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Cost Containment

Coupons for Patients, but Higher Bills for Insurers

The brilliant brand name drug marketers, per this New York Times article,  have found a simple way to undermine the consumer incentives in place to encourage use of generics: cover the co-pay differentials that patients would otherwise need to pay, and sock the big difference in cost to the carrier and therefore to the employer or ratepayers and ultimately others in the plan.

This is one more example of the inherent flaws in a health care system where the consumer is not paying in any direct way for the choices that they or their doctors are making. If the cost of a particular drug were somehow felt by the patient, and there were two choices—one expensive and one less so—the consumer would make some of their own cost benefit decisions and in many cases, select the less costly alternative.

The problem outlined by these practices can and should be dealt with either legislatively—by prohibiting incentives to patients designed to undermine plan designs— or by the plans themselves, deciding to not cover such drugs absent an effective appeals process.

How Valid Are Pain Validity Tests?

Sprained ankle

We recently ran across an article citing a company that has reportedly devised a test to determine if pain is real. Here is the article, “Pain Validity Test Gets 30 Workers’ Compensation Claimants Back to Work Immediately.”

Here is the company that offers the test: http://veritassupporttesting.com. We have no experience with the test and would welcome comments from those who have reviewed or used it. It sounds like an interesting concept, but whether it meets scientific and clinical scrutiny is not clear to us.

Health Spending and the Aftermath of Economic Crisis

Given the widespread debate around health care (and its financing) reform, it’s important to understand the current status of health care finance and how it fits into the larger economy. How has the largest economic crisis in 80 years impact the situation? In 2009, per this New York Times article, health care accounted for a larger share of a smaller economy — a record 17.6 percent of the total economic output in 2009, according to a Federal government report issued earlier this month.

The nation spent $2.5 trillion on health care in 2009, for an average of $8,086 a person, and the recession had a profound influence. The share of the economy devoted to health care rose one percentage point in 2009, the largest one-year increase in a half-century of record-keeping.

The economy contracted while health spending continued to grow. Yet Many consumers decreased their use of health care goods and services.

What are the implications for health care reform? That question is widely debated. Senator Orrin Hatch (R, Utah) in line to be the senior Republican on the Finance Committee, said the new health care law could lead to “crushing increases in health costs and premiums.” By contrast, the chief medicare actuary, Richard S. Foster, has estimated that the new law will lead to an increase of only nine-tenths of 1 percent in national health spending over 10 years.  Read more…

Repealing Health Care Reform Is the Real Job Killer

We have been watching the pundits and partisans discuss, argue and scream about health care reform. What continues to baffle us is the ability of a number of big lies to dominate discussion, and for the topic to have become a proxy on Obama. Here is a very interesting column in the New York Times on the subject.  

The topic is too complex to dissect here but let’s address just one argument raised against change and cited by the new speaker Boehner: That health care reform is a job killer. From a recent interview on NBC:

You have to understand that in my opinion Obamacare is the biggest job killer we have in America today. It’s a weight over every employer that we have. Thereby requiring them to hold back their willingness to hire people. Secondly, I believe that Obamacare will ruin the best health care delivery system in the world. And then thirdly, I think it’ll bankrupt our country. On September 24th, when we rolled out our Pledge to America, we made clear that we wanted to repeal Obamacare. We are going to do what we said we were going to do.  Read more…

Let’s deal with some real on-the-ground experience – our own at MCN. When the founder of MCN first bought his own insurance as an individual physician in 1982, he does not remember it. This suggests that the purchase was a non-event, like insuring a car or a home.

Fast forward to 2010 and the company is annually faced with double digit increases for the same level of coverage, not unlike other companies. And the company benefits from group rates, unlike individuals who routinely face much higher increases, largely because the pools they are part of are skewed towards the sicker and higher care consumers.

Employees who leave the company are faced with COBRA expenses that are considerable and burdensome, if they choose to be covered and do not have other options. We also find ourselves increasingly cautious about adding staff. Obviously hiring decisions are complex, but the tangible cost of insurance is one further barrier to adding staff.

From a common sense and policy standpoint, we have always wondered why it is the business of an employer to provide health care for employees. It is not the employer’s job to feed, house or educated the children of employees. That is what a pay check is for. All of the above are necessities, but only one seems to be an employer cost. If everyone was employed and covered, I suppose it would be a non-issue, but that is not the case. Those employers who provide health coverage need to compete against those who do not, and this is not a fair competition in many cases, especially when in the same sector such as hospitality.

We would prefer to see in increase in taxes applicable to ALL businesses and employees — including small businesses — contributing to a system that covers all. The ability to have and pay for health care is not an option. Those who by virtue of true poverty or stupidity do not have access to coverage do not get denied care. The cost is shifted to the rest of us. A system depending upon involuntary cost shifting is not charity, it is inefficient and unfair to all.

 
Those who truly maintain their views that the Government has no place in health care I assume will be willing to burn their VA Health and Medicare cards or disavow those systems when and if they become eligible. A significant portion of the US Health spend is already government based, so it is a bit late to keep government out of it. Government involvement is not radical or unproven, but rather is the mode or some variant thereof, in many of the most robust world economies, including Canada, Australia and Germany, among others.

A claim made by those who support job creation – who doesn’t? — is that entrepreneurship is good. How does this relate to health care reform, however? What is the likelihood that an individual will leave the comfort of a secure job with health coverage for the immediate financial uncertainty of their own business — and how is this impacted by the burden of providing individual health care for the entrepreneur’s family?

This very real uncertainty as much as any other reason is why the status quo (which is not really a status quo, but rather a relentlessly increasing and unsustainable burden) is why innovation and job creation are being killed.

And a core issue that no current proposals appear to meaningfully address is the continued increase of health as a portion of GDP (17.6% in 2009) and the absence of normal market forces that come into play with most purchases. By this I refer to the buyer and the consumer being de-linked.

Witness drug companies waiving copayments on expensive drugs that get charged to the carriers (from another article in the New York Times), and witness our own behaviors that rarely involves asking — when it comes to health — “how much is it?” and shopping for alternatives.

Imagine going shopping and filling your cart in a store with no prices, and you have US health-care today. The “free marketers” who make up the health care industry decry and condemn allowing the true buyers of care – insurance companies, employers and government — when these entities suggest that they may use their purchasing power to impact price and consumption.

Our current view of patients and doctors knowing what is ‘right” while staying blind, indifferent to, or directly benefiting from the cost paid by others is not working.

Rather than reflexively engage in partisan bickering on the topic, let’s look at the reality of what we are now seeing in our businesses and lives and those of our families and neighbors – as we review our options going forward. David M. Cutler, Otto Eckstein Professor of Applied Economics, Harvard University, and a Senior Fellow at the Center for American Progress, notes that: “The imminent effort in the House of Representatives to repeal health care reform is a major step in the wrong direction if promoting economic recovery is job one.”

No fault, but not “no fraud”

New York’s no-fault auto insurance system, instituted in 1974, allows someone injured in a crash to file up to $50,000 worth of claims for medical costs or lost wages with their own insurer no matter who is to blame for the accident. The system was designed to speed payment for medical treatment by eliminating disputes between insurance companies over who was at fault.

This article in The Wall Street Journal explores the downside of “no fault” as detailed through a study to be released this week, conducted by the Insurance Research Council, a nonprofit organization funded by insurance companies.  The study illustrates one of the primary reasons why car insurance is more expensive in New York than in most other states — and why it costs more in the city than it does upstate. The no-fault portion of a driver’s coverage, called personal injury protection, cost $754 in the Bronx in 2009 on average, compared with a statewide average of $202, according to the Property Casualty Insurers Association of America.

Insurance companies aren’t alone in worrying about fraud: The state insurance department has been working for more than a year on a revision of the state’s no-fault insurance regulation. The state’s Insurance Fraud Bureau reports no-fault fraud increased from 10,117 instances in 2006 to 13,433 in 2009.

“Fraud is pervasive under no-fault, unfortunately,” said Steven Nachman, the New York insurance department’s deputy superintendent for fraud. “The bad guys have figured out how to game the system.” Read more…

Teamsters, doughnuts, and body mass index – more on the fairness of health insurance incentives

As a follow-up to today’s earlier blog post, “Who bears the responsibility for health and the cost of health,” the concept of “wellness” at the employer level—and the issues of fairness and appropriate incentives— is getting a lot of national attention.

Per this article in the Los Angeles Times, this focus began with the approval of the so-called Safeway Amendment as part of President Obama’s healthcare  reform (PPACA, or Patient Protection and Affordable Care Act), which allows employers to provide employees with reimbursement of up to 20% of insurance premiums (rising to 30% in 2014 or 50% with special approval) if they participate in reasonable wellness programs.

According to the National Business Group on Health, which represents large employers including Wendy’s, about 68% of its members either offer a discount of several hundred dollars on health insurance premiums to employees who quit smoking, or provide other incentives or penalties to make it happen. This article in the New York Times explores how a particular group—Teamsters hired by BNSF Railway—is responding to the push to lose weight and increase overall health.

As the LA Times notes, the idea of employee “wellness” raises another important angle in the debate over health care cost containment: lower-wage workers tend to have higher rates of the health problems [we’re] trying to fix: smoking and obesity.

The evidence is mixed on how well incentives work, but large employers are already embracing them to encourage good diets and exercise—with an eye toward keeping their employees from missing work and to keep health costs down.

The situation brings together many different aspects of health care issues, including how to promote good health, how “good health” is measured from an employer (and insurance risk) standpoint, socioeconomic differences in good health and lifestyle, and whose responsibility it is to encourage the workforce in general to adopt a healthier lifestyle, or bear the cost of maintaining lifestyles which statistically are shown to lead to long-term—expensive—health problems.

Who bears the responsibility for health and the cost of health?


I am troubled on many levels by themes in this article from The New York Times: The concept that individuals need to be incentivized with cash for taking care of themselves is perverse. Those who care about their health should need no incentive to take care of themselves on an ongoing basis. And the notion that employers must bear the burden of flagrantly poor health choices of their employees appears to underlie employers taking on the creation of incentives to change.

In the US, it is illegal to discriminate in hiring on the basis of a number of attributes, most of which are out of the control of the individual, such as age, gender and national origin. But employers discriminate regularly on the basis of past experience, academic standing and accomplishment, interviews, references and many other factors, some of which—but not all— may be under the direct control of the applicant, or at least flow from choices made at the application process or over time. Employers make no apology for such discrimination and applicants expect to be measured on many qualities.

Is an employer well served who ignores or downplays choices of prospective employees that increase their health risks? Is there a correlation on work quality and employment costs that can be observed among employees who engage at the time of hiring in fewer risky health behaviors? And what is the actual success rate of employer incentives, “wellness” programs (the trendy word “wellness” itself is in dire need of its own rehab – “health” would suffice), in creating long term results and change?

What would be the impact of employers making hiring decisions in part based upon legal discriminators that are health related, such as smoking, physical fitness appropriate to age and other factors. We tell our children to get a good education to increase their chances of successful employment, and this is strong incentive for study. Were there similarly explicit conversations about the relative employability of individuals based upon their physical lifestyle choices, might it have a positive social impact on the health of society overall?

Our declining health status and dramatic increases in chronic diseases relating to lifestyle—such as Type 2 diabetes—is creating billions in expense and much human tragedy. Society’s conversation on who bears the responsibility for health and the cost of health is one that must continue.

Reaping Royalties, Medicare Bounty

This article from the Wall Street Journal is important in a number of ways: Implant surgery is both highly expensive as well as hotly debated as to efficacy and indications. The article suggests that not only are the surgeons profiled therein highly compensated for their expertise in the operating room (and are not compensated nearly as well for declining to perform a procedure), but they appear to be receiving incentives from the device manufacturer for their relationship – one that is more than likely contingent upon continued use of and promotion of the devices.

The article discloses relationships of the sort that in the past were unreported but significant. Spine surgery is often suggested in workers’ compensation cases as well as auto accidents. The indications and cost of such procedures is highly relevant to those overseeing such claims.

Beyond continued scrutiny and perhaps regulation, what other suggestions are in order? One is that any patient should ask and have the right to know if their prospective surgeon is receiving compensation of any sort from device and pharmaceutical manufacturers, including the amount and the rationale behind the royalties. If surgery is proposed and a device by a company compensating the physician is to be used, it would be reasonable to get a second opinion from a physician who has no such interests.

Paying peanuts for health care after 500 billion percent inflation?

Yes, the IMF estimates that prior to 2008 Zimbabwe’s rate of inflation reached 500 billion percent.

Since then, a power-sharing government has formed after years of decline under President Robert Mugabe, and the economy has stabilized. Zimbabwe abandoned its currency last year, replacing it with the American dollar, and inflation has fallen to a demure 3.6 percent. Teachers are back in their classrooms and nurses are back on their wards.

But a recent United Nations report suggests how far Zimbabwe has to go. It is still poorer than any of the 183 countries the United Nations has income data for. It is also one of only three countries in the world to be worse off now on combined measures of health, education and income than it was 40 years ago, the United Nations found. And in the past 25 years, life expectancy has dropped by 14 years on average: a child born in Zimbabwe today can expect to live to the age of 47, nearly 40 years shorter than the longest lifespans enjoyed on the planet today.

In the wake of such a disastrous state of affairs, this New York Times article explores how Zimbabweans are paying for their medical care – through the barter system.

Confidentiality Cloaks Medicare Abuse

Christopher G. Wayne doesn’t look like a typical family-practice doctor. Known to admirers as the “Rock Doc,” he wears his hair spiked, punk style, and festoons himself with chains, bangles and leather bracelets.

He uses his upscale Miami Beach home as a production studio for Playboy photo spreads, and his MySpace page shows him posing with celebrities such as Paris Hilton and Aerosmith’s Steven Tyler.

There’s something else about Dr. Wayne that doesn’t resemble a normal family-practice doctor: his earnings from Medicare, the government insurance program for the elderly and disabled. Dr. Wayne took in more than $1.2 million from Medicare in 2008, according to a person familiar with the matter, a large portion of it from physical therapy. That’s more than 24 times the Medicare income of the average family doctor, according to a Wall Street Journal analysis of Medicare-claims data. Read more…