Faux health care report

Just a couple of quick links from the NEJM about electronic medical records and the difficulty doctors are having with implementation. Perhaps NoVA can help out and give a his perspective as well.

Even as consumer IT — word-processing programs, search engines, social networks, e-mail systems, mobile phones and apps, music players, gaming platforms — has become deeply integrated into the fabric of modern life, physicians find themselves locked into pre–Internet-era electronic health records (EHRs) that aspire to provide complete and specialized environments for diverse tasks. The federal push for health IT, spearheaded by the Office of the National Coordinator for Health Information Technology (ONC), establishes an information backbone for accountable care, patient safety, and health care reform. But we now need to take the next step: fitting EHRs into a dynamic, state-of-the-art, rapidly evolving information infrastructure — rather than jamming all health care processes and workflows into constrained EHR operating environments.

Escaping the EHR Trap — The Future of Health IT

Debates about the productivity yield of IT are new to health care but not to other sectors of the economy. During the 1970s and 1980s, the computing capacity of the U.S. economy increased more than a hundredfold while the rate of productivity growth fell dramatically to less than half the rate of the preceding 25 years.1 The relationship between the rapid increase in IT use and the simultaneous slowdown in productivity became widely known as the “IT productivity paradox,” and economists debated whether investing billions of dollars in IT was worthwhile. The Nobel laureate economist Robert Solow observed in 1987 that “you can see the computer age everywhere but in the productivity statistics.”

That earlier IT debate and its resolution carry important messages for today’s health IT debate. Solow’s famous observation launched more than two decades of research on IT’s effect on productivity, and that research revealed numerous explanations for the paradox — as well as evidence that earlier conclusions about the relationship between IT and productivity were incorrect and that under the right conditions, IT could indeed yield significant productivity gains.

Unraveling the IT Productivity Paradox — Lessons for Health Care

Medicare Trustees Report

Here’s all you need to know about the 2012 Medicare Trustees Report, which was “released” in the sense that press releases have been issued and talking points have been distributed. Have not seen the actual report language, but will post a link when I do.

The spin is that the ACA is working and will save money. And then CMS Richard Foster will speak.

Somewhere in the back of the report, Foster will write something to the effect of “these projections are based on current law and will not be viable” long term. He’ll reference the doc fix.

Count on it. So, are those pointing to the savings “wrong”? No. Are they lying bastards? Yes.

Update: Here’s the actual report.

Yep. Foster writes:

“Further, while the Affordable Care Act makes important changes to the Medicare program and substantially improves its financial outlook, there is a strong likelihood that certain of these changes will not be viable in the long range. Specifically, the annual price updates for most categories of non-physician health services will be adjusted downward each year by the growth in economy-wide productivity. The best available evidence indicates that most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services.
Without unprecedented changes in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law.”

He goes on:

For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).

Bartlett on Health Care in the Financial Times

Lapsed R Bruce Bartlett says government can do it better.  Hmmm.


The folly at the heart of the US healthcare debate

America is the only developed country that does not offer some form of national health insurance to all its citizens.

Those over the age of 65 have coverage through Medicare and the poor are covered through Medicaid, both established in 1965. Those who are neither poor nor old are expected to obtain their own health insurance or get a job that provides coverage. The federal government does subsidise private insurance through the tax code by allowing its cost to be excluded or deducted from taxable income. This reduces federal revenues by some $180bn per year.

In 2009, the Obama administration put forward a plan for extending health insurance to those who did not have it through an employer, those who could not afford it and those who could not obtain coverage due to a pre-existing medical condition. A complex system of subsidies was established to make coverage affordable to everyone and a mandate was put into place requiring people to get coverage or else pay a fine.

The mandate is by far the most controversial element of the Affordable Care Act. Its rationale is that insurance companies cannot be forced to cover those with pre-existing conditions without it, or else people will simply wait until they are sick before buying health insurance. Nevertheless, many Republicans view the mandate as an unconstitutional intrusion into the economy and they have brought a case before the Supreme Court to declare the legislation null and void for that reason. Court watchers believe the case could go either way, with a final decision expected just before the election in November.

Exactly what would replace the Affordable Care Act if it is found unconstitutional is a mystery. The Obama administration appears to have no back-up plan and Republicans have steadfastly refused to offer any proposal for expanding health coverage. One problem is that before Barack Obama became president, Republicans were the primary supporters of an individual mandate, viewing it is as a more market-oriented way of expanding health coverage without a completely government-run health system. Indeed, Mitt Romney, the likely Republican presidential nominee, established a healthcare system in Massachusetts, where he was governor, that is virtually identical to the national system created by Mr Obama.

Simultaneously, Republicans are keen to cut spending for Medicare and Medicaid, because they are among the most rapidly expanding government spending programmes. A plan supported by Republicans in the House of Representatives would effectively privatise Medicare, giving the elderly a government voucher to buy insurance or health services, in lieu of the pay-for-service system that exists now. Medicaid would be devolved to the states.

What neither party has made any effort to grapple with is the extraordinarily high cost of health, public and private. According to the Organisation for Economic Cooperation and Development, the US spends more of its gross domestic product on health than any other country by a large margin. Americans spent 17.4 per cent of gross domestic product on health in 2009 – almost half of it came from government – versus 12 per cent of GDP or less in other major economies. Britain spends 9.8 per cent of GDP on health, almost all of it through the public sector. The total government outlay is almost exactly the same in the US and the UK at 8.2 per cent of GDP. This suggests that for no more than the US government spends on health now, Americans could have universal coverage and a healthcare system no worse than the British.

However, the option of a completely government-run health system was never seriously considered in the US when the Affordable Care Act was debated in 2009. Americans are too convinced that everything government does is less efficient and costs more than if the private sector does it. The fact that this is obviously wrong in the case of healthcare has never penetrated the public consciousness.

At the moment, everyone is waiting for the Supreme Court to speak before moving forward on any serious new health reform plan. Whichever way the court rules, it is likely to give some push to further action next year regardless of the election outcome. Moreover, the growing governmental cost of Medicare and Medicaid is something that has to be addressed if there is any hope of stabilising the national finances. That alone would be an impetus for action even if the Affordable Care Act had never been enacted.

The writer is a former senior economist at the White House, US Congress and Treasury. He is author of ‘The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take’

Faux Health Care Update

Better publish this before I forget.

Bunch of links from the NEJM on Medicare reform.

On the whole, we do not believe that the recent slowdown in Medicare spending growth is a fluke. There has been a long-term trend toward tighter Medicare payment policy, and policy changes that began in the middle of the 2000s have continued that tightening (see graph).2 The Deficit Reduction Act of 2005 (DRA) reduced payment rates for imaging, home health services, and durable medical equipment, and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) made substantial cuts to Medicare Advantage plans. Even though Congress has overridden payment cuts dictated by the sustainable growth rate formula (SGR) each year, the resulting physician-fee increases have fallen further and further below the relevant index of inflation. All these specific constraints on payment rates probably also slowed growth trends in the volume of services provided, leading to a larger slowdown in spending growth.3

Slower growth in Medicare Spending

On December 15, 2011, Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI) released a Medicare reform proposal based on the concept of premium support.1 Under their proposal, Medicare would be converted from a defined-benefit to a defined-contribution program. Instead of guaranteeing to pay for services as they are rendered, as fee-for-service Medicare does, the program would give beneficiaries a subsidy (“premium support”) to purchase coverage from one of multiple competing health plans. The motivation behind the approach is to give plans a clear incentive to provide necessary services in a cost-effective manner, which can result in lower premiums or other beneficiary costs, attracting enrollees and increasing the plan’s share of the market.

Wyden-Ryan Proposal

These proposals would offer Medicare beneficiaries vouchers toward the purchase of private insurance or traditional Medicare. Private-plan offerings could vary, but the actuarial value of these alternatives would have to be at least equal to that of traditional Medicare. Increases in the amount of the voucher would be capped by an index that is expected to rise more slowly than health care costs. Advocates claim that cost-conscious enrollees and competition among profit-seeking insurers would hold down program costs. But if they didn’t, the growth cap would do so by shifting costs to the elderly and disabled.

Is premium support along the lines now being proposed a good idea? Is now the time to be making fundamental changes in Medicare? We believe that the answer to both questions is no.

Now is not the time for premium support

Before Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI) introduced their “Bipartisan Options for the Future” on December 15, 2011, the notion that Democrats and Republicans agreed about certain aspects of Medicare might have seemed unthinkable.1 But the pairing of a liberal Democrat who has long worked on health care reforms and a fiscally conservative Republican primarily known for work on budget issues suggests that it might be possible for the parties to reach a compromise on Medicare reform. Of course, meaningful reform is not likely to occur in 2012: any significant reform probably won’t happen until the public sends a clearer signal about the kinds of change it will tolerate, which won’t be possible until after the fall elections. Yet some Republicans and Democrats appear to be in substantial agreement about some changes that might make Medicare more efficient, effective, and fiscally sustainable — even if none of these changes are universally accepted by either party as desirable or even tolerable.

Bipartisan Medicare Reform

A surgeon writes at Reason on medical ethics, cost controls and therapeutic guidelines.

Trends in US health care spending


We here have been educated to understand the supply problem in American health care, thanks to NoVAH, Mike, and Michigoose, although many, if not all, of us understood the general outlines of this basic issue before we got here. This morning we read this:


What I did not know, until I read this article, is that Medicare covers the lion’s share of the cost of training medical residents.  Further, in order to make ACA’s package politically marketable, in the negotiations, there was no increase in the funding for residents.  Thus ACA built into itself the seeds of its own failure, and this is what NoVAH has been saying to us, although I don’t recall his having pointed to the failure to increase funding for residents.

When I read ACA in detail for my clients, I looked at it from the POV of the effect on small biz, which I decided was actually nil, for my clients.  A myopic view, I admit, but it fit my assignment.  A shortfall of 30000 new doctors in a near time frame will greatly increase health care costs above what they would have been if 30000 new docs had been trained.

Health Care Headlines

I wanted to put this post up last week, but got distracted by work and my one month old son (he’s great by the way). So some of this is a week or two old and I don’t have much time to add a bunch of analysis, but I thought some of these may provoke some discussion or just be informative to those who are interested.

The American College of Physicians encourages physicians to take into account the cost-effectiveness of their treatment decisions. In their ethics manual (which you can access for free), the ACP does more than just argue that physicians should take into cost effectiveness with regard to exposing patients to excessive, unnecessary or potentially harmful treatments. The manual encourages physicians to think about how cost effective care can increase the availability of health care to more people. Now I’m all for more cost-effective health care, but I’m not sure I want my physicians worrying about how a treatment they are ordering for me may somehow reduce health care resources available to the community as a whole.

USA Today recaps some of the provisions of the ACA that have already had an impact. It’s not exactly a critical look at the law (OK, it’s pretty much a puff piece), but the government’s success in fighting fraud has gotten more attention lately and the article leads with that aspect of the ACA. While the Obama Administration deserves some credit for the crackdown on fraud, I would also point to the increased use of electronic medical records as a reason for the increase in fraud prosecutions.

The Washington Post has a depressingly humorous article about doctors complaining that the Medicare “doc fix” was closer to becoming a reality than ever. So they’re complaining that the perpetually scheduled reimbursement cut that they know Congress will never pass was closer to passing this time than in the past. Boo-freaking-hoo. The refusal of Congress to pass the cut in physician reimbursement under Medicare is of great amusement to me and NoVa, but it’s emblematic of why we need to fundamentally change our health care system.

The Detroit Free Pressdiscusses all the merger activity between solo hospitals and larger health systems. One of the criticisms of the ACA and programs like ACOs was that they would lead to mergers which would lead to less competition and higher prices. To a large extent mergers were occurring before the ACA so it’s a bit difficult to determine to what extent the ACA increased that activity. It’s also difficult to determine whether or not the mergers will lead to higher prices. The argument that they won’t is that consolidation will lead to increased efficiency which will lower health care spending. It remains to be seen whether or not one or both of those theories will be true.

Lastly, here’s a link to the government’s anti-trust complaint against Blue Cross Blue Shield of Michigan (BCBS). It provides an interesting (albeit one-sided) read. As a brief summary, BCBS entered into most favored nation (MFN) agreements with hospitals throughout Michigan that required the hospitals to charge other insurers as much or more than they charged BCBS. Since BCBS has such a large share of the insurance market here in Michigan that made it hard, if not impossible, for some insurers to compete. And obviously it drove prices up for everyone, including BCBS. Both Michigan and the Feds are in on the suit and several private insurers have filed similar suits.

A Tribute to My Sister

”[E]nd of life is where a huge chunk of our health care dollars are spent. We could probably take a big chunk out of our deficit if we made inroads there even if we left the rest of health care alone.” H/T NoVAHockey, et al.

What kinds of inroads? So why aren’t we doing something about this? What should we do about this? Is it in fact a slippery slope?

I know something about the personal reasons for end-of-life-decisions, as do others here, and they are not always against the economic interests of society. But sometimes they are and maybe should be. My sister is probably a classic example. After her diagnosis with a rare blood disorder, she far exceeded (by 5+ years) life expectation . . . with excellent quality of life but very high Medicare cost. Her last six months, as treatments became less effective and more debilitating in and of themselves, her quality of life decreased significantly and she made the decision to go with grace and dignity. She made that decision at the right time IMHO. I admire her both for her tenacity and survival instinct as well as her uncomplaining departure. And I agree with a comment by lms to the effect that many people facing such decisions at some point have no hesitation about refusing further treatment if their families do not influence (or outright make) the decision.

I don’t perceive my sister’s situation to be at all unique and maybe it’s quite common. So how does this work out? What are the documented economics of end-of-life health care costs in the overall scheme of things? I’ve got the “touchy feely” part of this, but the societal economics of it are waaaay far out of my area of expertise. Help! Can we in fact arrive at a solution that is both compassionate and economically feasible?

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