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Tag: Costs

Letting the Data Speak: Estimating County Health Care Costs In Washington State

Besides state and higher-level health care expenditures, county level HCE are useful, integral really. For example, to promote the Triple Aim (the best care for the whole population at the lowest cost) you need per capita HCE. And knowing those costs at the county level would help a lot. However, county estimates generally don’t exist. They didn’t in Washington State until a client needed cost estimates for our 39 counties. To supply those estimates I used a regression approach resulting in this model:

percaphce = +0.1*percapinc + 247*pctage65 + 0.71*percapmedaid + 10.5*pctrural – 1349

Washington State Context
Before discussing model rationale and county HCE estimation, here’s some context about Washington State and its counties. You might view Washington as a microcosm of the nation. It has mountains, forests, deserts, rivers and lakes, vast rural areas, major cities, diverse populations and industries, and a varied climate. It is distinguished by active volcanoes and a coastal border. There is a wide range of political, social and economic clusters. In 2010 King County, where Seattle is located, median annual household income was about $67 thousand (the U.S. median was roughly $50 thousand) yet there are state counties where one in three children live in poverty. The total population is approximately 7 million with half of those people living in just three of the 39 counties.1 At the other end about a third of the counties have populations of 30 thousand or less.

An Aside about Seattle Weather
You may have been told that it rains all the time in Seattle. I live in Seattle and can tell you that’s a myth. Seattle’s average annual rainfall is less than New York City’s. However, during a good part of the non-summer months Seattle, and Puget Sound generally, is grey and cloudy. I once heard a story about the original settlers who landed in November, 1851, at Alki near present-day Seattle. The story is they were there for months before the weather finally cleared and they saw Mt. Rainier for the first time. I don’t know if that story is historically true, but as a Seattleite it’s believable. Regardless, Seattle is a summer paradise. Seattle summers, like most of Puget Sound, are characterized by pleasant sunny days, cool nights and no mosquitoes.

Background for the County HCE Estimates
Last year Empire Health Foundation of Spokane, Washington, asked me to estimate HCE for the 39 counties in the state. The purpose was for an upcoming meeting of policy types such as county commissioners, members of various health organizations, and other stake holders. A theme would be Donald Berwick’s Triple Aim, so cost estimates were wanted for benchmarks and context. The CMS2 Office of the Actuary had recently developed state HCE.3 If I could build a reasonable regression model on state-level data to predict state HCE, and there were similar variables at the county level, I could use the state model to estimate county HCE. That’s the approach I took. A caveat is my understanding was that acceptance—believability and reasonableness of the estimates to a lay audience—were as important as accuracy.

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Affording the Affordable Care Act

As enrollment in the Affordable Care Act’s (ACA) new health care markets, or exchanges as they are also known, begins, much of the debate over the law is focused on insurance: Who will get coverage? How much will premiums cost? Should our state expand Medicaid? Yet health insurance is not an end in itself.

The point of insurance is to help people get the health care they need at prices they can afford and, in the event of serious injury or accident, to protect them from catastrophically high medical bills. What often gets lost in the debate is how the new law will affect Americans’ ability to buy health care.

While relatively little will change for most people who already get their insurance through employers, an estimated 49 million Americans will be affected by the new law, either becoming newly insured or changing their source of coverage. How will these changes affect consumer health care spending? Will the Affordable Care Act live up to its name?

Of course, ultimately only time and experience will tell. But in the meantime, the law is being implemented, and policymakers and consumers confronting the new health care market are seeking answers about the law’s likely impact, beyond politicized charges and countercharges about whether it will succeed.

Using the COMPARE microsimulation model, my RAND colleagues and I examined how the ACA will affect spending by consumers who are insured for the first time or who change coverage as a result of the law. Specifically, we looked at out-of-pocket spending (spending at the point of sale — copays, deductibles, and coinsurance, which is the fraction of spending not covered by insurance); total spending on health care, which includes out-of-pocket spending plus insurance premiums; and consumers’ risk of high medical care costs.

The analysis focused on 2016, the first year in which penalties for not complying with the individual mandate will be fully in effect, and considered two scenarios: one in which the ACA is fully in place and another that estimates outcomes without the ACA.

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How to Cut Medicare Spending: Attack Large Claims!!

Medicare reform thus far has been focused on $79 office visits, co-payments for home health care, hospital readmissions, Miami infusion clinics, the price paid for scooters, $45 resting EKG’s, the Plan B deductible, etc. These are important areas to pursue — but they are not where the real money is.

While we are debating the ‘doc fix’, the drug companies, device companies and hospitals are backing up the truck and cleaning out the store!

Consider the following paid claims paid by Medicare in Indiana in 2011:

  • 113 Heart Transplants: average payment was $773,877 a piece
  • 96 Bone Marrow Transplants: average payout was $509,637 apiece
  • 129 Liver Transplants: average payout was $367,000 apiece
  • 2,200 Tracheostomies: average payout was $376,103 apiece
  • 1,517 Open Heart Surgeries: average payout was $185,000 apiece

Altogether, the 12,000 largest claims in one state totalled $2.4 billion in Medicare spending. If the other states are consistent, then large claims like these ate up $120 billion of Medicare’s total spending of $545 billion. And when you factor in sepsis treatments, defribillator-implants, and similar claims that cost “only” $75,000 each and so did not make the above list…….. then almost two-thirds of Medicare spending — over $300 billion a year — is focused on just ten percent of beneficiaries.

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What to Do About Futile Critical Care

Thanks to extraordinary advances in medicine, critical care providers can save lives even when the cards are stacked against their patients. However, there are times when no amount of care, however cutting-edge it is, will save a patient. In these instances, when physicians recognize that patients will not be rescued, further critical care is said to be “futile.” In a new study, my RAND and UCLA colleagues and I find that critical care therapies that physicians regard as “futile” are not uncommon in intensive care units, raising some uncomfortable questions.

Of course, we’re fortunate to have such fantastic technology at our disposal — but we must address how to use it appropriately when the patient may not benefit from high-intensity measures. When aggressive critical care is unsuccessful at achieving an acceptable level of health for the patient, treatment should focus on palliative care.

In our study, my colleagues and I quantified the prevalence and cost of “futile” critical care in the journal JAMA Internal Medicine. This can be seen as the first step toward reevaluating the status quo and better optimizing care for critical care patients.

After convening a group of critical care clinicians to determine a consensus definition of “futile treatment,” our research team analyzed nearly 7,000 daily assessments of more than 1,000 patients.

We found that 11 percent received futile treatment, while an additional 9 percent received “probably futile” treatment.

So physician-perceived futile critical care is indeed prevalent. But what about the cost?

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Diagnosing Concussions and Assessing Balance- On Your iPhone

The fall sports season is tantalizingly near; players and fans alike are gearing up for the Friday night lights and Sunday afternoon showdowns. But the season comes at a cost; every bone-jarring hit and wince-inducing header carries the risk of sustaining a concussion.

Most media coverage focuses on the National Football League’s professional players, but 65% of traumatic brain injuries are sustained by children. The majority are thought to be undiagnosed, but the Center for Disease Control estimates that 1.6 to 3.8 million sports-related concussions occur each year. This puts athletes at risk of sustaining a second concussion before their brains are fully healed, leading to longer recoveries, permanent neurological damage, and the potentially-fatal Second Impact Syndrome.

A just-released app hopes to change that. Sway Medical, founded by Chase Curtiss in 2011, aims to help health professionals objectively rate the risk of concussion at the source: on the football field or soccer pitch. On-the-spot concussion diagnosis is just the beginning, though; in the near future, the young company plans to enter the hospital space by the end of the year.

The FDA-approved app, called Sway Balance, uses proprietary software and the iPhone’s accelerometer to assess an athlete’s balance over time. In a phone interview, founder and CEO Chase Curtiss said that the app can be used by a health professional to “set up a baseline,” then “compare an athlete over the course of a season to that established norm.” Poor performance compared to baseline is indicative of a possible concussion.

Health care professionals can purchase a yearly subscription to the app for $199 – a fraction of the cost of a typical balance platform – and the patient-facing app is free to download.

Sway Medical has partnered with ImPACT Applications, an organization which Curtiss described as conducting the “gold standard of concussion testing on the market.” ImPACT uses baseline cognitive testing – verbal and visual memory, processing speed, and reaction time – and synchronous testing immediately after a hit to assess if a concussion has occurred.

“But you don’t have an element of physical control of the body,” Curtiss said – which is where Sway Balance comes in. “[ImPACT’s] interest in us is in pairing a balance test with cognitive testing.”

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Nurses Will Play a Vital Role in the Enactment of the Affordable Care Act

While in the care of a nurse, patients have a champion: a health care professional working to assure timely tests, procedures, and rehabilitative activities that foster better and faster recovery.  Prior to discharge from a health facility, it is often the nurse who assesses a patient’s self-care ability (or access to home caregivers) to provide the type of treatments and medications needed to prevent relapse or even costly return to a hospital.

Responsibility for optimal recovery is of course shared by all health team members, but the unique position of nurses at the patient’s bedside (literally and metaphorically) gives us many avenues to influence care and cure.

Though nurses already play a central role in cost containment, care quality, and patient safety, current trends in nursing education have us poised for even greater contributions. That’s because good baccalaureate and graduate programs in nursing increasingly incorporate quality improvement in care settings. Through attention to ‘microsystem’ processes, we work toward better outcomes not only for individuals but also for health systems as a whole. Nursing prepares leaders, administrators, and researchers who can improve care processes and related analytics around outcomes and cost.

The coming enactment of reforms included in the Affordable Care Act will increase the opportunities for nurses to make both individuals and care systems as healthy as they can possibly be. Patient communication, preventive care, and navigation across the vast medical landscape are well-established foci in the curriculum at major U.S. nursing schools. These areas of expertise could not be more essential now that new insurance options and Medicaid expansion are bringing millions of individuals into a national primary care system already taxed by provider shortages.

Nurse navigators and transitional care nurses are stepping up to central coordinating roles within Accountable Care Organizations—the model wherein participating health care providers are collectively responsible for their enrollees’ care, and also can share savings resulting from efficiency and improvements in that care.

Nursing as a profession actively engages in leading efforts to improve patient care and reduce costs; this is integral to our professional values, knowledge base, and skills. We have earned the trust of Americans (we’re voted most ethical and honest in Gallup polls), and will use that trust, along with our health promotion expertise, to communicate with patients about the best prevention, timely care, and most efficient ways to get needed help as they navigate together through America’s evolving system of care.

Kathleen Potempa, PhD, RN, FAAN, is the Dean of the University of Michigan School of Nursing and a national leader in health promotion, nursing education, and research. Dr. Potempa is the immediate past president of the American Associate of Colleges of Nursing and recently concluded a four-year term on the NIH’s National Institute of Nursing Research Council.

Enabling the Health Care Locavore

Three juicy lemons came through my inbox this week. The NY Times published an expose of why hip replacement surgery costs 5-10 times as much in the US as in Belgium even though it’s the same implant. JAMA published research and a superb editorial on the Views of US Physicians About Controlling Health Care Costs and CMS put out a request for public comment on whether physicians’ Medicare pay should be made public. Bear with me while I try to make lemonade, locally, from these three sour economic perspectives.

Here’s a super-concentrated summary of the three articles: The hip surgery is more expensive because, in the US, as many as 10 intermediaries mark-up the price of that same hip prosthesis. Then, Tilburt et al said in JAMA that “physicians report that almost everyone but physicians bears responsibility for controlling health care costs.” The physicians reported that lawyers (60%), insurance companies (59%), drug and device manufacturers (56%), even hospitals (56%) and patients (52%) bear a major responsibility to control health care costs. Finally, CMS is trying to balance the privacy interests of physicians with the market failure that my other two lemons illustrate.

Can we apply local movement principles to health reform? How much of our money can we keep with our neighbors? What policies and technologies would enable the health care locavore? The locavore health system couldn’t possibly be more expensive than what we have now and, as with food and crafts, more of the money we spend would benefit our neighbors and improve our community.

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Beyond the Affordable Care Act: A Framework for Getting Health Care Reform Right

The following was drafted quite a few months ago, and had its genesis in a list of recommendations for improving the health care system that David Dranove solicited from a number of academics for an issue of Health Management, Policy and Innovation. I’ve dawdled in finishing and polishing it up, but seeing the stimulating reform proposal posted  recently by Jay Bhattacharya, Amitabh Chandra, Mike Chernew, Dana Goldman, Anupam Jena, Darius Lakdawalla, Anup Malani and Tom Philipson motivated me to return and finish it; so here it is finally.

Introduction

One can hardly say that there’s been too little discussion of health reform recently. However, much of the discussion is focused on the ACA and its details. That’s fine, but we’ve gotten very far away from thinking about overarching principles that we think should guide the design of a health system, and what that implies for what it would look like [1]. What follows are some thoughts on what such a health reform might look like. They are informed by my read of the research evidence, and my observations of the U.S. health care system over a long period of time, but should be understood as representing only my personal opinions.

This is not intended as a criticism of the ACA. While the ACA certainly isn’t perfect, in my opinion we’re better off as a country with it than without it. However, there will be modifications to the ACA and other changes to the health system as we move forward, so having a framework to structure our thinking will be useful as we consider these inevitable changes.

Guiding Principles

What I propose below is guided by the following. First, economic efficiency is a goal. This simply means avoiding waste, i.e, trying to generate the maximum benefits net of costs. The second goal is that no American is exposed to excessive risk to their health or finances due to medical expenses. Last, the overarching design principle is to create basic ground rules for the system and then let the system run, avoiding heavy handed regulation or micro management. The key objective of these ground rules is to give participants the right incentives insofar as possible, while achieving insurance objectives. With that in mind, compassionate, efficient health reform would do the following.

Health Insurance Reform

First, eliminate the tax exclusion of employer sponsored health insurance. The exclusion of employer sponsored health insurance from income taxation distorts the demand for insurance. This leads to people with employer sponsored health insurance holding excessive coverage, which drives up medical spending and thus insurance premiums. Ironically, not taxing health insurance ends up making both health care and health insurance less affordable. Eliminating the tax exclusion of employer sponsored health insurance will eliminate a major distortion in health insurance, health care, and labor markets. It can generate substantial tax revenues (it’s estimated that the value of the state and federal income tax exclusion for 2009 was $260 billion[2]), while potentially allowing for lower income tax rates. It’s also worth pointing out that the subsidy is biggest for those who face the highest marginal tax rates, i.e., it’s regressive.

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My Family’s Obamacare

How will the Affordable Care Act affect my family and me? The answer, like the law itself, is complicated. There will be as many stories about health reform as there are families. But I’m confident that most of these stories will be good.

I say this both as a health-policy wonk, with my own health policy consulting firm, and as a husband and father. My wife and I live in Sacramento, California, and we have a five-year-old son. My wife also happens to have a pre-existing health condition. It’s nothing life-threatening but it’s just serious enough that she has been turned down for regular health insurance coverage. Up to a third of Americans face a similar issue, according to the Government Accountability Office.

Finding affordable, high-quality health coverage for my family has been, even for me, an “expert” in the area of health insurance, very complicated and frustrating. So I work with a health insurance broker to understand my options.

Currently, we have “COBRA” coverage for my wife, a type of health insurance you can get for 18 months after you’ve left employer-sponsored health coverage and that is available regardless of health history. It is expensive, though, costing us $655 per month. Then, since I don’t have an employer to provide coverage, I buy a separate policy in the so-called “individual market” to cover my son and myself. That costs $482 per month.

So before we get to any out-of-pocket medical expenses, we’re shelling out $13,644 per year in health insurance premiums. That’s actually quite a bit less than the average premium cost of $18,430 for people with employer-sponsored insurance (as calculated in the Milliman Medical Index of 2013), but the difference is that people with employer-sponsored insurance don’t have to take out their checkbook and pay the entire bill, since their company covers part of it and takes the rest out of their pay.

Our coverage is good for what we pay, but not extraordinarily so. It’s a pair of similar PPO (Preferred Provider Organization) products through Blue Shield of California that have a fairly broad network of doctors and hospitals.

Will my life get less complicated and frustrating on January 1, 2014, the day that health reform coverage starts? I believe it will.

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Managing Physician Skepticism About the Affordable Care Act

Let’s play a game. Today we are going to pretend you are a Vice President for Medical Affairs, or a Chief of Staff, or a health system CEO about to announce a collaboration with a major health insurer like CMS or a regional Blues Plan. You’ve done your homework, read the journals, listened to the experts, anticipated the future and haven’t applied enough skepticism in reading all those pro-EHR and pro-bundled payment posts on THCB.  You really believe payment reform and the EHR are the way to go.

You’ve called a meeting of your organization’s physician staff – the professionals you are counting on, caring for all those patients – and your job is go to the front of the auditorium and convince them that the success of your new venture relies on lowering health care costs with new payment arrangements that align incentives, in tandem with the launch of a new EHR.

Armed with a 30-slide PowerPoint filled with the latest consultant nostrums, you launch into your presentation.  The physicians listen in respectful silence.  After a few easy questions, there’s always that one doc in the back of the room who uncomfortably points out that the evidence about the ability of payment reforms and the EHR ability to optimize costs is uneven and that organization is making a huge bet.  Many of the docs in the room nod in agreement.  That’s when you realize that the insights of all those economists, policymakers, politicians and bloggers mean nothing if you don’t have the physicians on board.

That’s the real message behind this telling survey that was just published in JAMA.  While the overwhelming majority of physicians agreed that they have responsibility for health care costs, higher percentages felt hospitals, health systems, insurers, pharma, medical device manufacturers and personal injury attorneys had a greater mandate.  In other words, everyone is responsible, but the physicians’ duty is superseded by their ethical obligation to advocate for their patients regardless of cost.  The survey also showed that not all physicians are convinced that the electronic health record (74%) is a cost-reducing panacea, while a minority felt readmission penalties (41%) and bundled payments (35%) were likely to lead to lower costs.

So what do you do? How do you convince physicians to get on board and make this thing work? What can you possibly tell them to convince them that they should set aside their preconceived notions about the grand adventure you are all about to engage on is a worthy one?

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