Today THCB is happy to publish a piece reflecting the learnings from Charles Silver and David Hyman’s forthcoming book Overcharged: Why Americans Pay Too Much For Health Care, shortly to be published by the libertarian leaning Cato Institute. In subsequent weeks we’ll feature commentary from the right radical libertarian zone on the political game board (Michael Cannon) and from the left (Andy Slavitt) about the book and its proposals. For now please give your views in the comments–Matthew Holt
There are many reasons why the United States is “the most expensive place in the world to get sick.” In Part 1 of Overcharged: Why Americans Pay Too Much For Health Care, we show that the main reason is that we pay for medical treatments the wrong way. Instead of having consumers purchase these treatments directly, we route trillions of dollars through third-parties payers – both government and private insurers.
Relying on third party payers has many consequences — few of them good. To start with, this arrangement removes the budgetary constraint that would otherwise cap the amount consumers are willing to spend. By minimizing the direct cost of treatments at the point of sale, third party payment arrangements alter everyone’s incentives fundamentally. Consumers no longer need worry about balancing marginal costs against marginal benefits; instead, they have an incentive to use all treatments that have any potential to help, regardless of their prices. When millions of consumers act on these incentives, total spending skyrockets and consumers collectively wind up worse off, because their fixed costs spiral upward too. Heavy reliance on third party payers creates a classic failure of collective action.
It isn’t just consumers. Providers love third party payment as well. And why not? Once providers have access to the enormous bank accounts of third party payers, the sky is the limit, at least until third party payers start setting limits on the amounts they will pay and saying no to unproven and/or cost-ineffective treatments that doctors want to provide and patients want to receive.
Not surprisingly, it has turned out to be extraordinarily difficult and politically unpopular for third party payers to set such limits. Obamacare’s appeal derives largely from two requirements: health insurance plans must accept all comers, including applicants with preexisting conditions that require expensive medical treatments; and health plans must provide unlimited benefits (i.e., no annual or lifetime spending caps). From an individual consumer’s perspective, what could be better than having access to unlimited amounts of money to spend on medical needs? From society’s point of view, though, this combination is a recipe for disaster.Continue reading…
Between September of 2016 and last month, CMS released “final evaluations” of all three of its “medical home” demonstrations. All three demos failed.
This spells bad news not just for the “patient-centered medical home” (PCMH) project, but for MACRA. The PCMH, along with the ACO and the bundled payment (BP), is one of the three main “alternative payment models” (APMs) within which doctors are supposed to be able to find shelter from the financial penalties inflicted by the MIPS (Merit-based Incentive Payment System) program which was recently declared to be unworkable by the Medicare Payment Advisory Commission. Medicare ACOs and virtually all Medicare BP programs are also failing. Thus, we may conclude what some predicted a long time ago – that neither arm of MACRA (the toxic MIPS program and the byzantine APM program) will work.
In this post I describe each of CMS’s three PCMH demos, review the findings of the final evaluations of the three demos, and then explore the reasons why all three demos failed. I’ll conclude that the most fundamental reason is that the PCMH is so poorly defined no one, including the doctors inside the PCMHs, knows what it’s supposed to do. That’s not to say that the hopes and dreams of PCMH proponents were never clear. They have always been clear. PCMH proponents have said over and over the PCMH is supposed to lower costs and improve care. But a clear expression of hopes and dreams is not the same thing as a clear description of what it is you’re dreaming about.Continue reading…
In the depths of winter, America was shocked by the video of a young, bruised and confused woman being discharged from a Maryland Hospital – alone into the cold night, wearing nothing but a thin hospital gown and socks. Hospital security officers dropped her at the nearby bus-stand and then briskly wheeled away the chair in which they had brought her out, deftly avoiding the questions of a concerned citizen who bore witness to this inhumane act. Most healthcare workers in the U.S., physicians and nurses, allied health professionals, and janitors alike felt a wretched sadness watching the video, recognizing as they did another sign of the sickness that ails the healthcare system today.
As our culture has become increasingly more consumeristic, healthcare has become increasingly more commercialized. A “provider interaction” has become a commodity; and hospitals have become the factories producing that commodity. This has shifted the balance of power from healthcare providers to professional managers. This change, ostensibly done to provide doctors more time to practice their art, instead has insidiously but surely changed the culture of our healthcare institutions.
The daily-lived values of our institutions have changed from the core values of medicine – caring, compassion and empathy for the patient, to more corporate values of productivity metrics and profits. What was to be a properly balanced socio-economic model for hospitals has gone tragically wrong. The goal was efficacy – efficient and effective patient-centric care. However, the disproportionate focus on efficiency, achieved by applying industrial engineering and productivity standards to patient care, has compromised effectiveness. More importantly, this has eroded the core of patient-centric care – compassion and empathy. That the CEO of the Maryland hospital insisted that the patient was provided appropriate medical care, even as he acknowledged the failure of humanity and compassion, sadly demonstrates that compassion and empathy are no longer the core values of healthcare.
The University of Southern California (USC) appears to look the other way when male physicians harass or assault women. In reality, sexual violence spares no occupation, including medicine, but the way an organization responds to crime against women indicates a certain level of integrity. The World Health Organization estimates sexual violence affects one-third of all women worldwide. In a nation where women make up 50% or more of each incoming medical school class, only sixteen percent of medical school deans are female, making gender imbalance in leadership positions nearly impossible to overcome.
For the second time in less than a year, USC President C.L. Max Nikias is grappling with sexual misconduct allegations against a physician faculty member. Complaints go back to the early 1990s from staff and patients about inappropriate comments and aggressive pelvic exams done by Dr. George Tyndall, the only full-time gynecologist for the past three decades at the campus clinic. USC ignored complaints until a nurse contacted the campus rape crisis center.
Dr. Tyndall was initially suspended pending inquiry and forced to resign shortly thereafter. More than 100 complaints have been received and five are suing USC.Continue reading…
Of my time arguing with doctors, 30 % is spent convincing British doctors that their American counterparts aren’t idiots, 30 % convincing American doctors that British doctors aren’t idiots, and 40 % convincing both that I’m not an idiot.
A British doctor once earnestly asked whether American physicians carry credit card reading machines inside their white coats. Myths about the NHS can be equally comical. British doctors don’t prostate every morning in deference to the NHS, like the citizens of Oceania sang to Big Brother in Orwell’s dystopia. Nor, in their daily rounds, do they calculate opportunity costs for keeping patients alive on ventilators.
Conversations such as this are vanishingly rare.
Administrator: “It’s costing an arm and leg keeping this sick baby alive – to balance the annual budget we need to stop dialyzing a granny.”
ICU doctor: “We’ll have to send poor Ethel to her grave. That’s a shame. She was beginning to grow on me.”
Health Ethicist: “Wait, let me check with National Institute of Clinical Excellence, the rationing experts, who should be relieved of intensive care first. Perhaps it should be Winston, not Ethel – because Winston is an alcoholic. We need to make rationing scientific and fair.”
In 2014, the majority of international health aid was dedicated to HIV. So, one might reasonably assume that this is the largest health problem facing the world. Yet, HIV only constitutes 4% of the global burden of disease. In 2014, noncommunicable diseases (NCDs) made up 50% of the entire disease burden, but only received 2% of all global health funds.
The disease burden of NCDs is fast outpacing that of infectious diseases. Despite this, the proportion of global health financing dedicated to combatting NCDs has remained constant over the past 15 years at 1 to 2%.
Currently, 32.6 million individuals are living with cancer (diagnosed in the last five years). In 1970, 15% of new cases were in low- and middle-income countries. In 2008, 56% were in low- and middle-income countries. By 2030, this proportion is expected to be 70%. So, not only is the burden of NCDs rising globally, but it is also beginning to disproportionately affect countries with the least resources to deal with them.
But, if NCDs have been steadily increasing in low- and middle-income countries, why has global action not followed suit? Continue reading…
The Administration proposal that would enable small employers to band together to purchase health insurance by forming Association Health Plans has several good features. Large companies do pay about 15% less, apples-to-apples, for health insurance than small businesses because they negotiate lower administrative fees, get larger discounts on health care prices and avoid premium taxes and risk charges by self-insuring. Allowing small business to replicate what boils down to volume discounts also appeals politically to many as a market-based alternative to government intervention. Reliance on Association Health Plans could result in substantial volume discounts, but, in the end, would be like paying $10 for a tube of toothpaste that retails for $100, a big discount and a rip-off price.
Even though the largest companies get very deep discounts, there is substantial research showing that their net costs are much higher than everywhere else because we in the United States pay higher prices for health care goods and services. One need to look no further than the benchmark large corporate purchasers who continue to pay about 40% or 50% more than Medicare for the same health care to see how excessive health care prices for private payers are. And this disparity is likely to get worse. While hospitals gobble up other hospitals and doctors’ practices and gain near monopoly market power to raise prices, employers of all sizes remain highly fragmented and, as a result, impotent price negotiators.
A better approach to health care cost containment than Association Health Plans hides in full view. Continue reading…
Intrigued by many things in my first few days in the U.S., what perplexed me the most was that there seemed to be a DaVita Dialysis wherever I went; in malls, in the mainstreet of West Philadelphia, near high rises and near lower rises. I felt that I was being ominously followed by nephrologists. How on earth could providers of renal replacement therapy have a similar spatial distribution as McDonalds?
After reading Friedrich Hayek’s essay, Use of Knowledge in Society, I realized why. In stead of building a multiplex for dialysis, which has shops selling pulmonary edema-inducing fried chicken, DaVita set shop where people lived or hung out. It wasn’t a terribly clever business plan but its genius was its simplicity, its humility. If the mountain will not come to Muhammed, Muhammed must go to the mountain. DaVita went to the masses.
The link between Hayek’s wisdom and DaVita’s business plan may seem tenuous. But Hayek has been misunderstood, particularly in healthcare. Many a times and oft in the policy world Hayek has been rated about money and usances. This is because of a misperception that Hayek was all about profit and loss, which are anathema to healthcare. Hayek’s message was simple: local knowledge can’t be aggregated. From this premise sprouts others – dispersed agents in certain times and places possess fragments of knowledge which don’t come easily to central planners.
For Hayek, socialism and capitalism weren’t moral but epistemic issues. Socialism would fail because of a coordination problem – markets would succeed because they could use price signals to coordinate. Healthcare doesn’t use price signals to coordinate, not explicitly, at least. Nor does it capitalize on dispersed agents – on local knowledge. Hayek, a supporter of universal healthcare, didn’t specifically discuss healthcare in his essays. Nonetheless, it would be a useful intellectual exercise to speculate how Hayek might have applied his wisdom to modern healthcare.
What does local knowledge in healthcare even mean? Stated in a rather unlettered way, it is the provision of healthcare locally. AEDs are no good if they aren’t located where people congregate. The value of local presence of medical facilities, particularly in poor neighborhoods, is hardly rocket science. Just as great cities grew near rivers, great hospitals germinated in poor neighborhoods. But, with growing centralization of healthcare, with hospitals becoming multiplexes, futuristic cities with a distinct architectural phenotype, different from the neighborhoods they serve, the value of decentralization can be missed.
I’m not a parent. But I was once a gymnast. Now I teach at a medical school. As far as my own injuries, I consider myself lucky; I can walk through airport security without setting off any metal detectors. But I certainly have had my fair share of visits to the emergency department, the orthopedist, the chiropractor, and the physical therapist – as an adult and as a child, at times without a parent present.
We heard so many powerful statements from young women at Larry Nassar’s sentencing hearings. As I read and listened to these women confront their abuser, I was empowered by statements like those of Kyle Stevens, who said: “…little girls don’t stay little forever. They grow into strong women that return to destroy your world.”
But I wondered if parents of male athletes were paying as much attention to the Nassar story as were the parents of young girls. Now that the first male gymnast has come forward to accuse Nassar of sexual abuse perhaps they will.
When Russian forces stormed the school held hostage by Chechen terrorists, over 300 people died. The Beslan school siege wasn’t the worst terrorist attack arithmetically – the fatalities were only a tenth of September 11th. What made the school siege particularly gruesome was that many who died, and died in the most gruesome manner, were children.
There’s something particularly distressing about kids being massacred, which can’t be quantified mathematically. You either get that point or you don’t. And the famed Chechen rebel, Shamil Basayev, got it. Issuing a statement after the attack Basayev claimed responsibility for the siege but called the deaths a “tragedy.” He did not think that the Russians would storm the school. Basayev expressed regret saying that he was “not delighted by what happened there.” Basayev was not known for contrition but death of children doesn’t look good even for someone whose modus operandi was in killing as many as possible.
There’s a code even amongst terrorists – you don’t slaughter children – it’s ok flying planes into big towers but not ok deliberately killing children. Of course, neither is ok but the point is that even the most immoral of our species have a moral code. Strict utilitarians won’t understand this moral code. Strict utilitarians, or rational amoralists, accord significance by multiplying the number of life years lost by the number died, and whether a death from medical error or of a child burnt in a school siege, the conversion factor is the same. Thus, for rational amoralists sentimentality specifically over children dying, such as in Parkland, Florida, in so far as this sentimentality affects policy, must be justified scientifically.
The debate over gun control is paralyzed by unsentimental utilitarianism but with an ironic twist – it is the conservatives, known to eschew utilitarianism, who seek refuge in it. After every mass killing, I receive three lines of reasoning from conservatives opposed to gun control: a) If you restrict guns there’ll be a net increase in crimes and deaths, b) there’s no evidence restricting access to guns will reduce mass shootings, and c) people will still get guns if they really wish to. This type of reasoning comes from the same people who oppose population health, and who deeply oppose the sacrifice of individuals for the greater good, i.e. oppose utilitarianism.