That is what we have been told the Obama administration will claim today as they begin the job of reselling Obamacare.
Is Obamacare even partly responsible for the slowdown in health care costs?
That is silly.
First, Obamacare is not a health care reform law; it is a health insurance reform law. No one on either side of the debate has ever argued anything different.
Does the law have some limited cost containment features in it?
Yes. But these are either pilot projects or are years from being fully implemented.
I have heard the argument that the Medicare cuts that were made to help pay for the program are examples of cost containment efforts that are having a short-term impact on controlling costs. The Democrats need to be careful with this one. I recall their countering Republican “Mediscare” claims by saying the Medicare cuts were not significant.
In a letter last year accompanying the Medicare Trustee’s report, the Medicare actuary said, “The [Obamacare Medicare cuts] will affect Medicare price levels more gradually, but a strong likelihood exists that, without very substantial transformational changes in health care practices, payment rates would become inadequate in the long range.”
Translated: The Obama Medicare provider cuts are not having a big impact in the short-run but will be unsustainable over the longer-term.
Continue reading “Is Obamacare Responsible For the Recent Slowdown in Health Care Costs?”
Filed Under: THCB
Tagged: Costs, Health care spending, Obama administration, Robert Laszewski, The Affordable Care Act
Dec 6, 2013
The most commonly heard comment in healthcare these days is that we have to move from paying for volume to paying for value. While it may sound trite, it also turns out to be pretty true. Right now, most healthcare services are paid for on a fee-for-service basis – with little regard for the quality of that service. We clearly need to move towards value-based payments (sometimes referred to as pay-for-performance or P4P).
Although a few folks remain skeptical about whether VBP/P4P can work (as though our pay for volume strategy is working out so well), asking whether we should pay for volume versus pay for quality no longer seems like a particularly interesting question.
The far more compelling and difficult question is how best to pay-for-performance? As I have written before, we need bold experiments with new payment models that employ three key principles: putting real money on the table, focusing on outcomes, and keeping the reward system simple (i.e. the better you do, the more you should get).
One such new payment model is the value-based purchasing (VBP) program from CMS, the largest payer of hospital care in America. It’s a modest program but an immensely important one. It is modeled after the Premier Hospital Quality Incentives Demonstration (HQID), which ran for 6 years and had modest effects on hospital performance on process measures and no effect on patient outcomes.
Despite these disappointing findings, the U.S. Congress, in crafting the Affordable Care Act, modeled VBP closely on HQID. The incentives in the program are small (currently at 1.25% of total Medicare payments) and still more heavily weighted towards process measures than outcomes.
The key question for VBP is whether it will work – whether patients will be better off because of it. We don’t know and realistically, we won’t for another year or so.
But what we do know is that two years into the program, certain hospitals seem to be doing well and others, not so much. Yes, the incentives are small and my guess is that any impact will be very modest as well. But, it’s still worth taking a look at how different types of hospitals are faring under VBP.
So we ran some numbers.
Continue reading “Finding the Value in Value-Based Purchasing”
Filed Under: Hospitals, THCB
Tagged: Ashish Jha, Costs, Hospitals, Pay for Performance, Value-based Purchasing
Nov 20, 2013
Recently I was asked to intervene on behalf of a patient who, trapped by circumstance, was paying off an enormous bill for a lithotripsy procedure. What I uncovered wasn’t news, but it drove home how egregious the current system can be, why it so badly needs to be fixed, and how the Affordable Care Act (ACA) helps move us in the right direction.
The patient had health insurance through her husband’s job. But it was cancelled just after the hospital validated it, because the employer failed to pay the premium. The procedure was performed, and the patient was charged as “self-pay.”
If Medicare had been the payor in this case, the hospital’s total reimbursement would have been a little less than $2,000. But the lithotripsy and associated costs were billed at $33,160, or just under 17 times the Medicare rate. After the patient applied for financial assistance, a 30% contractual adjustment was applied, reducing her bill to just under 12 times the Medicare rate.
If the health system had asked her to pay 190 percent of Medicare – typically the upper end of commercial insurance rates – her bill would have been about $3,800. By the time I was contacted, the patient and her husband – responsible people trying to make good on their debt – had already paid the health system $5,700 or 285 percent of Medicare. The hospital insisted they owed an additional $16,000.
I laid this out in a letter to the CEO and, probably because he wanted to avoid a detailed description of this unpleasantness in the local paper, he relented, zeroing out the patient’s balance. No hospital executive wants to be publicly profiled as a financial predator.
But while that resolved that patient’s problem, it did nothing to change the broader practice. Most US health systems, both for-profit and not-for-profit, exploit self-pay patients in this way. Worse, not-for-profit health systems legally pillage their communities’ most financially vulnerable patients while getting millions of dollars in tax breaks each year for providing charity care.
Aggressive collections procedures, including home liens, are widespread.
Some states have strictly limited what hospitals can charge low income patients. In California, uninsured patients with incomes below 350 percent of the federal poverty level (FPL) – $82,425 in 2013 for a family of 4 – can be charged no more than Medicare rates. In New Jersey, patients within 500 percent of the FPL cannot be charged more than 115 percent of Medicare.
Section 9007 of the ACA took effect last year and prohibits excessive pricing for self-pay patients, and would revoke a charitable hospital’s tax-exempt status if it charges them more than it charges for insured patients. The language is ambiguous, conceivably allowing health systems to circumvent the law’s intent. But the spirit is clear. To keep their not-for-profit tax status and perks, health systems must stop taking advantage of self-pay patients.
Continue reading “And Yes, The Affordable Care Act Really Does Make Care More Affordable. Here’s One Example ….”
Filed Under: Hospitals, THCB, The Business of Health Care
Tagged: Brian Klepper, Costs, Hospitals, Medicare, Patients, Premiums, self-pay patients, The Affordable Care Act
Nov 18, 2013
The Obama administration announced on Friday that it will require parity for mental health insurance coverage. That means that health insurers must apply the same copayments, deductibles, and visit limits to mental healthcare as they do for physical health care treatment. Call it fair, call it political, but please don’t call it a good economic or health policy.
The story about how this is fair, or at least politically popular goes something like this: Health insurers are evil and powerful firms that can and will do whatever they want. On the other hand, patients with mental health problems are politically weak and must be protected from the powerful insurers that have no interest in taking care of them.
In this story, the Obama administration rides in on its white stallion and rights the wrongs being perpetrated by the villainous insurance companies. All we need is a damsel in distress, an evil step-mother, and a catchy tune and Disney will sign the movie rights.
The problem with this simplistic story line is that you can replace “mental health” with nearly any other condition and the story would sound just as plausible.
Continue reading “Mental Health Parity and the Affordable Care Act”
Filed Under: OP-ED
Tagged: Costs, Craig Garthwaite, David Dranove, insurance coverage, Mental Health, mental health care, The Affordable Care Act
Nov 11, 2013
Besides state and higher-level health care expenditures, county level HCE are useful, integral really. For example, to promote the Triple Aim (the best care for the whole population at the lowest cost) you need per capita HCE. And knowing those costs at the county level would help a lot. However, county estimates generally don’t exist. They didn’t in Washington State until a client needed cost estimates for our 39 counties. To supply those estimates I used a regression approach resulting in this model:
percaphce = +0.1*percapinc + 247*pctage65 + 0.71*percapmedaid + 10.5*pctrural – 1349
Washington State Context
Before discussing model rationale and county HCE estimation, here’s some context about Washington State and its counties. You might view Washington as a microcosm of the nation. It has mountains, forests, deserts, rivers and lakes, vast rural areas, major cities, diverse populations and industries, and a varied climate. It is distinguished by active volcanoes and a coastal border. There is a wide range of political, social and economic clusters. In 2010 King County, where Seattle is located, median annual household income was about $67 thousand (the U.S. median was roughly $50 thousand) yet there are state counties where one in three children live in poverty. The total population is approximately 7 million with half of those people living in just three of the 39 counties.1 At the other end about a third of the counties have populations of 30 thousand or less.
An Aside about Seattle Weather
You may have been told that it rains all the time in Seattle. I live in Seattle and can tell you that’s a myth. Seattle’s average annual rainfall is less than New York City’s. However, during a good part of the non-summer months Seattle, and Puget Sound generally, is grey and cloudy. I once heard a story about the original settlers who landed in November, 1851, at Alki near present-day Seattle. The story is they were there for months before the weather finally cleared and they saw Mt. Rainier for the first time. I don’t know if that story is historically true, but as a Seattleite it’s believable. Regardless, Seattle is a summer paradise. Seattle summers, like most of Puget Sound, are characterized by pleasant sunny days, cool nights and no mosquitoes.
Background for the County HCE Estimates
Last year Empire Health Foundation of Spokane, Washington, asked me to estimate HCE for the 39 counties in the state. The purpose was for an upcoming meeting of policy types such as county commissioners, members of various health organizations, and other stake holders. A theme would be Donald Berwick’s Triple Aim, so cost estimates were wanted for benchmarks and context. The CMS2 Office of the Actuary had recently developed state HCE.3 If I could build a reasonable regression model on state-level data to predict state HCE, and there were similar variables at the county level, I could use the state model to estimate county HCE. That’s the approach I took. A caveat is my understanding was that acceptance—believability and reasonableness of the estimates to a lay audience—were as important as accuracy.
Continue reading “Letting the Data Speak: Estimating County Health Care Costs In Washington State”
Filed Under: Economics
Tagged: Costs, Economics, Frank de Libero, health care expenditures, The States, Washington state
Nov 6, 2013
As enrollment in the Affordable Care Act’s (ACA) new health care markets, or exchanges as they are also known, begins, much of the debate over the law is focused on insurance: Who will get coverage? How much will premiums cost? Should our state expand Medicaid? Yet health insurance is not an end in itself.
The point of insurance is to help people get the health care they need at prices they can afford and, in the event of serious injury or accident, to protect them from catastrophically high medical bills. What often gets lost in the debate is how the new law will affect Americans’ ability to buy health care.
While relatively little will change for most people who already get their insurance through employers, an estimated 49 million Americans will be affected by the new law, either becoming newly insured or changing their source of coverage. How will these changes affect consumer health care spending? Will the Affordable Care Act live up to its name?
Of course, ultimately only time and experience will tell. But in the meantime, the law is being implemented, and policymakers and consumers confronting the new health care market are seeking answers about the law’s likely impact, beyond politicized charges and countercharges about whether it will succeed.
Using the COMPARE microsimulation model, my RAND colleagues and I examined how the ACA will affect spending by consumers who are insured for the first time or who change coverage as a result of the law. Specifically, we looked at out-of-pocket spending (spending at the point of sale — copays, deductibles, and coinsurance, which is the fraction of spending not covered by insurance); total spending on health care, which includes out-of-pocket spending plus insurance premiums; and consumers’ risk of high medical care costs.
The analysis focused on 2016, the first year in which penalties for not complying with the individual mandate will be fully in effect, and considered two scenarios: one in which the ACA is fully in place and another that estimates outcomes without the ACA.
Continue reading “Affording the Affordable Care Act”
Filed Under: THCB, The Business of Health Care
Tagged: Christins Eibner, Costs, Health Insurance Exchanges, Insurance premiums, The Affordable Care Act
Oct 3, 2013
Medicare reform thus far has been focused on $79 office visits, co-payments for home health care, hospital readmissions, Miami infusion clinics, the price paid for scooters, $45 resting EKG’s, the Plan B deductible, etc. These are important areas to pursue — but they are not where the real money is.
While we are debating the ‘doc fix’, the drug companies, device companies and hospitals are backing up the truck and cleaning out the store!
Consider the following paid claims paid by Medicare in Indiana in 2011:
- 113 Heart Transplants: average payment was $773,877 a piece
- 96 Bone Marrow Transplants: average payout was $509,637 apiece
- 129 Liver Transplants: average payout was $367,000 apiece
- 2,200 Tracheostomies: average payout was $376,103 apiece
- 1,517 Open Heart Surgeries: average payout was $185,000 apiece
Altogether, the 12,000 largest claims in one state totalled $2.4 billion in Medicare spending. If the other states are consistent, then large claims like these ate up $120 billion of Medicare’s total spending of $545 billion. And when you factor in sepsis treatments, defribillator-implants, and similar claims that cost “only” $75,000 each and so did not make the above list…….. then almost two-thirds of Medicare spending — over $300 billion a year — is focused on just ten percent of beneficiaries.
Continue reading “How to Cut Medicare Spending: Attack Large Claims!!”
Filed Under: The Business of Health Care
Tagged: Bob Hertz, Costs, DRG Reimbursement, entitlement reform, Hospitals, Medicare Part A, Medicare Reform, Upcoding
Sep 26, 2013
Thanks to extraordinary advances in medicine, critical care providers can save lives even when the cards are stacked against their patients. However, there are times when no amount of care, however cutting-edge it is, will save a patient. In these instances, when physicians recognize that patients will not be rescued, further critical care is said to be “futile.” In a new study, my RAND and UCLA colleagues and I find that critical care therapies that physicians regard as “futile” are not uncommon in intensive care units, raising some uncomfortable questions.
Of course, we’re fortunate to have such fantastic technology at our disposal — but we must address how to use it appropriately when the patient may not benefit from high-intensity measures. When aggressive critical care is unsuccessful at achieving an acceptable level of health for the patient, treatment should focus on palliative care.
In our study, my colleagues and I quantified the prevalence and cost of “futile” critical care in the journal JAMA Internal Medicine. This can be seen as the first step toward reevaluating the status quo and better optimizing care for critical care patients.
After convening a group of critical care clinicians to determine a consensus definition of “futile treatment,” our research team analyzed nearly 7,000 daily assessments of more than 1,000 patients.
We found that 11 percent received futile treatment, while an additional 9 percent received “probably futile” treatment.
So physician-perceived futile critical care is indeed prevalent. But what about the cost?
Continue reading “What to Do About Futile Critical Care”
Filed Under: THCB, The Business of Health Care
Tagged: Choosing Wisely, Costs, critical care, futile care, Neil S. Wenger, Physicians, Rand, UCLA
Sep 15, 2013
When Michael injured his knee, he did what any responsible person would do. He was not incapacitated, and though the knee was painful and swollen, he could get around pretty well on it. So he waited a few days to see if it would get better. When it didn’t, he saw his primary care physician, who examined it and quite reasonably referred him to an orthopedic surgeon. The orthopedic surgeon considered ordering an MRI of the knee but worried that insurance would not cover a substantial portion of the $1,500 price tag, so he suggested a less expensive alternative: a six-week course of physical therapy that would cost only $600 – a quite responsible course of action.
At the end of this period of time, Michael was still experiencing pain and intermittent swelling. The orthopedic surgeon made another quite responsible decision and ordered the MRI exam, which showed a torn meniscus. The orthopedic surgeon could have recommended arthroscopic surgery, which would have earned him a handsome fee and generated revenue for his physician-owned surgery center. Instead he again acted quite responsibly, advising Michael that the surgery would actually increase the pain and swelling for a time and probably not improve his long-term outcome. Based on this advice, Michael declined surgery.
Though everyone in this case proceeded responsibly, the ultimate outcome was inefficient and costly. Many factors contributed, but perhaps the most important was the fact that Michael’s physician outlined choices based on an inaccurate understanding of the costs associated with his recommendations. The orthopedic surgeon thought that the cost of six weeks of physical therapy was 60% less than the MRI. In fact, however, the actual payment for the MRI from the insurance company would be only $300, not the “retail” price of $1,500. What appeared to be the less expensive option was actually twice as expensive, and it delayed definitive diagnosis by six weeks.
This story is emblematic of a larger problem in contemporary healthcare. No one – not the patients, the physicians, the hospitals, or the payers – really understands in a thorough way the true costs of their decisions. After receiving care, patients routinely receive by mail multi-page “explanations of benefits” that show huge differences between list prices and actual payments. Most find it baffling to try to determine who is paying how much for what. Physician practices and hospitals get calls every day from panicked patients who believe that they are being billed for exorbitant costs, when in fact most or all of the charges will be paid by insurance at a huge discount.
Continue reading “The Black Box at the Center of Health Economics”
Filed Under: Economics, OP-ED, THCB
Tagged: Costs, doctor/ patient relationship, Economics, Patients, Physicians, Richard Gunderman
Sep 9, 2013
The fall sports season is tantalizingly near; players and fans alike are gearing up for the Friday night lights and Sunday afternoon showdowns. But the season comes at a cost; every bone-jarring hit and wince-inducing header carries the risk of sustaining a concussion.
Most media coverage focuses on the National Football League’s professional players, but 65% of traumatic brain injuries are sustained by children. The majority are thought to be undiagnosed, but the Center for Disease Control estimates that 1.6 to 3.8 million sports-related concussions occur each year. This puts athletes at risk of sustaining a second concussion before their brains are fully healed, leading to longer recoveries, permanent neurological damage, and the potentially-fatal Second Impact Syndrome.
A just-released app hopes to change that. Sway Medical, founded by Chase Curtiss in 2011, aims to help health professionals objectively rate the risk of concussion at the source: on the football field or soccer pitch. On-the-spot concussion diagnosis is just the beginning, though; in the near future, the young company plans to enter the hospital space by the end of the year.
The FDA-approved app, called Sway Balance, uses proprietary software and the iPhone’s accelerometer to assess an athlete’s balance over time. In a phone interview, founder and CEO Chase Curtiss said that the app can be used by a health professional to “set up a baseline,” then “compare an athlete over the course of a season to that established norm.” Poor performance compared to baseline is indicative of a possible concussion.
Health care professionals can purchase a yearly subscription to the app for $199 – a fraction of the cost of a typical balance platform – and the patient-facing app is free to download.
Sway Medical has partnered with ImPACT Applications, an organization which Curtiss described as conducting the “gold standard of concussion testing on the market.” ImPACT uses baseline cognitive testing – verbal and visual memory, processing speed, and reaction time – and synchronous testing immediately after a hit to assess if a concussion has occurred.
“But you don’t have an element of physical control of the body,” Curtiss said – which is where Sway Balance comes in. “[ImPACT’s] interest in us is in pairing a balance test with cognitive testing.”
Continue reading “Diagnosing Concussions and Assessing Balance- On Your iPhone”
Filed Under: Tech, THCB
Tagged: Apps, concussions, Costs, John Schumann, mHealth, Mike Miesen, Reimbursement, Sway Medical, traumatic brain injuries
Aug 19, 2013