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Government Policy

Making up for Medicare Shortfalls?

Do hospitals need to make up payment shortfalls from Medicaid and Medicare by charging higher prices to privately insured patients? That theory, known as cost shifting, has been discussed considerably over the past few decades.  But many recent studies have in fact suggested something else: lower medicare hospital payment rates for inpatient care might just lead to lower private payment rates.

Cost shifting is based on the notion that a hospital’s costs (staff, equipment, supplies, space) are fixed, with an event requiring a specific set of resources. Therefore when reimbursements don’t meet the hospital’s expenses the cost must be met in some other way. However, in reality hospitals as with any other industry face and respond to various market forces.

As was reported to Congress in 2011, it’s been hospitals’ underlying costs, not cost shifting, that have led to differences in prices charged to insurers and to Medicare shortfalls or profits. In fact, as noted in this New York Times editorial:  “Today, hospital cost shifting is dead, and the spillover effect reigns. A consequence is that public policy that holds or pushes down Medicare and Medicaid prices (or their growth) could put downward pressure on the prices hospitals can charge to all its customers and, in turn, on the premiums we pay to insurers.” Good news indeed for consumers of health care and especially for those concerned with the long-term potential shortfall effects of reduced payments to Medicaid and Medicare.

One Procedure, Many Prices

A new report from Blue Cross Blue Shield, The Health of America analyzed the cost of hip and knee surgeries in 64 areas across the US and found that the amount charged for the same procedure in the same city varied by as much as 313%.

The amount charged by the hospital is different from the amount negotiated by an insurer, which is itself different from the amount owed by a patient. That’s one reason deciphering hospital bills can be complex. It’s also a perfect example of why people can end up buried under a mountain of confusing medical debt if they are uninsured, lack good insurance, or simply don’t understand what their insurance plans actually cover.

“If you are in a plan that charges a $30 copay to see an orthopedist, that is your cost,” explained Dan Mendelson, the CEO of consulting firm Avalere Health and a former associate director for health at the federal Office of Management and Budget. But if you have a high deductible, if your surgery isn’t covered, or if you are uninsured, your already high costs may end up being three times higher just because you chose the wrong hospital.

Would these differentials in price exist if the patients had some skin in the game and they rather than their carriers were paying the bulk of the charge? Or if “skin in the game” meant more than meeting an annual deductible.  Though higher deductibles and co-pays do prompt patients and families to track expenditures and self-ration when possible, it’s not a step in the direction of making prices readily available or easy to understand.  And the disparities begs the question of why carriers like the Blues are willing to pay the higher prices when one of their insureds choose one of those hospitals.

Chronic Fatigue Syndrome Becomes Systemic Exertion Intolerance Disease

We have now seen another example of the medicalization of distress and the emergence of a new “disease” (as opposed to a group of symptoms) according to the linked article.

While we have not yet read the report and reserve full conclusions, the release suggests nothing new in terms of science, etiologic agents, or new findings that lend meaningful clarity and a path to recovery from the symptoms of Chronic Fatigue Syndrome (CFS). Rather, the deciding panel appears to have largely achieved a political goal of validating a syndrome of various symptoms that do not lean to any conclusions as to cause or cure. That those who claim to have CFS or whatever new name may be ascribed to it are suffering is not in question. What remains unknown is why, and whether this syndrome is caused by a lesion of some sort, a viral or bacterial pathogen. What is going on with this action?

Likely a number of things. One is that it addresses the anxiety and perceived stigma that often applies to experiences that are ill-defined and may be considered to have an emotional component, implying lack of validity for the sufferers. Noteworthy is that the panel is seeking responsive treatment and diagnostic codes. By validating a syndrome as a disease, the conversation changes to one of obligations and rights for the sufferers that they believe they lacked before.

And it implies and may create duties by others in the industry of treating diseases, including insurance carriers, employers, courts and the culture to increase the level of payment, support, acceptance and accommodation to those claiming the disease. And let’s not forget members of the medical profession, drug companies, hospitals and other parties who have a strong vested interest in adding to the list of issues for which they may/will receive payment.

The list of syndromes, new diagnoses or disorders with expanding numbers and those claiming them are many. In no particular order they include: Post-concussive syndrome, “Low-T,” erectile dysfunction (with a recent ad featuring a beautiful woman claiming that over 50% of men over 40 suffer from some form of it), Epstein Barr Virus, Autism, Post-traumatic stress disorder, Fibromyalgia, ADHD (attention deficit hyperactivity disorder), Lyme Disease, and others. Common to many are claims of financial, educational, occupational or legal entitlement, partial exculpation from responsibility, expensive and proprietary medications, strong advocacy groups and heated arguments in the media and professions.

In short, recent “clarification” on Chronic Fatigue Syndrome likely fits more into the realm of politics than science.

Eating Sawdust Will Not Make You Smarter

Eating sawdust will not make you smarter. Nor, likely, will eating powdered houseplants or a mixture of dried rice, mustard, wheat and radish, no matter how the product is labeled. And yet millions of Americans apparently are eating just that: As it turns out, testing announced by the state of New York this week found that the Ginkgo biloba sold by Walmart, for example, contained no Ginkgo biloba DNA — it was a mixture of rice, mustard, wheat and radish.

“Supplements” are not considered by the Food and Drug Administration to be drugs or food and therefore are not subjected to rigorous testing and related laws regarding product labeling. The results of multiple tests have shown that many supplements don’t contain much, if any, of what they’re labeled as being (though to be clear, nothing has been found so far that does contain sawdust). Ginkbo biloba may or may not be good for your health, but you might never find out – because the product you’ve bought might not actually contain any.

One in four dollars in the supplement market passes though Utah, the home stage of Senator Orrin Hatch, whose son is a longtime lobbyist for the supplement industry and who was the chief author of a federal law enacted 17 years ago that allows companies to make general health claims about their products, but exempts them from federal reviews of their safety or effectiveness before they go to market.

“There’s a lot of wrong information out there,” warns the American Cancer Society, in its tutorial on these products. “Even for those who are usually well informed, it can be hard to find reliable information about the safe use and potential risks of dietary supplements.”

Read more…

One Way Other Countries Have Lowered Prescription Med Costs

What if we didn’t require insurance companies to cover all drugs? As this article suggests, companies are taking advantage of a mix of laws in the US that force insurers to include essentially all expensive drugs in their policies, and a philosophy that demands that every new health care product be available to everyone, no matter how little it helps or how much it costs.

Many European countries say “no” to a handful of drugs each year. For those of you who worry this would eliminate availability to crucial medications, of the 29 major cancer drugs included in the study that are available in the United States, about 97% and 86% are also available in Germany and France, respectively. As a consequence of the stand taken by those countries, prices in Europe for prescription drugs are 50 percent below what we pay in the US.

Because they can say no, “yes” is not a guarantee the drug will be covered, so drug companies are pushed to offer competitive pricing to ensure coverage.  A recent survey of cancer drug policies revealed you don’t have to say no very often to get discounts for saying yes, as demonstrated by Express Scripps and CVS Caremark. Read more…

 

West Point Professor and Iraq War Veteran Weighs in on Disability Pay

Disability benefits, especially for veterans, can be a difficult, often emotional issue to discuss as is witnessed in this The New York Times article and accompanying comments. Lt. Col. Daniel Gade, a professor of public policy at the United States Military Academy, lost a leg while serving as a tank company commander in Iraq in 2005. He spends much of his spare time publishing essays and traveling the country pushing the idea that the Department of Veterans Affairs should move away from paying veterans for their wounds and instead create incentives for them to find work or create businesses.

“It’s a difficult issue to broach. People immediately think you are trying to shortchange veterans,” he said in an interview. “But I’m in a position to do it because I have skin in the game, literally.”

Colonel Gade wants to avoid a partisan fight over his ideas which says are first about helping veterans and second about saving money: “I think we can show we have a no-kidding better way to help veterans that is cheaper and more effective.”

One comment author summed many points up not just on veterans’ benefits but the disability system in general: “We can say that ‘disability status’ can become a disability in itself, without suggesting any sort of malingering or intent to defraud. This applies to vets and civilians alike. There are many cases of disability where the person really can’t work; gaining disability status is a godsend for them. It enables them to actually be more successfully productive in the community than continually failing in the workplace. BUT…Some people don’t do well being disabled. The status itself seems to undermine their ability to take charge of their lives.” Read more…

Rate of Health Spending Increases on the Decline

Much has been noted recently about a decrease in the growth of healthcare spending as announced by the Obama administration early this month.

“The pattern observed in recent years is not unique and is consistent with historical patterns,” Anne Martin of the Centers for Medicare & Medicaid Services said. The agency’s report noted: “The key question is whether health spending growth will accelerate once economic conditions improve significantly; historical evidence suggests that it will.”

Three recent pieces in The New York Times explore different aspects of what causes this decrease in growth rate and what it means for consumers and for the future (“Good News Inside the Health Spending Numbers,” “Health Spending Rises Only Modestly,” and “The Health-Cost Slowdown Isn’t Just About the Economy.”).

The medical system really is changing, which is why cost growth has been slow. But the changes aren’t guaranteed to continue. Some key points include:

  • Health spending in 2013 grew at the lowest rate since government officials started tracking it — back in 1960.
  • 2013 is the fourth consecutive year that health spending growth has kept pace with the growth in the overall domestic economy, suggesting something more durable than random.
  • The slowdown in health spending growth began in 2002 and has become more pronounced in recent years.
  • Spending by the federal Medicare program, private health insurance and people’s out-of-pocket expenditures all declined, suggesting that the savings were systemwide and not due to changes in just one kind of insurance.

 

Why Everything We Think We Know about Health Care Is Wrong

Catastrophic Care: Why Everything We Think We Know about Health Care Is Wrong – by David Goldhill

Review

By Brian L. Grant MD

MCN Talk regularly addresses — some would say obsesses about — the health care system in the US. David Goldhill in his book Catastrophic Care: Why Everything We Think We Know about Health Care Is Wrong has created a compelling and essential read for those who enjoy a sense of hopelessness and depression.

Affect and emotions aside, it is a must read for anyone who wishes to understand the scope of the irrational and out of control system of American health care and observe his views of how we may improve upon an out of control if not dire situation.

The book flowed from businessman, not health economist, Goldhill’s experiences with the death of his father in a hospital which he chronicled in an article in the Atlantic Monthly in September 2009. (Hint to those word-challenged readers: some Amazon reviewers suggest this lengthy article is a suitable surrogate to the much longer book).

Reading this with an open mind, it gives this writer pause and is tempering my enthusiasm for the ACA. Don’t get me wrong – I believe the ACA is superior to the system in place before, but that is saying very little. At core, Goldhill postulates and backs up with data and appropriate comparisons to the rest of world that health care, by our reliance on surrogates to pay for all aspects of care (insurance and government) has in place a series of perverse incentives, moral hazards and an absent marketplace that would work for much of the health care spend in improving quality, reducing utilization and curbing price.

He notes that unlike everything else in the economy, we rely upon insurance to pay for everything in health care, from the most routine to the most urgent. The surrogates are the customer and they are the problem, with primary customers – patients — being indifferent to cost and utilization, abrogating decision making and spending to others.

He illustrates that we conflate heath care with health, falsely and at our peril. When commenting on disparate health status of other countries he notes: “The reason Swedes, Japanese and Italians live so long isn’t their (very different) health care systems; it’s that they live like Swedes, Japanese and Italians…” Goldhill does not suggest that we do away with insurance, but that it be a true safety net for truly insurable and rare events, health crises that are “major, rare and unpredictable.” Vaccinations, routine exams, visits for the flu, contraception and the like, all affordable and predictable like a great deal of health care, would not fall under insurance but would be paid for by individuals of reasonable means.

He notes that the usual features of business and the marketplace, including competition, price comparison, and transparency, convenience and comfort, would quickly emerge when the surrogates are eliminated and buying decisions are made – in much the same way that we can dine out, vacation, obtain car repair or electronics – based upon providers who innovate and differentiate to receive our hard-earned dollars. He illustrates from his own experience the indecipherable nature of health care bills and the inefficiency of hospitals because there is no incentive to simplify and improve in the current system that is accountable to payers, not patients.

Goldhill demonstrates that the factors most impacting health are wealth, education and lifestyle, not access to health care. However, we focus on tests, procedures and other interventions that often do little and may harm, because that is where the money is. Most staggering is his illustration of how much the current system costs each of us in terms of real earnings in our lifetime.

He puts the lie to the concept that insurance is other people’s money. Thru payroll taxes both general and Medicare, employer spend, state taxes and other funds, our 18% of GDP currently spent on an inefficient health care system is money that is not going into paychecks and other more productive uses. When I was 13, we spent as a nation 5.8% of our GDP on health care. Today it is 17.6% and rising. Had health care only growth along with the GDP at the same rate over the past 45 years, we would each on average have more than $4,000 to spend annually each year, or $16,000 for a family of four.

Those who defend this increase on the basis of better technology and other factors should be reminded that the rules of economics and innovation generally work to reduce costs and increase quality at the same time. Witness the smartphone in our pockets that pack more computing power than those in the moon launches. We have seen a multi-thousand fold decrease in memory costs and gains in processing speeds and other features with major improvements in most technologies. Why not this same transformation in health care, which claims that technology and innovation is a driver for outsized cost increases?

Goldhill’s closing remarks in chapter 3 “The Disconnect” recaps his basic position: “Consumers don’t have enough information to be good consumers. But the agents we’ve designated to act on our behalf have proved to be worse. When it comes to regulating our health care system – providing real discipline on quality, excess, price and safety – there is no real surrogate. It’s a job that only we can do.”

The newer paperback version of the book is almost 400 annotated pages. Anyone in the business of providing care, overseeing, or paying for care – and perhaps the rest of us who receive care as patients would benefit from reading it.

Quick links:

Catastrophic Care: Why Everything We Think We Know about Health Care Is Wrong – by David Goldhill.

The New York Times Book Review: “Obamacare, How It Should Be Fixed.” David Goldhill’s response.

The Atlantic: “How American Health Care Killed My Father.”

The Private Practice Oncologist, a Vanishing Breed

In the northwest we are lucky indeed to be home to the Seattle Cancer Care Alliance; the SCCA is a world class center that unites doctors from Fred Hutchinson Research Center, UW Medicine, and Seattle Children’s Hospital. But what if someone wanted to seek treatment or even just an opinion elsewhere in Seattle? As it turns out, there’s only one independent oncology group in Western Washington now.

It’s not just in the Northwest where independent oncology groups are disappearing. The Community Oncology Alliance, an advocacy group for independent practices, said that since 2008, 544 of 1,447 such groups were purchased by or entered contractual relationships with hospitals; another 313 closed and 395 reported they were in tough financial straits.

This is tied to reimbursement schedules for chemotherapy drugs: cancer centers, as opposed to private groups, participate in a federal program that lets them purchase these drugs for about half what private practice doctors pay. When a doctor is affiliated with a hospital or research center, though, patients end up paying, out of pocket, an average $134 more per dose for the most commonly used cancer drugs, according to a report by IMS Health, a health care information company. So while cancer centers pay less, they charge more.

Thus far health care economists say they have little data on how the costs and profits from selling chemotherapy drugs are affecting patient care. The cost of chemotherapy drugs has increased tremendously in the past decade, however, resulting in more out-of-pocket expenses for those even with comprehensive insurance coverage and tremendous expenses for those without coverage. With drug manufacturers promoting individual drugs through aggressive marketing techniques (as an example in this New York Times article, Celgene, in a recent email about its drug Abraxane, told one doctor who had bought 50 vials that he could get a rebate of $647.51 by buying 68 vials. If he bought 175 vials he’d get $1,831.93), the effects of this combined set of circumstances — increased cost of drugs, tiered reimbursements, fewer private practice alternatives — the best treatment options may not be the prevailing care options for some cancer patients.

While individual oncologists deny choosing treatments that provide them with the greatest profit, Dr. Kanti Rai, a cancer specialist at North Shore-Long Island Jewish Cancer Center, said it would be foolish to believe financial considerations never influence doctors’ choices of drugs. “Sometimes hidden in such choices — and many times not so hidden — are considerations of what also might be financially more profitable,” he said.

Dr. Peter Eisenberg, in private practice in Marin County in Northern California, summed it up: “The disgrace is that we have to treat people differently depending on how much money they’ve got.”

Gotten Your Flu Shot Yet?

Some good news on the vaccination front: the World Health Organization (WHO) welcomes the approval by Swissmedic, the Swiss regulatory authority for therapeutic products, for a trial with an experimental Ebola vaccine at the Lausanne University Hospital. This marks the latest step towards bringing safe and effective Ebola vaccines for testing and implementation as quickly as possible. The goal is to produce millions of doses of two experimental Ebola vaccines by the end of 2015.

That’s incredible news; as of last Friday the U.S. Center for Disease Control was reporting a total of 10,141 report cases worldwide, with 5,692 confirmed by testing and 4,922 deaths so far.

Closer to home, there are plenty of alarming health situations to worry about over which we have much more control. During the 2013-2014 flu season, for instance, only 46% of Americans received their flu shot, even though it kills about 3,000 people in this country in a good year, nearly 50,000 in a bad one. Flu shots don’t provide immunization against every strain of flu, but they greatly decrease the likelihood of contracting the flu and the severity of the flu should one become ill. So, as New York Times op ed piece asks:

Do me a favor. Turn away from the ceaseless media coverage of Ebola in Texas — the interviews with the Dallas nurse’s neighbors, the hand-wringing over her pooch, the instructions on protective medical gear — and answer this: Have you had your flu shot? Are you planning on one?