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POLICY: Becker-Posner miss the point

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And in, I hope, the last comment on the Cutler piece, two venerable Univ of Chicago economists debate it on their blog, the Becker-Posner Blog

Posner ascribes the problem of the high cost of adding a year of life to an elderly person to the desire of people near the end of life to spend whatever it takes to stay alive. Other than that’s not how people at the end of their life usually feel, the problem with these rational analyses is that they don’t understand how health care works. Decisions about end of life care are not made by patients–they are made by doctors and health care organizations. Wennberg’s work clearly shows that. The enormous practice variation in end of life care is a factor of cultural variation amongst physicians not one of patient choice—the patient don’t know about it. And it applies whatever the insurance status of the individual because it’s ingrained in local medical cultures.Other countries have got their physicians somehow to accept that (for instance) heart surgery or kidney dialysis on a 95 year old with a life expectancy of 6 months is not good medical practice. Here we routinely do it (as in Posner’s father’s case).Stopping that absurdity is the solution to our health care crisis as that’s where the vast majority of the unnecessary spending is. But to do that we have to change medical culture, and rather more difficultly, health care system incomes!

TECH/POLICY: A prime example of how health care works, sort of.

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The continuing fuss about the Cutler article rumbles on. Here’s the Scientific American article that I’m quoted in. You’ll note that I may seem a little extreme (“rubbish”) but I was interviewed before I’d seen the article (or even knew that it was coming out!) and the reporter told me that the number for a year of life was between $100,000 and $200,000. But the question is still “worth it compared to spending the money on what else?”

Meanwhile the answer from David Henderson at Hoover (the guy I challenged on the local NPR call in show —on the MP3, my piece is cut out totally! The response is at 44.14) remains “we’ve picked the low hanging fruit, so it will be more expensive to move the needle as the years go by.” I wasn’t given the chance to say a) the industry has co-opted the government so it’s not like there’s a real “choice” in how we spend the money, and b) perhaps we’d get better value for money picking low hanging fruit in some other area of our society. In other words there are diminishing marginal returns from the flat of the curve medicine—so perhaps we should think of spending the money elsewhere? Meanwhile a few others have picked up on that. In the Huffington Post, Merrill Goonzer (yes that’s really a name!) from the Center for Science in the Public Interest points out the other part of the problem—“we may be paying for an Aston Martin but we’re getting a Ford”.

And when the status quo proponents say “costs are going up in other countries too” you can note that in 1970, health care costs in Canada and the US were the same as a share of GDP—and they’re not now! And in the 1990s both Japan and Canada reduced health care costs as a share of GDP. So societies can make choices about this, even if ours politically won’t. In fact in the last decade the Brits made a conscious choice to increase the amount of money they spend on health care—with some interesting consequences.

Of course the whole thing is totally bogus, as no one thinks of these things other than as ex-post facto justifications, and pretty weak ones at that. There’s a perfect example in the NY Times this morning. It says that Cardiologists Question the Risks in Using Drug-Coated Stents, a story that’s been reported on for a while, and includes a new Swiss study that says that only one in three cases is the use of the drug eluting stent correctly indicated.

Of course three years ago a Stanford health services research group suggested that stents as a whole weren’t worth it on a cost-benefit level, and got totally ignored other than on this blog! So there’s a chance (and it’s a slight chance) that medical counter indications might, just might, slow the spread of a technology that is basically unproven. There’s no chance that saying it’s not cost-effective will slow it at all.

Which kind of proves that arguing about the Cutler article is a waste of time!

HEALTH PLANS/POLICY: A health plan CEO who genuinely believes in universal coverage

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Health Plan CEO Georganne Chapin believes managed care can evolve with universal coverage! I thought her money quote was pretty amusing.

So then, if Americans are interested in universal coverage, the industry supports it, and the money is already in the system, when will it happen? “In 1996, I said it would come in 10 years,” Chapin says. “We still have four more months.”

Of course she runs a non-profit Medicaid HMO, so her attitudes may not represent those of a typical AHIP member CEO!

POLICY: Starring on NPR

Not quite, but the local NPR station had a show on poverty, the middle class et al, and the TCS/Hoover /ExxonMobil representative David Henderson came out with the standard crap line about how we were getting more for our health care dollars. Given the recent Cutler piece I just had to pick up the phone and tell him that we weren’t. Unfortunately they cut me off before I had a chance to respond to his "well you go after the hanging fruit first so it’s bound to get more expensive" argument. He failed to note that there’s a point at which you stop going after the fruit well out of your reach, but that we live in a society in which the government has abdicated its fruit grabbing responsibility  and has a allowed a system in which we bow down to the orchard owners and the companies who make ladders.

Meanwhile, his argument in favor of greater income inequality (which is what I originally called the show about) is that we have fluid classes so you’re not surveying the same people all the time…..sadly they’re not as fluid as they are in those stagnant European nations. But it sounds like Henderson got himself in the right class, and I guess it’s just tough luck on those who got themselves in the wrong one.

I’ll get the audio link up when it’s available….

QUALITY/TECH: Book reviews on quality and technology strategy

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So it’s time for book reviews on THCB.  The first book I will talk about is an excellent business written by — full disclosure — my good friend Tony Seba. For several years now Tony has been teaching a course on high-tech marketing strategy.  I used to think this was just a chance for him to hang out at Stanford and spend some time in New Zealand, but in fact the course he has developed combines interesting and relevant business cases with general marketing lessons, and most importantly practical explanations of what to do about it if you are creating a business.Now Tony has put his course into a book, so you can get the benefit of his wisdom, without having to go to class.  The book is called Winners Take All – The 9 Fundamental Rules of High Tech Strategy.  I was really very surprised when I read it because the articles and examples that Tony brings up are things that may appear obvious. But from my time working in even small corporations, I know how hard it is for people to organize and coalesce around getting those things done.  Tony’s basic thesis is that for most high-technology markets, one corporation tends to dominate an entire product line.  Of course that is not a new theory, but what Tony has successfully done is to identify nine rules that allow companies and products which are in different parts of their life cycle to effectively dominate their markets.

What is particularly useful about the book, beyond the interesting stories and insight you will gain from reading it, is that there are practical ways in which you can put your own project. product or company within the context of the rules.  Although Tony is concentrating on high-tech marketing, I think this has  many applications for projects and products within the world of healthcare and healthcare technology.  And of course any of those of you reading this who are thinking about developing new products for sale to the healthcare industry will have to take the marketing rules deeply to heart.

Interestingly enough, even though I’m pretty sure Tony could have got a standard publishing contract for his work, he decided to publish it at Lulu.com in what he calls a beta version.  His argument is that it’s better to get the book out now and to get feedback and incorporate it into the rest of his course and his work, then to take on the traditional 18 months publishing process. But if you go and buy the book at Lulu, which I highly encourage, you won’t be able to tell any difference from a book you’d get in regular store (unless of course you choose to download the PDF version).  So not only are you looking at the future of high-tech strategy, you are also looking at the future of publishing.  Given that one of the industry’s that has been revolutionized by on demand online access to their product is low recording business, and it’s one that Tony featured in the book, I suspect that the publishing industry should be similarly concerned.

The other book I am reviewing is of a somewhat different flavor. It is one that has been advertising on THCB for the past couple of months, so I felt honor bound to take a quick read.  The book is called On Track to Quality, written by James Todd, a professor of pediatrics at Denver Children’s Hospital. Essentially James has developed ten major rules around quality, many of which will be familiar to those of us who have tracked the quality movement in healthcare and outside in the past two decades.  I was glad to see the pretty early on in the book he gone in favorable mentions to the greatest book about quality of all time, Robert Pirsig’s Zen and the Art of Motorcycle Maintenance, and in fact the style of Todd’s book reflects some of the qualities of that hippy classic.  In the case of On Track to Quality instead of it largely being a discussion between a man, his alter ego and his son on a motorcycle journey, it is a discussion between a group of unlikely passengers on a snowbound train heading across the Rockies.  However the passages include enough characters that one suspects that Todd has had some interesting beyond those one would normally associate with an academic pediatrician!

However when one strips away the somewhat stylized way that the material is presented, again in a fairly brief book — it’s just over a hundred pages -there is very useful information about what the quality movement is all about, and a holistic view of how it might be applied to medicine and healthcare. I particularly liked the way each chapter ends with a summary of the rule, and that you could build out the 10 rules and make them relevant to your own situation.

POLICY/THE INDUSTRY: Cutler used as propaganda–is that how he likes it?

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So David Cutler’s piece which I mentioned in passing because I was asked about it yesterday is now out. (Abstract is here). And although I don’t have access to the whole thing (being a mere blogger and too damn cheap to pay the NEJM’s freight), the results are what you’d expect:

From 1960 through 2000, the life expectancy for newborns increased by 6.97 years, lifetime medical spending adjusted for inflation increased by approximately $69,000, and the cost per year of life gained was $19,900. The cost increased from $7,400 per year of life gained in the 1970s to $36,300 in the 1990s. The average cost per year of life gained in 1960–2000 was approximately $31,600 at 15 years of age, $53,700 at 45 years of age, and $84,700 at 65 years of age. At 65 years of age, costs rose more rapidly than did life expectancy: the cost per year of life gained was $121,000 between 1980 and 1990 and $145,000 between 1990 and 2000.

And course so are the conclusions.

On average, the increases in medical spending since 1960 have provided reasonable value. However, the spending increases in medical care for the elderly since 1980 are associated with a high cost per year of life gained. The national focus on the rise in medical spending should be balanced by attention to the health benefits of this increased spending.

How anybody without the benefit of a tenured Harvard professorship can possibly describe spending $145,000 to gain one extra year of life expectancy from somebody who is over 65 as “reasonable value” boggles the mind. But I guess he’s not actually quite doing that. But he does say that the five fold increase in the cost of gaining an extra year of life over the period is reasonable value. But that of course is the money quote that will be picked up (see below for more).

Briefly, as I tried to explain to the Scientific American journalist, there are three main ways that economists try to ascribe value to life. (I hope I’ve got this right it was a long time ago when I looked at it!) Those are roughly what somebody spends, what somebody makes, and how much they would spend to avoid death.  In a long article about him in the New York Times Magazine last year, Cutler estimated that it cost more than $100,000 to save a life by installing airbags in cars, and therefore that is a reasonable number. (I guess we should be thankful he didn’t base it on the cost of extending Terry Schiavo’s life, including whatever it cost to fly air force one from Crawford to D.C.!)

But of course no one sat down and prospectively calculated out the value of lives that would be saved by introducing airbags.  Most safety innovations were forced on the automobile industry by people like Ralph Nader who couldn’t give a rat’s arse about cost effectiveness. And after that auto industry marketing people began to realize that safety was a feature not a bug and therefore used the power of commercials to explain to American housewives than you needed airbags and SUVs (even though it turned out that SUVs make driving less safe!).

In reality, the average American working income is just above $40,000 a year.  That would suggest that the average working American’s life is worth somewhere below $50,000 a year.  According to Cutler’s calculations, it has cost some $36,000 to gain an extra year of life.  But of course all those years of life that are being gained are at the end of life, when incomes are considerably lower, so it’s hard to tell why that $36,000 number is a reasonable value, when it exceeds the total value that the economy as a whole places on an average retired individual (ignoring of course what the health care system makes off that average retired individual!).

But then again this is just a wonky economic argument, right?  We all know that nobody sits down to figure out what the value of life is or what they’re adding to the general good when they implement a new healthcare technology.  Instead the industry tries to figure out what they can get away with charging Medicare and other payers.  No one makes the calculation about the value of a year of life, let alone whether that money would be better off being spent on something else entirely, like education, protecting the environment, handbags for Paris Hilton, or more frappuchinos.

But the industry is totally happy to use Cutler’s arguments — very much out of context — to praise ex-post all manner of technologies, procedures and services that they’ve foisted on the American patient and taxpayer. The ink was barely dry on the editions of the New England Journal, when Advamed, an umbrella group for all kinds of medical technology companies, was out with its press release. Its chief lackey, one  Stephen J. Ubi, was certainly not looking this gift horse in the mouth:

"When health care dollars go toward procedures and products that make a difference, that’s when our health care system is at its most effective," Ubl said. "Medical device and diagnostic interventions have played and will continue to play an essential role in providing this value to the health care system and society through faster recoveries, improved treatments, and more precise diagnoses."

Ubl was commenting on the August 31 article by David M. Cutler, Allison B. Rosen and Sandeep Vijan. Studying health and spending trends from 1960 to 2000, they found that despite dramatic increases in health expenses since 1960, the return on medical spending is high.

It is by no means the first time the Advamed has come out with similar tosh — in cooperation with some other healthcare industry front groups they published something like this back in 2004. That was mostly remarkable for the fact that the instant video fake news clip that was distributed with it included “reporting” from one Karen Ryan who’s voice also showed up in a instant use fake news clip about the Medicare bill distributed by the Bush administration,much  to the amusement of the leftie blogosphere. While rational academics like the Wennberg crowd, Enthoven, Fuchs, Steffi and David, et al will tell you that we are wasting huge amounts of money in the way we finance and deliver healthcare, as noted at length on THCB last week the loonies out in left or is it right field seem to have grabbed hold of the megaphone. Cutler is doubtlessly doing good work in terms of calculations of cost per increased year of life expectancy. But given that he won’t call a spade a spade, on the “value” issue, the overall ramification of the work he is doing — and the crazy statements made by a row Robert Fogel the noble laureate from Chicago which Gina Kolata wrote about last week — is that the real debate about how to fix our financing system and deliver some type of cost-effective medical care in this country is getting pushed to the sidelines. That of course is just how the industry wants it.Which of course makes me very suspicious about why the not exactly purer than pure New England Journal is one publishing this somewhat obscure economic analysis in its limited policy section, as opposed to some real debate about how to fix the healthcare system’s problems. Is it possible that they too are bending before their advertisers? Perhaps Roy Poses will find out for me!

THCB/HOSPITALS: Google plus THCB makes for some interesting stuff!

So a little over a year ago, I wrote a piece following a WSJ article about a surgeon in S. Dakota, who’d opened a specialty hospital and done very well out of it. Today I was futzing around on my blog and looked at it again.  What amazed me was that there were seven long comments that were posted more than a week after the article was written, and three of them were posted more than 6 months after it was written…and pretty interesting they were too. All mostly from people who know the situation very personally…

This is yet more power to the testament of Google, which has swept up the THCB piece in with the other stuff about the surgeon Larry Teuber. Yup, in the Google search on Teuber the WSJ article is the first two filings, a very critical review on a site called Rate My Prof of a poor agriculture prof at UC Davis is third, and the original THCB article is fourth.

So I guess that as more and more blogs get written, more and more people will be recording information of all kinds. And more and more opinions of people who know what’s happening directly will come out.

And let’s not get started on Yelp and its reviews of doctors. Let’s just hope that health care consultants are not their next target!

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