Cost, Choice, and Value

Jacobi_john_lg1 The Massachusetts Massacre has everyone stepping back a bit. The President says that we should “coalesce around those elements of the package that people agree on,” but it is unclear just which elements those might be, given the extreme polarization that has defined the debate. He suggests that points of agreement might center on insurance reform and cost containment, which are both important goals. I’m skeptical that a sudden flowering of bipartisanship will allow such agreement, however. Ezra Klein, on the other hand, has a paring proposal that goes in another direction, and reminds us of why we got into this in the first place: to extend coverage to the uninsured. If we must narrow our focus, Klein says we should extend Medicare to those over 50, and expand Medicaid to those under 200% of poverty. This would get lots of people insured, and could well be accomplished through budget reconciliation if no Congressional coalescing is to be had.

However the parsing, paring, and palavering goes, cost control is and will be at or near the health reform debate for years to come. Two recent articles are worth a look for those interested in analysis of cost-containment strategies.

In his health care speech to Congress, the President suggested that one component of an effort to lower health care costs should be to empower a commission of “doctors and medical experts” to identify and,

encourage the adoption of . . . common-sense best practices by doctors and medical professionals throughout the system. Wrapped up in that suggestion are notions of adhering to expert guidance in treatment decisions.

The stimulus bill passed in February pushed for scientific assessment of modes of care, providing $1.1 billion for comparative effectiveness research. The current reform bills further emphasize CER, and would encourage the adoption of proven and promising treatments through professional education and some payment reform. Harvard Medical School professor Jerome Groopman writes on evidence-based medicine in the latest New York Review of Books. In his 2007 book, How Doctors Think, Groopman did a great job of explaining the complex and fraught process by which doctors make decisions, and he is fully on board with the notion that there is ample room for improvement. His new article, however, cautions that the use of panels of experts with authority to impose or even recommend best practices is a dangerous way to go.

Groopman acknowledges the need for health policy folks to consider the bounded rationality of both doctor and patient. He examines the Obama Administration’s policies on evidence-based practice by contrasting the views of two key advisors: Cass Sunstein, whose view of “libertarian paternalism” incline him to favor gentle “nudges” that may encourage certain behavior while leaving people free to reject the advice if they wish, and Peter Orszag, who is more inclined to employ forceful regulatory standards and financial incentives to achieve cost effective medical practice. Groopman is compellingly skeptical of expert claims of definitive standards on what “works” in health care, and cautions that such standards can result in harm to patients who fit uncomfortably into the hard categories defined in such best practices.

Groopman’s analysis seems incomplete for two closely intertwined reasons, and surely as a result of space constraints. First, he suggests that the administration is faced with a stark choice between

aggressively pushing doctors and patients to do what the government defines as best, or [being] respectful of their own autonomy in making decisions.

Surely there is much middle ground between tying doctors’ hands and respecting complete clinical independence. And it is not enough to say, as does Groopman, that

Most physicians seek data and views on treatments from peers and, as needed, specialists, and then present information and opinion to patients who ultimately decide.

Maybe so, but physicians are sometimes self-interested, and patients’ choices are sometimes influenced by advertisements or other considerations disconnected from quality concerns. For these and other reasons, spending decisions are no longer consigned to the doctor/patient dyad, but increasingly must accommodate the cost-containment interests of third party payers — government, employers, or insurers.

Second, Groopman describes two exclusive categories of procedures: “mechanical procedures” such as the insertion an intravenous catheter (where he argues that enforcing standards to avoid infections is proper) and all other procedures, where the individual patient’s condition becomes relevant, and where he argues that coercing clinical choices is out of bounds. It is not obvious that the universe of procedures is so divisible; it is even less clear that the dividing line between the two categories is uncontroversial.

Many questions remain. Groopman is surely right that we must be cautious in enforcing categorical “best practices;” it is important to create public processes for vetting their accuracy and usefulness. He is also surely right that public and private health finance rules must accommodate variation in medical needs, and must bend readily when a “best practice” is not suitable for a particular case. But cost is relevant, and encouraging efficient practice can reduce the cost (and therefore the extent) of coverage.

So, how might a balance between financial constraints and patient protection work? In a Health Affairs article posted yesterday, Michael Chernew and coauthors examine the growing phenomenon of “value-based insurance” — a structuring of insurance co-payments responsive to the needs of people with chronic illness. The co-payments imposed by insurers are, of course, intended to reduce demand for health care services (an Orszag, not a Sunstein tool, you might say). Value based insurance reduces or eliminates these co-payments for services of “high clinical value.” That is, if an insurer determines that it would rather not discourage utilization for a particular service, it reduces or removes the patient cost-sharing, presumably increasing usage, for cost as well as clinical reasons. As the authors explain,

The belief that a value-based insurance program will lower health care spending rests on the recognition that the use of high-value health care services reduces the probability of adverse events related to chronic disease and that on a population basis, these events are much more costly than the services aimed at preventing them.

The authors found some evidence that such programs are cost effective, even in the narrow sense of reducing a plan’s health care expenditures. They suggest that widening the economic lens to consider broader societal goals would only strengthen those conclusions.

The article acknowledges the reality of economic coercion in the clinical setting, and measures attempts to shape the tools of cost containment in a way that protects patients while maintaining cost containment. One doesn’t have to accept the general wisdom of patient cost-sharing to value attempts to protect patients from untoward effects of its use.

The need to obtain “value” for health care spending and to take steps to restrain health inflation will persist however we come out of the current reform debate. The discussion will benefit from both the erudite analysis of Groopman and others warning us away from answers that are too easy, and that of Chernew and others who can shine a light on the efficacy of particular cost containing measures.

Professor John Jacobi’s work is primarily in the areas of Health Insurance and Access, Mental Health Law, and Disability Law. He is a regular contributor to Health Reform Watch.

Professor Jacobi received B.A., summa cum laude, from the State University College of New York at Buffalo and his J.D., magna cum laude, from Harvard Law School. He teaches Health Law, Health Finance, Disability Law, Public Health Law, Mental Health Law, and Torts. Professor Jacobi spent five years working for the New Jersey Department of the Public Advocate as Special Assistant to the Commissioner, where he worked on health, civil rights, and disability issues through litigation and advocacy in legislatures and regulatory agencies. He then became a Gibbons Fellow at the law firm of Gibbons, Del Deo, Dolan, Griffinger & Vecchione, where he pursued health, prisoners’ rights, and disability issues. During 2007-2008 he was on leave from the law school, serving as Senior Associate Counsel to N.J. Governor Jon S. Corzine on Health, Human Services, and Chrildren’s Issues.

Professor Jacobi writes and speaks on issues including disability rights, health access and finance, public health, and mental health. His recent and current scholarly projects include examining the improvemen tof chronic care in health systems, the funding and structure of Early Intervention Services for children with disabilities, examining the obligations of government to provide services to people with serious mental illness, the clash of disability rights and public health interests, and the prospects and social effects of “consumer-driven” health insurance models on health costs and rights of access for the poor and people with disabilities. He served on the Governor’s Task Force on Mental Health, the Board of Advisors of the New Jersey Office of Child Advocacy, the New Jersey Olmstead Advisory Council on disability rights, and on other government and non-profit boards and committees. He is Associate Director of the Seton Hall Health Law & Policy Program, and the Seton Hall Institute of Law & Mental Health.

7 replies »

  1. Health is very much valuable thing for us. It is a god gifted wealth. If our health is well then all is well. So we should be aware about our health. And we should know also about the cost of health care.

  2. I notice that ChristinewithRegence is BlueCross/BlueShield – yes the one(s) that opposed cost control in the bill but only wanted taxpayer subsidies for insurance. What’s your year end bonus Christine? Got one of those tax free “cadillac health plans” as well? Here is NC BCBS spent lots of money against the bill – odd for a so called “non-profit”.

  3. Health care is an irrational commodity. This is why the most recent effort failed. It is why the flap over mammograms occurred, it is why everyone screams about costs as long as controlling them doesn’t affect the care they receive right or wrong. Make me well, nothing else matters. That is why solving the health care problem is an insolvable problem in the US. I administered health benefits for a group of 40,000 people for fort eight years and inbthat time you get a good sense of the individual perspective.

  4. In all the talk about health care reform, I don’t feel like there’s enough discussion about understanding the real costs of health care. Why don’t we ever know the costs of health care procedures and treatments? I got a kick out of this fun, short video. Check it out. It makes you wonder why our health care system is set up the way it is.

  5. “>Most physicians seek data and views on treatments from peers and, as needed, specialists, and then present information and opinion to patients who ultimately decide.<
    Maybe so, but physicians are sometimes self-interested, and patients’ choices are sometimes influenced by advertisements or other considerations disconnected from quality concerns."
    Correct. And it is hard to believe that Groopman does not know that a lot of "peers" and "specialists" are simply bought by the pharm. industry (by paying them for lectures/"speaker's bureau". Maybe that passage is quoted out of context, but it is either so naive or so deceptive that I don't feel like reading anything else by Dr. Gropman.

  6. Chernew has my money for one of the most engaging and interesting minds today in health care economics research. Cuts through the partisan-motivated research that you are so often likley to see at a CATO or other places and gets down to it using data from research from interesting marketplace programs & examples. Too bad the academic literature process basically creates a gap of at least 9-12 months from initial submission to final publication.