Month: June 2013

Would We Be Better Off If Employers Stopped Paying for Health Insurance?

Jun 30, 2013• 16

By Uwe Reinhardt

In his “Are Employers to Blame for Our High Medical Prices?,” David Dranove takes issue with my statement in a New York Times blog post:

“One reason for the employers’ passivity in paying health care bills may be that they know, or should know, that the fringe benefits they purchase for their employees ultimately come out of the employees’ total pay package. In a sense, employers behave like pickpockets who take from their employees’ wallets and with the money lifted purchase goodies for their employees.”

He writes:

“The correct economic argument is a bit more nuanced. Employees do not care about the cost of their benefits; they care about the benefits. If an employer can procure the same benefits at a lower cost, the employer need not increase wages one iota. In this regard, there is nothing special about health benefits. Suppose an employer offers employees the use of company cars. Workers don’t care what the employer paid for the cars, and if the employer can purchase cars at a deep discount, it will pocket the savings.”

So far I can buy the nuance. It is something we could theorize about.

But then David he notes that:

“Employers may have an incentive to reduce benefits costs yet they are passive purchasers. With a few exceptions, nearly every American corporation outsources its healthcare benefits to insurers and ASO providers and then looks the other was as the medical bills pile up. Sure, they complain about the high cost of medical care, but they don’t take direct action by aggressively shopping for lower provider prices. Doesn’t this passivity demonstrate a lack of interest? No more so than the fact that auto makers do not aggressively shop the lowest rubber or silica prices implies that they are disinterested in the costs of tires and windows. Auto makers outsource the production of tires and windows (and most other inputs) and let the Michelins and PPGs of the world worry about rubber and silica prices. By the same token, American companies outsource the production of insurance and let the Blues and Uniteds of the world worry about provider prices. This is entirely appropriate.”

Forgive me if by now I am lost. Do we really believe that modern corporations, whose management and board of directors agonize even over an extra penny of earnings per share (EPS) – believe me, I know whereof I speak – simply outsource the procurement of major inputs and then look the other way?

They do seem to do it in health care – which is the puzzle – but they surely do not in connection with other important inputs where smart buying can add pennies to EPS.

Can Hospitals be Sued for Excessive Markups on Medications and Devices?

Jun 30, 2013• 3

By ALEX STEIN

Steven Brill’s TIME MAGAZINE blockbuster article, Bitter Pill: Why Medical Bills are Killing Us, uncovers the CHARGEMASTER: a publicly undisclosed pricelist accountable for what we see in hospital bills. What we see there doesn’t look good: it includes acetaminophen sold for $1.50 a tablet (you can buy 100 of those for the same price at Amazon); $77 for a box of sterile gauze pads (Amazon’s prices vary between $6 and $11); $18 for a single diabetes test strip (sold for 54 cents by Amazon); $108 for antibacterial Bacitracin ointment (Amazon’s prices vary between $2.50 and $6.50); and so forth. Charges for stay, scans, surgeries, canes, and wheelchairs skyrocket as well.

The American Hospital Association (AHA) rejects Brill’s analysis. According to AHA, the chargemaster aggregates the hospital’s overall costs on delivering quality care to patients: “In order to take medications in a hospital, even over-the-counter medicines, they must be prescribed by a doctor (a little bit of cost for the doctor), that order gets transmitted to the pharmacy (a little more cost), the order gets filled by a pharmacist or pharmacy tech who retrieves just one Tylenol pill and individually packages that one pill (still more cost), the pill gets transported from the pharmacy to the nursing unit where the patient resides (a little more cost), then the pill is retrieved by a registered nurse who personally gives the pill to the patient and then must document the administration of that pill in the patient medication administration record (a little more cost). All of this process to give a patient a single dose of Tylenol in a hospital bed [must also be] in compliance with all pertaining regulations (a little more cost).”

This post will not try to resolve the Tylenol Debate. Nor will it say anything about the government as a plausible substitute for the eccentric chargemaster. Instead, I will raise a legal question: Can patients sue hospitals for excessive markups on medications and devices?

My answer to this question is a qualified YES.

Entrepreneurial and business aspects of running a hospital fall under states’ consumer protection laws (Brookins v. Mote, 292 P.3d 347 (Mont. 2012)). Those aspects certainly include billing (Jaramillo v. Morris, 750 P.2d 1301, 1304 (Wash. App. 1988); Ambach v. French, 216 P.3d 405 (Wash. 2009)).

The key question here is whether an excessive markup on medications and devices amounts to deceit or an unfair trade practice. If it does, the hospital would be in violation of the relevant state consumer protection law.

Yes. Employers Really Are to Blame For Our High Medical Prices

Jun 29, 2013• 43

By Uwe Reinhardt

I welcome Leah Binder’s earlier post on this blog, written in response to my blog post in The New York Times. To be thus acknowledged is an honor.

As an economist, I am not trained to respond to Ms. Binder’s deep insights into my psyche, dubious though it may be. Nor, alas, can I delve into hers, fascinating though that might be. Let me therefore concentrate instead just on substance.

First of all, I do not recall calling employers “stupid,” nor did I question their IQ. I do confess to having once called employee benefits managers, when addressing them at some of their usually mournful meetings, “kind-hearted social workers dressed to look like tough Republicans.” At that meeting I contrasted how carefully their company’s tough-minded VP for Procurement, Murgatroid de B. Coverly III, Princeton ’74, purchased paper clips for the company with the much more mellow approach taken by their V.P. of Human Resources to purchase health care for their company’s employees.

Benefit managers – I hate to call them BMs — really are the nicest folks. They care deeply about their employees’ well being (until, of course, the latter lose their job with the company). They worry incessantly about their company’s ever rising outlays for health insurance. And, after a cocktail or two, they regularly lament how rarely they get the attention of top management and of the board of directors – the very folks I once told to go look into a mirror in their search for the culprit behind rising health care costs.

No, when I say “employers” I really mean top management and boards of directors who make the rules. And I did not even call those mighty ones stupid, but merely “passive payers” as did, by the way, David Dranove on this blog in his critical response to my New York Times piece. Why these usually tough and smart people have behaved so passively in buying health care for themselves and their employees remains a puzzle at the level of economic theory.

Three Reasons Uwe Reinhardt Blames Purchasers for Everything

Jun 28, 2013• 39

By Leah Binder

Uwe Reinhardt is one of the nation’s most respected health care economists, professor at the prestigious Woodrow Wilson School at Princeton, fellow of the Institute of Medicine, and one of the shining lights in health policymaking circles.

But alas, even the best and the brightest are wrong sometimes. Case in point: Reinhardt’s recent comments in the New York Times on the role of the American business community in fueling our nation’s health care problems. To paraphrase, Reinhardt believes that employer purchasers of health care are 1) dim bulbs and 2) responsible for the escalating costs of care.

This seemed puzzling coming from Reinhardt, whose views are widely respected by purchasers. But I was able to diagnose the problem by drawing on insights from social psychology.

Social psychology investigates “attribution,” our mind’s process for inferring the causes of events or behaviors. It’s how we describe why things happen — to us or to someone else. It turns out, we humans aren’t very accurate in our attribution processes because all of us suffer from at least one of the following problems. In his New York Times piece, poor Professor Reinhardt appears afflicted by all three at the same time. Let’s take a closer look at each:

1. Actor-Observer Bias: This is the notion that when it comes to explaining our own behavior, we tend to blame external forces more often than our own personal characteristics.

Reinhardt is rightfully troubled by a decade of escalating health care cost growth under employment-based health insurance. But seized by Actor-Observer Bias, Reinhardt blames this problem not on the world of health care that he played such an influential role in over the past few decades, but on external forces, the employers who purchase health care.

Getting Back to Normal

Jun 28, 2013• 9

By Allen Frances, MD

We have become a pill popping society. It makes absolutely no sense that twenty percent of our population regularly uses a psychotropic medicine and that the United States has more deaths each year from overdose with prescription drugs than from street drugs.

The causes of excessive medication use are numerous- the diagnostic system is too loose; some doctors are trigger happy in their prescribing habits; the drug companies have sold a misleading bill of goods that all life’s problems are mental disorders requiring a pill solution; and the insurance companies make the mistake of encouraging quick diagnosis on the first visit.

My purpose here is to advise individuals on how best to deal with the risks of overdiagnosis and overtreatment.

E lsewhere I have suggested the things government needs to do. A diagnosis, if accurate, can be the turning point to a much better life. A diagnosis, if inaccurate, can haunt you (perhaps for life) with unnecessary treatments and stigma.

Spend at least as much effort ensuring you have the right diagnosis as you would in buying a house. Become a fully informed consumer, ask lots of questions, and expect clear and convincing answers from any clinician who offers a diagnosis and recommends a treatment. If the diagnosis doesn’t seem to fit, get second or third opinions.

Never accept medication after receiving only a brief diagnostic evaluation, especially if it has been done by a primary care physician who may not be expert in psychiatry and may be too influenced by drug salesmen.

Don’t believe drug company advertisements that end with, ‘Ask your doctor.’ Drug companies profit if they can convince you that you have a psychiatric disorder and need medication. They portray the expectable problems of everyday life as mental illnesses due to a chemical imbalance because this sells pills and makes money- not to help you.

Bending the Cost Curve with Reference Pricing

Jun 27, 2013• 12

By Mike Miesen

Mitt Romney’s/Paul Ryan’s premium support/voucher plan was heavily derided during the dark days of Campaign 2012, but the devil was always more in the details than the theory. While the re-election of President Obama left premium support dead on the Medicare level, health insurers are increasingly turning to the ideas that drove it – choice, competition, and the power of a (carefully regulated) market – to address high costs on the procedural level. Call it the micro-voucherization of health insurance.

This is known by wonks as reference pricing, and its recent results in California are promising: the costs of hip and knee replacements fell by 19%, with no attendant decrease in quality. Using reference pricing is an assault on the status quo that holds the promise of “bending the curve” in a meaningful way, but it faces technical and political concerns that may consign it to the graveyard of promising-but-unfulfilled ideas.

Broadly-speaking, reference pricing is the act of offering a set amount of money for the purchase of a good, where the reference is an amount that can reasonably said to offer meaningful coverage for that good. Sometimes, reference pricing is focused on a given procedure – what I’ll refer to as “inputs-oriented reference pricing”; other times, a given outcome, or “outputs-based reference pricing.”

That’s pretty vague, so let’s use the colonoscopy procedure (which has recently received a lot of attention thanks to an informative New York Times article) to help color this in. The inputs-oriented approach would see the payer asking: given the choice to have a colonoscopy – a procedure which varies wildly in cost without varying wildly in quality – what’s a reasonable price to pay? It would decide this based on some combination of price, quality, and geography, and would inform consumers of its spending cap.

Say it finds that most of its insured population can reasonably access a high-quality colonoscopy for $10,000; if a consumer choose provider that charges $15,000, he or she would pay the $5,000 difference out of pocket. Choice is preserved, but at a cost. The simple chart above shows how this may work.

But, if you read the colonoscopy article, you may be asking a separate question: why pay for a colonoscopy at all?

Obesity and the AMA

Jun 27, 2013• 25

By Vik Khanna

Last week’s announcement by the American Medical Association’s (AMA’s) council on science and public health cheered me. It said that the AMA should not designate obesity a disease, because doing so was unlikely to improve health outcomes and because the most widely utilized obesity metric — the body mass index or BMI — was simplistic and flawed. It’s a reasonable and principled stance, which should have been the first clue that it was doomed.

The AMA’s board and delegates proceeded to snatch defeat from the jaws of victory by ignoring their own scientific council and labeling obesity as a disease. To be clear, the decision is almost purely symbolic; it has no legal force or authority, but it does up the ante in the debate with insurers and employers over what care elements should be covered and reimbursed. In other words, this is about money. Obesity: the new ATM for the health care system.

I’m just curious about where physicians have been for the past, oh, thirty years. Since 1980, as Americans have morphed into the fattest culture in the history of Western civilization, physician supply per 100,000 population has increased about 50%. Per capita medical care spending has increased from roughly $1,100 to over $8,400. 1980 was also the last time that roughly half of US adults were normal weight. Now, only about a quarter of American adults have a normal BMI.

Were US physicians blindfolded as they encountered patients growing incrementally larger with each visit? Were they keeping their mouths shut about the obvious — gee, I really think you should get out for some walking and limit the snacks — because they were awaiting a chance to make more creative use of ICD and CPT codes?

How Patients Can Assess the Quality of Their Outpatient Care

Jun 27, 2013• 6

By Leslie Kernisan, MD

Even before I launched my geriatric consultation practice, I found myself often pouring over another doctor’s outpatient notes, trying to explain to a patient what the other doctor was doing.

Sometimes these other doctors were specialists to whom I’d referred the patient. But often they were simply clinicians – either previous PCPs or currently involved specialists — whose involvement with the patient predated my own.

Not every patient had questions and concerns about what their other healthcare providers were saying, and doing, but a fair number of them did. And family caregivers, in particular, were often concerned that perhaps their older loved one hadn’t been getting the “right” medical care.

These are, in truth, legitimate concerns patients have. In a busy outpatient setting, doctors often don’t have the time to explain the assessment and plan to a patient and family. And in many cases, the care that clinicians provide may not correspond to best practice guidelines – if applicable to the situation – or to the patient’s preferences and values.

So if you are a concerned patient or family member, and you’re not entirely sure about the medical care you’re getting, what to do?

Should you:

Look up the provider’s quality ratings online, through a government, non-profit, or other website?
Figure that the ACO or payer is on top of it, now that we are moving to pay-for-quality and fee-for-value?
See what other patients have said about the provider’s care?
See how many doctors are referring to the provider in question, and assume that if many doctors refer to this clinician, the clinician must be good?
Look up your medical problems online, and try to determine for yourself whether you’d been getting the right medical care?
Get a second opinion from another doctor?

My guess is that most patients and families end up trying one – or both – of the last options. In this post, I’ll explain why I’ve come to believe that facilitating second opinions is integral to empowering patients, and to improving the quality of outpatient care.

Why seek a second opinion

I don’t know about you, but when I’ve found myself trying to solve a problem in which I lacked adequate expertise, I’ve turned to a professional for help. (I haven’t had to do this for medical reasons in the past decade, but have done it for issues such as home renovation and website design.)

And in many cases, after meeting with an expert for a while, I’ve then turned to yet another expert to get an additional perspective on the issue at hand.

Hacking HIPAA

Jun 26, 2013• 2

By David Harlow

Join me in attacking an endemic problem in health care today by Hacking HIPAA. I am crowdfunding the development of a new legal form to be used on and after September 23, 2013 to allow patients to opt-in to easier health care communications – a Common Notice of Privacy Practices that is patient-focused. (Text me, please! Email me, please! etc.)

Depending on how much support this project garners, we can attack some related problems as well. Contributions at any level are welcome; contributions at the levels designated on the Hacking HIPAA Medstartr page get you a seat at the virtual table, voicing your concerns that need to be met in the CNPP and in follow-on projects.

I’m working on this project with two leading health care open source software developers, Ian Eslick and Fred Trotter. Check out Fred’s video intro to the project on the Medstartr page – you can find Ian and Fred online via the links on the project page, too.

Here’s an excerpt from the crowdfunding project page:

The Problem

Right now we have the worst of all worlds with regards to patient privacy in healthcare. Patients are frequently subject to sub-standard security and privacy practices AND healthcare innovators are unable to deliver solutions that would be useful to patients because their technical approaches are uncomfortably novel for health care bureaucrats. Patients end up getting poor security and no innovation, the worst of all options. This problem is going to get worse before it gets better, since the new Omnibus HIPAA Rule will make cloud hosting of health care projects untenable very soon.

Continue reading…

Malpractice Claims Feel Endless Because…They Are.

Jun 26, 2013• 30

By Peter Ubel, MD

I am very fortunate to have never been sued. That is not necessarily because of my amazing ability as a physician. I always practiced in Veterans Affairs medical centers, where my status as a federal employee meant I would not get sued by my patients. I also had an incredibly appreciative patient population.

But I know that most of my physician peers have been sued, successfully or unsuccessfully, at least once in their careers. And I know that these lawsuits take an emotional toll upon them. To make matters worse, malpractice lawsuits have a nagging tendency to drag themselves out for months upon months. Consider this figure, from a study led by an economist at the RAND Corporation. It shows that malpractice claims related to temporary injuries take a median of a year to resolve, while those dealing with fatalities or permanent injuries take a median of 18 months.