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
That past month of debate over the botched launch of the health care exchanges has brought the programming geeks, and their hired mouthpieces, out in the open to defend the indefensible. As painful as this has been for so many Americans, we cannot help but be amused to hear so many commentators doing their best impression of Captain Renault and expressing their shock that the federal procurement system could have produced such an outcome. Of course, most of this is a sideshow, the opening act to an even more serious drama in the making.
Let us be clear from the outset, the rollout of Healthcare.gov is an embarrassment. However, this only becomes a real problem if it dissuades enough people who were already marginal customers with respect to their purchase of health insurance on the exchanges to simply pay the penalty and avoid the hassle of staring at a computer screen, waiting on hold for hours, or refusing to try again once the geeks get this all sorted out.
While the self-appointed technology experts on both sides of the aisle have been debating the causes of the web site debacle, attention has been diverted away from the necessarily frank discussions we must have about the real potential benefits and looming costs of the exchanges.
In a valiant attempt to steer the conversation towards the benefits of the ACA, President Obama held a rose garden press event where he repeatedly claimed that the health insurance on the exchanges is good product. But as is all too often the case, the President talked about the benefits and side stepped the difficult conversation about the costs.
At least he is half right. If they can ever fix the web sites, people with pre-existing conditions who shop on the exchanges will gain access to insurance at a more affordable price. Enrollees may save thousands of dollars. But let’s not kid ourselves.
The exchanges do not reduce the cost of medical care; they only change who pays for it. And we all know who that is.
Continue reading “The Opening Act”
Filed Under: Economics, THCB
Tagged: business of healthcare, Craig Garthwaite, David Dranove, Economics, Employers, Health Insurance Exchanges, Healthcare.gov, Obama administration, The Affordable Care Act
Oct 28, 2013
Beholding David H. Howard’s rendering of the crazy-quilt of financial sources that have been tapped by the designers of the Affordable Care Act of 2010 (hereafter ACA ’10) to finance the new entitlements they put in place – a little nuisance tax here, a little nuisance cut in other federal spending there – reminds me once more of the sincere, indeed touching, naiveté with which Democrats tend to go about enacting new entitlements.
It is a totally counterproductive and inelegant approach. To be sure, none of the added taxes or spending cuts in the bill seriously disrupt anyone; but they do spread a little pain all around. Therefore, it seems almost deliberately designed to maximize opposition to it from many quarters.
It also leads to acute embarrassments, such as having to postpone by a year (and perhaps more years) the unseemly penalty imposed on employers with 50 or more employees each working 40 your or more etc etc, even at the appearance of having broken the law – or so we are told.
When will the Democrats ever learn?
And from whom might they learn?
From the Republicans, of course.
Dream back to the good old days – 2003 – when the Bush Administration and the Republican Congress pushed through, with deft parliamentary maneuvering and some arms twisting, H.R. 1 (2003), the Medicare Prescription Drug, Improvement, and Modernization Act – hereafter the MMA ’03.
Continue reading “How Naïve Can Democrats Get?”
Filed Under: Economics, OP-ED, THCB
Tagged: Cadillac Tax, Democrats, Economics, Employer Mandate, entitlements, GOP Repeal, Medical Device Tax, Medicare Prescription Drug Improvement and Modernization Act, Medicare spending, Obamacare, The Affordable Care Act, Uwe Reinhardt
Oct 14, 2013
Like many health policy experts, I’ve closely followed and participated in the debate over the Affordable Care Act. I’ve spoken at town hall events, fielded questions from reporters, and discussed the ACA with students, friends, and colleagues.I have been asked a wide range of questions about the ACA, but I am always amazed by the one topic that almost never seems to come up: how the deeply indebted federal government will pay the roughly $200 billion annual cost of expanding coverage.
The inattention to the financing of the ACA by the public, the media, and even Republicans is a testament to the skill of its drafters. The benefits of the ACA are highly visible, the costs are concealed.
Consider the ACA’s treatment of Medicare hospital reimbursements. Reimbursements to hospitals increase from year to year based on the projected increase in hospitals’ labor and capital costs. The ACA reduces the rate of growth in payments by 0.1 percentage points per year plus an additional factor based on projected economy-wide productivity growth. It is possible that the application of these factors will result in a net reduction in payments, but, more likely, payments will not increase by as much as they would have in the absence of the law.
This provision, which will raise $64 billion in 2020, may result in the closure of some hospitals and reduce quality in those that remain open. However, these effects are uncertain and difficult to summarize in a soundbite.
Other financing provisions are only slightly less obtuse. About one quarter of Medicare beneficiaries are enrolled in private health plans, the so-called Medicare Advantage plans. The ACA will revamp the formula used to set payments to these plans for a savings of $19 billion in 2020. The ACA will reduce subsidies to so-called Disproportionate Share Hospitals (hospitals that serve a large number of low-income patients) for a 2020 savings of $9 billion.
Continue reading “Paying for the ACA: A Field Guide”
Filed Under: Economics, THCB
Tagged: David Howard, Economics, GOP Repeal, Health care spending, The Affordable Care Act
Oct 12, 2013
My wisest and longest-time friend in health care, Jane Sarasohn-Kahn has a new project, new research and a new website called HealthcareDIY out today. I encourage all of you to look around her new site and consider the stories she is telling, as they matter to all of us.–Matthew Holt
We’re DIY’ing home renovations, photo development, music playlists, personal financial management, and travel reservations. Increasingly, we’re also DIY’ing health. Think: Maker Faire-Meets-Health.
My thinking about HealthcareDIY was first inspired by my mother Polly, who died 34 years ago this month. She was my first role model for an engaged patient. When she was diagnosed with Hodgkins lymphoma in 1971, there was no internet for her to tap into for a patient network, a clinical trial, or a directory of oncologists or centers of excellence that were Top Doctors for treating the condition.
Polly did, however, absorb the books of Adelle Davis and her Let’s Get Well series on nutrition and health. Polly’s good friend, a librarian with whom she worked, tapped into the Index Medicus on her behalf and retrieved abstracts of articles on blood cancers that he printed out from the microfiche. Polly partnered with her doctor, an internist with a keen interest in hematology, for her care. She also had a huge and diverse social network (offline, of course) that surrounded her with a whole lot of love. Her M.O. was informed by Dr. Bernie Siegel, who started Exceptional Cancer Patients in 1978 and evangelized about patient engagement, living fully with cancer, and dying in peace, which she did, in October 1979.
Among many legacies Polly left me was her can-do attitude when faced with a six-month-prognosis upon diagnosis with Hodgkin’s. Mom worked full-time until the last two years of her life, wore beautifully tailored clothes and put on lipstick every day, and project-managed her health through eight years of treatment: primarily, radiation and blood transfusions. Polly figured out how to take control where she could, and she did it with grace, humor and sheer human will.
She DIY’d her health given the resources she had at-hand between 1971 and 1979: books, cassette tapes, in-person support groups, medical journals in print, a specialist and internist, and lots of love.
In the three decades since Polly’s death, two seismic forces have structurally changed consumers in America: the Great Recession beginning in December 2007, and the near-universal use of the internet in health. Ogilvy’s report, Eyes Wide Open, Wallet Half Shut, found two countervailing forces re-shaping U.S. consumers: re-trenching and re-imagining. On the retrenching side of behavior, people began to do more binging: in media consumption, drinking, and eating.
On the re-imagining front, some people looked to re-invent themselves, reconnect with others, and re-train to re-tool careers. This group of people has sought to be more active and more deliberate, and accept more complexity in daily living. These people are more mindful, more frugal, and open to trading down. 9 in 10 use coupons, shop at discount stores, and buy more store brands and generics.
For this latter group, Ogilvy said, “Self Reliance is the new insurance policy,” with a group ethos believing that, “Americans need to be strong, get their house in order, and protect themselves,” per the report.
That’s where HealthcareDIY comes into play. Continue reading “HealthcareDIY: An Old Idea Made New”
Filed Under: THCB, The Insider's Guide To Health Care
Tagged: Economics, Health Care Reform, Jane Sarasohn-Kahn, Patients, The Insider's Guide To Health Care
Oct 8, 2013
One of the chief aims of the Affordable Care Act (ACA) is the expansion of insurance coverage to individuals who at present either cannot afford it or choose not to purchase it. Unfortunately, many Americans lack the financial literacy needed to navigate the numerous and complex options thrust upon them by the ACA.
The ACA contains a number of mechanisms through which coverage will be expanded, including the individual mandate, the state insurance exchanges, and the expansion of Medicaid.
Yet, while many more Americans will be able to obtain health insurance under the law, the new policies present a complex new choice environment for consumers, one that contains new penalties, new subsidies, and a potentially vast number of plans to choose from. Successfully navigating these choices requires consumers to be financially literate.
As recognized in research on related areas of financial decision-making – such as retirement planning, investing, and debt – consumers often lack the understanding, ability and confidence to make financial choices that are in their best interest.
To shed light on consumers’ ability to navigate the ACA, we recently examined the distribution of financial literacy by household income. Our findings were recently posted on the Health Affairs Blog and in a working paper by RAND’s Bing Center for Health Economics.
Continue reading “Why Explaining the Affordable Care Act Turns Out To Be A Lot Harder Than We Thought It Would Be.”
Filed Under: THCB, The Business of Health Care
Tagged: Amelie Wuppermann, behavioral economics, consumer driven health, Economics, Health Insurance Exchanges, Katherine Grace Carman, RAND study, Sebastian Bauhoff, The Affordable Care Act
Oct 1, 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
Risk adjustment is a key mechanism to ensuring appropriate payments for Medicare Advantage plans, Medicare Part D drug plans, and Medicaid health plans. Since health plans vary in their mix of healthy and sick enrollees, risk adjustment modifies premium payments to better reflect the projected costs of members served and compensate plans that enroll high-cost patients.
Historically, risk adjustment was only used in Medicaid and Medicare – in effect, redistributing some revenue from health or drug plans with a relatively healthier mix of members to those plans with a more costly enrollment profile. However, the Affordable Care Act (ACA) extends risk adjustment to the individual and small group health insurance markets starting in 2014.
A new brief from The Synthesis Project tackles the issue and makes several interesting recommendations for how to improve risk adjustment methods for the post-ACA market. Without accurate risk adjustment, health plans have a strong financial incentive to seek out only the healthiest enrollees, especially under ACA-mandated adjusted community rating. Under adjusted community rating, health plans may not vary premiums based on health status or sex and are limited in how much they may vary premiums based on age. Under ACA, the healthy, the young, and men subsidize the health costs of the unhealthy, the older, and women.
Risk adjustment is therefore a necessary factor in stabilizing the dramatically new post-ACA health insurance marketplace, particularly the new Health Insurance Exchanges. Even then, the ACA is a giant game of musical chairs. The market under ACA will be chaotic and challenging, with a mix of winners and losers once the music stops and the dust settles, which will take at least three to five years.
Continue reading “How Health Plan Risk Adjustment Models May Change Under the ACA”
Filed Under: Economics, THCB
Tagged: Economics, Health Insurance Exchanges, Kip Piper, Risk adjustment, Synthesis Project, The Affordable Care Act, Upcoding
Sep 3, 2013
Congress is in recess, but you’d hardly know it. This has been the most do-nothing, gridlocked Congress in decades. But the recess at least offers a pause in the ongoing partisan fighting that’s sure to resume in a few weeks.
It also offers an opportunity to step back and ask ourselves what’s really at stake.
A society — any society —- is defined as a set of mutual benefits and duties embodied most visibly in public institutions: public schools, public libraries, public transportation, public hospitals, public parks, public museums, public recreation, public universities, and so on.
Public institutions are supported by all taxpayers, and are available to all. If the tax system is progressive, those who are better off (and who, presumably, have benefitted from many of these same public institutions) help pay for everyone else.
“Privatize” means “Pay for it yourself.” The practical consequence of this in an economy whose wealth and income are now more concentrated than at any time in the past 90 years is to make high-quality public goods available to fewer and fewer.
In fact, much of what’s called “public” is increasingly a private good paid for by users — ever-higher tolls on public highways and public bridges, higher tuitions at so-called public universities, higher admission fees at public parks and public museums.
Much of the rest of what’s considered “public” has become so shoddy that those who can afford to do so find private alternatives. As public schools deteriorate, the upper-middle class and wealthy send their kids to private ones. As public pools and playgrounds decay, the better-off buy memberships in private tennis and swimming clubs. As public hospitals decline, the well-off pay premium rates for private care.
Continue reading “The Return of the Greater Common Good”
Filed Under: OP-ED, THCB
Tagged: Congress, Economics, Privitization, public institutions, Robert Reich
Aug 27, 2013
After doing Talmudic-like studies of the doctrines on health reform promulgated by Republican health-policy makers and the conservative economists who inspired them during the past two decades, I am devastated to discover that all of those studies have been for naught. We are now told, sometimes by the same prophets of yore, that these doctrines were not only wrong, but outright heretical, which in this context means un-American.
New doctrines are rumored to be in the making, but the first word on them has yet to be committed to new, sacred tablets, mainly because there have not yet emerged any new ideas worth committing to tablets.
Do not take my word for it. Newt Gingrich, one of the Grand Old Party’s aging prophets, said so himself in his recent speech to the Republican National Committee.
Comes now conservative commentator John R. Graham of the Pacific Research Institute, telling us that Republicans seem lost in the desert even in their hit-and-run insurgency against their sworn enemy, the Affordable Care Act of 2010 (ACA).
What is a befuddled immigrant to the United States like me, eagerly trying to become a right thinking American, to make of it all?
My early introduction to the texts coming from conservative thinking on health reform was the Heritage Plan of 1989, Viewed through the prism of the ACA of 2010, its language seems eerily familiar. One provision, for example, proposed a:
“[m]andate all households to obtain adequate insurance. Many states now require passengers in automobiles to wear seatbelts for their own protection. Many others require anybody driving a car to have liability insurance. But neither the federal government nor any state requires all households to protect themselves from the potentially catastrophic costs of a serious accident or illness. Under the Heritage plan, there would be such a requirement” (p.5).
The Heritage Plan also called for income-related, refundable tax credits toward the purchase of private health insurance. Although it did not call for community rated premiums, it proposed means-tested public subsidies and toward high out-of-pocket expenses of individuals and families. It did not spell out the daunting administrative apparatus that would entail. But one can imagine the required new bureaucratic apparatus, replete with auditors to prevent fraud and abuse. Presumably, income-related subsidies would have involved the Internal Revenue Service (IRS) in some ways as well.
Next came a text put forth by conservative economist Mark V. Pauly and like-minded colleagues in Health Affairs. It is worth a reading again. Here’s the core of these prophets’ proposal:
“In our scheme, every person would be required to obtain basic coverage, through either an individual or a family insurance plan. …All basic plans would be required to cover specified health services; plans could, however, offer more generous benefits or supplemental policies. The maximum out-of-pocket expense (stop-loss) permitted would be geared to income, with more complete coverage required for lower-income people, to ensure that no one faced the risk of out-of-pocket expenses that were catastrophic, given their income.” Again, lots of government intrusion into health care, along with links to the IRS.
There then followed a real life health bill based on these ideas, the late Republican John Chafee’s antidote to the emerging Clinton plan. It was called the “Health Equity and Access Reform Today Act of 1993” and had an impressively long list of Republican co-sponsors, among them Senator’s Orrin Hatch (R-Utah) and Charles Grassley (R-Iowa), now fierce opponents of the ACA. As the folks at the Kaiser Family Foundation have shown, many of its provisions of Chafee’s bill have a striking similarity to provisions in the ACA of 2010 and comparing.
Continue reading “Talmudic-Like Studies of Republican Health Reform Ideas”
Filed Under: Economics, OP-ED, THCB
Tagged: Economics, GOP, Health Care Reform, Health Insurance Exchanges, Heritage Foundation, Obamacare, The Affordable Care Act, Uwe Reinhardt
Aug 18, 2013