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Category: THCB

Are Market-Oriented Economists Wrong About Health Care?

Tyler Cowen posted 10 common mistakes of market-oriented economists the other day, paired with 14 common mistakes of left-wing economists. That prompted Ezra Klein to propose his own list of mistakes and others are chiming in.

I think it’s too bad that economists are classified as right and left. After all, economics is a science and reality is reality. Why should political preferences interfere with the scientific quest for truth? Milton Friedman once said there are only two kinds of economics: good economics and bad economics. I not only agree, I think only “good economics” qualifies as “economics.” But I’ll yield to convention for the remainder of this post.

On health care, Tyler says right-of-center economists go wrong in two ways:

  1. I’m all for Health Savings Accounts, Tyler writes, but unless done on a Singaporean scale, and with lots of forced savings, they’re not a health care plan to significantly benefit most Americans.
  2. There is less of a coherent health care plan, coming from this side [the right] than one might like to think. There is already considerable health care cost control embedded in the Affordable Care Act (ACA), most of all for Medicare, and this is not admitted with sufficient frequency.Continue reading…

Privatize Medicaid? Have We Learned Nothing??

As we move thru 2011, many states are eagerly progressing with implementation of the Affordable Care Act (ACA). We have many Early Innovators that are leaders in setting up the state based exchanges.  These states are Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin and a multi-state entity led by the University of Massachusetts Medical School that consists of Connecticut, Maine, Massachusetts, Rhode Island, and Vermont.  Furthermore, Vermont is poised to pass the country’s first state-wide single payer system.

You can imagine when I look in my own back yard I get a bit depressed. Despite our 80 degree sunny weather, our state is leading the charge to overturn the ACA. Our newly elected governor, Rick Scott (the past CEO of Columbia/HCA when the company pleaded guilty to MCR fraud and paid $1.7 bil fine) is singularly focused on not implementing the ACA in Florida. As the months go by and other states move forward, we continue to move backwards.

As expected, it is the poor and sick that continue to suffer the most. The current assault occurring in Florida is on Medicaid. Medicaid currently covers close to 3 million Floridians (nearly 15% of the population) at a cost of nearly $19 billion dollars. The cost of each state Medicaid program is a burden shared jointly by the states and the federal government.

For every $1 spent by the state, the federal government matches $1.84. Florida Medicaid already has some of the most restrictive eligibility criteria in the country, such that the only people who can qualify for Florida Medicaid are: 1) low-income infants, toddlers, preschool-age children, and pregnant women; 2) extremely low-income school-age children, seniors, people with disabilities; and 3) parents of children in deep poverty. 60% of FL Medicaid recipients are children.Continue reading…

The Inspector General Observes

A recent report by the Massachusetts Inspector General raises a thoughtful concern about the implementation of global payments in the state.

In the effort to contain health care costs, much discourse has centered on moving from a predominantly fee-for-service system to one based mainly on global payments to providers organized as Accountable Care Organizations (“ACO”). There is little doubt that fee-for-service reimbursements create incentives for providers to increase utilization of health care services, with obvious inflationary consequences. But moving to an ACO global payment system, if not done properly, also has the potential to inflate health care costs dramatically.

There is nothing inherent in the current marketplace that would cause an ACO-based global payment system to contain health care costs. The evidence, in fact, suggests the opposite conclusion. For the past two years, the primary experiment with global payments in the private insurance market in Massachusetts has been the Alternative Quality Contract (“AQC”) popularized by Blue Cross Blue Shield of Massachusetts (“Blue Cross”). The payments to providers under this contract are made on a global capitated basis. The capitated amounts are determined by starting with the previous year’s experience of the population of lives covered by the specific AQC. That entire amount becomes the base year from which all future payments are derived. Therefore, the AQC embraces and adopts any excessive or wasteful payments in that base year, including all overutilization resulting from over a decade’s worth of fee-for-service provider contracts. Implicitly, the premium increases of that decade, which overall were well in excess of 100%, are made a permanent part of our health care system’s cost structure.Continue reading…

Looking For Quality In the Wrong Place

Last week I attended the first annual meeting of the Long-Term Quality Alliance and listened to Gregg Pawlson (a geriatrician and executive with NCQA) talk about quality measurement.  Right now, quality measurement does too little to drive practice towards quality care because it is based only on things that are “feasible,” or easy to measure—like what gets coded on medical bills. Pawlson observed that while feasibility must be one of the watchwords of quality measurement for now, in the near future electronic medical records should allow us to move beyond billing codes to gather real clinical data for more important quality measurement, including key care processes and outcomes.

I sure hope so. Because those who have looked beyond the dim illumination of current billing-based “quality measures” and searched in the darkness where real processes of clinical care can found have found that the situation is grave.  The ACOVE (Assessing Care of Vulnerable Elders) process, while laborious, looks at clinical care where it really happens – in offices and charts – rather than in bills and therefore has a better chance of driving meaningful quality improvement. Readers  know that I am a big fan of this work, begun at RAND by outstanding clinician-researchers including Neil Wenger, David Solomon, David Reuben, and many others.  I believe that ACOVE is an example of what we need in elder care: high quality evidence about essential clinical practices that are sensibly related to real health outcomes and show how we could (often easily) do better for older people.  ACOVE is a blessing.Continue reading…

Medicaid and (supposed) Welfare Dependence

Jonathan Cohn has a piece on Medicaid yesterday with which I agree. I want to amplify one related point.

National Review and Forbes writer Avik Roy believes that Medicaid is a “humanitarian catastrophe” which is actually worse than no insurance at all. Now Scott Gottlieb has taken up the argument in the Wall Street Journal. I’ve noted before that this is a bad argument. Medicaid should certainly provide better coverage. I’d also like to see the new exchanges provide poor people with better options outside of Medicaid. Yet the claim that people would actually be better off uninsured than they would be with Medicaid—this strains credulity.

I’ve basically said my piece regarding the causal impact of Medicaid in various studies. I want to pick up a different aspect of this debate.

Roy’s response to my initial column includes the following:

Many of the factors Harold raises as flaws of the study are actually flaws of Medicaid. It’s Medicaid that restricts access to the best hospitals and the best doctors and the best treatments. It’s Medicaid, i.e., welfare dependency, that leads to family breakdown and social disrepair. (For those who seek a more extensive discussion of this problem, read Charles Murray’s landmark book, Losing Ground: American Social Policy 1950-1980.)

I took umbrage at that, as indicated below. Roy then took umbrage at my umbrage, writing:

One aspect of Harold’s post is wholly unjustified, and a bit of a cheap shot: his assertion that I am “disrespectful” and “disparaging” to welfare recipients, because I’ve highlighted the corrosive effects of welfare dependency (something Harold dismisses as a “bromide”). We’ll never have a constructive debate on Medicaid policy if we can’t get past this kind of nonsense. The entire point of my series of posts on Medicaid is that Medicaid beneficiaries are the victims of an uncaring and bureaucratic system, and also the victims of those who, for ideological reasons, ignore the very real problems that Medicaid has.Continue reading…

Why Berwick Matters

Two cover stories in this week’s Time magazine debate a provocative question: Is America in decline?

Both the yes and no arguments are made persuasively, and I found myself on the fence after reading them, perhaps leaning ever-so-slightly toward the “no” side (optimist that I am). Sure, times are tough, but we’ve got the Right Stuff and we’ve bounced up from the mat before.

Then I considered the political fracas over Don Berwick’s appointment as director of the Centers for Medicare & Medicaid Services (CMS), and decided to change my vote, sadly. Yes, America is in decline, and this pitiful circus is Exhibit A.

Berwick, as you know, is a brilliant Harvard professor and founding head of the Institute for Healthcare Improvement. He is also the brains and vision behind most of the important healthcare initiatives of the past generation, from the IOM reports on quality and safety, to “bundles” of evidence-based practices to reduce harm, to the idea of a campaign to promote patient safety.

President Obama’s selection of Berwick to lead CMS last year was inspired. In the face of unassailable evidence of spotty quality and safety, unjustifiable variations in care, and impending insolvency, Medicare has no choice but to transform itself from a “dumb payer” into an organization that promotes excellence in quality, safety and efficiency. There is simply no other person with the deep knowledge of the system and the trust of so many key stakeholders as Don Berwick.

But Berwick’s nomination ran into the buzz saw of Red and Blue politics, with Republicans holding his nomination hostage to their larger concerns about the Affordable Care Act. In the ludicrous debate that ultimately culminated in Obama’s recess appointment of Berwick, the central argument against his nomination was that he had once – gasp – praised the UK’s National Health Service. Interestingly, without mentioning Berwick by name, Fareed Zakaria pointed to this very issue to bolster his “decline” argument in Time:

A crucial aspect of beginning to turn things around would be for the U.S. to make an honest accounting of where it stands and what it can learn from other countries. [But] any politician who dares suggest that the U.S. can learn from – let alone copy – other countries is likely to be denounced instantly. If someone points out that Europe gets better health care at half the cost, that’s dangerously socialist thinking.Continue reading…

Quality or value? A Measure for the 21st Century

One of the founders of the evidence-based medicine movement, Muir Gray

Fascinating, how in the same week two giants of evidence-based medicine have given such divergent views on the future of quality improvement. Here (free subscription required), Donald Berwick, the CMS administrator and founder and former head of the Institute for Healthcare Improvement, emphasizes the need for quality as the strategy for success in our healthcare system. But here, one of the fathers of EBM, Muir Gray, states that quality is so 20th century, and we need instead to shine the light on value. So, who is right?

Well, let’s define the terms. The Merriam-Webster dictionary defines quality as “the degree of excellence.” The same source tells us that value is “a fair return or equivalent in goods, services or money for something exchanged.” To me “value” is a holistic measure of cost for quality, painting a fuller picture of the investment vis-a-vis the returns on this investment. What do I mean by that?

Simply put, the idea behind value is to establish what is a reasonable amount to pay for a unit of quality. Let’s take my used 1999 VW Passat as an example. If my mechanic tells me that it needs to have some hoses replaced, and it will cost me under $100, and the car will run perfectly, I will consider that to be a good value. However, if my transmission has fallen out in the middle of Brookline Ave. in Boston (really happened to me once, many years ago and with a different car), and it will cost me $5,000 to fix, I may say that the value proposition is just not there, particularly given that the car itself is worth much less than $5,000. Given that my budget is not unlimited, I have to make trade-off decisions about where to put my money, so I may instead spend the money on another used Passat that has good prospects.

But in medicine, we routinely avoid thinking about value. There seems to be an overall impression that if it out there on the market, and especially if it is new, it is good and I am worth all of it. This impression is further enabled by the fact that CMS has no statutory power to make decisions based on value of interventions — they are legislatively mandated to turn a blind eye to the costs. Does this make sense? How toothless is our comparative effectiveness effort likely to be if it has to ignore half of the story?Continue reading…

Why Apple iPad will Dominate in the Enterprise

Ok, before I even begin, let me put it right out there: I’ve been using Apple products since I first got my hands on one of those cute little Mac SEs in the late 80′s having given up my spanking, brand new Compaq 386 with 64kb of RAM and a dual 3.5 & 5.25 floppy drives to a post doc at MIT who traded me the Compaq, which he needed to finish his thesis, for his Mac. I never looked back. I will attempt to keep that bias in check in this post.

Tomorrow, Apple will formally release the iPad 2, a device that has seen extremely strong adoption in the healthcare sector and even one of the HIT industry’s leading spoke persons, John Halamka of Boston’s Beth Israel Deaconess Hospital (he’s also Harvard Med School’s CIO) spoke to the applicability of the iPad in the healthcare enterprise in the formal iPad 2 announcement last week.

The iPad 2 release is happening while most other touch tablet vendors including HP, RIM, Cisco and those building Android-based devices struggle to get their Gen 1 versions into the market. Of these other vendors, only Android-based devices are available today, including among others the Samsung Galaxy and the Motorola Xoom.

But it is not so much the new features in the iPad 2 (e.g., lighter weight, faster processor, two cameras, etc.) that will continue to make the iPad the go to device for physicians and healthcare enterprises, it is the process by which Apple vets and approves Apps that are available in the App Store. Apple imposes what at times for many App developers is an arduous and at times capricious approach to approving Apps. This approval process is in stark contrast of the one for Android, which is based on an open, free market model letting the market decide as to which Apps will succeed and which will not.Continue reading…

Observations About the Israeli Health Care System

As I share this view from my room in Tel Aviv after leaving the conference in Haifa, it is a good chance to consider the features of the Israeli health care system and draw some comparisons with that of the US. You can find a full description here, but let me hit the highlights as I understand them, based on discussions over the last two days.

Israel has had universal coverage for many years. It is provided by four HMOs, one with about 55% of the market, another with 20% or so, and the remaining two splitting the rest. The competition that exists is not based on price. Indeed, the cost of care is covered by a payroll tax and other government funding in the form of a capitated payment to each HMO based on enrollment. People are free to shift from one HMO to another as often as every two months, but only a very small percentage (well under 2%) shift each year.

Supplemental insurance, privately paid, is also available. However, the basic coverage offered to the population is very inclusive, and the supplement is for the small number of elective items that are not of great interest to most people.

The HMOs offer a strong primary care network and then contract with the hospitals for secondary and tertiary care. Some hospitals are owned by the HMOs, but many of the patients go to hospitals that are not owned by the HMOs. These are either government owned or are private, non-profits.

Now, as we explore transactions among these entities, it gets interesting. What is the process by which the rates for the government hospital are set with the HMOs, for the services purchased by the HMO out of its capitated budget? This is a negotiation in which the government is a participant. But recall that the government also owns those hospitals for which it is negotiating the rates with the HMOs. The HMOs are not permitted to joint together to negotiate with the government.Continue reading…

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