Category: Health Policy

Controlling Health Care Costs: How to “Bend the Curve”

Nov 10, 2009• 5

Stephen Shortell

By STEPHEN SHORTELL

As Congress nears passage of the first substantial health care reform in decades, there is an ominous challenge: No reform will be sustainable unless we slow the rapid growth of health care spending.

Health care costs are rising at a staggering pace. Expenditures have been increasing at 2.7% per year faster than the rest of the economy over the past 30 years. In 1980 the US spent about 8% of GDP on health care. We now spend over 17%. We need to rein in growth of health care spending to levels no higher than overall economic growth — or ideally “bend down” the growth curve to an even lower figure.

How do we “bend the curve”? What are the best ways to slow the growth of health care costs, thus making other reforms sustainable?There are three major areas in which reforms will help bring health care spending under control.Prevention: US health care is burdened by diseases that are preventable. If we can improve lifestyle issues – nutrition, exercise, obesity, tobacco use – we will lower the future incidence of diabetes, heart disease, cancer, and other costly maladies. Current health reform proposals that allocate $10 billion for a Prevention and Wellness Fund represent a major step in the right direction. Disease prevention likely provides the greatest return on investment regarding health care costs of anything we do.

Hospital and Physician Behavior: Hospitals have no incentives to prevent unnecessary hospitalization. Physicians, paid mostly by fee-for-service, have every incentive to order more tests and procedures. Neither is rewarded directly for making – or keeping – patients healthy. Key to controlling health care costs in the future will be to realign these incentives.

This will require performance measurement and public reporting for both cost and quality. Provided that predetermined quality criteria are met, hospitals and physicians who can provide better care for less money would share in the savings.

Why “free market competition” fails in health care

Nov 3, 2009• 32

By JOE FLOWER

In trying to think about the future of health care, thoughtful, intelligent people often ask, “Why can’t we just let the free market operate in health care? That would drive down costs and drive up quality.” They point to the successes of competition in other industries. But their faith is misplaced, for economic reasons that are peculiar to health care.

More “free market” competition could definitely improve the future of health care in certain areas. But the problems of the sector as a whole will not yield to “free market” ideas – never will, never can – for reasons that are ineluctable, that derive from the core nature of the market. We might parse them out into three:

True medical demand is wildly variable, random, and absolute. Some people get cancer, others don’t. Some keel over from a heart attack, get shot, or fall off a cliff, others are in and out of hospitals for years before they die. Aggregate risk varies by socioeconomic class and age – the older you are, the more likely you are to need medical attention; poor and uneducated people are more likely to get diabetes. Individual risk varies somewhat by lifestyle – people who eat better and exercise have lower risk of some diseases; people who sky dive, ski, or hang out in certain bars have higher risk of trauma. But crucially, risk has no relation to ability to pay. A poor person does not suddenly discover an absolute need to buy a new Jaguar, but may well suddenly discover an absolute need for the services of a neurosurgeon, an oncologist, a cancer center, and everything that goes with it. And the need is truly absolute. The demand is literally, “You obtain this or you die.” Continue reading…

Why McAllen Should Have Mattered in the Health Reform Debate

Oct 29, 2009• 45

By JEFF GOLDSMITH

Back in June, Atul Gawande, a Harvard trained surgeon, published a riveting article in the New Yorker about the physician community in McAllen Texas. If ever an article was strategically timed to influence the nation’s health policy debate, this was the one. His story was accompanied by a graphic showing a patient as an ATM machine. President Obama read it and put it on his staff’s reading list. Yet, it’s depressing how little impact Atul’s article has had on health reform.

Atul’s purpose was to explain a major policy conundrum: why some communities manage to spend as much as triple on Medicare services as other communities. McAllen’s physicians practice some of the most expensive medicine in the United States, second only to Miami, and spend seven thousand dollars per Medicare beneficiary more than the national average. Peter Orszag has said that eliminating this type of variation could cut Medicare expenses nationally by as much as 30% and actually improve the quality of care.

State of Health Care Quality: Some States Better Than Others

Oct 23, 2009• 6

Peggy O’Kane has been running the NCQA for longer than she might care to remember. NCQA is an independent, non-profit organization whose mission is to improve the quality of health care everywhere, but it’s best known for creating the HEDIS measures that rate health insurer and provider performance. I’ve been a fan of Peggy since I met her in the mid-1990s. Today she shows she’s still fighting the good fight. This is her first contribution to THCB —Matthew Holt

By PEGGY O’KANE

Suppose you’re one of the 22 million Americans living with diabetes and you have to decide where you want to live. Your choices: Providence, Rhode Island, or Houston, Texas. Providence is pretty and you’d have easy access to lobster dinners and weekends at the Cape. But Houston is warmer in the winter and just a hop, skip and a jump from a weekend in Cancun. A hard decision but you’re leaning toward Houston because, let’s face it, you hate shoveling snow!But then you take a look at the 13th annual State of Health Care Quality Report by the National Committee for Quality Assurance (plug alert: I run the place) and you find out the quality of care for diabetics is nearly 11 percentage points better in New England than it is in the South Central region of the U.S. and you begin to reconsider. In fact, you look at the newest data released October 22 and you find that the quality of care in the Texas region of the country is consistently the worst while care in New England is almost always the best. Providence here I come!

Here’s the problem: Most people don’t have a choice of moving from Texas or Oklahoma or Alabama to Massachusetts, Connecticut or Rhode Island. They have to live with the health care system they have. For a diabetic, those 11 points can translate into more kidney problems, loss of vision, toe or foot amputations or, heaven forbid, a shorter lifespan.The thing is, it doesn’t have to be this way. True, care isn’t going to be identical in all parts of the country. And, true, the population of Dallas may have a lot more health problems than the people in Hartford. But 11 points is too big a gap to explain away with demographics.

Hiding In Plain Sight: Using Medicare To Solve The ‘Public Option’ Conundrum

Oct 21, 2009• 53

Barack Obama_addresses_joint_session_of_congress_2-24-09 As Senate and House Committee versions of health reform move toward unified legislation and floor votes, the most complex political challenge is how to resolve the “public option” controversy. While one would have thought weightier issues such as the shape of Medicare reform, the taxation required to support coverage subsidies, or the presence or absence of mandates would have been pivotal in this debate, the seemingly peripheral issue of a Medicare-like “public option” might be the hill on which health reform dies.

The reasons are almost completely political. The Democratic base wants to end private health insurance. Single payer advocates view the public option as a down payment on an entirely public health financing system. Public option advocates believe that the plan’s bargaining power will drive private insurers out of business. (I’ve argued in a previous blog posting that, without fully understanding what they are doing, these single payer advocates are probably right.)Continue reading…

Why AHIP needs the public option

Oct 16, 2009• 38

By MATTHEW HOLT

It’s been a fun week. After years of THCB explaining that neither could AHIP do genuine research nor could its venerable President open her mouth without lying, the rest of the world has caught on. I won’t rehash the blow by blow here—Jonathan Cohn is among many who’s done that already—but essentially AHIP commissioned PWC to include the half of the analysis about the Baucus bill that was favorable to them and leave the rest out. And the fall from grace has been particularly fun to watch. Even the whores from PWC who wrote the report criticizing the bill have been backing away from it. And some astute commentators think that the debacle has helped the likelihood of a more liberal bill’s passage.

Now to be fair (or overly fair as they’d never concede this to the other side), the insurers have a point. They loaded Baucus up with lots of cash and put a former Wellpoint exec in as his chief of staff. They romanced the White House and kept quiet when Pelosi and the rabble criticized them. The deal they thought they’d cut was that they would give up the way they currently make money by underwriting and risk skimming in individual-small group and being overpaid for Medicare Advantage, and in return they’d get 45 million more customers, all forced to buy insurance and subsidized by the government to do so.

But somehow along the way the Democrats, despite lots of tough talk about “bending the curve,” lost the cojones to find even a mere $100 billion a year to redistribute from the probably $1 trillion waste in our $2.5 trillion health care system.

Pop the Cost Bubble: Unallot Medicare

Oct 5, 2009• 8

By VICTOR SANDLER

Here’s a dirty little secret: Cutting health care costs is not that difficult, nor will it harm patients. That’s because it only involves giving up unnecessary medical care—tests and treatments patients may want but really don’t need because they don’t benefit their health.

How is this supposed to happen? In Minnesota we call it “unallotment.” When the state had to reconcile a projected multibillion dollar budget deficit this year, and the Republican governor and Democratic lawmakers couldn’t agree on how to do it, the governor simply “unalloted” billions of dollars of planned expenditures.

Medicare should do the same. All Congress has to do is pass the MedPAC Reform Act of 2009 (SF 1110) and give it teeth. We can then unallot the 30 percent of Medicare expenses that most health care experts believe are unnecessary. That’s the 30 percent that goes for tests, drugs, and devices that don’t have any proven benefit but sell like hotcakes anyway.

When Gov. Tim Pawlenty decided to cut medical expenditures during the unallotment process, he took no prisoners. More than 30,000 indigent adults will simply have their medical insurance eliminated starting next March. Medicare would take a higher road, eliminating unnecessary care and costs, not “unnecessary” people.Continue reading…

Will Victory on Health Care Reform Mean Defeat for the Democrats?

Sep 27, 2009• 50

By MATTHEW HOLT

Being a futurist is not really about making predictions, but people ask for them anyway.

So here is one: The way things are trending right now, Obama and the Democrats will succeed in getting a reform bill – and it will cost them the Congress in 2010 and possibly the presidency in 2012. Why? Because it will be ineffective at bringing most voters any tangible benefits soon, and ineffective especially at bringing down the cost of health care.

Obama (along with everyone else) repeatedly talks about “affordable” health care. What the bill is most likely to bring is health insurance reform. This is very important, and will bring tangible benefits especially for those who must go without insurance now because they have “pre-existing conditions.” But there is nothing in the bills that are most likely to pass that will really bring down the costs of health care any time soon. Yet the bills demand that the health plans cover many more people, and the providers treat them, while putting in place no mechanisms that would forcefully and quickly control costs – so costs are likely to go up even faster than before.

The Speech: Could this have been what he planned all along?

Sep 11, 2009

By BOB WACHTER

A conventional look at The Speech:

Obama over-learned the lessons of Hillary-care; he gave Congress too long a leash; he lost control of the message; the wacko’s attacked with a barrage of Socialist/Nazi/Plug-Pulling-on-Grandma-isms; not only was health reform on the ropes but the entire Obama Presidency was in danger of imploding (taking the Dems down with him in the mid-terms); Obama had his back against the wall, a make-or-break moment. Then last night, the President gave a great speech that staked out a thoughtful middle ground; Joe Wilson went rogue, horrifying nearly everyone; this led to real sympathy for Obama and the Dems and a shift in the political landscape. In the end, a mild version of health reform – with nearly-universal coverage, some regulatory protections against the most heinous insurance practices, fee hikes to pay for it all, and a little movement toward improving quality and efficiency – passes.