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Matthew Holt

Medicaid–a bleak picture gets bleaker

It’s remarkable how badly most health care observers understand Medicaid. But once you understand Medicaid, it’s less remarkable, because it’s so darned complicated! Many people think that Medicaid covers the poor and uninsured.  In fact it covers some sub-segments of the poor, but most of the working poor are not covered, and access to Medicaid has become more difficult for those who have been moved off the welfare rolls in the  late 1990s. Nonetheless, the Kaiser FF Commission on Medicaid & the Uninsured reported this week that costs have gone up but benefits have gone down, mostly because of the fall off in revenues at the state level.  And this will get worse — we’ve noticed that particularly out here in California where the recent budget deal included a further 5% cut in rates to Medi-Cal providers which has caused anguish on the political left.

In the last 15 years Medicaid has been responsible for taking on many millions of poorer Americans who would otherwise have had no coverage.  So without Medicaid expansion in the 1990s uninsurance rates would be much higher today, mostly because of the fall-off in employer-provided insurance (see this post).  This expansion of the Medicaid rolls was mostly among the AFDC population (poor moms with kids) in the early 1990s and mostly children only in the late 1990s, as part of the SCHIP expansion of health insurance for kids.  It’s hard to work out how many people are on Medicaid because the numbers go up and down all the time, and there is double counting with Medicare.  When I was researching this in the late 1990s, my estimate was that roughly 10% of the population (28-30 million people) were using Medicaid as their primary insurer. (the disabled and elderly tend to end up in the Medicare numbers). That number held steady until the year 2000, but now some 35 million adults and kids are in Medicaid.  Most of this growth has come from the kids insurance programs created by SCHIP, but the number of adults in the program has also been growing at 10% annually.  These are adults who have been crammed back down into welfare-type poverty levels in the current recession, even though they may not be on welfare itself.

Medicaid also covers many of the disabled and seniors in nursing homes who have "spent down"–i.e. have no money left. Medicaid also pays into Medicare to cover part B premiums and drugs for a group called the "dual-eligibles".  In fact the fate of the dual-eligibles is one of the many wrinkles that’s holding up the Medicare bill in Congress now. There are about 4 million elderly and 7 million disabled getting benefits from Medicaid, although most of these are also in Medicare.

The final wrinkle in Medicaid is the disproportionate share (DSH–pronounced "DiSH") payments that go to hospitals with a high proportion of uncompensated care and/or Medicaid patients.  These are usually big inner city teaching hospitals or county hospitals, and this is one of a number of subsidies they get–direct support from Medicare for training residents is another. DSH is evidence of the political clout of these big facilities, and of the fact that it’s hard for Medicaid recipients and the uninsured to get care at other facilities.

The costs of the program, while rising for all, are mostly spent on the elderly ($61 bn) and the disabled ($84 bn). The kids are a bargain at $36bn and the adults are only $25 billion.  DHS payments were about $15 billion in 2002 . Altogether, this leaves a Medicaid program which in 2002 spent over $200 billion for the first time.  (Medicare is $254 bn).

Reforming Medicaid is a nightmare and always has been. No-one understands it, the states use it as a way to extract money from the Feds, and the covered population is transient, hard to manage, doesn’t vote and so has little political clout. For national scale providers and pharma companies there are 50 different programs to deal with.  Under any rational system the care for the elderly and disabled would be split off, and the moms and kids would be added to some kind of universal insurance scheme.  Well that’s not going to happen any time soon. With the Medicare bill stuck in Congress, no comprehensive Medicaid reform will happen this side of 2005. So expect more pain in the provider world and much more experimentation in the purchasing world, including expanding the power of the state to extract discounts like MaineRX, as the states try to get a handle on spending.

Cronkite sued: A view into the underbelly of drug marketing

The headline says Drug ads row snares Cronkite.  Walter Cronkite remains the most trusted source of news among senior Americans.  According to his version of events, he thought that he had signed a contract to make educational programs about new treatments, and later found out via the New York Times that the company he’d signed up for made promotional infomercials,  sponsored by drug companies. So Cronkite is being sued by the marketing company for pulling out.

However, this isn’t the first controversy about what’s educational promotion and what’s hucksterism.  Several articles like this one and this one examine celebrities not revealing that they are being paid to promote drugs in medical segments on shows like The Early Show, 48 Hours and CNN. Some networks actually produced a code of practice about this last year.

Of course there are similar controversies about the way that pharmaceutical companies promote to physicians. A Harris poll earlier this year showed that this isn’t  a big concern for too many patients yet, although 55% believe that drug company marketing to doctors is either "a little" or "much" "too aggressive." What is clear is that the very sophisticated and not always transparent ways that pharma companies use to market their product will be used as a weapon to bash them when they oppose re-importation, collective buying by state programs, or even (take a deep breath here, pharma folks) price controls.

Employer-based health insurance is dissolving quite fast

A newer study based on Bureau of Labor Statistics finds an acceleration in a trend that’s been going on for a long time.  Fewer employees are getting health insurance from their employer. The Boston Globe reports that:

The study found 45 percent of US employees have health insurance at work, down from 63 percent in 1993……Walter Marshall, a bureau economist in the Boston office, called the drop in nationwide coverage "dramatic." But he warned the data may overstate the trend, in part because of coverage shifts within two-income families. Well there are many families in which everyone gets covered via the one family member with health insurance at work, but frequently that means paying a big share towards that coverage.  This goes along with the trend from defined benefit to defined contribution . As we used to say at Harris, "get less, pay more." One other thing we used to notice at Harris–dissatisfaction with health plans and services was highly correlated with out-of-pocket costs.

The trend to lower health insurance rates used to be concentrated among the lower paid.  Back in 2001 the Commonwealth Fund reported that 45% of those without health insurance from their employers earned less than $10 an hour. But the emergence of health care as a political issue in 1991 came as regular middle-class Americans found that they were getting access to care that looked more like care for poorer people (i.e. less and more expensive access). Well watch this space.  Most people are paying more for less insurance and those losing coverage are being forced into the individual "market"–which often means no coverage.  At the same time the Commonwealth Fund also reports that drug coverage for new retirees fell in 1995-2000 from 45% to less than 40% (down from 49% to 40% for male retirees.)

Health care hasn’t raised its head as a national political issue yet aside from the Medicare drug coverage debate/bills.  But if the drug coverage issue gets connected with the overall mess of the insurance market, it could be a sleeper issue.

Drug Distributors: Bergen hits a snag?

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The stock prices of the big three drug distributors, Bergen Brunswick, McKesson and Cardinal Health have taken different courses over the last 5 years.   Mckesson’s ill-fated purchase of HBO & Company put the company into a funk from which it has taken years to get out. Cardinal steered away from those problems by building a very diverse set of businesses, including specialty pharmacy services and niche information technology services. It has been a consistent profit generator and has generally had the stock result to match, although it had a big setback in late July when it announced that future growth would be 15% rather than 20%. 

Bergen which merged with Amerisource to match the scale of the big two in 2001 saw seen its stock rise dramatically faster than Cardinal’s for the next year (2001-2) and also since May 2003 .  Bergen’s revenue (of the two merged companies combined) at the time of the merger was around $35bn, and that’s shot up to $45 billion with profit growth to match. However, over the last year both stock prices have been mostly in negative territory and Bergen’s summer rally (up 40% between May and July) is well and truly over.

Friday’s news of an investigation into Bergen’s alleged double billing of rebates from pharma manufacturers may be old news (according to the company’s rebuttal).  However, the stock fell about another 5% on Friday and Bergen now has a significantly lower PE ratio than its competitors (15 vs 18 for Cardinal and 17.5 for McKesson).

Don’t forget that drug distribution is a complex, very low margin business.  Cardinal’s long term success in has been both due to its operational success and its push into several niche businesses in health information and specialty pharma services.  It hasn’t made the big misstep that McKesson made with the HBO& Company deal. McKesson, meanwhile, has also been regrouping and making pushes into related markets, such as pharma market research. It’s worth watching to see if Bergen has hit a real snag or if it’s just a hurricane in a tea cup, which gives what the traders call "a good buying opportunity". It’s also worth seeing what these three sizable companies do regarding the on-or-off Medicare reform package, and whether any of them decide to get closer with the PBMs or the mail-order business.

The NHS: IT in a mess?

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Ok, that’s a cheap shot title which I only used because "En Aithch Ess" rhymes with Mess.  The UK’s NHS is trying to pull off what we in American healthcare can only dream about —  a full computerization of the system with electronic medical records for everyone. When I looked into computerization of medical records in the UK about 6 years ago, they were already well ahead of the US, with some 50% of GPs (who account for 80% of all UK doctors) using computers in the exam room, and 25% using only computers and no paper charts. (Anecdotal evidence from New Zealand and the Netherlands suggests that those countries are even further ahead).  The reason for this leap forward in the UK was direct government funding for technology under John Major’s government in the mid-1990s.  Lack of funding is one of the main reasons for the slow rate of physician computerization in the US.

So before long before it started getting in trouble about what it knew when about Iraq, the Blair government made some very, very ambitious plans for the entire automation of the health care system in the UK. Jane Sarasohn Kahn, who is the mainstay of iHealthbeat’s opinion columns (and a wonderful person to boot) used to live in the UK and has written about the enormity of the scope of the plan.  The plan, by the way, included increasing spending on IT for the NHS from around $1.5 billion to $3.7 billion (2.3Bn GBP).

However, it appears that some of the contracting has been a little tricky, particularly the demand by the NHS that vendors take liability for data input mistakes made by system users.  Last week Lockheed, that well known health care IT firm (!), pulled out of bidding for the project.  The NHS’ attempt to go fast and do something very bold is in stark contrast to most other IT implementations in health care, which tend to take an inclusive softly-softly approach.  Perhaps the only comparable one in the US is Kaiser Permanente’s attempt to move to electronic medical records.  That has been characterized by infighting between the regions, continual vendor churn and much wasted effort and money. But Kaiser is well ahead of other American provider systems in what it’s trying to do–getting to the Holy Grail of electronic patient records. It’s not unreasonable to expect the same in the UK, although the potential for a disaster, like IRS’ long  computer modernization train wreck, does exist.

For much more on the NHS project as a whole see here.

Technical snafu corrected

I had problems with the archiving function of blogs for early September, but as part of my continual self-education about software coding, they are all corrected now.  To see the archives, click here.

Quality Quickie: NCQA’s annual report

The National committee on Quality Assurance (NCQA) has  new report out that funnily enough contrasts strongly with the report from the Harvard academic physicians that I was somewhat cynical about in this post yesterday.  NCQA’s mission is to improve health care via greater accountability and information. Although it’s directors and staff tend to come from the payer rather than the provider side, and its money comes from Foundations and the pharma industry, it has worked hard to maintain academic independence. In my view they have been telling the truth about health care quality all along — really all they have to do is point out the obvious. 

Anyway, enough editorial, the NCQA’s  State of health Care Quality report details what many of us have know for many years.  In order to treat heart disease, diabetes, asthma, etc, etc, etc, as John Mattison from Kaiser told me many years ago "We know what to do, we just don’t know how to make sure it gets done."  The consequence of practice variation away from best standards of care, according to the Peggy O’Kane, NCQA’s President, is "More than 57,000 people will die this year because there is a huge gap between what we know and what we do."  There’s also some 41 million sick days and billions in wasted expenditure ($1.6 billion for heart disease alone). None of this is news, John Wennberg’s Dartmouth Health Atlas has been detailing the extent of practice variation for decades.

The one area where NCQA says there has been improvement is among those health plans where they are actually measuring the impact of treatment protocols. (The report cards that NCQA promotes are part of that effort). Of course, none of this much matters if providers are not being rewarded for improving care quality.  In fact since the "end of managed care" (see my earlier post), the quality improvement movement has been struggling, even though some plans are now paying bonuses based on quality.  In the end the biggest payers (i.e. Medicare, Medicaid, FEHBP) and the government (i.e. Medicare, Medicaid, FEHBP)  must come together to promote compensation for quality if we’re ever going to make progress.  And as shown in the recent JAMA article, the provider industry has plenty of fire power with which to resist.

Drug imports–This is getting a little nasty

Drug imports from Canada are now being stopped at the border.  We’re already had Glaxo trying to cut the Canadians off at the wholesale source (later joined by Pfizer).  Now we have the FDA trying to shut down a major exporter, claiming that its Insulin was not delivered frozen. While this is going on, the state of Illinois was telling its retirees to look north for their drugs.

This long article in the Boston Globe, which I got to via the excellent Bloviator medico-legal site, suggests that the crux of the FDA’s case is that insulin and some other drugs need better care (i.e. temperature controls) during transit. Even if that’s true for safety reasons, it is a) equally true for US based mail-order pharmacies and b) probably not true for most drugs sent in pill-boxes. In fact the Canadian Internet pharmacies are bending over backwards to do this properly.  Look at this example.  You need a new Rx script from a real American doctor.  While, if you want to buy Viagra online from this American source, you just need an "online consult."

So why the crackdown on the Canadian imports only? Let’s take the FDA at their word for the moment and realize that they are where the buck stops for patient safety. But if the FDA is trying to avoid appearing to be the handmaiden of PhRMA, it needs to work on its PR a bit more!

Quality Quickie: the Docs resist pay for performance

So the quality movement has been making slow strides and the first vestiges of a pay for performance system has appeared in California and has been going for a couple of years in Massachusetts. But not so fast! You may (as I did) have missed, while you were recovering from your labor day exertions, the September 3 JAMA article from several leading Boston doctors which explained that pay for quality and performance won’t work.  (You can see the abstract here). I quote a chunk of their press release below so you get the idea:

"Measuring a physician’s quality of care by numerical standards — such as adherence to a disease management protocol or a treatment outcome — is often invalid for a variety of reasons, say the authors of a study in the Sept. 3 Journal of the American Medical Association.

While not a general nationwide practice, several payers around the country are using quantitative quality measures as a basis for reimbursement bonuses (for Blue Cross and Blue Shield of Massachusetts’ program, see MD Practice Alert, July 30, 2003). Some medical groups also reward higher quality with higher pay. "Quality" for such incentive payments usually means adherence to well-recognized disease management or preventive care protocols or procedures. Quality measured in this way is beginning to be available on some Web-based "physician report cards" that increasingly may be the way some patients, such as those on consumer-directed health care plans, choose doctors.

Bruce Landon, M.D., researcher at the Harvard Medical School Department of Health Care Policy, and lead author of the JAMA study, says that although it looked at the use of such quantitative measurement (also called "physician clinical performance assessment" or PCPA) for credentialing doctors, many of the cautions raised in the study "are relevant for ‘paying for quality.’"

While PCPA can be valuable and is improving, Landon and his co-authors say, it has several common problems, some of which are:

–Insufficient sample size in an individual doctor’s practice. The authors suggest that 100 patients may be an appropriate sample (patients with the same disease treated by the same physician), but note that the National Committee for Quality Assurance says a 35-patient sample is adequate. "The proportion of all physicians for whom sample sizes are large enough to permit valid PCPA is unknown at this time," Landon writes.

–Systematic differences in populations of patients, who may differ in adequacy of insurance, general health status and other ways. "Health plans typically don’t adjust for health status or sociodemographic characteristics," Landon notes, although their reimbursement bonuses deal with patients who have the same insurance. To solve the problem of differing health statuses, some PCPA measures may include only "ideal candidates," he adds, but that approach could create sample-size problems.

–Poor reflection of entire practice. Obviously, adherence to one or two protocols is only a small part of what any given doctor does. Studies have shown that adherence to one protocol is a poor predictor of adherence to another not used to evaluate physicians.
Cost. "Collection [of PCPA data] in the outpatient setting would be substantially more expensive [than collecting valid hospital quality data] because of the multiple different locations and lack of funding mechanism to pay for this type of performance assessment activity," Landon says.

–Potential conflicts with quality improvement. PCPA activities may differ depending on whether they’re conducted to assess physicians’ competence or to foster quality improvement. Conflicts with patient communication and other unmeasured aspects of care also could arise, he adds. Groups focusing on a given kind of quality improvement "might pay less attention to other important features of quality that are not being measured."

–Lack of evidence-based measures for many specialties.

–Challenges in defining minimum thresholds for acceptable care.

"Many health plans," Landon says, "use arbitrary thresholds (e.g., the top 25%), when in fact there might not be much difference [in performance] between those that receive the bonus and those that don’t." Lack of uniformity among payer bonuses also is a problem, he says. "There are often so many measures from different plans that the signal to increase quality can get lost in all the noise."

The last two sentences of the abstract indicate that they are not happy with the ways they are being assessed.  "We conclude that important technical barriers stand in the way of using physician clinical performance assessment for evaluating the competency of individual physicians. Overcoming these barriers will require considerable additional research and development." And their last sentence is a thing of beauty. "Even then, for some uses, physician clinical performance assessment at the individual physician level may be technically impossible to accomplish in a valid and fair way."

Matt Quinn, who’s been working in health quality data assessment for some years now, and who’s vigilance saved me from missing this work of art, commented. "I guess that means that efforts to measure performance and inform consumers just aren’t worth it and that everyone involved should just continue to assume that all docs provide consistently excellent quality care that adheres to evidence-based guidelines." I’m sure Matt would agree that the correct performance assessment of no other human process has ever had to overcome this magnitude of challenge!

I’m reminded of Gene Wilder as the sheep-loving struck-off MD in Woody Allen’s film Everything you ever wanted to know about sex but were too afraid to ask. He’s working as a waiter and when too many customers start complaining and it all gets too much, he shouts "Don’t treat me like that–I’m a Doctor! I’m a Doctor!"

Stents: on the forefront of combining drugs and devices

Often those of us who’ve concentrated on IT, health delivery and pharmaceuticals forget the huge amounts spend on medical devices.  Some of those medical devices are very expensive and in some the technological arms race is faster and has as much impact as that in the pharmaceutical approval war.  The battle over coronary stents–tiny tubes that keep blood vessels open after angioplasty– has become bigger and bigger over the past few years. This is notwithstanding the opinion of a Canadian health services researcher I met a few years back who’s research "proved" that they had no real incremental value over straight angioplasty. But then we never cared about health services research or Canadians!

The latest development in stents is coating them with drugs to prevent scar tissue building up around them and necessitating more surgery. J&J’s market leading Cypher stent has it and as does Boston Scientific’s new market entry Taxus (selling in Europe and looking likely to be approved later this year for the US). The news that Taxus’ approval was in the offing led Boston Scientific’s share price to jump even after a big rise already this year.

The stent market has been an ongoing battle, as this Businessweek article shows, for many years, and now is a $5 billion worldwide market–split usually between J&J, Boston Scientific and Guidant.  Who gains and loses the lead in market share changes over the years depending on who has the latest gizmo, and who’s sales staff impresses the surgeons the most. But the combination of drugs and devices is a trend that is going to have staying power.