Category: Health Policy

Managed Care History Part III: The Rise of Machine-Driven Managed Care

Dec 19, 2024

This is part 3 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1 & Part 2

By JEFF GOLDSMITH

Two major changes in health insurance ensued as the US health system entered the 21^st century- a strategic shift of health cost risk from providers to patients and the emergence of machine driven managed care.

Insurers Shift Strategy from Sharing Risk with Hospitals and Doctors to Markedly Implicating their “Patients’.

After the 2008 recession, employers and their health plans shifted strategy from putting physicians and hospitals at risk through delegated risk capitation to putting patients at risk through higher patient cost sharing. In the wake of the recession, the number of patients with high deductible health plans nearly quintupled–to over sixty million lives. By 2024, 32% of the lives in employer-based plans (50% among small employers’) were in high deductible plans regardless of patient economic circumstances.

The stated intention of the High Deductible Health Plan movement was to encourage patients to “shop” for care. In real care situations, however, patients found it difficult or impossible to determine exactly what their share of the cost would be or which providers did the best job of taking care of them. For an extensive review of the literature on how healthcare “consumers” struggle to manage their financial risk, read Peter Ubel’s 2019 Sick to Debt: How Smarter Markets Lead to Better Care.

Employers and insurers, working together to “empower consumers”, rapidly shifted “self-pay” bad debts onto their provider networks. Some 60% of hospital bad debts are now from patients with insurance. Instead of “shopping for care”, consumers found themselves saddled with almost $200 billion in medical bills they could not pay, and hospitals and physicians ended up eating most of it.

This escalating “insured bad debt” problem forced providers to hire revenue cycle management (RCM) consultants to revise and strengthen their policies regarding patient financial responsibility, “revenue integrity” (meaning crossing all the “t’s” and dotting all the “I’s” in each medical claim and making sure care is coded properly) and rigorously monitoring the flow of claims to and from their major insurance carriers. As a result many providers found themselves spending 10-15% of their total operating expenses on RCM!

Medicare Advantage Enables Insurer Market Dominance

The movement from Ellwood’s vision of regionally-based provider sponsored health plans to market dominance by huge national carriers was cemented by the emergence of Medicare Advantage as the most significant and profitable health insurance market segment. In 2013, Medicare Advantage accounted for 29% of total Medicare spending. A decade later, in 2024, it was 54% (of roughly a trillion dollar program). And until a federal crackdown on MA coding and payment policies by the carriers, it was a 5% margin business, significantly more profitable than commercial insurance, ObamaCare Exchange or managed Medicaid businesses.

As Medicare Advantage emerged as the largest health insurance market, it was dominated by a cartel of large publicly traded carriers.

Managed Care History Part II- HMOs Give Way to Managed Care “Lite”

Dec 18, 2024

This is part 2 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1

By JEFF GOLDSMITH

The late 1990s crash of HMOs opened the door to a major consolidation of the health insurance market controlled largely by national and super-regional health plans. While HMOs by no means disappeared post-backlash, the “movement” begun by Ellwood and Nixon fell far short of national reach. HMOs never established a meaningful presence in the most rapidly growing parts of the US- the Southwest, South and Mid-Atlantic regions, as well as the Northeast.

The exemplar, Kaiser Permanente, damaged its financial position with an ill-considered 1990’s (McKinsey-inspired) push to become a “national brand”. Today, over 80% of Kaiser’s 13 million enrollment is still in the West Coast markets where it began 80 years ago!

HMOs Go Public and Roll Up

Two little noticed developments accelerated the shift in power from providers to payers. One was the movement of provider sponsored health plans into the public markets. PacifiCare, the most significant hospital sponsored health plan owned by the Lutheran Hospital Society of Southern California, was taken public in 1995. A subsequent merger with FHP health plan destabilized the newly public company.

After PacifiCare crashed post the 1998 Balanced Budget Act cuts, and struggled to refinance its debt, it was acquired by United Healthcare in 2005, bringing with it a huge sophisticated, delegated risk contracting network. United then bought Sierra Health Plan based in Nevada in 2007, including its large captive medical group, its first medical group acquisition. Following these acquisitions, United rolled up PacifiCare’s southern California based at-risk physician groups in the late 00’s, and then capped off with its purchase of HealthCare Partners, the largest of all, 2017 from DaVita in forming the backbone of today’s $110 billion Optum Health.

United’s buying BOTH sides of the delegated risk networks-plan and docs-in high penetration managed care markets is not fully appreciated by most analysts even today.

It has meant that as much as 40% of Optum Health’s revenues, including almost $24 billion in capitated health insurance premiums, come from competitors of United’s health insurance business.

However, of greater strategic significance was Humana’s decision in 1993 to exit the hospital business by spinning its 90 hospitals off as Galen.

Managed Care History: From HMOs to AI Assisted Claims Management Part 1

Dec 17, 2024

By JEFF GOLDSMITH

Healthcare payment in the US has evolved in decades-long sweeps over the past fifty years, as both public programs and employers attempted to contain the rise in health costs. Managed care in the United States has gone through three distinct phases in that time- from physician- and hospital-led HMOs to PPOs and “shadow” capitation via virtual networks like ACOs to machine-governed payment systems, where intelligent agents (AI) using machine learning are managing the flow of healthcare dollars. This series will explore the evolution of managed care in 3 phases.

Phase I- Health Maintenance Organizations and Delegated Risk Capitation

In response to a long run of double-digit health cost inflation following the passage of Medicare in 1965, the Nixon administration launched a bold health policy initiative- the HMO Act of 1973- to attempt to tame health costs. The Nixon Administration intended this Act to provide an alternative to nationalizing healthcare provision under a single payer system, as supported by Senator Ted Kennedy and other Democrats.

The goal of this legislation was to restructure healthcare financing in the US into risk-bearing entities modeled on the Kaiser Foundation Health plans- a successful group-model “pre-paid” health plan founded in the 1940s and based on the Pacific Coast. These plans would accept and manage fixed payments for a defined population of subscribers, and offer an alternative to what was perceived as an inflationary, open-ended fee for service payment system. In varying forms, this has been the central objective of “progressive” health policy for the succeeding fifty years.

The HMO Act of 1973 provided federal start-up loans and grants for HMOs, much of which went to community-based healthcare organizations and multi-hospital systems. It also compelled employers to offer HMOs as an alternative to Blue Cross and indemnity insurance. While a few HMOs either employed physicians directly on salary (staff models like the Group Health Co-Operatives), or contracted on an exclusive basis with an affiliated physician group (like Kaiser’s Permanente Medical Groups), many more delegated capitated risk to special purpose physician networks- Independent Practice Associations (IPAs)- whose physicians continued in private medical practice.

By 1996, according to the Kaiser/HRET Employee Benefits Survey, HMOs covered 31% of the employer market (roughly 160 million employees and dependents), and the federal government had begun experimenting with opening the Medicare program to HMO coverage. The impact of HMO growth on overall US health spending remains uncertain, because health spending as a percentage of US GDP continued growing aggressively during the next fifteen years, before levelling off during the mid-1990’s around the Clinton Health Reform debate.

Two things brought the HMO movement to a crashing halt in the late 1990’s.

The Next Steps in Parkinson’s Disease Research

Dec 13, 2024

By STEVEN ZECOLA

Steven Zercola is back with his latest insights into research in Parkinson’s disease. You can say previous part of this series here

In its latest report, the National Institute of Health (NIH) references 508 active Parkinson’s disease (PD) projects as the recipients of $243M in grants.

A few caveats are warranted about these numbers:

The information is not as precise as it seems. The NIH report states that: “NIH does not expressly budget by category”. Rather, it “categorizes diseases, conditions, and other research based on a computerized process that it uses at the end of each fiscal year”.
NIH alludes to $74 million of the overall budget as indirect costs without an explanation of this distinction.
Only about half of the aforementioned research grants are available to review. The NIH report specifies that “{t}he minimum reporting threshold for a specific disease/condition is $500,000”.
NIH isn’t the only federal government agency providing grants for PD research. For example, the Department of Defense also maintains a budget for PD research, albeit much smaller.

Generally speaking, one can categorize basic research into having exploratory, explanatory or diagnostic objectives. Given that basic research for PD has gained some important insights over the past several decades, I have added some PD-specific categories to the more general categories of research, as shown in the chart below.

Once these additional categories were identified, I assigned each of the reported studies and associated costs to the corresponding categories as follows:

Category	Number	Costs ($000)
Explanatory	50	18,162
Exploratory	32	13,178
Diagnostic	21	11,499
Tools	7	4,444
Biomarkers	9	3,541
DBS	13	3,598
Alpha-synuclein	38	16,642
Physical therapies	17	18,119
Indirect	27	18,975
Total	214	$108,158

As you can see from the activity on explanatory and exploratory research, NIH is still very much in a discovery mode when it comes to PD research. From my perspective as a patient, only about 25% of these identified grants are in a position to produce game-changing results within the 10-year window of the legislation (namely, tools, biomarkers and alpha-synuclein).

In terms of clinical research, clinicaltrials.gov provides a listing of all trials, broken down into phases, including those that are completed, recruiting or terminated. However, the inputs are not reviewed by an independent party, and the overall numbers are not reliable and do not reflect the funding status of the trials.

Nevertheless, there are a series of individual trials that show promise.

A Health Economist to lead the NIH

Dec 12, 2024

By SAURABH JHA

Early on in the COVID-19 pandemic a seroprevalence study from Santa Clara indicated that the viral spread was far greater than was believed. The study suggested that the infection fatality rate (IFR) was much lower than the case fatality rate and perhaps even lower than the suspected IFR. The researchers estimated that 2.8% of the county had been infected by April 2020. The virus was contagious and, most importantly, caused many asymptomatic infections.

The study, released as a preprint within a month of the lockdown, should have been published by the NEJM or Lancet. The specificity of the immunoassay was a whopping 99.5% and could not have been lower than 98.5%. Instead, it was roundly criticized by born-again methodological purists. Noted statistician, Andrew Gelman, known expert at dealing with (very) imperfect statistical methods, wanted an apology from the researchers for wasting everyone’s time by making “avoidable screw ups.”

Around the same time, a similar study published in JAMA came to similar conclusions. Researchers found that the seroprevalence COVID-19 antibodies in LA county was 4.65%, 367 000 adults had SARS-CoV-2 antibodies, substantially greater than the 8430 confirmed infections. They concluded that “contact tracing methods to limit the spread of infection will face considerable challenges.” No one asked the researchers for an apology, presumably because the study had passed anonymous peer review and had escaped the wrath of the medical commentariat.

A few months later, a German study suggested that many infected with COVID-19 had myocarditis. This meant that the asymptomatic were not just reservoirs of viral transmission, but walking tombs of cardiac doom. By many, the researchers, who used cardiac MRI to look for myocarditis, put a figure at nearly 80%. That’s a lot. No virus had ever done that. That number itself should have invited scrutiny. The animated, born-again empiricists, who has been energized by the Santa Clara study into becoming methodological sleuths, went into hibernation after the German myocarditis study. The study was swallowed uncritically by many and was covered by the NY Times.

If the rigor demanded of the Santa Clara study was that of a Pythagorean proof, the German myocarditis study received the scrutiny of a cult prophet. The burden of proof in them days was like shifting sand, which shifted depending on the implications of the research. The Santa Clara study suggested the test – isolate strategy was forlorn, as controlling the viral spread was akin to chasing one’s tail. The German myocarditis study was cautionary, emphasizing that that the virus should not be under estimated, as even asymptomatic infections could be deadly. The Santa Clara study challenged lockdowns, the German study supported lockdowns.

The senior author of the Santa Clara study, Jay Bhattacharya, has been nominated by President Trump to be the next NIH director. His nomination has surprised a few, upset a few, irritated a few, shocked a few and, as befits a polarized country, pleased many. Bhattacharya may well have won the popular vote, though I’m uncertain he will win the institutional vote.

Bhattacharya’s anti-lockdown views rapidly made him a persona non grata in academic circles.

Cancer’s Juvenescence: An Incoming Tide and the Urgent Need for a Paradigm Shift

Dec 6, 2024

By GEORGE BEAUREGARD

During my years in a bustling metropolitan primary care practice from 1992 to 2010, I recall only a handful of patients under 50 who developed cancer. Not surprisingly, these were mostly cases of Hodgkin’s and Non-Hodgkin’s lymphomas, myeloma, skin, and breast cancer. Fortunately, those few patients were wearing the mantle of cancer survivor by the time I left clinical practice.

Since 2010, I’ve transitioned into physician executive roles across various U.S. markets, overseeing large physician networks and other health systems, including so-called Accountable Care Organizations (ACOs) that oversee the care of tens of thousands of attributed patients. My goal has been to help transform healthcare delivery to focus on consistently delivering high-value care–defined as being of high quality and cost effective. My engagement with cancer has mainly been through monitoring how our organization performs on established cancer screening measures for breast, colon, and cervical cancers, based on HEDIS guidelines for age ranges.

During those two periods, my life took two profound turns. The first occurred in October 2005 when I was diagnosed at 49 with advanced-stage bladder cancer. The second, more devastating one, occurred on September 16, 2017, when my previously healthy 29-year-old son was unexpectedly diagnosed with stage 4 colon cancer. That shocking news came a month after his wedding. While I knew the grim 5-year relative survival rate for this stage was about 13 percent, I still hoped and prayed that he would somehow end up being on the positive side of that survival statistic.

Throughout his three-year treatment at Dana Farber Cancer Institute (DFCI), in Boston, my son, while courageously fighting his battle—one he would eventually lose at 32—became a passionate advocate for raising early-onset colorectal cancer (CRC) awareness and the need for increased research funding. He played an important role in helping to launch DFCI’s Young Onset Colorectal Cancer Center, which has since treated over 1,500 patients. Many of those individuals are between the ages of 20 and 40. Six months before his death, my son made a memorable appearance on The Today Show.

Fatherhood and medicine are deeply ingrained in my identity. After the initial shock of my son’s diagnosis, I delved into medical and scientific literature, seeking all relevant information. What I’ve discovered, and continue to learn, is that there’s been a global surge in early-onset cancers, defined as occurring in people under the age of 50. Between 1990 and 2019, early-onset cancer cases globally surged by nearly 80 percent, with related deaths increasing by around 30 percent. In the U.S., projections suggest that by 2030, one-third of colorectal cancer cases will be in individuals under 50. It’s already the leading cause of cancer deaths in men younger than 50. In women, it now trails only breast cancer.

You Can’t Spell Fair Pay Without AI

Dec 5, 2024

By KIM BELLARD

Everything’s about AI these days. Everything is going to be about AI for a while. Everyone’s talking about it, and most of them know more about it than I do. But there is one thing about AI that I don’t think is getting enough attention. I’m old enough that the mantra “follow the money” resonates, and, when it comes to AI, I don’t like where I think the money is ending up.

I’ll talk about this both at a macro level and also specifically for healthcare.

On the macro side, one trend that I have become increasingly radicalized about over the past few year is income/wealth inequality. I wrote a couple weeks ago about how the economy is not working for many workers: executive to worker compensation ratios have skyrocketed over the past few decades, resulting in wage stagnation for many workers; income and wealthy inequality are at levels that make the Gilded Age look positively progressive; intergenerational mobility in the United States is moribund.

That’s not the American Dream many of us grew up believing in.

We’ve got a winner-take-all economy, and it’s leaving behind more and more people. If you are a tech CEO, a hedge fund manager, or a highly skilled knowledge worker, things are looking pretty good. If you don’t have a college degree, or even if you have a college degree but with the wrong major or have the wrong skills, not so much.

All that was happening before AI, and the question for us is whether AI will exacerbate those trends, or ameliorate them. If you are in doubt about the answer to that question, follow the money. Who is funding AI research, and what might they be expecting in return?

It seems like every day I read about how AI is impacting white collar jobs. It can help traders! It can help lawyers! It can help coders! It can help doctors! For many white collar workers, AI may be a valuable tool that will enhance their productivity and make their jobs easier – in the short term. In the long term, of course, AI may simply come for their jobs, as it is starting to do for blue collar workers.

Automation has already cost more blue collar jobs than outsourcing, and that was before anything we’d now consider AI. With AI, that trend is going to happen on steroids; jobs will disappear in droves. That’s great if you are an executive looking to cut costs, but terrible if you are one of those costs.

Stick to the Science

Nov 26, 2024

By KIM BELLARD

A year ago I wrote about disturbing news from the Pew Research Center that trust in science, and in scientists, had fallen since the pandemic. I am slightly relieved to report that a new follow-up study by Pew indicates that trust is up slightly – but still way below where they were pre-pandemic.

Overall, 76% of Americans express fair or a great deal of confidence in scientists to act in the public’s best interests (versus 87% in April 2020). The public is about evenly split about how active a role scientists should take in policy debates – 51% think they should, 48% think they should stick to science. A year ago those numbers were flipped.

I think about all this in the context of the proposed members of President-elect Trump’s health team, whose takes on “science” are often considered out of the mainstream.

Trump surprised many a few months ago when he brought Robert F. Kennedy Jr. into his fold. Over the years, RFK Jr., an environmental lawyer by background, has expressed numerous startling views about health and our healthcare system. According to Jennifer Nuzzo, the director of the Pandemic Center at Brown University, RFK Jr. “is just in a category by himself. R.F.K. Jr. just willfully disregards existing evidence, relies on talking points that have been consistently debunked.”

Nonetheless, Trump vowed: “I’m going to let him go wild on health. I’m going to let him go wild on the food. I’m going to let him go wild on the medicines.” He has now named him as his candidate for Secretary of Health and Human Services.

The team behind RFK Jr. have their own unconventional views. A quick rundown:

The Healthcare Industry Needs a Course Correction

Nov 20, 2024

By STEVEN ZECOLA

The United States healthcare system has failed by any measure.

First, costs are out of control. For example, 17% of the country’s GDP is spent on healthcare. This percentage was less than half that amount in 1980. It is expected to continue growing to 20% by 2032. Seventy-five percent of these costs are attributable to chronic diseases.

Second, notwithstanding the highest percentage of GDP spent on healthcare of the top ten high-income countries, the US has the worst performance outcomes whether measured on life expectancy, preventable mortality through disease management, and even access to care through insurance coverage or other means.

Third, the agency overseeing the healthcare industry is the Department of Health and Human Services. HHS is organized by functions such as Clinical Health Services and Behavioral Health Services rather than organized by disease management. The five strategic imperatives of its 4-year strategic plan do not contain benchmarks for improving the health status of the population, nor concrete steps to achieve the benchmarks. There is no mention of costs.

Fourth, the industry is huge and has many different components from healthcare providers to equipment manufacturers, to researchers, to pharmaceutical companies, to genetic companies, to insurance companies and so on. Over 16 million people are employed in the industry, with 60,000 in HHS alone. At this level of aggregation, leadership and management prowess becomes watered down and there can be no driving force for across-the-board improvements in disease management.

Fifth, the industry spends about $100 billion per year on R&D in pursuit of FDA approvals. The cost of this development translates into more than $2 billion per approved drug. Once approved, the drug effectively gains a barrier against unfettered competition. Independent analysts have estimated the costs of this regulatory scheme vastly exceed the benefits. Yet the FDA holds firm in its approach, given that its primary objective is safety.

Take a deep breath: Trump may not mean that much change–for health care, that is

Nov 18, 2024

By MATTHEW HOLT

At some point I had to crawl out of my hole and put pen to paper on the election debacle that just took place, and what the ensuing lunacy might be like for the health care system. So this is my attempt to do just that.

It’s really hard to understand why Trump won this election or why Harris and the Democrats lost. There was a lot of weirdness going on. Remember that before the vote Harris was generally praised for running a steady campaign, the Democrats had tracked to the right on immigration (trying to pass what IMHO was a horrendous bill ), and Harris kept talking about having a Glock, being a prosecutor and campaigned with a Cheney. The swing states (which vote at a much higher proportion than everyone else) all (with the narrow exception of Pennsylvania) voted for Democratic senators. For President they only went 3% against where they were in 2020. Even weirder was that hundreds of thousands of Trump voters didn’t appear to vote down the ballot at all. Yet nationwide the swing was big enough for Trump to win the popular vote. (If you really want to dig in, Charles Gaba has put together a great spreadsheet)

The simplest explanation is that the teeny middle in American politics voted against the incumbent. And the “middle” is getting teenier. In 1964 Johnson got 61% of the vote. Nixon (1972) and Reagan (1984) won with nearly 60% of the vote. Obama’s big 2008 victory was with just 53% of the vote and he won by 7%.

Biden won in 2020 with just over 51% and Trump will end up winning while likely getting just less than 50% of the vote. This isn’t an overwhelming mandate. It’s a small minority of voters switching because they are pissed off with the status quo. This year the bug bear was inflation, which really wasn’t Biden’s fault even though he got the blame. It also appears that a decent slug of Arab-Americans and far left Democrats stayed home or voted for Jill Stein because of Gaza.

And let’s not forget the impact of the Electoral College which reduces turnout outside of swing states (not exclusively). Surely if we had a popular vote in which every vote counts, turnout would be higher, including in the big 2 states that are Dem strongholds (NY & CA).

However, even if you think it’s inconceivable that a majority would vote for Trump because of what happened in 2016 to 2021 (especially on January 6, 2021!), apparently that’s not enough of a disqualifier. He’s going to be President.

So what happens next? Particularly in health care.

My expectation (and hope) is that this is a snake eating its own tail. There are so many repugnant egos circling around Trump that it’s more than likely they’ll turn on each other, and little to nothing gets done. That doesn’t mean nothing will happen.