefits to allow patients to choose skinnier, cheaper plans turns into being against the future children of America because health plans would be allowed to not include maternal care benefits.  Similarly, the age band rating change designed to lower premiums in the young, instead becomes a tool created to raise taxes on the old.

These issues still do not begin to touch the two areas of greatest concern in the AHCA: the number of individuals that will gain coverage, and the cost of premiums.  The Republicans, and particularly Donald Trump assured the country more people would have coverage, and the health care delivered would be terrific.  Clearly, no one talked to the CBO before making these promises.

Many have high regard for the CBO – a group of non-partisan technocrats who use the best available evidence to make predictions of the future.  Prized for their non-partisan brand, they are also alternatively vilified or lauded based on what is politically most expedient.  In the case of the AHCA, the CBO believes premiums don’t appreciably reduce, and may in fact increase in the short term.  They also strongly believe that the lack of an individual mandate means even fewer younger and healthier will sign up for the program – thus recreating the problem of adverse selection that plagued the Obamacare markets.  Getting the estimates right on millions who would enroll is critical to assess the impact on premiums.  The fewer people that sign up, the higher premiums are.

The CBO’s projection of enrollment in the past are instructive, and this nice chart from Avik Roy’s FREOPP.org demonstrates the grand difficulty of predicting whether Jim and Mary in Altoona will sign up for health insurance whether you’re partisan or not.  This is even more complicated by the fact that many of the Obamacare enrollees were covered under an expansion of Medicaid – 19/31 states rejected medicaid expansion in the past, and estimating the future of how states will respond to medicaid rules reminds of the time I tried to play ping-pong on a windy day.  I gave up – but I guess the CBO isn’t allowed to throw its hands up in the air and walk away.

The effect on premiums is thus even harder to predict. The CBO estimates that average premiums in the individual market will increase prior to 2020 and decrease after – precisely because they believe taking away the individual mandate will induce ‘fewer comparatively healthy people to sign up’. These estimations are, of course, fraught with assumptions.

Take this next, pretty series of graphs by Avik Roy, a prominent conservative health policy wonk.

The lines in this figure represent the net cost to the patient after ACA subsidies or AHCA subsidies that go to insurance companies to lower the burden of premiums on patients. The simpler green line represents the current (perhaps already dated?) GOP idea to have a flat tax credit that varies with age, but doesn’t rise with income or geographical area as the ACA did. It would appear from the graphs that the AHCA is a loser, especially for older and poorer americans.

Studying these graphs tells you why so many different ideologies are upset by this bill. The liberals are upset because this appears to shift costs from younger, healthier, relatively better off consumers to older, and sicker consumers. Pure conservatives and libertarians are hopping mad because the bill preserves subsidies from the tax payer to third party payers (insurers).
But it should be clear that these predictions and analyses are fools missions. It should be obvious that the strength of these assumptions that predict enrollment to the nearest million and premiums to the nearest dollar have a flip of a coin’s chance of being correct. If young and healthy patients flood into the marketplace, the average premium falls greatly, and if far fewer than even the CBO estimates stay out of the marketplace, premiums will be even more expensive than what’s predicted. If all my decisions on therapy for a patient were based on this quality of evidence, I would quit.

None of the analysts with very strong opinions on either side of the debate cop to the tremendous uncertainty baked in to all of this. The large majority of opinion-holders hold their ideology sacrosanct, and gleefully and selectively pick up ‘data’ that falls off the garbage truck of what passes for evidence in health care policy today.

I have no idea what the effect of health care policy legislation will be as it arises from the font of central planners in the nation’s capital, but I am left with the strong impression that decisions surrounding the nations healthcare are poorly made in this manner. The false impression being given to a hapless public is that one policy think tank or the other has a surfeit of knowledge with regards to what will happen. The words of economist Friedrich Hayek, champion of a decentralized approach to complex problems identified the problem inherent in leaving decisions to a select few ‘experts’:

“It may be admitted that, as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available-though this is of course merely shifting the difficulty to the problem of selecting the experts. …It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.”

The lesson being missed in all this may be that the health care policy you should support is the simple kind – the one that gives maximum flexibility to the two most important players in the health care tangle: the patient and their doctor.

Categories: OIG Advisory Opinions

A Healthcare Reform Compromise That Just Might Work (Maybe)

Thu, 03/23/2017 - 11:14

Healthcare reform is stalled, so says Politifact. Fake news or the truth? Hard to know these days. President Trump and Speaker Ryan both sounded optimistic in recent public appearances. The Tweeter-in-Chief this week tweeted, “Great progress on healthcare. Improvements being made – Republicans coming together!” Maybe so, but remember that every TV news network was optimistic over Hillary Clinton’s landslide victory until about 9 PM on election night.

Is Trump’s enthusiasm part of “The Art of the Deal”? To quote from the book, “I never get too attached to one deal or one approach. For starters, I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first.” Is the Ryan plan just but one ball floating in the Washington, DC air?

If conservative Republicans in the House and Senate revolt, Ryan’s plan ignominiously dies. What’s next? How about a compromise that just might garner support from all warring factions? There is an old saying, “Compromise is where nobody gets what they want.” But the corollary is that everyone gets something they like out of the deal.

There are five factions in this battle. The Democrats and the political left want government-run healthcare, in the form of universal coverage and/or single-payer. Conservative Republicans want free market reforms without government involvement. The establishments of both parties want only the status quo, slow walking any changes to the point that nothing changes. A majority of Americans believe the federal government should make sure everyone has healthcare coverage. Lastly President Trump has a goal of “insurance for everybody.”

How can such disparate goals be reconciled? The default is Obamacare, which is not working, is unpopular, leaves millions without insurance and is in a financial death spiral. Nothing changes until something changes. What might a compromise deal look like?

In a nutshell, Medicaid-for-all and a parallel free-market driven private insurance industry, free from government interference.

Before I’m called horrible names in the comment section following this article, let me explain.

Medicaid-for-all is catastrophic coverage. Exactly what insurance is designed to protect against. The unexpected and expensive. The car wreck, not the oil change or new wipers. There will be howls of protest over what’s covered and what’s not. The solution is to follow the Oregon Medicaid model. “Rank health care condition and treatment pairs in order of clinical effectiveness and cost-effectiveness.” What is at the top of Oregon’s current prioritized list? Maternity and newborn care, substance abuse, sterilization and depression. At the bottom, conditions “with no or minimally effective treatment or no treatment necessary.”

Who makes the rankings? A commission using evidence-based science, a “transparent public process”, and “input from providers and members of the public, including those affected by the conditions.”

Once ranked, a line is drawn through the list based on available funding. Above the line covered, below the line not. Current healthcare spending in the US is $3.2 trillion per year meaning that much could be covered.

Would the Oregon list be the same as a national list? Doubtful. One could certainly argue whether having a baby or being hooked on drugs are catastrophic conditions requiring insurance coverage compared to an accident or cancer, but the process to decide this would be in place.

Those with a vested interest, either as a patient or provider, in their condition being “covered” won’t be happy to land below the cut off line. Let the ranking and cut off line be reviewed and modified twice a year. Make the case that your condition should be covered and maybe it will be in a future ranking.

This should satisfy the political left as it provides their holy grail of universal coverage, and makes concern over preexisiting conditions moot. As well as the majority of Americans who by, “a 76 percent to 24 percent majority also agrees that since most other advanced countries can afford to provide universal health insurance, so could this country.”

The healthcare as a “right versus privilege” is worthy of debate, but politically it’s a nonstarter. Even a populist President Trump called it a right. “I won’t let people die in the streets” he declared in one of the early debates.

The other part of the grand compromise is to get government out of the rest of the insurance business. No mandates. No essential benefits. No requirement for individuals to purchase insurance or for employers to provide it. An open market. Purchase what you want and need. Price competition and transparency. Let individuals choose how to spend their money. Like purchasing other types of insurance – auto, home, disability, life, and so on.

Music to the ears of conservative Republicans advocating for free market solutions to healthcare reform.

Many will be happy with their “free” Medicaid. Others will choose to purchase up for coverage of what they deem important. No one will be left uncovered. Everyone gets a seat in the back of the plane. Want more legroom, a free beverage, or a meal, then sit in economy plus or first class and pay the extra fare.

Should private insurance be tax deductible? Some or all of it? Worthy of debate but that’s the fine-tuning. Ditto for work requirements for Medicaid coverage. Ot wellness incentives. Don’t smoke, exercise and maintain a healthy weight and there can be coverage or financial incentives for both Medicaid or private insurance. Again, that’s in the fine-tuning.

As always, the devil is in the details. This is a 1000-word essay, not a thousand plus page legislative bill. Meaning there will be plenty of “what about this or that?” The idea still holds. A compromise. Disliked by all but perhaps acceptable to all as well.

Remember the words of the Rolling Stones. “You can’t always get what you want. But if you try sometimes well you might find you get what you need.”

 

Categories: OIG Advisory Opinions

The Incredible Self-Destructing Healthcare Marketplace

Wed, 03/22/2017 - 14:26

Too frequently what gets overlooked in policy making are the regulations that implement or update legislation.  As Henry Mintzberg observed over 30 years ago policy is oftentimes formed without being formulated.  For example, the Congress did not define the most important provision in MACRA.  The Congress simply defined financial risk under an Alternative Payment Model (APM) as monetary losses in excess of a nominal amount.  It was CMS that determined via regulatory rule making specific revenue and benchmark-based standards.  While the focus has largely been on Congressional Republican efforts to repeal the ACA, three weeks ago the Trump administration recommended regulatory changes, via a proposed “market stabilization” rule, that will likely, should it as anticipated go final this month or next, have a more near term negative effect on state marketplaces.     

The market stabilization rule, announced February 15th, proposes six insurance reforms.  Briefly and again (these were summarized by the THCB editors the day they were published), the proposed rule would reduce the 2018 open enrollment period from three months to six weeks, or from November 1 to January 31 to November 1 to December 15.  The proposed would allow what was previously prohibited under the ACA’s “guaranteed availability” provision.  That is the proposed would now allow an insurance company to collect past due premiums before re-enrolling an individual in coverage.

The proposed would require pre-enrollment verification for all Special Enrollment Period (SEP) categories for all applicants served by the Healthcare.gov platform beginning in June 2017.  It would expand the de minimus actuarial value (AV) of plans from +/-2 percent to -4/+5 percent, that is the agency would allow plans to offer less comprehensive coverage under a certain metal level, beginning in either plan year 2018 or 2019.  The proposed would allow states, instead of the Department of Health and Human Services (DHHS), to determine insurance plan network adequacy (or rely on an insurer’s accreditation) and would reduce a plan’s requisite percent of Essential Community Providers (ECPs) from 30 to 20 percent.    

While CMS argues in the proposed these changes “are urgently needed to stabilize markets,” the agency provides no evidence that any of these reforms will actually stabilize the markets.  The agency does, remarkably, admit these reforms might actually produce the opposite effect, or destabilize the markets.

Shortening the open enrollment period by six weeks could, CMS states, “lead to a reduction in enrollment” because “primarily younger and healthier enrollees . . . usually enroll late in the enrollment period.”  The agency’s solution to “potential gaming” concerns under its proposed “guaranteed availability” reform is not only based on no evidence but, CMS admits, the agency is unable to quantify the extent of the problem or “determine the amount of past due amounts that consumers would have to pay in order to resume coverage.”  “The additional steps required to verify [SEP] eligibility,” CMS states, “might discourage some eligible individuals from obtaining coverage, and reduce access to health care for those individuals, increasing their exposure to financial risk.”  CMS also notes, requiring 100 percent SEP verification, “if it deters younger and healthier individuals form obtaining coverage, it could also worsen the risk pool.”  Therefore, CMS states, the “net effect of pre-enrollment verification and other proposed changes on premiums and enrollment is uncertain.”  Proposed changes in the de minimus values could, CMS notes, “reduce the value of coverage to consumers, which could lead to more consumers facing increases in out-of-pocket expenses, thus increasing their exposure to financial risk associated with high medical costs.”  The agency is “uncertain” what net effect transferring network standard reviews to states would have and lessening the percent of ECP participation CMS recognizes could lead to cost increases in “the form of increases travel time and wait time for appointments or reductions in continuity of care for those patients whose providers have been removed from their insurance issuer’s networks.”

In sum, CMS states “the net effect of the proposed rule provisions on enrollment, premiums and total premium tax credit payments are ambiguous.”  “On the one hand,” CMS writes, premiums could fall if “more young and healthy individuals obtain coverage” and insurance plans “are able to lower costs due to reduce regulatory burden and greater flexibility in plan design.”  “On the other hand,” CMS writes, a “shortened open enrollment period, pre-enrollment verification . . . , reduced actuarial value of plans, less expansive provider networks result in lower enrollment, especially for younger, healthier adults, it would tend to increase premiums.” 

What we do know is that it is more likely than not these reforms will prove destabilizing.  Concerning the proposed shortened open enrollment period, CMS presents no evidence that a shortened open enrollment period “reduces opportunities for adverse selection.”  Even if the Trump administration’s decision to pull back ads and outreach the last week of 2017 open enrollment did not have a negative effect, we know that just 367,000 people signed up for coverage in the final two weeks of 2017 open enrollment on the federal exchange compared to 700,000 in the last week of 2016 enrollment.

The proposed SEP changes are problematic for several reasons.  First, CMS presents no evidence the SEPs are being misused.  If anything, as Laurel Lucia’s noted in her February 16 Health Affairs essay,  research shows only approximately 9 to 10 percent of those eligible to enroll during a SEP actually do so. 1  The short duration of SEP enrollment is, or should be, anticipated since pre-ACA data shows there’s considerable churn in the individual market.  It’s neither surprising nor unusual for SEP enrollees to utilize comparatively more services in part because SEP enrollment takes considerable effort and those with the greatest health care needs are those most motivated to enroll.  As Brookings’ Matthew Fielder noted, “even if the entire cost differential between SEP enrollees and other enrollees resulted from inappropriate use of SEPs, the overall implications for average claims costs in the individual health insurance market would be modest.” 2  If anything, awareness of SEPs should be improved and the enrollment process made easier by, for example, improving the process by which individuals can transition from Medicaid to the marketplace.  This is particularly important since, per CMS’ own research, those 18 to 24 are far less likely to complete a verification process due to “hassle costs” than those 55 to 64.        

CMS believes expanding actuarial value (AV) de minimus values would help issuers design new plans thereby promoting competition.  Again, the agency provides no evidence in support of this belief.  Research shows however that allowing up to 4 percentage points below standard values would reduce premiums as well as premium tax credits since tax credits adjust dollar-for-dollar.  This change would allow for less generous silver benchmark plans for as many as 9 million silver plan enrollees.  The Center for Budget and Policy Priorities (CBPP) estimated that a silver plan with a 66 percent AV would increase costs for a family of four with an income of $65,000 by $550 per person. 3

Concerning the state marketplaces generally while participation by more young and healthier individuals and more plans would certainly help, the evidence is they’re not in a death spiral.  After accounting for 2017 increases, marketplace premiums approximate CBO’s initial projections.  For example, in 2016 premiums were 12 percent to 20 percent below CBO’s initial estimates.  As for premium increases, the ACA ensures that an individual’s contribution to the benchmark plan is capped at a certain percentage of their income.  ACA enrollment has increased every year since 2014 and enrollees are becoming healthier.  CMS’ own estimates show that per member per month spending slightly decreased between 2014 and 2015. 4

In late January THCB posted an essay I wrote titled “ACA Repeal and the Ethics of Belief” where I cited William Clifford’s seminal 1877 essay, “The Ethics of Belief.” 5  Clifford argued it is “wrong always, everywhere, and for anyone, to believe anything upon insufficient evidence.”  The resulting danger is that we “become credulous,” or willing to believe anything, and to do so results in society, he said, “sink[ing] back into savagery.”  If you read the administration’s proposed “market stabilization” rule, it appears we’re sinking.

End Notes

1. Laurel Lucia, “How Do We Make Special Enrollment Periods Work?” Health Affairs Blog (February 16, 2016).  At: http://healthaffairs.org/blog/2016/02/16/how-do-we-make-special-enrollment-periods-work/.

2. Matthew Fielder, “Trump Administration’s Proposed Change to ACA Special Enrollment Periods Could Backfire,” Brookings Institution (February 17, 2017).  At: https://www.brookings.edu/blog/up-front/2017/02/17/trump-administrations-proposed-change-to-aca-special-enrollment-periods-could-backfire/.

3. Aviva Aron-Dine and Edwin Park, “Trump Administration’s New Health Rule Would Reduce Tax Credits, Raise Costs, For Millions of Moderate-Income Families,” Center on Budget and Policy Priorities (February 15, 2017).  At: http://www.cbpp.org/research/health/trump-administrations-new-health-rule-would-reduce-tax-credits-raise-costs-for.

4. CMS, “Changes in Individual Market Costs from 2014-2015,” Near-Zero Growth Suggests An Improving Risk Pool.” (August 11, 2016).  See also, Jason Furman and Matt Fielder, “The Economic Record of the Obama Administration” Reforming the Health Care System,” (December 2016).  At: https://obamawhitehouse.archives.gov/blog/2016/12/13/economic-record-obama-administration-reforming-health-care-system.

5. The essay is at: http://thehealthcareblog.com/blog/2017/01/23/aca-repeal-and-the-ethics-of-belief/.

Categories: OIG Advisory Opinions

I Dub Thee “Three Pronged” Care

Wed, 03/22/2017 - 08:23

There are approximately 18 million Americans who purchase health insurance on the so called individual market, on and off the Obamacare exchanges. There are another 14 million or so who could be buying insurance on the individual market, but choose not to buy anything. This puts the total individual market at about 10% of Americans. Half of those are, or are eligible to be, heavily subsided through Obamacare (including those huge deductibles). The other 5% are facing the full brunt of health insurance price increases under Obamacare. Of those, 3% are paying for Obamacare health insurance and getting garbage in return for their money, while the remaining 2% are uninsured.

This is the magnitude of the primary problem we are supposedly trying to solve. The 17% of Americans on Medicare are not upset at Obamacare. The approximately 23% of Americans on, or eligible to be on, Medicaid are not angry at Obamacare either (although the 1% eligible for the Medicaid expansion in states that chose not to expand it, might be angry with their Governors). Some of the 50% or so, who are getting health insurance through their employer, and used to get rather flimsy insurance in the past, may be somewhat disgruntled because the Obamacare imposition of “essential benefits” caused their share of premiums and deductibles to rise, and their ability to choose their doctors to plummet.

This is the secondary problem we are supposedly trying to solve. The American Health Care Act (AHCA) addresses neither problem and exacerbates both.

Three Pronged Care

The proposed GOP solution is “three pronged”. Prong One repeals Obamacare (whatever that means) and replaces it with more widespread, but less generous, subsidies for the individual market and reduces funding for Medicaid, while also reducing Obamacare taxes on corporations and wealthy individuals, including taxes slated to increase the longevity of the Medicare trust fund. Prong Two is a flurry of yet to be determined regulatory relief that the Secretary of Health and Human Services will be supposedly providing at his discretion. Prong Three consists of new legislation, which will require the support of at least some Democrats in the Senate, to relax both the definition of Obamacare “essential benefits” and the regulations on health insurance corporations, so cheaper insurance plans can proliferate across the land (as they did before Obamacare).

The most important thing to understand about the Three Pronged Care proposal is that although the CBO can, and did, estimate the effects of the first Prong, nobody can estimate the cumulative results of all three Prongs, because nobody knows what the second Prong is and because it will take an act of God to make the third Prong materialize. Since we are talking about health care, think of this as some sort of orthopedic, cardiac or transplant surgery. First you cut the patient open, then you remove or adjust the offending parts, and then you put in something new and hopefully better. Coming in after a previous surgeon messed things up is obviously harder, but cutting the patient open and walking away until you figure out if you want or are able to do more, is hardly a viable option for the patient, and will likely result in a huge malpractice suit (plus a copious prison sentence) for you.

What if Prong One is as good as it gets?

Unfortunately, this is precisely what Paul Ryan and his ragtag coalition are proposing to do with Prong One, whose sole effect will be to add insult to the Obamacare injury. Once we accept the premise that the Federal government has an obligation to help people get health care, the remaining disagreements are just haggling over price. And once we dismiss highfalutin principled rhetoric, the problem with Prong One is that for most people, in absence of Prongs Two and Three, this is just a stingier version of Obamacare. The GOP argument that two imaginary birds in the bush are better than a real bird in hand flies in the face of millennia of human wisdom. On top of that, there is absolutely nothing in Prong One that even begins to address the fundamental problem in our health care system, which is the unit price of health care services. Therefore, premiums and deductibles will likely continue to rise unabated.

In all fairness though, there is a twisted argument to be made that if you cut subsidies and there is less money available, insurers will work hard to lower the price of their products to match what the “market” can bear. That may be true if the reduction in funds affected the entire market, instead of at most 10% (likely 5%) of it, and the least profitable 10% to boot. In “normal” markets, a non-participation rate of 10% percent is certainly sustainable and actually pretty good for the sellers. That said, smaller health insurance vendors currently specializing in Medicaid managed care could step into this niche and offer a commercial product through their existing underpaid networks. If you’re a physician, this prospect should set your hair on fire.

The Free Market Delusion

At some point we will need to collectively disabuse ourselves of the notion that a market in health care insurance could be created without abolishing the provision of health insurance benefits through employment. I know everybody is talking about Flo and the little lizard selling health insurance on TV as the ultimate solution to health care affordability, but that is nothing short of demagoguery. First, practically all auto insurance is business to consumer (B2C), while health insurance is overwhelmingly business to business (B2B). I suggest you try buying a cow from a feedlot and see for yourself how much negotiating power your consumer status bestows on you in a B2B market. If you want to try a free market solution for health insurance, you would need to do more than just kick a few poor people off their subsidies. You would need to kick 150 million people off their employer health insurance plans. Good luck with that.

I have to admit that there is something compelling about the conservative vision of a portable health insurance product that people buy and carry with them wherever they go. Obviously health insurance that is intended to serve people from cradle to grave cannot be a game of Russian roulette with covered benefits, or as Mr. Ryan refers to it, “patient-centered” insurance. Equally obvious is the fact that State and Federal governments will still have to honor their obligation to help those who can’t afford to purchase insurance for a predefined set of “essential benefits” on their own. Will such semi-free health insurance market deliver the health care affordability we seek? Not likely. The deceptively simple truth is that you cannot successfully tackle the pricing failure in the health insurance market without first taking an axe to our dysfunctional health care delivery system.

The Three Prong Shuffle

Obamacare not only failed to put a dent in health care delivery prices, but arguably made things worse by actively encouraging system consolidation. Under the best case scenario, a heavily modified GOP Prong One plan (e.g. higher tax credits, lower tax cuts for the rich, more money for Medicaid), will not change the Obamacare trajectory one bit and will not provide meaningful relief to people hurt by Obamacare. All this tinkering and re-tinkering with an insignificant portion of the health insurance market is like obsessively unclogging the kitchen sink on the Titanic. The sketchy descriptions of Prong Three, the free market prong, are just too ridiculous to consider at this point, but Prong Two, the regulatory prong, has great potential. After reading the manager’s amendment to the Ryan Make America Poor Again plan, I would like to offer my own citizen’s amendment.

New Prong One: Swallow hard and let the AHCA die a merciful death. Extend some temporary relief to the 5% hurt by Obamacare. Give Secretary Price a chance to affect regulatory changes first. Medicare is the de-facto price setter for health care services. The Secretary can affect changes to Medicare fee schedules and payment models that will quickly ripple through the commercial sector. I would start with the RUC and hike the relative value of comprehensive primary care. I would create a monthly CPT code that can accommodate subscription based primary care (not quite what the Direct Primary Care lobby wants, but darn close). And I would engage in a long string of multi-payer initiatives to accelerate dissemination of measures to control unit prices, while leaving behind the naïve and failed attempts to cut utilization.

New Prong Two: This is not a purely health care prong, but it is necessary because this is the only way to fix health care in America. Get those tax cuts done, renegotiate trade agreements, fix the education system, get infrastructure projects going, get manufacturing back, drain the swamp, and create lots of opportunities. Introduce specific pieces of legislation along the way to negotiate drug prices, break health system monopolies or at least encourage independent, small and more cost-effective practices to thrive. Keep up a brisk regulatory and deregulatory program to curtail the flow of billions of health care dollars to opportunistic corporations that do not provide care or any other benefits for patients. Think creatively about connecting health insurers’ participation in State/Federal programs to affordability in the individual market (at the very least make it count in Medicaid RFPs).

New Prong Three: If all goes well, we can finally do away with Obamacare, which should become automatically obsolete if Prongs One and Two are executed successfully (otherwise Obamacare will be the least of our problems). If the economy catches fire and more people have good paying jobs, and health care unit prices are at the very least contained, fewer people will need subsidies or Medicaid welfare. Make a note to schedule a symbolic full repeal and replace on January 21st 2020. I am certain it will pass with strong bi-partisan support.

Will Washington DC put the horses in front of the cart for a change? Not by choice. However, the good news is that all of a sudden Prong One seems to be on life-support in the House and dead on arrival in the Senate. The excellent news is that President Trump made another promise: “We will take care of our people or I’m not signing it” (it being Prong One, whatever it ends up being, if it ends up being). The disastrous news is that no self-respecting Democrat will engage in any effort to help the President help the American people. That would be too much to ask of our elected representatives.

Categories: OIG Advisory Opinions

The AHCA (Full Text) Updated 3/13

Wed, 03/22/2017 - 00:20

As of today, observers believe the American Health Care Act lacks the votes necessary to pass in the House.  That may or may not change as events unfold. This version of the Republican’s draft health reform legislation will remain archived on THCB until an updated version is released. If you have a question about the bill’s language or there is an item you’d like to call out, you can comment below.

AmericanHealthCareAct-Budget

Categories: OIG Advisory Opinions

Make Trumpcare the First Big Step toward a Free Market in Healthcare

Wed, 03/22/2017 - 00:18

Say what you will about Obamacare—at least President Obama eventually took ownership of it. When it comes to the American Health Care Act, President Trump isn’t ready to do that. He’s discouraging people from calling it “Trumpcare.” Since Trump normally he puts his name on everything within reach—even the trash can liners at the Trump SoHo Hotel bear his moniker—he must be keeping his distance from the AHCA because he’s ashamed of it.

The editors of The New York Times think he should be. They accuse Trump and the rest of the GOP of “Trading Health Care for the Poor for Tax Cuts for the Rich.” The charge is based on the CBO’s prediction that Trumpcare will immediately cause 14 million Americans to lose their coverage through private insurers or Medicaid, with that number rising to 24 million by 2026. Adding those people to the existing un-covered population, 52 million Americans will be uninsured a decade after Trumpcare incepts.

The consensus among policy wonks on the left and the right is that this would be a disaster for the country. Rolling back Medicaid will harm the states that expanded their programs on the promise that the federal government would pick up the tab. It will damage hospitals and other providers too as the demand for charity care goes through the roof. The newly uninsured will suffer worst of all. Without private insurance or Medicaid to rely on, many will forgo needed medical treatments and all will face the risk of financial catastrophe associated with serious injury or illness. All of these possibilities worry Republican governors and legislators, who fear losing office when the healthcare sector revolts and voters take revenge at the polls.

One can, however, see the GOP’s predicament as an unparalleled opportunity. Instead of vewing the 52 million un-covered Americans as pathetic creatures with nowhere to turn, one could regard them as an enormous army of consumers who will have to buy their own healthcare and who will be hungry for medical services that are effective and cheap. If we were talking about housing, transportation, energy, food, clothing, televisions, cell phones, or computers, we might already see them that way.

These other goods are all things that people pay for themselves, without the help of insurance. They are also all things that retailers have figured out how to deliver to people of limited means. Consider H&R Block, a timely example given that the April 15th filing deadline is nearing. H&R Block has figured out how to make a buck preparing returns for poor people who want earned income tax credits and refund anticipation loans. Markets will not deliver the best goods or services to the poor—poor people are rarely in the market for those things. But markets do a wonderful job of delivering what poor people can afford, and they reward sellers for figuring out how to serve poor people better.

Could markets help the army of the un-covered get what its members need too? That will depend on how much money its members have to spend. Suppose that the average un-covered person would willingly pay $2,000 a year for health care. The un-covered army would then be a potential source of $104 billion in annual aggregate demand. That’s real money that health care businesses should be interested in earning. $2,000 a year should be enough to take care of most of the un-covereds’ medical needs too. Singapore shows that. It spends only $2,500 per capita on healthcare for all of its residents, with fabulous results. Its infant mortality rate is half of ours, and its citizens’ life expectancy at birth is 5 years longer. Singapore relies heavily on direct payment for medical services too. If American healthcare providers operated as efficiently as those in Singapore, the army of the un-covered would fare reasonably well.

As currently written, though, Trumpcare neither guarantees that the un-covered will have any minimum amount to spend on healthcare nor provides any impetus for American healthcare businesses to become more efficient. Fortunately, both shortcomings have the same fix. Trumpcare provides tax credits that range from $2,000 to $4,000 per person, up to $14,000 per family. That’s enough money to turn the army of the un-covered into a formidable purchasing force. Right now, though, the credits are only available to people who buy insurance. That restriction could be eliminated with the stroke of a pen, and should be. If the credits were available to everyone, including the un-covered, Trumpcare would add an enormous stimulus to the market in consumer-driven healthcare.

Stimulating the retail market would have many desirable effects, the most important being that it would give providers strong incentives to make healthcare cheaper. One of the main reasons that American medical services cost too much is that people pay for them with insurance far too often. The more we rely on third party payers to do our shopping for us, the less we care about costs and the more expensive healthcare becomes. By giving money to bargain-hunting consumers, Trumpcare should reduce the impact of insurance-driven demand on the prices that medical providers charge. It should also greatly reduce the rate at which unnecessary medical services are delivered.

The GOP could also improve Trumpcare by adding supply-side reforms that would remove barriers to competition. The bill should pre-empt state laws that prevent doctors from practicing across state lines; that forbid nurse practitioners, physician assistants, and other para-professionals from setting up shop independently; and that inhibit pharmacists from teaming up with doctors, nurses, or PAs and delivering the full range of services that their combined training qualifies them to provide. It should also eradicate Certificate of Need requirements and laws that prevent corporations from running healthcare businesses. Walmart, Costco, CVS Health, and other retailers already operate clinics, pharmacies, audiology centers, and optometry outlets that charge affordable prices for flu shots, routine medical services, hearing aids, drugs, eye exams, and glasses. They will bring down the costs of other medical treatments and services if we let them sell those too.

The deep irony, then, is that although Trumpcare is supposed to repeal and replace Obamacare, both programs have the same goal. Both encourage people to stay in our dysfunctional, third-party-payer-dominated healthcare system by maximizing the use of insurance. But as long as healthcare itself is over-priced, healthcare insurance must be over-priced too. Trumpcare should therefore focus on making medical services cheaper. It should target excessive service levels, absurd prices, rampant fraud, and other major cost drivers. It can do all of that (and more) by turning healthcare purchasing over to consumers. Once that happens, prices and spending will fall, and coverage against catastrophes will become affordable. Because poor people are very price-sensitive, they will benefit the most. If we allow them to lead, the rest of the healthcare system will follow.

Charles Silver is a professor at the University of Texas School of Law. David Hyman is a professor at Georgetown University School of Law. They are leading medical malpractice researchers, and co-authors of After Obamacare: Making American Health Care Better and Cheaper (forthcoming).

Categories: OIG Advisory Opinions

Replacing the ACA; Closing the Deal

Tue, 03/21/2017 - 23:18

Last week, the CBO threw buckets of cold water on the American Health Care Act.

While there are serious questions concerning the CBO’s methods and its historical accuracy (see Avik Roy’s critique), Democrats fighting to defend the ACA as it heads towards collapse celebrated; they know CBO scores have potent political weight.

The Republican response was two fold—the loudest voices want to repeal the ACA and see what happens.  They’re wishing away the concerns of millions of Americans to demand a rapid march over the political cliff.

Many other Republicans (e.g., Senators from Medicaid expansion states) are quietly eying the hills. To succeed politically and substantively, the AHCA needs to preserve the ACA’s most popular features in a fiscally sustainable way while building a base of political support that lasts beyond the next election.

Here’s a path forward.

ACA’s core flaws.  The ACA has two fundamental flaws—it is financially unsound and politically unstable.  The ACA’s financial instability is hard-wired.  Combining a weak individual mandate, community rating that strongly tilts against young people, guaranteed issue and comprehensive benefits has produced predictable results. Too many young people have concluded the ACA’s a bad deal, too many others are gaming the system and premiums/deductibles are too high for too many.

Whether the ACA is in a death spiral is debatable.  Whether it’s heading that direction is not.

The ACA’s enactment added political instability to the mix. 

Had common ground with Republicans been found when the ACA was enacted, its repeal would not be today’s top legislative priority.

AHCA’s proposed fix; heat and light

The AHCA carries a heavy load of political peril. The AHCA replaces subsidies with refundable tax credits.  Critics on the left believe the tax credits won’t be generous enough.  Refundable tax credits give the Freedom Caucus real heartburn.

Medicaid will transition to a block grant program.  ACA proponents are convinced Medicaid will then wither on the vine.  The Freedom Caucus wants the expansion off-ramp to kick-in yesterday.  Many Americans need an orderly transition.

To encourage young people to buy healthcare coverage, the AHCA widens rate bands to shift more of the cost of care to the consumers of care; i.e., older people.

Because older people are paying attention and most younger people aren’t, the politics of that move are very dicey.  There’s already been movement on this front since the CBO report.

Finding the political sweet spot.  Most of the chatter about the AHCA’s prospects assumes enactment will be a purely Republican exercise.

If last week is any indication, it’s far from clear Republican can thread that needle within their ranks.

If they succeed, they’ll tee up the same partisan strife as the ACA, and attacks ads targeting Trump voters write themselves if some of the AHCA’s current provisions remain.

In a strong contender for political tin-eared move of the year, the AHCA eliminates the ACA’s application of Medicare taxes to investment income.

The prospect of campaigning against a bill that cuts care for struggling working families in the heartland while giving tax breaks to Wall Street has Democratic consultants salivating.

President Trump should defer that idea until tax reform efforts begin in earnest.  A smart negotiator should be able to secure some Democratic support for a revised AHCA that eliminated the investment income tax cuts.

The President knows there isn’t a private company in the world that would forego the negotiating strength its market clout gives the federal government.  He’s been talking about getting better Rx deals since his campaign started.

Ten days ago, the President met with Rep. Elijah Cummings to discuss reducing Rx costs.  That could be a harbinger.  If the Administration looks for bipartisan support for an ACA replacement, securing authority to negotiate drug prices as part of the AHCA could provide some glue.

The additional revenue from deferring the investment tax cuts and the savings from Rx price negotiations will also improve the CBO score.

These changes would provide room to further cushion the blow of broader rate bands on lower-income, older Americans, ease the Medicaid transition and/or strengthen the proposed risk pools.

To close the deal with Congress, the President will need to knock heads with Republicans who put ideological purity ahead of achieving what’s important and possible.

Campaigning for the AHCA in the red states with Democratic Senators is part of the path to enactment.

Perhaps most importantly, giving moderate Democrats some positive reasons to vote for the AHCA would go a long way towards avoiding the political instability that’s haunted the ACA since its inception.

The ACA needs fixing.  Let’s get it done once and done right.

Gary Mendoza is CEO of Health eWay, healthcare’s mobile first platform.  He served as California’s HMO regulator in the mid-90s and was the Republican candidate for Insurance Commissioner in 2002.

Categories: OIG Advisory Opinions

Register for Free Live Webinar Health 2.0 Is Hosting This Thursday

Tue, 03/21/2017 - 17:22

Recently, the Republican Congress introduced the AHCA. What will it mean for the health tech industry and the impact on the industry’s growth?

Join Health 2.0’s Indu Subaiya and Matthew Holt as they tackle these questions and more with policy expert Josh Seidman from Avalere Health during the Repeal and Replace: Impact on Health Tech Webinar this Thursday, March 23, 2017, at 10 AM PST.

Get the latest perspective on what the repeal/replace will mean for startups/entrepreneurs, whether companies will benefit from these changes, and if Medicaid is cut, what does it mean for hospital spending?

CLICK HERE TO REGISTER!

Jill Merrigan is the Marketing Manager at Health 2.0.

Categories: OIG Advisory Opinions

Democrats Paid a Steep Price For Ignoring the CBO. Republicans Will Too.

Tue, 03/21/2017 - 10:07

Eight years ago it was Democrats who were criticizing the Congressional Budget Office. Now it’s Republicans who are bashing the CBO for estimating that 14 million Americans will lose their health insurance next year if the House Republicans’ “repeal and replace” bill becomes law.

The media and the blogosphere have done a reasonably good job of debunking the Republicans’ criticisms of the CBO. Any citizen paying attention can discover that although fewer people enrolled in the Obamacare exchanges in 2014 than the CBO predicted in 2010, the CBO correctly forecast that the uninsured rate would fall by about half and that employers would not stop offering health insurance. The attentive citizen can also discover that the CBO’s predictions were more accurate than those of many other experts.

The media has also reported that Democrats leveled their own unfair criticisms against the CBO back in 2009 and 2010. Obama, Nancy Pelosi, and Max Baucus, to name just a few prominent Democrats, criticized the CBO for not giving the alleged cost-containment provisions in the Affordable Care Act more credit.

I want to make three points here that I have not seen made elsewhere:

(1) The criticism that both Democrats and Republicans make of the CBO consists almost exclusively of raw opinion, usually delivered in a huff, and almost never cites or discusses research;

(2) The CBO may have been off in predicting how many people would enroll in Obamacare and Medicaid, but it was accurate in predicting the failure of the managed care fads written into the ACA to cut costs; and

(3) Today, more than ever, America needs the CBO because the CBO adheres to the quaint principle that evidence should trump ideology.

Democracy thrives on rational debate, not whining and dodging

What I find offensive about the Democrats’ criticism of the CBO in 2009 and 2010, and Republicans’ criticism now, is the near-total absence in their critiques of any discussion of the evidence the CBO relied on to make its predictions. It’s one thing to engage in a civil dialogue about evidence; it’s totally another just to sit back and bitch. When, for example, in 2009 Senator Max Baucus badgered then-CBO director Doug Elmendorf about the CBO’s estimates of the non-existent savings in what would become the ACA, Baucus did not seek to engage Elmendorf in a discussion of the evidence behind ACOs and the other managed care fads the Democrats were counting on to cut costs. No, Baucus demanded that Elmendorf not play “God,” whatever that meant, and to be “creative” in his calculations of the ACA’s ability to cut costs.

Today Republicans are doing exactly what Democrats did eight years ago – they’re whining rather than telling the public what it is about the CBO’s methodology they disagree with. The closest Republicans have come to discussing methodology is to accuse the CBO of overestimating the coercive effect of the ACA’s individual mandate (the penalty for not buying health insurance) while carefully dodging the fact that the House bill substantially reduces the subsidies available to lower-income people that make health insurance more affordable. Ok, so you think the Obamacare mandate was less effective than the CBO thought it would be? Fine. Tell us why. Republicans won’t do that. [1]

CBO never drank the managed care Kool Aid

We all know now that the CBO, like every other agency, think tank and human being, failed to estimate accurately in 2010 how many Americans would buy insurance through the exchanges come 2014 despite an intelligent and good-faith effort. But almost no one has given the CBO credit for accurately predicting that the managed care cost-containment nostrums written into the ACA (including ACOs, “medical homes,” penalties for “excess” hospital readmissions, and lower out-of-pocket costs for preventive services) would save little money and might even raise costs. CBO’s only reward for that prediction was criticism from Democrats in 2009 and 2010.

Since at least the early 1990s when the CBO issued several reports on how it would score any legislation relying on managed care proposals, the CBO has never succumbed to managed care hype. There have been a few near exceptions (the CBO was a bit too optimistic about staff model HMOs in the 1990s), but by and large the CBO has been immune to the groupthink that propelled managed care theology to dominance in the American health policy debate four decades ago. The CBO has never said, for example, that prevention or “coordination” or ACOs will cut costs. They have refused to make such statements despite enormous pressure – both direct pressure from politicians and the indirect pressure of groupthink – to do so. They have refused because they insist on basing their decisions on evidence.

The CBO’s reliance on evidence has placed them on a collision course with the managed care movement and all the politicians who listen to managed care advocates. Since the earliest days of the managed care movement, managed care advocates have given high priority to their own opinions and low priority to evidence. (For a discussion of the managed care culture and its low regard for evidence, see my comment here )

Let me illustrate how different the culture of the managed care movement is from CBO’s culture by quoting statements made by President Obama and Doug Elmendorf, the CBO’s director from 2009 to 2015, about the myth that prevention saves money. According to a 2009 Politifact article , Obama asserted, “Insurance companies will be required [by the ACA] to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies…. That makes sense, it saves money….” Elmendorf replied: “The evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.” Note which of those two men used the word “evidence.” It wasn’t Obama. [2]

And what does the research say? A review of the literature by Joshua Cohen et al., published in the New England Journal of Medicine, concluded, “Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” Cohen et al. noted that the “prevention saves money” myth was fueled in part by what I have called the “free lunch syndrome”  – the pretense that the proposed managed care intervention is free.

Precisely because the CBO relied on research while the liberal critics of the CBO relied on managed care folklore, the CBO’s predictions of how the managed care fads in the ACA would perform were far more accurate than those of Obama, Baucus, Nancy Pelosi, Barbara Boxer, Peter Orszag, et al. The CBO’s December 2008 report estimated ACOs would cut Medicare’s costs by a tenth of a percent (see my discussion of this report in this THCB post ). That was remarkably accurate. Today (almost a decade later) we know CMS’s Pioneer ACOs have cut Medicare’s costs by a magnificent one-tenth to seven-tenths of a percent over their first four years (that’s not counting the costs the ACOs incurred) while the much larger MSSP ACO program has raised Medicare’s costs by about two-tenths of a percent (again, not counting the costs the ACOs incurred) over the same period.

As Republicans gnash their teeth about the CBO’s failure to estimate exactly how many Americans would enroll in the exchanges, let us not forget how accurately the CBO predicted the performance of the managed care programs in the ACA. That was impressive. It is further evidence that the CBO’s loyalty is first and foremost to evidence, not groupthink, not Democrats, not Republicans.

Democrats and Republicans should celebrate an independent CBO

The health policy debate, like the debate about virtually everything else, has become even hotter and more polarized than it was a decade ago. We need the CBO’s independent, evidence-based judgment now more than ever. But like democracy and trust in institutions, the CBO’s independence cannot be assumed. It must be nourished – diligently and always. CBO’s 200 employees are human. We should not assume they can resist any and all groupthink no matter how suffocating, and any and all political pressure no matter how threatening.

If we are to retain an independent CBO, leaders of both parties must stop bashing the CBO and start celebrating its commitment to evidence-based health policy. I am not equating intelligent, evidence-based disagreement with “bashing.” I have had my own disagreements with the CBO (for example, I thought the CBO’s conclusion that somewhere between zero and 10 million Americans would be insured by the over-hyped “public option” was too generous). By “bashing” I mean accusing the CBO of “playing God,” of being “socialist,” or otherwise attacking the good faith or intelligence of CBO’s staff while simultaneously refusing to engage in a debate about the research the CBO relied on.

Donald Trump poses a new threat to the CBO. Trump has demonstrated repeatedly that he is willing to sabotage institution after institution (the national intelligence agencies, the Department of Justice, NATO, the media, and the courts). With the release of his budget, it’s now clear he is willing to destroy or cripple any government agency he doesn’t like. This does not bode well for the CBO.

To give you some idea of what it feels like inside the CBO when the threat level rises to uncomfortable levels, let me relate to you a disturbing tale told by Haynes Johnson and David Broder in The System, their book about the rise and fall of the Clintons’ Health Security Act. The year is 1994. Robert Reischauer, a Democrat, is the CBO director. The CBO is preparing an analysis of the Health Security Act, the Clintons’ ponderous “managed competition” bill. One of the issues the CBO must decide is whether the expenditures on insurance by alliances of employers the Clintons call “health insurance purchasing coalitions” should be considered private or public spending. The Democrats want the CBO to declare the expenditures to be private and therefore off-budget. Republicans argue the expenditures would be mandated by federal law and should therefore be treated as on-budget spending. The pressure on Reischauer from both sides has reached white hot intensity over the last few weeks.

Here’s how Johnson and Broder described the pressure and how badly it rattled Reischauer and his staff.

“I received numerous phone calls,” Reischauer said…, “from people of great fame and with common household names telling me what they thought the right answer to the question was and questioning why I would have the audacity to decide otherwise. I also got probably a quarter as many phone calls from the other side [Republicans] who said they were sure we had caved in to the administration, and that our institution was going to be marked for its entire life because of this.”

Some who called accused him of trying to destroy a president. Others angrily warned him that if health reform died because of an unfavorable CBO verdict, children would suffer, and some would die. That’s going to be on your conscience, he was told…. For Reischauer, the worst moment came at nine o’clock on a Sunday morning, shortly before his report was to be released.… The phone rang. His wife answered. It was Ted Kennedy.

Kennedy was furious…. For nearly half an hour, Kennedy assailed Reischauer, bellowing his outrage. Reischauer was going to bring down the Clinton administration. Here was a president with a once-in-a-lifetime opportunity to do something as historic as health reform, and you, a minor staff official, are taking it upon yourself to thwart the will of the American people…. You aren’t elected….. Who are you to say this isn’t private insurance? Who are you to say whether this is on budget or off budget?….

Reischauer was shaken. He had never experienced such a tongue-lashing….
As the time for the decision neared, Reischauer summoned his executives to a meeting at seven o’clock at night in his office. Panic had set in at the White House….

Reischauer spelled it out for his executive staff. This is such a controversial issue, he said,… with such high political overtones that there almost certainly will be institutional repercussions. The political environment was so highly charged, he told them, that there was a good chance CBO could see its budget eliminated or slashed to a point where none present would be interested in working there. He wanted to make sure they understood the stakes; and be certain, also, that they fully discussed the most controversial part of their report and came to a decision about it: the chapter in their projected seventy-seven-page report that described the proposed health alliances as governmental activities financed with government funds.

For an hour and a half that night the CBO executives discussed the issue. Then Reischauer gave each a piece of paper. “I want you to vote yes or no,” he said.
Every person voted yes. There were no dissenters. They voted to include the chapter in the report even if it destroyed their agency and their jobs.
This triumph of principle over politics was never reported; their deliberations, and their vote, remained private. (Haynes Johnson and David S. Broder, The System: The American Way of Politics at the Breaking Point, 1996, pp. 285-86)

Could such abuse occur today? Of course it could. In today’s environment, would the outcome be the same? Would “principle prevail over politics” if the bullying were accompanied by a bona fide threat to cut the CBO’s budget?

I’ll settle for self-interest

In today’s environment, I realize it’s asking a lot of elected officials to stop bashing the CBO and to start promoting an evidence-based discussion. But if politicians and others with access to the media cannot find it within themselves to act altruistically, then I beg them to act in their own self-interest. It is not in the self-interest of either party to reject the CBO’s findings and then enact legislation that cannot do what its proponents claim it can do.

Democrats should have thanked the CBO for warning them that the managed care fads in the ACA would not cut costs. Instead they grossly exaggerated the cost containment in the ACA and crammed the ACA through Congress. Voters were not fooled. Voters handed Democrats their rear ends on a platter, in large part because they were not happy with the ACA. [3]

Similarly, Republicans should be grateful to the CBO for warning them the House “repeal and replace” bill will throw tens of millions of Americans to the wolves. Republicans can bash the CBO all they want, but voters will not be fooled. And when they discover Republicans tried to fool them, they will hand Republicans their rear ends on a platter.

Democrats and Republicans should make a vow now to swear off abusive remarks about the CBO and to pay close attention to the CBO’s findings. If they can’t bring themselves to do that for the love of truth and love of their country, they should do it for love of their own rear ends.

[1] In order to predict in 2010 how many people would be insured through the Obamacare exchanges come 2014, CBO staff had to familiarize themselves with research on (1) compliance with mandates (such as laws requiring the purchase of automobile insurance), (2) what economists call the “price elasticity of demand” for health insurance, and (3) economic models that predict multiple economic variables such as recovery from the Great Recession, employment levels and household incomes.

Do Newt Gingrich or Paul Ryan have a different interpretation of that research? Do they think the CBO ignored variables they should have included in their analysis? Who knows?

[2] Here is an example of how the CBO discussed another of the enduring myths peddled by managed care proponents (as well as advocates of vouchers, health savings accounts, and of “price transparency”), namely, the myth that risk-adjustment is both accurate and inexpensive. “Mechanisms to adjust for risk selection in an accurate and unbiased way are essential but not yet available,” stated the CBO in one of several reports to Congress on how it would score managed care fads. “Those under development would not work unless applied to large groups of insured individuals. Even then, they could be expected, at best, to adjust partially and imperfectly for the effects of selection on costs and to do so in a way that improved fairness among providers only on average and over time. Thus, some organizations that enrolled a disproportionate number of high-cost individuals might experience poor financial outcomes for essentially random reasons. In short, where risk adjustment is concerned, it is unclear how good is ‘good enough’ and whether adjustments that are good enough could be achieved in the near term.”(Managed Competition and Its Potential to Reduce Health Spending, CBO, May 1993, p. 25).

Although accurate risk-adjustment that does not cost a king’s ransom is essential to managed care solutions, it is extremely rare to find a matter-of-fact, honest assessment like this in managed care manifestos and in peer-reviewed analyses of managed care proposals.

[3] Trump’s claim that he would replace Obamacare with something “terrific” inexplicably influenced the views of some voters. But Republican hype about Obamacare and their own “repeal and replace” plans was a secondary factor. The public saw with their own eyes the contrast between the Democrats’ hype about the ACA and its actual performance. They will also see the gap between Republican hype about “repeal and replace” legislation and its actual performance.

Categories: OIG Advisory Opinions

The Law of Diminishing Returns of Ethicism

Mon, 03/20/2017 - 16:46

Many allege that the FIRST trial, which randomized surgical residencies to strict versus flexible adherence to duty hour restrictions, was unethical because patients weren’t consented for the trial and, as this was an experiment, in the true sense of the word, consent was mandatory. The objection is best summarized by an epizeuxis in a Tweet from Alice Dreger, a writer, medical historian, and a courageous and tireless defender of intellectual freedom.

@RogueRad @LVSelbs @ethanjweiss @Skepticscalpel Consent to experimentation. Consent. Consent. Am I not being clear?

— Alice Dreger (@AliceDreger) November 20, 2015

It’s important understanding what the FIRST (Flexibility In duty hour Requirements for Surgical Trainees) trial did and didn’t show. It showed neither that working 120 hours a week has better outcomes than working 80 hours a week, nor the opposite. Neither did the trial, despite being a non-inferiority trial, show that working 100 hours was as safe as working 60 hours a week. The trial showed that violating duty hour restrictions didn’t worsen outcomes. The trial was neither designed nor powered to specify the degree to which the violation of duty hours was safe. This key point can be missed. To be fair, neither the trialists, nor the editorials about the trial, claimed so.

The trial was a triumph of flexibility of hours, not of long hours, a triumph for decentralization over rigid adherence to centrally-determined rules. The trial confirmed the intuitions of the Nobel prize-winning economist, Friederich Hayek, that local decisions trump central decisions – which he articulated in his landmark essay, Use of Knowledge in Society.

The trial affirmed Herbert Simon’s “bounded rationality,” which is that what defines reasonable isn’t a point estimate but a range, a bandwidth. Bounded rationality replaces optimal (point estimate) with satisfice – good enough (range). What’s good enough for resident hours is best determined locally, not centrally. Central authorities are good at defining point estimates, not so good at establishing the range of permissibility.

But is Dreger correct that patients should have been consented for the trial? Dreger draws our attention to the Helsinki Declaration. Briefly, if one studies an intervention and collects data to see if the intervention works, it’s an experiment, and patients must be consented for an experiment. By this definition, the FIRST trial, a randomized controlled trial (RCT), is an experiment.

One objection that patients needed consent is that there was equipoise, meaning it was genuinely unknown if strict adherence to duty hours has better outcomes than flexible working hours. The reason for the equipoise is instructive. It was never demonstrated, by a rigorous experiment, that the degree to which duty hours were restricted improved outcomes. Instead, the 80-hour work week, was a reflexive policy based on real anecdotes and what sounded plausible – residents get more tired by working longer hours, which impairs their performance, harming their patients.

There are few better reminders that healthcare is a complex system than resident duty hours. In complex systems, reductionism and simple solutions are enticing, but wrong. My friends in surgery in Britain, who experienced both the brutal 48-hour call and a week of night call when hours were restricted but spread out, preferred the former because they could “get the pain over and done with.”

From my own experience in surgery, I looked forward to the 24-hour call because I left the hospital next day at noon and, invariably, ended up in the local pub by 2 pm. The more brutal the call, the less tired I felt, because the less time I had to feel tired.

Curtailment of duty hours is, by no means, an unalloyed good, as there’s a price for rest, if in deed, residents feel more rested in a shift system which, arguably interferes with circadian rhythms just as much. Not to mention that the shift system disrupts continuity of patient care, as any radiologist who has been frustrated speaking with housestaff about the appropriateness or results of an imaging study when told “Mr. Patel is not my patient – I’m just covering,” can attest.

The question arises why should work be restricted to 80 hours, not 70, or 92 hours. To that, I can do no better than to quote Cyril Radcliffe, who drew the border between India and Pakistan. According to urban myth, when Radcliffe was asked why he drew the border where he had drawn the border, he replied “I had to draw the line somewhere.” All lines are arbitrary, and arbitrariness isn’t an argument against drawing a line, merely a confirmation that a line has been drawn.

Equipoise justifies an RCT but equipoise doesn’t necessarily justify the waiving of consent – i.e. equipoise tells us that it’s ok experimenting, not that it’s ok not getting permission to experiment. When there’s no equipoise, such as reduction of a fracture-dislocation of an ankle versus leaving it alone, experimentation is unethical, even with consent. Extending this logic, if an intervention, such as a quality initiative (QI), is widely implemented without consent, as it often is, it implies there’s no uncertainty about its efficacy, that its efficacy is self-evident, like a parachute.

On a technicality, Dreger may be correct that, by the Helsinki Declaration, the FIRST trial was an experiment which needed consent. However, a technicality is no good if it survives for its own sake, it must serve a bigger goal. The technicality exposes a bigger problem than it solves.  Untested ideas such as Meaningful Use (MU) for Electronic Health Records (EHR), checklists, paying physicians for performance (P4P), compliance with quality metrics, such as MACRA, ideas which have gains and losses for patients, can be implemented without patient consent because they seem like a good idea at the time. But when it comes to testing them, to seeing if they really work if, for example, randomizing healthcare systems to P4P and no P4P needs patient consent, one may never be able to study the true risk-benefits of great policies.

In other words, it seems ok implementing an untested quality initiative on every patient without their consent, but when testing that untested quality initiative, it’s unethical implementing it on only half the patients without their consent. I shan’t labor over the parody this numerical discrepancy inspires, except that I can’t help imagining telling Chengiz Khan that it’s less unethical that he slaughters an entire village than spares, randomly, half the villagers.

I’m a fan of ethicism and medical ethicists, largely because I’m weary of the Benthamite, “greater good for the greatest number,” trap. Ethics saves the individual from being sacrificed at the altar for the greater good, for the sake of the population. Ethics seems to do less well protecting the population (lots of individuals, if I may remind you) from being sacrificed at the altar for the anecdote, or some elite’s bright idea.

A distinction has been made between an experiment in which an intervention is implemented with the purpose of collecting outcome data, and health policy which has no ambition of explicitly measuring. Therefore, the logic follows, we need consent for experimentation and not for policy, because as the latter is not implemented with a view to measuring its efficacy, it’s not an experiment. Admittedly, this is clever logic, but it makes me despair even more. Drugs, QIs, and policy have the same intent – improving outcomes. Any distinction between implementing policy and experimentation is a false one. That implementers of policy and quality initiatives are neither required to, nor seek to, deliberately confirm that they work, that is measure outcomes during their implementation with a view to rescinding them if they don’t work, makes our unchallenging their implementation even odder.

All policy and quality initiatives are experiments, provisional assumptions, unless we believe that scholars in this realm have such an unusual access to wisdom that it renders scientific curiosity redundant. It’s an epistemological irony that we can submit statins to greater scientific rigor than, arguably, the more consequential MU for EHR.

Carl Sagan said “extraordinary facts need extraordinary evidence.” Christopher Hitchens went further and said “what is asserted without evidence can be dismissed without evidence.” By Hitchens’ reasoning, policy or QIs implemented without evidence can be dismissed without evidence. The trialists in the FIRST trial compromised Hitchens’ strict dictum. They cluster randomized. If the original policy waived consent in all patients, the FIRST trial waived consent in half the patients. I’m aware of the logical fallacy – two wrongs don’t make a right. But surely, a wrong and half a wrong, 1.5 wrongs, are less wrong than two wrongs.

Quality initiatives have two easy passes. They’re implemented with plausibility and good intentions, alone. And, when it comes to studying their efficacy, the burden of proof inverts – that is the burden is to show that they don’t work, rather that they work. The non-inferiority design of the FIRST trial implicitly recognized the inverted burden of proof – the burden fell on flexible hours to prove that they were safe enough, rather than on restricted hours to prove they were safer. Some might argue that the burden of proof should have been even more stringent – that is flexible hours should have shown they’re safer than restricted hours. Regardless, my point that burden of proof inverts with quality initiatives is supported by the design of the FIRST trial.

The first error with ethics lies in formalizing ethics, like regulations, which induces people to fret over the letter, rather than the spirit, of the law. The danger of such fretting was best exposed by Portia in the Merchant of Venice when she held Shylock, who insisted on Antonio’s pound of flesh, to the letter of the law and said he take no more, but also no less, than a pound of Antonio’s flesh.

The bigger error with ethics is in failing to recognize that ethics is constrained by practicality – there’s a cost in obtaining consent, and sometimes this cost is too prohibitive. As much as I despise MU and MACRA, their implementation couldn’t have been conditional on consenting patients. Aside from consenting patients about unknown risks (who would have thought EHRs would sully the doctor-patient encounter?), you can’t divide pubic goods between those who want it and those who don’t. If public policy can be implemented only when voted by a majority of the proletariat, all policy decisions would need elections, elections less attended than mid-terms, elections every hour. It was inevitable that EHRs were rolled out without patient consent. The proof of the health policy pudding is in eating it – there’s no way round this.

The FIRST trial would have collapsed were consent required because of the impracticality of excluding sick surgical patients, once deemed they required a laparotomy, for instance, from hospitals with either flexible or restricted work hours. There’s no reason assuming well-informed patients would consistently have chosen one not the other. Unless we grant the same slack to investigators who study health policy and QIs systematically, as we grant the implementers of policy and QIs, bad ideas will accumulate faster than are expelled and, eventually, like Gresham’s Law, bad health policies will drive out good health policies.

The biggest error with ethics is in failing to acknowledge that ethics is contextual. During the Ebola epidemic, some said that experimenting an unproven Ebola vaccine on Africans was “unethical.” If we can’t distinguish morally between studying the natural history of syphilis by exploiting unsuspecting and vulnerable African Americans and experimenting a vaccine on at-risk Africans during an epidemic, which could save many other at-risk Africans from Ebola, we’re in big ethical trouble.

“Unethical” is now thrown around so frivolously that the word has lost all meaning just as “fascism,” “stat” and, in my case, “uncaring,” have lost all meaning. My wife used to call me “uncaring” once a month – now she says it every day.

Recently, I heard two doctors argue. One said that giving cancer patients false hope is unethical (hope, like aggregate is, by definition, false). The other doctor said that denying cancer patients hope is unethical. It reminded me of prematurely closing RCTs, like the National Lung Screening Trial, on ethical grounds. When it’s apparent there’s a treatment effect sooner than anticipated in a trial, it can be argued, both, that it’s ethical and unethical continuing the trial. It’s unethical randomizing patients when there’s evidence of a treatment effect. But is it not unethical closing a trial prematurely when we don’t know the true treatment effect, which can better inform about risk: benefit ratio, which can take longer to reveal? You could make a cogent argument for both because ethics, like Schrodinger’s cat, is suspended in a dual state of being and not being.

Rather, what’s ethical or unethical depends more on an interlocutor’s will and skill in making an argument than our moral intuitions. This is both distressing and reassuring because medical ethics is more important than ever. In the era of gene editing, what’ll save mankind from bokanovskification are an articulate ethicist’s rapier logic and persuasive prose. I desperately wish to take ethicists more seriously, but I’m afraid of being tuned out by the boy who cried “unethical.”

(About the author: Saurabh Jha is a radiologist and contributing editor of THCB. He can be reached on Twitter @RogueRad. He’s ethical but his Tweets are unethical)

Categories: OIG Advisory Opinions

Personalized Cancer Services are Needed: GuideWell is Calling on You

Mon, 03/20/2017 - 13:29

The moment you are diagnosed with cancer, you become a survivor. You now live with a daunting illness. Your everyday monotonous activities turn into new challenges, flooding your thoughts with countless questions and new struggles. In the 2006 National Survey of U.S. Households Affected by Cancer, 15% of respondents said they had the experience of leaving a doctor’s office without answers to important questions about their illness. And, even when patients do have the relevant information to cope with their illness, a lack of logistical and material resources, such as transportation, medical equipment, and supplies, can often prevent them from ever actually using the suggested support. GuideWell is launching the GuideWell Cancer Challenge to crowdsource ideas about concierge services to help the millions living with cancer understand and access the services they need.

GuideWell is calling on everyone, from developers creating solutions to patients who can share their own insights, to come together and solve this issue. We need you to join the movement and participate in the challenge. When you visit the GuideWell Cancer Challenge website you can submit your ideas, provide insights that can spark someone else’s creativity or comment on others’ ideas with your feedback and suggestions. You can even participate by simply voting for the ideas you like the best. This challenge is your chance to get involved in Greater than C>ncer: The Immersion Journey, an initiative powered by the American Cancer Society with the goal of gaining a better understanding of these problems and potential solutions. The GuideWell Steering Committee will evaluate all ideas and insights, and award prizes totaling $12,000. In addition to cash prizes, the best ideas will also be shared within the GuideWell ecosystem through an online and printed publication.

The deadline for submitting all ideas and insights is April 28, 2017. If you have an idea, go ahead and SUBMIT IT! Or, simply browse submissions and VOTE for your favorite. If you want to learn more about the challenge, or have questions about the process REGISTER for the Q&A WEBINAR to be held on March 30, 2017 at 3:30 PM ET.

GuideWell is confident that when we bring great minds together, we’ll transform new ideas into health solutions. We may not be able to cure cancer (yet), but there are things we can do to help make life better for people living with these life altering diseases. Contribute to the challenge today!

Chelsea Polaniecki is a Program Manager at Catalyst @ Health 2.0.

Categories: OIG Advisory Opinions

The Coming DRexit

Sun, 03/19/2017 - 12:29

Brexit was a British version of “I’m mad as hell and I’m not going to take it anymore,” a famous line from the film “Network.” Brits were fed up with intrusive and nonsensical regulations from the European Union, including whether eggs could be sold by the dozen — really important stuff affecting the lives and well-being of our neighbors across the pond.

“Frexit” may be the next iteration, as one of the leading French presidential candidates, Marine Le Pen, promises voters a referendum to leave the E.U. Donald Trump’s election to the presidency is the American version, in which voters chose to leave behind the political and media Establishment and favored a new direction.

Now, in medicine, a similar movement is called “DRexit,” as described by Dr. Niran Al-Agba, a pediatrician in Washington State, who wrote about this in a blog post — and it may be pushing physicians away from stifling bureaucracies of government-run health care. Endless rules, regulations, and mandates are turning physicians from healers into robots and transforming the medical clinic into the post office or the Department of Motor Vehicles.

The practice of medicine for decades has been micromanaged by the government and insurance companies. First were the price controls, dictating what physicians were (and are) paid for their work, regardless of costs. This is not so in law, another service profession. Lawyers charge by the hour and their rates are based on experience, reputation, and the value they provide to their clients. They also charge separately for their expenses. Not so in medicine.

Second was Obamacare, with its insurance networks limiting physician access to patients and interfering with the all-important and often long-standing physician-patient relationship.

Third was MACRA, a bit of congressional legislation from 2015. It was Big Brother on steroids, perched on the shoulders of American physicians. MACRA replaced the Sustainable Growth Rate (SGR) that dictated how much physicians were paid for their services. The SGR tied payment rates to general inflation, ignoring that medical inflation outpaces the consumer price index at typically twice the rate — meaning physician payments were not keeping pace with their costs of doing business.

Congress ditched the SGR to the relief of American physicians, but replaced it with MACRA, full of quality measures and incentive payments based in large part on checking boxes in electronic medical records and other meaningless processes. This program also encourages physicians to do less, and prescribe less expensive medicines and treatments — treating the federal budget rather than their patients.

Upon graduating from medical school, new physicians take the Hippocratic Oath, promising to “first do no harm.” So what happens when government mandates change the promise to “first spend less money”?

At some point, physicians cry uncle and head for the exits — the “DRexit.” Many will opt out of Medicare and Medicaid, the government-run insurance plans covering about a third of the U.S. population and generally the most vulnerable — the elderly and the poor. Commercial insurance companies aren’t much better, as they often piggyback on the federal programs with similar rules and regulations.

As physicians “DRexit,” many will not accept any insurance. They’ll instead require patients to pay cash for their services and then submit their bills to their insurance company, whether Medicare or Anthem.

Related: Patients and Their Doctors Can Talk Again

The chattering classes of the media and the Left fret over Republican plans to repeal and replace Obamacare and who might lose coverage if Medicaid expansion and insurance mandates are curtailed or ended. What is conveniently or intentionally overlooked is the fact that insurance coverage is not the same as health care.

If enough physicians “DRexit” and choose not to accept Medicare, Medicaid, or commercial insurance, all the Medicaid expansion in the world doesn’t mean these patients will have a doctor to see when they are sick. Rather than worrying only about who gains or loses coverage under repeal/replace, policymakers should not forget those who may or may not provide such coverage.

Brian C Joondeph, M.D., MPS, is a Denver-based physician and writer. 

Categories: OIG Advisory Opinions

Hospitals Helping Hospitals Be Better Hospitals

Sat, 03/18/2017 - 18:58

The moment that an accreditation team shows up unannounced can spike the pulse of even the most seasoned hospital executive. The next several days will amount to one big exam for the safety and quality of care, as surveyors meet with executives, managers and care teams, and watch first-hand as care is delivered. Make the wrong move or give a wrong answer, have them see rust on a ceiling sprinkler, and your hospital may get dinged. Get dinged too many times or have findings of serious patient risks, and your accreditation (and the federal funds attached to that) may be in jeopardy.

This is a useful and essential exercise. It makes sure that hospitals are doing what they’re supposed to. For example, do they have an infection prevention and control plan? Do they conduct fire drills? Do they inspect, test and maintain medical equipment? Do doctors sign their orders and notes?

Regulators have been innovating how they evaluate hospitals to make their reviews more meaningful and impactful for patient safety. Yet, if we truly want to strive for the best possible care, end preventable patient harm and reduce needless costs, meeting regulations alone isn’t nearly enough. Regulations may help identify the “bad apples” and ensure compliance with minimum requirements. Yet these regulations alone have not been enough to transform a health care system that still harms patients too often, improves too slowly, wastes too much and innovates too little. How do we help hospitals to excel?

One approach with great potential is peer-to-peer assessment, a concept borrowed from the nuclear power industry. In peer-to-peer, a team of reviewers — executives, managers, frontline clinicians, researchers and others — visit another hospital for a structured, confidential and nonpunitive review of its safety and quality efforts. While it would be foolhardy to show your flaws to regulators, in peer-to-peer assessments it is encouraged. The goal is to create an environment of learning, not judging, for both sides. The organization being reviewed discusses its weaknesses, while highlighting its successes, which can then be shared more broadly.

This is not theoretical. For several years we at The Johns Hopkins Hospital have adapted the peer-to-peer approach to help intensive care units to reduce their rates of catheter-related bloodstream infections. We also had an “exchange program” with Massachusetts General Hospital — they assessed us in Baltimore and we assessed them in Boston, using structured surveys that we developed together. The experience helped both organizations to see areas for improvement, plus innovations they can borrow from each other.

Within three months of the visit, both hospitals already made some changes at the bedside and at the organization level. For instance, at Johns Hopkins we realized we needed a better structure in place to ensure that quality and safety targets were met at the departmental level. So shortly after the assessment, we borrowed a strategy from Mass General and created positions for vice chairs of quality at each department. Such discoveries about robust management practices come more readily when teams have an environment of transparency and deep trust.

Peer-to-peer review helps hospitals to discuss their problems in a safe environment, when it isn’t a crisis. We should strive for a day when a hospitals voluntarily and routinely take part in these exercises. It’s been said that change progresses at the speed of trust; trust among peer organizations can accelerate improvement that saves patients’ lives.

Categories: OIG Advisory Opinions

Join Health 2.0’s Free Webinar To Hear the Potential Impact on Health Tech from Repeal & Replace

Fri, 03/17/2017 - 17:47

Register for Live Webinar To Hear Experts Discuss The Future of Health Tech

In the last week, the Republican Congress introduced the AHCA. What does this mean for the health tech industry, and how will this impact the growth rate of health technology?

Join Health 2.0’s Indu Subaiya and Matthew Holt as they tackle these questions and more with policy expert Josh Seidman from Avalere Health during the Repeal and Replace: Impact on Health Tech Webinar on March 23, 2017 at 10 AM PST.

Get the latest perspective on what the repeal/replace will mean for startups/entrepreneurs, whether companies will benefit from these changes, and if Medicaid is cut, what does it mean for hospital spending?

Space is limited so register today to secure your spot for the free webinar.

Deepa Mistry is the Operations & Marketing Manager of Health 2.0.

Categories: OIG Advisory Opinions

A Doctor’s Dilemma: A Case of Two Right Answers

Fri, 03/17/2017 - 10:29

Imagine you are a doctor running a clinic in a primarily lower-income neighborhood, where many of your patients are recent immigrants from different parts of the world. You are granted a fixed annual budget of $100,000 through your local public health department, and it is unlikely that you can obtain additional funding later in the year. Traditionally, you have used your entire budget for the past several years, which usually lasts from January until December. This allows you to care for all of the few thousand patients who come to you for treatment throughout the year.

One day in January, a frightened, thin young man appears to the clinic with a folder of medical records. He is accompanied by his aunt, who explains to you that he has recently traveled from El Salvador, where he was diagnosed with a rare type of cancer that, if untreated, will result in his death within 6 months. After further inquiry, you determine that his cancer is treatable, but will require $50,000 of your budget to save his life. What do you do?

Thinking Through the Moral Dilemma

The ethical dilemma in this case is one that physicians and public health practitioners confront often, particularly in very low-resource settings: the care of the individual versus the equitable distribution of resources to the society at large. For this case, treating this single patient means that there will not be enough money to treat all of the other patients who come to the clinic over the course of the year. In economic terms, we might say that his care is not cost-effective because for the same amount invested in supplying the clinic, we could prevent many more deaths or disability adjusted life years (DALYs) for a greater number of patients. However, allowing a patient to die of a treatable condition feels wrong on many levels.

Thinking through this further, we must look closely at our values as a country and a health system: thanks to EMTALA, we ensure that no patient will ever be allowed to die of an emergency condition while in a hospital; thus, we value saving people from imminent, preventable death.

 However, there are two bioethical principles at odds here: beneficence (doing what is best for the individual patient) and justice (doing what is most equitable for a society or group of patients).

What if the situation was framed as follows: if you spend $50,000, you can save the life of this single patient, or you will certainly prevent morbidity for 500 future patients? What if you knew more of this patient’s backstory, such as the fact that his mother sold one of her kidneys in the underground organ trade to be able to pay for his hospital visits and tests in El Salvador—would these narrative details change how you felt about spending the money for his care? Is it fair for these details to influence your decision?

The Lens of Moral Distress

How we judge what is right versus wrong is very challenging in medicine and public health, and even more so when two choices might both actually be “right” in their own way, which is far more often the case. How do we end up choosing? One way to approach this ethical problem is from the perspective of moral distress. Moral distress is a term originally coined from the nursing field referring to the stress that is birthed from one’s inability to turn moral positions into complementary moral action—in other words, feeling like you know what the “right” choice is, but being unable to act on it for some reason. Research suggests that the way in which we fundamentally make decisions ends up being tied directly to emotions, even if we think we are functioning completely analytically. Thus, evaluating which option—treating him or not—causes you more moral distress is one way to decide.

Interestingly, our moral distress responses are probably tied closely to our lived experiences. For instance, my own background in global health led me to lean on the side of not treating the patient in this case because I have witnessed so many deaths due to unequal distribution of resources in hospitals in Sub-Saharan Africa—deaths of patients suffering from cheaply treatable conditions because of heavy illness burdens on fragile health systems. For me, rationing of care was an unfortunate reality that I had faced many times in global health settings. I found more moral distress in the idea that several patients would not receive treatment because of my decision. Admittedly, I was less certain about whether I was “right,” but clear in my visceral reaction. 

A colleague found herself feeling the opposite, which she attributed to her experience being a medical student during which time she encountered many individual patients who were not treated with kind, compassionate care. This led her to commit to an ideal that she would attend to every individual patient, no matter the circumstances. As a medical student in the United States, she was far less comfortable with the idea that care had to be rationed. She experienced much greater moral distress from not treating a patient for whom we had resources available at that time. Our lived experiences in healthcare shaped our moral distress to the various choices, which ultimately tilted us toward one side or the other. We both shared an immense sense of care for the patient in the scenario, but we had different frameworks through which we analyzed the dilemma.

Ultimately, the role of a physician and a public health practitioner requires the balance between two very different needs, but ones that are very intricately and inherently intertwined. There can be no public health without individual health, but the health of the individual should also not detract from the health of the public. Moral distress is one explanation for how we ultimately make ethical decisions, and while most of these decisions will not have a clear “right” versus “wrong” outcome, they all deserve equal consideration and moral reasoning. As physicians, it is critical that we do not ignore the health needs of our communities; and as public health practitioners, we must remember that at the end of the day, we are fighting for communities that are made up of individual people.

Abraar Karan MD is a physician at the Harvard T.H. Chan School of Public Health in the Department of Health Policy and Management (Twitter: @AbraarKaran).This post first appeared in the Huffington Post.

Categories: OIG Advisory Opinions

Ayasdi–Big Data changing hospital operations

Thu, 03/16/2017 - 23:41

One of the more interesting companies playing in the analytics space is Ayasdi. We’ve featured them at Health 2.0 a couple of times, but at HIMSS I got a chance to talk a little more in depth with chief medical officer Francis Campion about exactly how they parse apart huge numbers of data points, usually from EMRs, and then operationalize changes for their clients. The end result is more effective care and lower variability across different facilities, for example changing when drugs are delivered before surgery in order to improve outcomes. And increasingly their clients are doing this over multiple clinical pathways. They’re really on the cutting edge of how data will change care delivery (a tenet of our definition of Health 2.0) so watch the interview to hear and see more!

Categories: OIG Advisory Opinions

Trump Friend & Ally: “Donald, Build Universal Healthcare!”

Thu, 03/16/2017 - 14:19

Opinions are flying. Opinionators with a plan to fix healthcare in America are suddenly as common as waiters with a script in Santa Monica. Few are worth a second glance. They fall into the “that’ll never pass” pile or the “that’ll never work” pile.

So why should we pay any attention to Christopher Ruddy’s idea? Because he’s a prominent conservative, the CEO of Newsmax, and a long-time friend and ally of Trump—and he is advocating for at least a “lite” version of universal coverage.

Trump actually campaigned on universal healthcare, saying specifically that he meant a government-funded program that would “take care of everybody.” Ruddy argues that Trump is getting dragged into a political morass by abandoning the healthcare promises of his campaign and trying to go along with the Republican-controlled Congress. Instead, he says, Trump should dump Ryancare, shore up Obamacare, and appoint a bipartisan commission to come up with a replacement that could gather bipartisan support in the Congress. Ruddy suggests not “Medicare For All” but a stingier “Medicaid For All (Who Can’t Afford Insurance)” as a universal basic plan, with Health Savings Accounts and tax credits built on top of that for people who can afford, and want, more robust health plans.

Is this the best possible plan? No.

But it is the best idea put forward by a conservative friend and ally of Trump—and the only conservative plan that acknowledges the need to, as Trump said, “take care of everybody.” And events unfolding on Capitol Hill show that Trump may well need a Plan B.

Categories: OIG Advisory Opinions

#They’llnevercare. Insurance Is Not the Problem. It’s Also Not the Solution

Thu, 03/16/2017 - 13:01

Most everyone is talking about Healthcare lately and I just can’t take it anymore and had to send out a primer, because there is so much bad information being floated.  I don’t like the ACA replacement because the idea is still based on the premise that you can give-away insurance as an entitlement program.  The problem is that you can’t “give-away” insurance, it’s an oxymoron, if there is no skin in the game for the insured they’ll never care.

I’m an insurance guy and Trump voter.  I only point this because I want you to know that my healthcare recommendation is heartfelt and I offer it with no real bias other than offering my experience and expertise on the matter.  My idea is just an independent thought and many Republicans, Libertarians and Democrats would hate it, but I think Trump (the Independent) would love it.  And I feel it’s the only way for Trump to try and “solve” the healthcare problems in the U.S. and keep his commitment that “all” would be covered.

I’ve worked in the insurance business for about 17 years at three of the top five health insurance carriers.  I’ve worked with both small businesses and multinational large employers, I no longer work in health insurance, I left when Obama got in thinking it was over.

I’m not sure of your opinion of insurance companies, but I imagine it’s negative. The problem with Healthcare in the U.S. actually has very little to do with insurance.  Don’t get me wrong, it’s not like I’m saying that insurers are filled with a bunch of Eagle Scouts, but anyone who thinks that they are the primary problem doesn’t truly understand the problem.  Insurance as a concept is probably one of the most noble and ingenious thoughts man has ever had.

Who holds the risk?

Most large health plans are self-insured, the health insurance Company is basically just a computer, and often they hold no liability for the claims risk.  This is something that I think most average people and even many politicians would be learning for the first time.  So whenever I hear anyone blame a health insurance company, I know right away they don’t know what they’re talking about.  One quick example is the 26 dependent ages.  Insurance companies’ love that idea, a 26 year old or younger is just about the best risk you could have from an underwriting perspective.  The ones who didn’t want it were the large employers; around 90% of large employers are self insured.

When self-insured, they are the ones holding the risk and having to add more people onto their company paid medical plans.  Pre-ACA, any large company that wanted to, could have included dependents till age 26, I’m sure some did, ACA just mandated it.  There are some large employers that cover all sorts of things that people have no idea about, the insurance companies don’t care, they just program the computer to either pay or not. So if you hate an insurance company because they didn’t cover your claim, t could be that your employer didn’t include that service in your plan.

Take fertility treatments for example, some companies include it, and most do not.  How is it the insurance companies’ fault that your company didn’t want to cover it, but people don’t know, they just blame the insurance company, its easier that way.  Its important to note, that most of the government insurance programs are fully insured, the most profitable type of coverage for an insurer, they actually do want to hold the risk, but often they are just an administrator.

Selling Across State Lines

Let me educate you quickly on another aspect of the solution of selling insurance “across state lines”.  I know a lot about insurance and every time I hear this from a politician, I cringe. Health Insurance companies probably spend more on lobbying than any other industry, so any decisions politicians make about insurance is suspect, from either side.

Not to beat up on Blue Cross, because they are group of good companies, but unless you break up the Blue Cross and Blue Shield Association (BCBSA), selling insurance across state lines will never work. The Blues, by Charter, can’t compete against each other.  And BCBS covers about 45% of all people for commercial Health insurance in the U.S. and they are trying to buy CIGNA.  On their website, they boast that they “cover one-in-three Americans”, are the largest processor of Medicare claims and “hold the world’s largest privately underwritten health insurance contract — the 5.4 million-member Federal Employee Program (FEP).”

For example, Blue Cross in Pennsylvania can’t compete against Blue Cross in New York because they are both Blue plans.  They also both have over 60% market share in their respective markets.  So you can try and sell across state lines all you want, but you’re basically asking a company to compete against itself.  You would need to break up the Blues association for this to even have a chance at working toward any savings through competition.  The simple fact is that Health care is local, that’s why the Blues model works so well, and the others have a tough time competing, they have a local model.

The Blues also have the best discounts of all the top carriers because they are typically the most politically tied into the local Hospital systems.  Most often the local Hospital system owns the local Blue Cross plan.  People think it’s the other way around, but the health systems tells Blue Cross what it’s going to charge and what they are going to pay in EVERY major market.

You’ll never get costs down or increase competition unless you break up how these negotiations go between carriers and hospitals.  The secret sauce to any savings in health care is in the discounts between hospitals, doctors, pharma companies and the insurance companies.  Super transparency needs to happen immediately on all medical pricing; this should be a part of any law and should be at the federal level.

Follow the money as they say, there should be discount uniformity for all carriers in any given local market.  I don’t like the government forcing things in the private market, but either make this part of the law or outlaw all health care lobbying, I’d be for either.  If you are forcing insurance companies to cover people with pre-existing conditions, then how is this manipulation and bastardization of a typically “market-driven’ concept any different?

Lets look at the numbers…

My numbers may not be perfect, but pulled from the internet and rounded from what I could find; basically, there are only five Health Insurers in the U.S.   (NOTE: There are about 318 million people in the U.S.)

  • Blue Cross – Covers about 140 Million People
  • UnitedHealthcare – Covers about 70 Million
  • Aetna – Covers about 24 Million
  • Humana – Covers about 13 Million
  • CIGNA – Covers about 12 Million

And the VA Covers about 15 Million People, but there are about 22 Million Veterans eligible for VA Medical Coverage.

Now that you know some of the numbers, only a Health Care Bill that makes more business people want to get into the health insurance business would be a good bill.  My test for any health care legislation (or any legislation) –

Unless you create legislation that has entrepreneurs and venture capitalists rushing in to create a new health insurance business, than your legislation stinks and is just more regulation.  UBER had to be created first, then legislated, but there is not one entrepreneur that wants to disrupt the health insurance business because the barriers to entry are too great. It’s too regulated already. There a couple trying to do it, Google ELAP services.  They deal directly with the hospitals and get sued to force hospitals to show their pricing.  They are the UBER of the Health Insurance world, in my opinion.

Who this is all about…

So there’s about 44 million people left who are on smaller health plans, Medicare, Medicaid, etc.  or not in the system all together.  The number not in the system altogether is what ALL of this hoopla is about, right?

The number is probably around 15-20 million totally uninsured and NEVER will be “insured” because these are the heroin addicts etc, who don’t give a crap about a subsidy, tax credit or even signing up for Medicaid, even if its free, they don’t have the mental capacity to do ANYTHING.  You could make car insurance $5 a year and guess what, they wouldn’t buy it.

That’s where my idea comes in, the number of totally uninsured or number of incapable is about the same number who are covered for the Veterans Administration.

In the simplest terms my idea starts with a question.  Why, if we republicans/conservatives don’t believe in universal medicine do we have our best citizens of this Country under government controlled medical care?  I’m talking about the Veterans Administration.  Of course, we didn’t put it in, it was the Democrats, but why would we keep it this way if we control all of Congress?  The spend on the VA was about $170 Billion in 2015, that’s a lot of money.  They have a network of about 200 government run hospitals and almost 2,000 facilities nationwide.

The crux of my plan is to put all veterans on private medical plans that the government pays for like any other business.  The large insurance carriers could compete for the business, like they do for Tricare.  Then Veterans would have access to all the best private market hospitals and doctors.

If you have to “give away” anything in a civilized society… Don’t give the poor insurance, give them health care.

The second big part of my plan would be to then convert all the current VA hospitals/facilities and doctors into the government direct health care system, not insurance.  The main problem with these other entitlements is trying to have government buy insurance for other people – that will NEVER work.  Thinking you can give away insurance is the same thinking like Medicare or Social Security entitlements, it will be insolvent, just a matter of time.

Even if you let the hospitals be privately run government funded, I’m fine with that, but you must take the insurance industry and the 95% of Americans held hostage and who won’t use this health system, out of it.

I know it might sound crazy, because it might be considered “universal healthcare” and cost would become the topic, but if we had direct care Government funded hospitals and doctors for “the rest” where we could control the costs; I know we could make it work.

As for the cost, I’m not the CBO, but I’m confident if those wonks looked at it, the money we would save by eliminating all other programs that subsidize insurance, Medicaid, etc would more than cover the cost of the VA to Poor transformed health system, hospitals and doctors by paying them directly.

This is honestly the only way we’ll ever be able to “fix” healthcare in our country. And if we don’t do it this way, when the Democrats get back in they will do it as it is Europe and Canada where its universal for ALL, which I’m totally against.   Boom – 100% covered, liberals happy, conservative sad, but wait…

How would this cut costs and improve the lives of the other 95%?

It would create savings because there would now be incentives to work and be on a private plan.

Currently we give away the best medical insurance coverage money can buy and the math just doesn’t work and will never work.  It’s like having a program where you want the less fortunate to go to a baseball game, then giving them front row tickets, while the people who paid sit in the nosebleeds.

I’m one of eleven children and my dad who was a cop got MS and went blind at 37 years old.  My mom had to work and she chose a job as a meter maid only to get the best Blue Cross coverage there was, it was that important to her to have the best coverage.  That incentive is gone.

Everything in life is about incentives, and there is currently more incentive to get a subsidy and not work then there is to try to receive coverage through your place of work.  This is true currently with ACA and won’t change under the RyanCare bill.  It’s the government competing with the private market employers for the in the most important employee benefit, health insurance.

If we convert the VA system, into the system of public hospitals and doctors for the poor then we could control the healthcare and therefore reduce costs of those who are less fortunate.

Costs would be controlled through coordinating preventative care, there may be waiting times and reviews for certain procedures that may not be covered if not life threatening or medically necessary, but at least at that point we could restrict some services.  Right now, it’s a free for all.  If you are on the “government plan”, then you also would have to register and be registered in the government system.  We could then track the care that these folks would get and if they didn’t like it, well, then they could work to get off the government plan to a private plan.

It would create incentive for people to want to be on a private plan, but the converted VA would still be better than nothing at all or people ending up in Emergency Rooms when they need care.  As for Emergencies, if a member on the public health plan has an emergency they can continue to go to ANY private hospital, but once stabilized, they will be safely transported back to a government run hospital.  I also think we could help new student doctors pay back their loans if they agree to do four years in a “government run” hospital.  They would get great experience, take lower pay, but we may also repay their loans.

The last benefit that I’ll mention to my plan is that it would keep the private insurance market private.  It would allow insurance to work the way it’s supposed to, we would have to reduce regulations 90% and let it work like Life Insurance works. Where the actuarial tables mean something again and not just pay for every medical cost because it’s heartless otherwise.

Go back to letting the companies’ offer the employee benefits (Insurance) they want to attract and compete for the best workers.  The private market could then create creative plans that could even cover cosmetic procedures and all sorts of innovative plan designs because the government would not be regulating them as much and the costs would go down because they would not have the burden of covering everyone.

Hospitals would also reduce costs because they would not have to take a loss on taking care of people who don’t have insurance, they would have to go to the public (privately run) hospitals.

The only way you can control health care costs is through network limits (why HMOs worked well), discounts (hospitals take less), or limit services.  And it’s against the law to limit any services, hell people in prison get sex change operations for free!

So, there it is in a nutshell.  There is a lot more I could offer on implementation and details, but too much to go into now.  I know it’s a monumental task, but no more difficult than going down the same road we’re going down now.  I follow this stuff closely and if I’m being honest, I’ve not heard one good idea to fix it another way from either side of the aisle.  Even if you don’t like my whole idea, you must admit that it’s unique from all the other ideas out there currently.

And to my fellow republicans, if you don’t like, let’s debate it if you think I’m wrong.  I understand some of you have these iron clad “conservative” principles that say NOTHING should be government run.  But we need uniform roads, military, public water, gas, and I believe basic direct health care for all, even if it’s not the level you and I would expect when we pay for it.  My opinion is its worse to give away insurance, than to have nothing at all.

I would love to live in Ayn Rand’s gulch, but the fact is that sort of libertarian utopia will never exist.  In America, I believe you should be able to pay and receive better, not pay and receive the same or even less than someone else gets “for free”.  I’m actually more conservative than most, I’d rather not have the Medicare or Social Security programs either; they have ballooned into something unrecognizable.

My last point is then fine, don’t let it be a government run, fund the Churches and let them find volunteers to do it.  That’s why there were so many Catholic health systems, because they would take anyone.  There is a solution in my comments somewhere, but all the crap the politicians are talking about is just crap, moving around the deck chairs on the titanic.

I want government OUT of all health insurance, but I do believe that the government should take care of the poorest at their own hospitals, if they want to do it at all.  Please debate me.  Why is the direct care system good enough (or bad enough) for our Veterans’ but not for the poor?

Thanks for reading.

Joseph Wood is an Insurance Executive with 17 years of experience in the Insurance industry.

Categories: OIG Advisory Opinions

Value-Based Purchasing and “Free Lunch Syndrome”

Wed, 03/15/2017 - 10:10

Imagine that a drug company released a “study” that claimed to find that if all 75 million Americans with high blood pressure took the drug company’s hypertension drug the nation’s annual medical expenditures would drop by $20 billion. Imagine as well that the “study” failed to take into account the $40 billion cost to patients and insurers of buying all those hypertension drugs. Such a study would be roundly criticized for failing to take into account an essential component of cost – the cost of the intervention that led to lower medical expenditures.

But studies like the hypothetical drug company study appear constantly in the health policy literature. Almost all peer-reviewed papers that examine managed-care interventions – HMOs, ACOs, “medical homes,” “value-based purchasing,” etc – fail to report the cost of the intervention. Instead, they measure only medical costs or medical utilization rates. If they find that costs or utilization rates fell, the vast majority of studies imply or come right out and claim that “costs“ went down. This unethical practice is so widespread and so chronic I propose we give it a name. I propose we call it the “free lunch syndrome.”

In this post I will present four case studies of the free lunch syndrome. The four studies I will examine were written by experts affiliated with Harvard, the Commonwealth Fund, and other well known institutions, and were published in highly regarded journals. They examined managed care proposals elevated to law-of-the-land status by the Affordable Care Act. I will close with a call for research on the incentives that induce so many health policy experts to commit the same mistake over and over.

Hospital readmissions and the free lunch syndrome

Case study number one is a paper  on Medicare’s Hospital Readmissions Reduction Program (HRRP) published in the December 2016 Annals of Internal Medicine. The authors, Jason Wasfy et al., reported evidence that the program has caused reductions in 30-day readmissions of patients hospitalized for acute myocardial infarction (AMI), congestive heart failure (CHF), and pneumonia. In a blog comment  posted a few days after their paper was published, Wasfy et al. claimed, “Our research suggests that penalties such as those imposed by the Hospital Readmissions Reduction Program can play important roles in improving performance [and] lowering costs….”

But Wasfy et al. made no effort to determine what it cost the hospitals to achieve these reductions and whether patient health was improved. Nevertheless, the authors thought it was ethical to claim the HRRP program is “improving performance [and] lowering costs.”

Commonsense and anecdotal evidence tells us that whatever hospitals did to lower readmissions was not performed by elves working for free. Whatever it was the hospitals did (Wasfy et al. admitted they had no idea what that was) cost money.

I wish I could offer you peer-reviewed evidence on what it is the hospitals did to reduce readmissions after July 9, 2009, which is when CMS added AMI, CHF and pneumonia readmission rates to its Hospital Compare Website, or after October 1, 2012, which is when CMS started punishing hospitals for “excessive” AMI, CHF and pneumonia readmissions. But I can’t. US policy-makers and health policy analysts are relentlessly incurious about the costs that pay-for-performance and other managed care schemes force providers to incur. I can, however, offer anecdotes. Here are two.

On October 5, 2012, four days after CMS begin punishing hospitals for “excessive” readmissions under the HRRP, the Medicare Payment Advisory Commission met to discuss yet another evidence-free, “value-based payment” fad – punishing hospitals for “potentially preventable admissions.” Near the end of the meeting Commissioner Peter Butler, a recently retired executive of Rush University Medical Center in Chicago, offered three examples of interventions hospitals deploy when “value-based payment” schemes are imposed on them. Here are the last two:

Another situation, 25 years ago I was in, where you had a very highly incented, primary care motivated, capitated Medicare product…. [T]he ER doctors called the participating primary care physician to come in … before it registered an ED visit to help avoid the admission. It was almost – it was over the top. And if they didn’t get there within the 20 minutes, it converted to an ED visit. I mean, it literally was that kind of management, suggesting the payer incentives do make a difference, to an extreme in that situation.

The third situation, I was in [was] a large capitated system. We actually had chest pain clinics set up in ED … to manage the capitated business to help avoid the admission. [pp 137-138, transcript of October 5, 2012 meeting ]

Butler’s anecdotes confirm what anyone with common sense knows – hospital responses to the HRRP and other P4P schemes create costs for someone. The lunch is not free. [1]

ACOs and the free lunch syndrome

Another 2016 Annals of Internal Medicine paper  is the subject of my second case study. This paper bore the extremely misleading title, “Savings from ACOs – building on early success.” The author was J. Michael McWilliams. I have already criticized McWilliams for modeling a simulated version of Medicare’s MSSP ACO program and claiming he studied the real program (see my last post on THCB). Now I have an additional criticism to make: McWilliams has free lunch disease.

McWilliams begins “Savings from ACOs” by claiming Medicare’s MSSP ACO program cut Medicare’s costs by 0.7 percent in 2014 (after taking into account CMS’s bonus payments to the ACOs). His only authority for this is his ACO simulation study , the one I criticized in my last post. According to the CMS data I quoted in that post, the actual MSSP program did not cut Medicare’s costs by 0.7 percent as McWilliams would have us believe, but rather raised Medicare’s costs by roughly two-tenths of a percent over the 2012-2015 period.

After citing that 0.7-percent simulated savings figure, McWilliams steps deeper into the simulated reality he has constructed by arguing that his 0.7 percent estimate is actually an underestimate, and that the “real” (simulated) savings figure is 1.6 percent. McWilliams presents three arguments for this claim:

(1) “ACO contracts probably also affect care of patients that are served by ACOs but not attributed to [them]”;

(2) “ACO spending reductions … reduce ACO benchmarks [for succeeding years]”; and

(3) “Spending reductions by ACOs similarly lower Medicare Advantage spending because payments to Medicare Advantage plans are tied directly to local fee-for-service spending.”

Arguments 1 and 2 are debatable (we have no evidence that ACOs apply ACO magic to all their attributed patients; we have only mixed and debatable evidence for the argument that non-ACO providers adopt ACO magic; and we have no reason to believe that ACOs will continue to participate in ACO programs if insurers keep driving benchmarks down year after year).  But for now let’s assume all three arguments are valid and examine two more fundamental defects in McWilliams’ claim.

First, as I noted above, real-world MSSP ACOs drove Medicare’s costs up, not down. If we apply McWilliams’ three creative arguments to the higher costs generated by the real-world MSSP ACOs, we may conclude the ACOs raised Medicare’s costs by more than double the two-tenths of a percent reported by CMS, or roughly half a percent. Second, McWilliams labors under the free lunch illusion: He thinks that whatever it is ACOs do to lower medical spending, they do with doctors and nurses who work for free, computers that cost nothing to buy and run, etc.

I wish I could tell you we have excellent research on what it costs ACOs to start up and maintain operations, but, as is the case with the intervention costs of hospitals responding to the HRRP program, I must report that ACO advocates and analysts do not give a fig about ACO start-up and maintenance costs. They have spilled oceans of ink about the tiny effect ACOs have had on medical costs (and a thimbleful of quality measures), but for some reason they just can’t find the time to report on the start-up and overhead costs ACOs incur to achieve those tiny effects. [2]

I can, however, report that MedPAC’s staff tells MedPAC that ACO intervention costs equal 1 to 2 percent of ACO medical spending. [3] If we add that 1-to-2 percent to the half-percent increase in the real-world Medicare costs we derived from McWilliams’ clever arguments, the total damage to the health care system (not just Medicare) is 1.5 to 2.5 percent – half a percent increase in the real-world costs incurred by Medicare plus 1 to 2 percent in costs incurred by the ACOs. [4]

ACOs, “medical homes” and the free lunch syndrome

My third case study is a paper published in 2015 in the New England Journal of Medicine  by David Blumenthal and two of his colleagues at the Commonwealth Fund which reviewed the impact of the Affordable Care Act five years after its enactment. In that paper Blumenthal et al. manifested an unusually severe case of the free lunch syndrome. Blumenthal et al. claimed the Pioneer and MSSP ACO programs, and CMS’s Comprehensive Primary Care Initiative (CPCI,“medical home”) demonstration, had all saved money, and they quoted specific dollar figures for each of the three programs. But in all three cases, the dollar figures represented gross savings only. If Blumenthal et al. had bothered to take into account CMS’s payments to the ACOs and “homes,” they would have had to report much lower savings for the Pioneer ACOs and that the MSSP and “home” programs actually raised Medicare’s costs. And when costs incurred by ACOs and “homes” are taken into account, even the Pioneer ACOs are probably raising total costs.

Here is an example of Blumenthal et al.’s free-lunch logic. They stated the CPCI “has reduced monthly Medicare expenditures per beneficiary by $14, or 2 percent,” but conveniently failed to mention that CMS paid the “homes” $20 per beneficiary and the net effect, therefore, was a loss for CMS (see p. xvi of Mathematica’s first-year evaluation , the very document Blumenthal et al. cited). Free lunch disease does not get much worse than this.

When Ted Marmor and I submitted a letter  to NEJM pointing out that Blumenthal et al. failed to mention CMS’s payments to ACOs and “homes,” Blumenthal et al. replied with more disingenuous arguments. They claimed that they did mention the $20 per beneficiary payment in an online appendix to their article and, in defense of their free-lunch ACO “savings” estimates, they misrepresented a CMS document Ted and I cited. [5] They just could not bring themselves to discuss the issue Ted and I raised, namely, it is extremely misleading to conceal or ignore the intervention costs of ACOs and “homes” and to claim that the gross savings represent net savings or losses.

The Alternative Quality Contract and the free lunch syndrome

My last case study examines a 2012 Health Affairs paper  by Zirui Song and seven colleagues. In this paper, Song et al. claimed repeatedly that the Alternative Quality Contract (AQC), an ACO set up by Blue Cross Blue Shield (BCBS) of Massachusetts in 2009, “lowered medical spending.”

Like Blumenthal et al., Song et al. failed to measure (1) the shared-savings and other payments BCBS made to the participating physician groups and (2) the costs those groups incurred to provide whatever services it is ACOs provide. However, unlike Blumenthal et al., Song et al. had the integrity not only to mention the bonuses and other payments BCBS made to providers, but to say as well that those payments “probably” exceeded the reductions in medical costs. “[T]otal payments to groups from Blue Cross Blue Shield of Massachusetts, including surplus sharing, quality bonuses, and infrastructure support, probably exceeded the savings achieved by most groups that year,” wrote the authors.

But despite having the backbone to warn readers BCBS’s payments to providers “probably” exceeded the reductions in medical costs, Song et al. couldn’t refrain from stating repeatedly – first in the title, then in the abstract, and then in the text – that the AQC cut “spending.” And when Song et al. were challenged by a letter to Health Affairs from Rachel Nardin et al., Song and co-author Michael Chernew responded with bafflegab. In their letter, Nardin et al. noted what I have just stated – that Song et al. claimed BCBS’s “spending” went down when in fact, as Nardin et al. put it, “[BCBS’s] total costs under the AQC went up by some undisclosed amount, not down.”

But like Blumenthal et al., Song and Chernew just refused to concede that conflating gross with net spending is misleading and that a few edits would have avoided this problem. Instead, Song and Chernew argued that conflating medical with total spending is ok because (forgive me, this will make no sense, but I’m merely the messenger here) readers want to know how physician “behavior” changes in response to ACO incentives, and readers can’t know that unless Song et al. celebrate the reduction in medical spending and ignore or downplay the intervention costs.

This is free lunch disease in its worst form. How is the paper by Song et al., and Song and Chernew’s response, any different from the laughable hypothetical drug “study” I described at the outset? It isn’t. Like the hypothetical drug company, Song et al. went out of their way to induce readers to think the intervention in question created net savings when in fact the reverse happened – total spending went up when the intervention costs were included – and when they were challenged, they dodged the issue and spouted nonsense.

Etiology of free lunch disease

The relentless spread of free lunch syndrome among “value-based payment” advocates and allegedly objective analysts cries out for analysis. What causes this form of groupthink? What are the incentives that cause so many intelligent men and women to pretend that the extra services provided by ACOs, “homes” and other creatures from the managed care menagerie are free or are so inexpensive they can be ignored?

Most analysts who publish in health policy journals, especially ACO proponents, are obsessed with incentives, especially financial incentives. They routinely accuse doctors and hospitals of caving in to financial incentives at the expense of payers and patients. But managed care proponents show utterly no interest in looking in the mirror and asking what incentives influence their profession and whether those incentives might be warping their judgment. The prevalence of the free lunch syndrome is circumstantial evidence that health policy entrepreneurs and analysts are influenced by a common incentive or set of incentives. I believe money, tenure, and status are among those incentives. Research on my hypothesis is at least as important as research on the incentives that influence physicians and hospitals. I urge the health policy community, including the foundations and other institutions that finance health policy research, to get on with it.

[1] Here is another comment by a hospital executive about hospital responses to “value-based performance” schemes. The executive in this case was Dr. Lara Gotein, medical director at Christus St Vincent Regional Medical Center in Santa Fe, New Mexico. In a 2014 article  in JAMA Internal Medicine in which she commented on a paper that reported on the perceptions of CMS’s “quality” measures held by hospital executives, Dr. Gotein observed that hospital responses to the HRRP and other P4P schemes include short-changing patients whose care is not being measured, and changing coding and documentation policies. “Lindenauer et al surveyed hospital leaders (chief executive officers and executives responsible for quality) about publicly reported quality measures required by the CMS,” wrote Gotein. “Although most respondents said that they used the measures extensively, more than half were concerned that the measures encouraged teaching to the test, and almost half reported trying to maximize performance primarily through changes in documentation and coding.”

[2] We do have some gray-literature reports on absolute sums of money ACOs incur to start up and maintain ACOs, but to my knowledge no one has translated those estimates into percent-of-medical-spending estimates.

[3] Here is an example of a statement by MedPAC staff that ACO overhead is 1 to 2 percent of medical spending by the ACO. At the September 11, 2014 MedPAC meeting, commissioner David Nerenz asked MedPAC staffer Jeff Stensland if “we know anything about” ACO “overhead.” Stensland replied, “[P]eople we talk to and the data we have seen, it looks like maybe 1 to 2 percent of your spend, that that’s what they’re spending on their ACO to operate it….” (p. 133 of the transcript ).Stensland also reported, “[I]f you averaged everybody [that is, all ACOs] so far, at least in the first year of the program, the share of savings, on average, that they get is going to be less than their administrative costs of being in it….” (p. 144)

[4] ] Of course, it’s possible the ACOs finance some of their 1-to-2-percent by short-changing patients, for example holding ACO “attributees” in hospitals for “observation” instead of admitting them, or driving away sicker “attributees.” If hospitals finance all of their 1-to-2 percent overhead costs that way, then total spending in the short-term would not rise. It might rise over the longer term due to the damage done to patient health.

[5] In their New England Journal of Medicine paper about the ACA, Blumenthal et al. claimed CMS’s MSSP program had saved $700 million and the Pioneer program $385 million. Both of those numbers were free-lunch  numbers – they were gross savings, not net savings to Medicare, and did not take into account ACO start-up and maintenance costs. 

In our letter to NEJM, Ted Marmor and I noted that fact and stated that the MSSP program had raised Medicare’s costs by 0.2 percent.  We cited a 2015 report by CMS’s Office of the Actuary (OACT). Rather than simply concede the fact that the MSSP program had raised costs and that they had misled readers by citing gross rather than net figures, Blumenthal et al. claimed that the OACT report concluded “the MSSP have been shown to produce savings…” That was false. I urge readers to go to page 4 of the report and read this statement: “[T]he MSSP beneficiaries in the program’s first performance period (covering April 2012 through calendar year 2013) exhibited total spending that was only 0.5 percent below the combined benchmark, or slightly less than the offsetting cost of resulting shared savings payments (net of shared losses) that represented about 0.7 percent of the combined benchmark.” If we subtract savings of 0.5 from payments to ACOs of 0.7, we get a loss to Medicare of 0.2 percent.

The OACT report also examined a simulated version of the MSSP which did not simulate shared savings, and reported modest gross savings for the MSSP ACOs. Blumenthal et al. may have been referring to this simulation of gross savings. If they were, they were being doubly disingenuous. Citing a SIMULATION that examined GROSS savings to demonstrate that the REAL-world MSSP achieved NET savings is disingenuous twice over.

Categories: OIG Advisory Opinions