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John Irvine

Legislative Pressures

As financial pressures impinge the health care system, the various players sometimes seek legislation to protect their interests.  I have heard of two such situations in Massachusetts, and I offer them for your consideration and your comments.

The first involves emergency ambulance service.  Earlier this year, several of the major insurers in the state stopped reimbursing out-of-network ambulance providers, and instead started to send the checks to patients who used those ambulances. Those ambulance companies now have to try to collect from people for payments, and they are losing hundreds of thousands of dollars.

(This only relates to emergency calls, not routine transfers. For routine transfers, ambulance providers already agreed to be reimbursed at agreed-upon rates with insurers and municipalities.)

I can understand why the insurers want to use lower cost ambulance services, but I have trouble imagining a more cruel thing than approaching a patient or a patient’s family after an emergency situation (which perhaps led to long-lasting disability or death) to collect funds that the insurers have sent to the family.  It is also inherently inefficient and adds costs if the ambulance companies have to try collect funds from hundreds of individual patients rather than the few insurance companies.

Rep. Jim Cantwell of Marshfield has filed a bill to force insurers to pay EMS providers, and it has a cost-control provision that would give ultimate rate-setting power to local selectmen.  The Fire Chiefs Association, Massachusetts Municipal Association and Massachusetts Hospital Association support this bill.  This sounds like one that, in legislative parlance, “ought to pass.”

Then there is a proposal that comes out of the growth of tiered networks, in which insurers charge higher co-pays or otherwise limit coverage to patients who choose higher cost providers.  Well, it turns out that some of those high-cost providers are seeking legislation that would require insurers to include them in the low-cost tier of the network.  The two fields at play are pediatrics and cancer care.  The providers’ argument is that they offer essential services not available at other providers, or that they offer similar services but at higher quality.Continue reading…

The Wyden-Ryan Plan

House Budget Chair Paul Ryan (R-WI) and Senator Ron Wyden (D-OR) have embraced a Medicare reform plan that in concept borrows heavily from one championed by former New Mexico Senator Pete Domenici and former Clinton budget chief Alice Rivlin.

Specifically, Wyden and Ryan are proposing to alter the earlier Ryan Medicare plan by:

  1. Continuing to offer the traditional Medicare plan—Ryan would have eliminated it—in addition to a range of private Medicare plans offered by health insurers.
  2. Tying federal Medicare premium support to an amount equal to the second lowest cost Medicare plan—public or private—available to seniors in each market. Ryan would have set a flat premium support amount in year-one and increased that only at the rate of inflation.
  3. Instituting a series of consumer protections and medical underwriting rules designed to protect seniors.
  4. Instituting an annual cap on what the federal government could pay for Medicare at an amount equal to the increase in the nation’s GDP + 1%—Ryan would have capped annual increases in the federal premium support amount at the increase in the consumer price index.

On this blog I have been arguing that the risk for health care costs rising too quickly should not be borne entirely by seniors–that the stakeholders who really run the system should be most accountable. And, that is what the Wyden-Ryan plan would do: “Any increase over that cap will be reflected in reduced support for the sectors most responsible for cost growth, including providers, drug companies, and means-tested premiums,” their plan states.
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Obituary: RIP to the EHR

I just received another email from another EHR Vendor pandering to physicians to implement their technology so that the physician so they can access some usability incentive to use technology that they should already be using. Here is the offending language:

State Medicaid providers across the country have an unprecedented opportunity to collect over $21,000 in EHR incentives in the last few weeks of 2011. If you’re already using Xxxxxxxx Xxxxxx, there are a few easy steps you can take to earn your incentive.

This is just so wrong on so many levels to me. First, I find it completely incongruous that we have to incent physicians to use a simple tool that is designed to make their life easier, their practice more efficient, and their care more effective. I can’t recall, but I didn’t see the need to incent the stethoscope, antibiotics, or any other health innovations.

Second, the offer itself is just dripping with the grease and slime of “taking” something “while the getting is good”. Does anyone care that this “stimulus” money is subject to the grossest abuses? That it will be misapplied? That most of it is being doled out to people who have already implemented these technologies and now are getting a little gloss on top? Does anyone care that our country is broke and this is just another program that is unsustainable, unnecessary, and incapable of producing its intended results. Is there any evidence that this is having an impact?Continue reading…

What Really Needs to be Done About the Critical Shortage of Cancer Drugs

Hospitals nationwide are experiencing shortages of critical generic intravenous drugs. We believe a fundamental reason for this national shortage is government price controls. With these limits there is little incentive to invest in new facilities and technologies, leading to equipment failures. Manufacturers have little economic incentive to prepare proactively for the quality assurance issues that routinely arise in the manufacturing of a sterile injectable compound. To reincentivize this process, the market needs to be free. spurring more manufacturers to produce these drugs, encourage reinvestment in facilities and the stockpiling of reserves.

The drugs in shortest supply include those used in critical care units such as norepinephrine for shock, antibiotics for infections, and cancer chemotherapy. Almost all are generics and manufactured by a just few companies. Among the oncology drugs in short supply are cytarabine and leukovorin. Cytarabine is the best single drug for acute myeloid leukemia. Leukovorin is used in childhood acute lymphoblastic leukemia.

These are older “off patent” drugs. As generics, they are far less expensive that newer drugs. They have stood the test of time, are still used extensively and are necessary for optimal patient care. Individual patients need exactly the right drugs on precisely the right schedule – no substitutes; now, not later. As pointed out in Congressional testimony and a Wall Street Journal editorial, these shortages are having a major negative impact for ongoing clinical trials designed to improve cancer treatment results. Another critically needed cancer drug is Doxil, a drug used for the treatment of many cancers. It is sold by Johnson and Johnson (J&J) and until recently it had been manufactured on contract for J&J by Ben Venue Laboratories. Unfortunately, Ben Venue is exiting the contract drug business. Thus, Doxil is not currently available. Prior to 2003, Medicare paid for cancer chemotherapy injectables based on the average wholesale price. But with no transparency, some distributors or physicians could reap huge profits. To combat this and with the best of intentions, a new system was developed as part of the Medicare Modernization Act of 2003, based instead on the average selling price updated quarterly.

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Can We Design a Heart Healthy Home?

There is increasing evidence that the quality of our homes and cities is a critical determinant of cardiovascular disease, diabetes and lung conditions. As urbanization and economic change occur globally, whether we live in a house free of dust in a city with open parks and traffic regulations, or in a dusty tenement building next to a major road, seems critically correlated with our likelihood for having shortened life expectancy, poor nutrition, heart disease and lung problems. In this week’s blog post, we look at some of the mechanisms relating the “built environment”—our human-made surroundings of daily living—to the risk of illness. We ask the question: can we do for our hearts and lungs what the Bauhaus movement did for functional design?

Indoor air quality

If Dwell Magazine had a feature edition on designing a healthy home, they’d have to tackle the major issue of indoor air quality. Much research on the built environment’s impact on health was revealed through a series of studies on asthma among children living in low-income public housing units in the United States. Poor indoor air quality resulting from dust and dirt in public housing units was a major cause of emergency room visits during the 1980’s and 90’s among these children, leading to new programs for housing quality checks and maintenance, which we featured in a previous post.Continue reading…

A Litmus Test For Elected Officials

Six months ago, who could have imagined that a large percentage of rank-and-file Americans would support the Occupy Wall Street (OWS) against special interests’ rigging of the American dream? So why not go to the next step? Why not pointedly ask political candidates, “Will you take money from lobbyists?” and “If elected, what will you do to stop special interest influence?”

Most Americans are deeply disturbed by this issue. In a recent Time Magazine poll of people familiar with the OWS protests, 86 percent thought that “Wall Street and its lobbyists have too much influence in Washington.” Gallup found that 68 percent of Americans think corporations should have less political influence.

These trends didn’t just happen. They resulted from special interests’ vigilant attention to legislative possibility, lubricated by the exchange of money for votes. Influence peddling is now so accepted in American politics that the Center for Responsive Politics (CRP) has established a lobbying data base, Open Secrets. But making lobbying contributions transparent hasn’t slowed the torrent of money that re-shapes law and wealth distribution.

Since 1952, the percentage of gross domestic product (GDP) represented by corporate taxes has plummeted from 6.1 to 1.0 percent, while the percentage represented by employment taxes has skyrocketed from 1.8 to 6.3 percent. Meanwhile, a just released Congressional Budget Office study confirmed that the top 1 percent of earners more than doubled their share of the nation’s after tax income over the last 30 years.Continue reading…

The Constitution Is Not a Turkey

I think the world of Jon Gruber, the MIT economist who helped design both the Massachusetts Health Plan and the Health Insurance Exchange provisions of President Obama’s Affordable Care Act. So I was more than a bit dismayed to read this quote from Jon: “I’m frustrated that the future of the American health care system rests in the hands of one or two of these unelected people who might make the decision based on political grounds.” The “unelected people” that Jon is referring to are justices of the Supreme Court. Jon almost seems surprised that the Supreme Court has a say in the matter.

The Health Insurance Exchange is an idea that economists have floated for more than three decades and thanks to his hard work, that idea has become a reality in Massachusetts and perhaps the rest of the nation, provided that the Supreme Court doesn’t block this fine bit of economics. Unfortunately for supporters of the exchange (including myself) the health insurance purchase mandate – an essential element of any economically viable exchange – might be unconstitutional. God forbid that the U.S. Constitution might interfere with beautiful economic theories.

There is a solution. I am almost too modest to say it but I proposed this idea in my book Code Red long before Barack Obama put his hand on the bible to be sworn in as Regulator-in-Chief. The beauty of the solution is that it respects, nay, was inspired by Jon’s work in Massachusetts, and is constitutional to boot! The solution is in its own way conservative, because it does not mandate a single approach to health reform. Congress should have given each state a block grant conditional on expanding health insurance coverage. The states could have chosen how to proceed. The U.S. Constitution might prohibit a federal mandate to purchase insurance, but it says nothing about what the states may do.

Some states might have chosen to adopt their own versions of the Massachusetts Health Plan. A few states may have centralized insurance, creating their own versions of single payer systems. Others may have given individuals vouchers and encouraged the growth of private insurance exchanges. This would be the closest to a free market solution, keeping the government out of it, except as a vehicle for transferring wealth. Perhaps all of these ideas would have been better than the status quo. Perhaps states could have learned from each other. Even Jon Gruber might have learned something new! Through this experimentation, we could have rapidly expanded health insurance coverage and also put lots of theories to the test. I still think this is a terrific idea. But in 2009 when politicians and economists huddled together to write the Affordable Care Act, no one invited me to the party. Alas. Continue reading…


Earlier this month, Chicago Mayor Rahm Emanuel talked about the innovative ways his administration is using health IT to fight rising healthcare costs. In his address, Emanuel announced that Merge Healthcare will donate 100 health kiosks to the city of Chicago. The kiosks are internet-connected health stations where consumers can check their vitals, including weight, BMI, blood pressure and heart rate for free.

The Michael Jackson Verdict

It has been over two years and the tragedy of Michael Jackson’s death has finally been laid to rest. The verdict of accidental manslaughter highlights how dangerous medications of any kind can be. A couple of years ago I wrote about the events surrounding Michael Jackson’s death and tried to look at why Dr. Conrad Murray was being tried for manslaughter rather than some other charge like murder. I also took a look at what happened and how.

Now that the verdict is in, it looks like Dylan Schaffer was right and the verdict does match what we knew publicly. There are a great many lessons that can be learned from the whole saga, but the biggest one is that people really need to try to understand what the medications prescribed for them do, why they should and should not take them and most importantly, really know what the right dosages are. And please do not be fooled by the fact that the drug in question is a rare and powerful one that requires prescription and careful administration.

It is all too easy to die from taking simple over the counter medications in the wrong amounts and at the wrong time. And mixing and matching medications and other substances makes things worse. Probably the easiest way to get yourself in trouble with medications is something like getting a headache and the flu, taking a heavy dose of paracetamol, then a couple of stiff drinks and a big slug of something like Nyquil. Suddenly you are getting awfully close to liver damage or death.

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How Much Is a Life Worth?

This blog continues my ongoing series of “mysteries of health economics.”

The mystery this week is “what is a life worth?” We cannot ignore this question because it seems unthinkable. As will discuss, coverage decisions by public and private insurers depend on the answer. Some payers are rather explicit about they think a life is worth.

Before I try to solve this mystery, let me acknowledge that we should not spend money on health services that are of zero value (or worse.) But what about expensive health services that might prove to be of some value? How much should we spend on these?

Let us accept the reality of insurance. When we “purchase” health care, someone else foots the bill. Perhaps insurance should contain big deductibles, but even big deductibles are quickly exhausted if we need surgery or have a chronic health problem. If we are pooling our resources to pay for medical care, then we will probably want to reach some sort of collective decision about what drugs and treatments we will pay for. The alternatives would be to invite massive moral hazard. (Let me repeat for those who bang the drum loudly for big deductibles – deductibles are quickly exhausted when serious illness strikes and moral hazard again rears its ugly head.)

Now imagine a new cancer drug that offers a small prospect of survival to patients who have no other choices. Suppose that on average, patients who receive this drug can expect to live about another three months and that there are no downsides to this drug. If the drug company offered to give the drug away for free we would surely want patients to have access to it. If the drug company asked $100 million a dose, we would probably agree to spend the money elsewhere.

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