Thursday, June 30, 2011

Premium Freeze in Massachusetts?

Today’s Managing Health Care Costs Indicator is 0

Health Care for All, an advocacy group that played a substantive role in passing health care reform here in Massachusetts, has come out in favor of a health insurance premium freeze.    They cite the case of Sarah Higginbotham, who says her biweekly take-home pay for a part time job at a church used to be $900, but has dwindled to $164 since she now has a family plan and health insurance premiums have risen by double digits each year.

Premium increases are caused by a combination of increased unit prices, increased utilization, increased intensity of services, and increased burden of illness.  Price increases could be substantially decreased or eliminated quickly, although that might take price controls.   Lifestyle change can lower burden of illness, but not by 2012.  Increased utilization can be changed – but takes some time.  Increased intensity of service sometimes represents innovations that can save lives (such as today's New England Journal, which has an article showing that screening CT scans for those at high risk for lung cancer can save lives. More on that in a future post.)  

Most insurance funded by large insurers is “self insured,” so that the stated premium is irrelevant – as the employer pays the bills.  However, smaller employers need to purchase “fully funded” insurance –so the level of stated premium is the price paid by the employer and employee.   A premium freeze would be a big break for small employers and nonprofits.   But it won’t be easy to achieve, and lower premium increases will only be sustainable with genuine change in the health care delivery system.

Health insurers in Massachusetts could offer a premium freeze on fully-insured health plans by one of the following methods:

Lower Profits:
Some insurers have high profit margins, and could endure a year of a premium freeze just be accepting lower profits.  However, Massachusetts insurers generally have low profit margins.

Lower administrative costs:
Administrative costs for the nonprofit regional health plans here are also on the low side nationally.   Administrative costs represent less than 10% of total premium, and the claims must be paid – so that wouldn’t likely achieve enough savings to allow for a premium freeze.

Lower provider payments The Attorney General’s report documents that some providers receive higher unit payments, and also have higher risk-adjusted total medical expense costs.  However, each health plan would need to reopen negotiations with multiple providers to get lower prices.  The market has determined those prices – so it won’t be easy to change these quickly.  Remember also that we don’t have providers with huge profit margins. So, significant provider pay cuts will likely cause job loss and attempts to cost-shift to payers that have less leverage.

 Lower medical costs Health plans have been performing medical management for years – and these programs can make a difference, especially for high risk patients.  Health management programs aren’t cheap, though, and they take a substantial amount of time to pay off.   I don’t imagine that plans to increase medical management or to improve healthy lifestyles of Massachusetts residents will make huge difference in health care costs in 2012.

Cost-shifting Insurers could raise premiums elsewhere to cover the lost revenue from a premium freeze.  Again, the market wouldn’t make this easy – and some national insurers might leave the state.

Risk-shifting Insurers could avoid insuring the sickest patients – and could therefore avoid premium increases.  However, regulation of the small group market makes it difficult for health plans to selectively enroll healthy patients.

So, I’m not optimistic we’ll achieve a health insurance premium freeze in Massachusetts in 2012.  However, hats off to Health Care for All for humanizing the impact of health care premium increases.   I think this conversation can help push meaningful change in health care delivery that could lower future health care cost increases.

Wednesday, June 29, 2011

Bring Back the Mystery Shopper Survey

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

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

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

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

The survey was to have cost $347,370.  

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

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

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

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

Monday, June 27, 2011

The Debt Ceiling Debate—Some of These People Are Nuts

I don’t know about you but the politicians are starting to scare me with their inability to make progress in the federal debt limit discussions. Worse, is the apparent eagerness of some to actually take the government to default to make a political point.I know a lot of conservatives say missing the August 2 deadline isn’t a big deal but I think it is.The 2011 deficit is projected to be $1.6

Biotech Firms Oppose the Independent Payment Advisory Board

Today’s Managing Health Cost Indicator is 3403

Today’s Boston Globe  highlights the full court press the Massachusetts biotechnology industry is making to convince Senator John Kerry to oppose the Independent Payment Advisory Board, Section 3403 of the Affordable Care Act.  The IPAB, which is opposed by drug companies, some physicians, and the biotechnology companies, would create an independent board which would make recommendations for lowering Medicare costs if those costs continued to increase.  Congress would have to vote these recommendations up or down without amendment – like military base closings. 

The current debt ceiling debate shows how hard it is for Congress to lower the cost of the federal government – and many of the necessary solutions to our escalating health care costs will be easily subject to demagoguery like claims of “death panels” and “bureaucratic government throttling private-sector innovation.”

Henry Aaron, in this week’s New England Journal, calls the IPAB “Congress’s Good Deed.”   He says

Among the most important attributes of legislative statesmanship is self-abnegation — the willingness of legislators to abstain from meddling in matters they are poorly equipped to manage.

If the IPAB is effective, it will lower potential profits in biotechnology.  It would be hard otherwise to control burgeoning health care costs.

Kerry’s spokeswoman said

If we’re going to protect taxpayers and control costs, it seems a little bonkers to eliminate something the experts say is our best hope of doing that before we even have a chance to evaluate it

I hope Senator Kerry will stand his ground. 

Sunday, June 26, 2011

RomneyCare Works.

Today’s Managing Health Care Costs Indicator is 98.1%

Click to enlarge image
There has been a lot in the national press about how health care reform in Massachusetts has worked.  There's a lot of blather on both sides of the political spectrum, and the Boston Globe had a comprehensive article today reviewing how “RomneyCare” is working here. 


1) Far more people are insured than before health care reform, despite the disastrous recession (98.1%)
2) More employers (up from 70 to 76%) are offering insurance, again despite the recession
3) The exchanges work for individuals - they haven't worked well for small employers yet
4) The cost of the care of the uninsured has declined.
5) There is inadequate primary care access, and ED visits have gone up rather than down.
6) The cost has been manageable - but the state has relied on some payments from the feds (stimulus dollars and Medicaid add-on dollars) that will not continue. The federal government has paid a disproportionate share of the total cost (as it will under the Affordable Care Act).
7) Health care reform promised incremental provider Medicaid payments that have not been funded. Hospitals say they must pass these costs on to other payers, which worries employers greatly.
8) Health care reform is actually pretty popular in Massachusetts.  The last Harvard School of Public Health poll said that 63% of residents support health care reform. 

Thursday, June 23, 2011

Supreme Court Overturns VT Ban on Selling Physician Drug Data

Just a brief note.  The Supreme Court agreed with my post from a few months ago and will allow pharmaceutical companies to purchase data on physician drug prescribing practice. The vote was 6-3; Sonia Sotomayor joined Anthony Kennedy and the four pro-business conservatives.

I think having more of this data collected in a standard way will be good - and eventually will help us improve prescription practices.  I'd like to see this data available in patient-friendly ways.

In an era of high patient cost-sharing, patients will start wanting to know if their doctor is making cost-effective prescription choices.

Massachusetts Attorney General Reports on Health Care Costs

Today’s Managing Health Care Costs Indicator is 10%

Martha Coakley, the Massachusetts Attorney General, just released her 2011 report on health care in the Commonwealth.

The AG’s office delivered civil investigative demands, the equivalent of a subpoena, to three major health plans and 16 different provider organizations.  They then reviewed payment rates among the plans and providers, and incorporated health plan risk adjustment in their analyses.  They also reviewed available quality data – which showed little correlation with cost.

There are 55 pages of gems here – and I’ll talk about the relation of wealth and health care costs in a future post. 

The news reports I’ve heard so far have concentrated on disparities of provider payments – with some providers getting payments as much as twice as high as others.  The AG’s office concludes that addressing price inequities was a prerequisite to lowering the cost of health care, and that moving to global or bundled payments alone will not solve our health care cost crisis.

I’m still digesting this document.  Here’s a link to the Boston Globe report  in today’s paper. 

I’d like to highlight a few of the report’s conclusions today.

1. There is substantial disparity in total medical expenditure, risk adjusted, from provider group to provider group. Here's an example from the AG report: 


2. The Children's Hospital provider organization is high cost in all three health plans, and there are a few other providers which appear in the top five most expensive in all three health plans.  However, there is a huge amount of scatter in which groups get paid more and which get paid less.  Market clout is similar for      provider groups with each payer – so it’s surprising to see such widespread differences. Here are the three relevant graphs - double click on each one to enlarge.

    3. The BCBSMA Alternative Quality Contract, which includes a global budget, appears to increase the short-term total medical expenditure.  The non-AQC groups, which include Partners HealthCare, have lower costs in the first place and a lower trend rate than the AQC groups. The annual trend during 2009, the first year of the AQC, the trend for the nonAQC groups was 1.7%, while the trend for the AQC groups was 10%.  It’s striking that BCBSMA projects that the costs per member per month for the AQC groups will converge with the nonAQC groups in 2013 – and that costs which are now ~$375- $400 pmpm will be just under $550 pmpm

    I’ll have more thoughts on this report in the coming days.

    Tuesday, June 21, 2011

    The Tragedy of Underfunded Mental Health Care

    Today’s Managing Health Care Costs Indicator is  19,900

    The NY Times  on Friday had a deeply disturbing article on a murder that stunned the mental health community here in Massachusetts.   A long-term schizophrenic man, off his medicine and spiraling into incoherence, killed a young female counselor who was the sole worker at a group home in a Boston suburb. 

    His mother, who works at a Boston teaching hospital, was frantic with worry as her adult son, who had been arrested for assault multiple times, was becoming more psychotic.   It was hard for her to get anyone’s attention.

    The counselor was the first in her family to get a college degree, and had just decided to go to nursing school.   Now she’s dead – and her family had trouble scraping together the resources for a burial.  The schizophrenic will be imprisoned for the rest of his life – which ironically could be the best chance for him to get appropriate medical care.

    Both families are thrown in to turmoil – many lives have been inexorably altered.  How did we get here?

    The Massachusetts Department of Mental Health is responsible for 19,900 people with severe and persistent mental illness.  Massachusetts has closed 20,000 inpatient mental health beds over the last decades, and the state is debating closing a quarter of the remaining 626 long-term mental health beds.  Hospitals that offer inpatient mental health services are struggling to survive – and patients who need inpatient mental health admissions can languish in Emergency Departments while psychiatrists scurry to find scarce placements. 

    It’s just as bad on the outpatient side.   Very few child psychiatrists, in short supply, take any kind of private insurance, and waiting lists are long.  Adult mental health services have diminished, and psychiatrists have largely transitioned to medication management, leaving cognitive therapy to nonphysicians.  Health plans have historically done aggressive utilization review on mental health services, so that patients are discharged from outpatient or inpatient therapy more quickly – and it’s hard to get back into the system with a relapse.  With major psychiatric disease, relapses are common.

    It’s much better in Massachusetts than elsewhere in the country, where the budget crisis has hit harder, and where few politicians will advocate for the mentally ill.  After Jared Loughner killed 6 and wounded 13 including Congressman Gabrielle Giffords in January, there were a series of articles about mental health cuts in Arizona and elsewhere in the country. But that attention didn’t last.

    When we underfund mental health care, we bear the costs outside of the medical budget.

    Families bear the majority of these costs; parents leave their jobs to watch their deeply ill children even as they reach adulthood, and spouses struggle to be case managers for their loved ones. 

    We send many of those with severe mental illness to jail – at a very high cost.  In Massachusetts, a quarter of the prison population now requires mental health services, up by 2/3 since 1998.  

    Employers bear some cost, as well, with lost productivity from those with mental illness, as well as from family members who are struggling to themselves compensate for the failings of our system.

    Managed behavioral health care has been wildly successful, though.  While the cost of most medical services has burgeoned, the cost of professional services for those with mental illness has been pretty much flat.  The cost of hospitalization has shrunken dramatically, and we’re severely underfunding outpatient mental health services.

    Those with mental health needs have dramatically higher overall medical expenses – and are more frequently readmitted to the hospital.  

    The only place we’re spending more money on mental health services is in pharmaceuticals, which rose from 7% of total mental health spending (1986) to 27% of spending (2005).   Mental health drugs represent a third of total Medicaid drug spending in many states.    More irony – many of the newer antipsychotics that replaced inexpensive generic medications appear to be no better

    I often argue for decreased spending in many areas of health care.  I think there is opportunity to lower the cost of pharmacotherapy in mental health, too. But it feels like we’ve gone too far in trying to lower professional and inpatient behavioral health costs.  We’ve transferred these costs from society (largely Medicaid) and risk  pools (employers) to prisons and to the individuals and families haunted by mental illness. 

    There must be a better way.  

    Monday, June 20, 2011

    Unnecessary Double Chest CT Scans

    Today’s Managing Health Care Costs Indicator is 75,000

    Saturday’s New York Times had a great example of using variation to identify waste in the health care system

    It’s almost never necessary to do two chest CT scans in a single day – one without contrast, the other with contrast.   The ordering physician should know in advance whether she is looking for disease that requires imaging of the vasculature system. 

    It’s bad to do sequential chest CT scans of patients for at least three reasons.  Each chest CT scan is the equivalent of 350 chest x-rays – and we should avoid the extra radiation exposure, which does cause some cases of breast and lung cancer. The  cost of CT scans is high – CMS reports that these duplicate CT scans cost Medicare alone $25 million.  Doing extra tests poses the danger of finding “incidentalomas,” findings that are not relevant to health, but that require additional tests which pose new health risks and additional expenses.

    Yet there are some hospitals that do double chest CT scans on almost nine of every ten patients who get a single chest CT.   Many hospitals are under 1% - yet the national average is 5.4%.  75,000 Americans had double chest CT scans in 2008.

    I encourage you to look at the interactive geographic map showing excess utilization – it shows pockets of overutilization including Texas, Oklahoma, southern California, and the midsection of the country from Illinois to Mississippi. 

    Fee for service payment is one of the culprits here – hospitals with high rates of repeat chest CT scans make more revenue – and for a high fixed cost item like CT scans, make even more margin on this service.   However, there is a straightforward fee for service fix.  We should simply bundle together any two chest CT scans done on the same person at the same facility within 48 hours of each other. 

    By the way, CMS also announced on Friday that it will use predictive modeling to proactively identify fraud in health care bills.  CMS until now has paid all submitted bills, and chased any fraudsters retrospectively identified.  Many of those billing CMS fraudulently have disappeared long before Medicare could recoup money -- so this could help lower Medicare costs.

    These are two good examples of studying variation to improve health care cost-effectiveness.

    Tuesday, June 7, 2011

    Inconvenient Facts for Both Republicans and Democrats—Neither Side’s Health Care Proposals Are Supported By Past Performance

    I call your attention to Ezra Klein’s column in the Washington Post this morning.In it he cites data that has been out there for a long time but Ezra puts some perspective on it that never occurred to me before.Examining the Kaiser Family Foundation brief, “Health Care Spending in the United States and Selected OECD Countries” he points out, “Our government spends more [as a percentage of GDP] on