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POLICY/FRIDAY FUNNY: Controlling Health Care Costs From the Bottom Up, By Michael L. Millenson

• 15

THCB regulars know that we love Michael Millenson, even if he is a swiftboater! Like some of these very vigorous THCB commenters, he’s been thinking a little about transparency!

News item: The Bush administration says it will publish the prices Medicare pays for common procedures in order to encourage comparison shopping. A private Web site immediately began posting some hospital prices. Mr. McClellan, is it? You’re here for the… ….colonoscopy. The Internet Special. I believe it’s $1,299.95 through the end of this week.

Quite right. As I’m sure you know, many people are still a bit squeamish about the idea of a tube being inserted up their…lower intestine, so we’re offering a real “bare bottom” price, if you get my drift. Before we begin, though, there are a few questions I need to ask. First of all, would you like anesthesia?

Don’t I need anesthesia? Mr. McClellan, we don’t believe it’s our role to dictate to consumers what they “need.” Should you wish to decline anesthesia, we will provide you with a set of headphones, loud music and a shiny new bullet to place between your teeth. However, in that case, we recommend strongly that you select the “extra-narrow gauge” endoscope equipment package. Endoscope? The tube that we put up your… Umm, I get the picture. But I’m still a little confused about the anesthesia not being included.

When you fly coach, Mr. McClellan, do you still expect the airline to provide you with a lavish meal? Our hospital will never compromise on your safety, but surely you cannot expect that in today’s competitive environment we will subsidize your comfort. I apologize for even mentioning it. How much does anesthesia cost? That depends on how long you would like to be sedated. We have very reasonable prices on “deep-sleep” packages that come in 15-minute units. You the empowered consumer decide how long you want to be sedated. We also offer the “all you can sleep” option, where we keep you sedated from just before the procedure starts until your doctor is totally finished. We think of this as being analogous to buying the full tank of gas at the car rental counter. Most of our customers believe the peace of mind this option provides is well worth the small extra expense, particularly if their colonoscopy takes longer than expected. I certainly agree with that. By the way, how long does a colonoscopy take? It varies, but with Dr. Hoover, about forty-five minutes. Dr. Hoover? Dr. Hoover comes standard with the colonoscopy package you selected. Quite frankly, since he retired from full-time practice a couple of years ago, the other physicians have found it close to impossible to match his fee. Naturally, at this price we can’t allow any substitutions. Now, if you don’t have any questions you’d like to ask me, I think we can begin. I do have just one question. If during my colonoscopy Dr. Hoover discovers a suspicious growth that might be cancerous, what happens next? Unfortunately, our hospital has found that it isn’t really profitable to get involved in the “post-surgical” part of the business. However, one of our customer service representatives will be delighted to provide you with some shopping tips on “pathology labs.”

 

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Copyright 2006, Michael L. Millenson. Michael is an author, health-care consultant and visiting scholar at Northwestern University’s Kellogg School of Management. He can be reached at: m-*********@**********rn.edu <b<

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POLICY: Nation’s Mental Healthcare System Gets “D” Grade,by Dr. Deborah Serani

• 2

There’s been some fuss about the recent grading of America’s mental health care “system”. Dr. Deborah Serani who’s usually to be found over on her Psychological Perspectives blog, explains what the new NAMI grading is all about, and no we don’t look good:

The National Alliance on Mental Illness (NAMI) the nation’s voice on mental illness, presented the first comprehensive state-by-state analysis of mental health care systems in 15 years in March 2006. Every U.S. state was scored on 39 specific criteria resulting in an overall grade and four sub-category grades for each state.

Nationally, the mental healthcare system is in trouble. It’s overall grade average is a "D". Five states receive grades in the B range. Eight receive F’s. None received A’s. And several states obtained a grade of "U", indicating an unresponsive score to the research data.In recent years, most =U.S. states either have reduced funding of services for people with serious mental illnesses or have level-funded these programs. The impact of inadequate funding has been devastating – we now see overflowing emergency rooms with no place for people to go, increased numbers of people with serious mental illnesses in jails and prisons, and large numbers of people without access to desperately needed services.Research shows that treatment works — if you can get it. But in America today, it is clear that many people living with the most serious and persistent mental illnesses are not provided with the essential treatment they need. As a result, they are allowed to falter to the point of crisis. The outcome of this neglect and lack of will by policymakers is catastrophic.The 230-page report, including individual state narratives and scoring tables, is available on-line at www.nami.org/grades.

HEALTH PLANS: More on buying individual health insurance, update on the Blue Cross cancellations

• 20

This is turning into pretty serious doodoo for Wellpoint.

Yesterday, WellPoint’s Blue Cross of California and its subsidiary BC Life & Health were sued for canceling policies retroactively. Of course the only policies they’ve been canceling were ones that they had to pay out on. Now health plans are in a bind in the individual market. Because we don’t have a universal risk pool, they are bound to be adversely selected against. (I explain why in my  Yin and the Yang article over at Spot-on)

But speaking as someone who just went through the rigmarole of filling in lots of application forms to get my own individual insurance, it’s clearly impossible to put your whole medical history on the form. The whole process, as I described a while back, is a complete disaster. In my case, having filled in exactly the same information on several places on the same identical (but separate) forms for both HealthNet and Blue Shield of California, they both wanted "more information". HealthNet sent me yet another form asking for exactly the same information as they’d asked for on the previous form. I put it on there and sent it back with a strong note telling them that they already had that information and that this was a waste of money. The good news is that they approved me at the underwritten rate (despite my gout and knee surgery history!).

Blue Shield instead wanted to go to the source. They wanted permission to get medical records from a doctor I’d seen last 18 months ago. I gave it to them, or rather to a unit they had subcontracted to. Apparently they have asked twice and haven’t got them yet. All that doctor did was write me a Rx for the gout medication which I declared on the form. The real joke is that Blue Shield was my insurer then and therefore already has this information in its own system somewhere, plus I put it in the application form. I haven’t seen that doctor since–for all he knows I could have terminal cancer.

The suits also accuse Blue Cross of using a vague, confusing and
ambiguous medical history questionnaire in an effort to trick
applicants into making mistakes that the company can use later to dump
them.

Too bloody right! The application process is so screwed up that there is no way that either the insurer won’t miss things, nor that someone who has a lifetime of medical records scattered all over the place won’t innocently miss something either. And you can be damn sure that the attorneys will find the best looking cases. And so they have. Pregnancy as a pre-existing condition? Oops.

Blue Cross also allegedly canceled coverage for
Laura Khatchikian of Los Angeles when she became pregnant with twins —
more than a year after she began paying monthly premiums.According to the suits,
each patient filled out the application honestly, was accepted for
coverage and paid premiums for months before being diagnosed with a
serious condition of which the patient was previously unaware. Yenny Shu of Los Angeles, for instance, says her coverage was canceled
after she was diagnosed with breast cancer at 46. In its letter
rescinding her coverage, Blue Cross allegedly told her that she failed
to disclose her exposure to the hepatitis B virus when she was a child.Other patients say they had, in fact, disclosed the information Blue Cross accused them of omitting. Dawn
Foiles of Riverside, for instance, says Blue Cross dropped her after
she had back surgery to replace a disc. Blue Cross, according to the
suit, rescinded her coverage because she purportedly failed to disclose
a history of back problems and previous surgery. But Foiles said she had listed a 1997 herniated disc operation on the insurance application in 2003.

The suits accuse Blue Cross of operating a "retroactive review
department" that systematically cancels policies that result in large
claims. It also claims that that Blue Cross looks for innocent
misstatements on applications to use as pretext to cancel coverage.

Now the state regulators are getting in the game, and by the way, it’s now a nasty big out of state insurance company that they get to have a go at!  California state insurance commissioner John Garamendi, who regulates BC Life & Health, and the Department of Managed Health Care, which regulates Blue Cross, are involved in the investigation. Garamendi, who has a history of handing out large fines, said "If we see a pattern with Blue Cross Life & Health, they are in deep trouble."

Of course given the popularity of health insurers, if it’s shown that they actually have a unit dedicated to retrospective policy cancellation, as the plaintiffs allege, Blue Cross can’t be looking forward to a jury trial either.

After all, once the jury understands the concept of a medical loss ratio, and how the insurers have been keeping a bigger and bigger percentage of the ever increasing premium dollar over the last five years–something that even I hadn’t noticed until Jonathan Cohn pointed it out to me recently–this could get really ugly. There’s plenty of evidence of very aggressive underwriting behavior by the biggest players, and Blue Cross has a history of being uglier than most. Plus Len Schaeffer came right out and explained that pricing and underwriting is how they make their money and the most important part of their operation. If I was the plaintiff attorney I’d be salivating for the chance to read that section of the McKinsey interview to the jury.

Something tells me that Wellpoint and the rest of the insurance industry should figure out where this can end up, and that they’d better get back on board with a policy initiative that gives them a role in the future. Remember the Clinton plan? After all Schaeffer, Glasscock, Rowe, McGuire and the rest of them have made their money (and plenty of it), but the next generation of execs and employees of these big insurers might well want to have a future. And this kind of story pours lots of flame on the single payer fire. The odds that there will be no insurance industry in 10 years time just got shorter.

TECH: JSK on PDAs, me on Epocrates, and eRx

• 5

The ever wonderful Jane Sarasohn Kahn has written a pretty definitive piece on physician PDA use at iHealthbeat. (Yes, Jane is a co-author and long time friend, so I’m biased, but she is wonderful). It’s called PDAs Reach the Tipping Point . The point is that somewhere between 50% and 60% of doctors and plenty of other clinicians are using PDAs for reference use.

Epocrates is a big reason why. I met with Epocrates’ Michele Snyder briefly at HIMSS. Epocrates has now some 135 people and hasn’t taken any more cash since the dotcom days when it took in $35m. It still gives away its drug databases for free to any PDA user, including a scad of formularies—some 400. It’s got around 500K active subscribers (updated in 6 months) — including 200K physicians in the US alone. The struggle is of course to make money off that database.

They do that by charging for a symptom and diagnosis checker ($60 a year each or $149 for the lot) and by charging health plans and PBMs to show their formularies. In addition they have 130K physicians in a market research panel which you can ask questions of, for a fee of course! Doctors can even do CME short credit courses on the device. And one of five of their alert messages are sponsored, so there is a little advertising, but less than on a prescription pad. And apparently using the database is worth it for doctors

Let’s use one of Epocrates’ findings from the Brigham and Women’s study to calculate potential revenue savings generated by using a PDA for drug reference information alone. The study found that 35% of Epocrates physicians saved at least 30 minutes per day. Assuming the average physician generated $1.26 a minute (according to the MGMA’s 2004 physician compensation survey), using a PDA for drug reference could produce about $10,000 a year saved for a single physician. Now, consider additional applications for the PDA and what they could generate in productivity savings (and thus income enhancement). Epocrates’ recent survey on Medicare Part D offers another factoid to consider: 70% of physicians surveyed believe accessing Medicare Part D formularies via Epocrates software will help them save at least an hour per week. These time savings would be in addition to the drug reference savings already calculated.

Of course the key question is whether the PDA as a platform becomes a transaction tool rather than just a reference tool. Palm, whom I met with last week, of course hopes so, and has recently brought out a Windows mobile version of its Treo to increase its range in health care—as well as other industries. (Epocrates already ran on both systems, but some ePrescribing tools like Zix were Windows only). It’s also worth noticing that cell phone penetration amongst docs is in the 90% range, and that the integration of PDA capability into the smart phone makes it easier to get transactions into the work-flow. When everyone’s used to getting email on their smartphone, eRx will fit right in.

In fact JSK has a list in her article of PDA applications in health care. Several (like PatientKeeper) are looks into larger health care IT systems, and Allscripts’ Touchscript is probably the leading eRx application—a transactional system. So this is coming together. And as we told you in our recent piece, the infrastructure is being laid so that the eRx applications can get to the pharmacy work-flow and improve efficiency in the pharmacy and the physician’s office.

Now we just have to beat the clinicians to the point of pain to make them use it!

 

THCB: Crass commericalism

So THCB is making a little progress. Over to the right, that squirrel with a tough nut to crack is an ad from the Healthy Oregon Plan –  a group supporting ballot measure 111 promoting universal health care in Oregon. Although I’m generally in sympathy with the cause, this in not an endorsement, it’s an ad. So THCB is moving very slowly into the world where political campaigns use us to advertise themselves, and raise funds. So go take a look, give money if you like, and one day I’ll be as rich as Instapundit or Atrios.

There’ll be more ads coming soon…hopefully!

Meanwhile, the main point of THCB is to sell my consulting and speaking services. My speaking page has been updated with a couple of video and audio clips, for those of you wavering on whether or not you should hire me for your group. I can fit most subjects and budgets. I’m also giving a talk at PARC in Palo Alto next month that will be open access and free. So look out for more news on that.

Finally in Google Adsense news, this site says that “mesothelioma lawyers” is the highest paying adsense word on “Google. Epocrates” is also remarkably high, for no good reason that I can think of, unless competitors are holding it hostage. My guess is that it’ll be about 35 minutes before Google figures out how to route around the list on the site, but to be fair I don’t really understand how the whole thing works!

POLICY/QUALITY: Sliding Down the Back Side of the Health Care Quality Curve: Who’s at Greatest Risk?, by Brian Smedley

• 22

The recent RAND study that suggested that there were few or no differences in the quality of treament of minorities when they got into the US health system has not been taken lying down by those who believe that there are great differences, and that ignoring them to look at the bigger picture, as the RAND researchers suggested, is not the way to go. Brian Smedley, the research director at The Opportunity Agenda wrote this opinion piece criticizing the RAND study for THCB:

Ask anyone who’s worked in, received treatment in, or studied American hospitals and health care systems, and you’ll find broad agreement:  U.S. health care systems are beset by quality problems.  Information systems don’t "talk" well with one another, medical errors remain all too common, and many patients don’t receive the types of treatments and services that they should.

 

Recently, a new study expands on these problems, finding that treatment is mediocre at best for all patients, regardless of race, ethnicity, gender, or income.  This study, published March 16 by physician Steven Asch and colleagues in the New England Journal of Medicine, finds that, on average, patients receive a little more than half of the care recommended by a set of "gold standard" guidelines.  And even though few patients are well-served, women and minorities were found to fare better than whites and men in receiving recommended care.

 

This finding wouldn’t be so shocking to most Americans, who tend to believe that health care is fair for all groups, even if less-than-stellar.  Many Americans tolerate (and therefore tacitly accept) that fact that minorities are more likely to be uninsured or underinsured, or to live in communities that lack high-quality primary and specialty care, access-related problems which have profound implications for quality of health care. But once patients are in the health care system, we believe, race or ethnicity doesn’t matter.

 

This view, however, squarely contradicts what the vast majority of research studies have found for decades – that some patients, most notably African Americans, Latinos, those who don’t speak English well, and in some cases, women – receive a lower quality of health care than their counterparts, even when they have similar health insurance and are treated for the same health conditions in the same hospitals. This applies across the gamut of health care, ranging from basic services such as screening and immunization, to primary care, to more expensive, high-tech, specialty procedures.

 

These are the conclusions of literally hundreds of studies published in peer-reviewed journals over the last two decades.  And while a few studies, such as the Asch study, find that disparities are diminishing or that all groups receive equal (albeit poor) treatment, their findings must be considered relative to the massive volume of evidence to the contrary.   Even the U.S. Department of Health and Human Services’ National Healthcare Disparities Report, released in January and which represents the most comprehensive survey of its kind, finds that, despite some areas of improvement, racial and ethnic healthcare disparities persist, and are worsening in some areas.   For example, the NHDR found that Latino patients with diabetes are receiving poorer quality care today than they were even a few years ago.   

 

Importantly, the Asch study confirms that quality problems abound.  But the authors’ conclusion – that "quality-improvement programs that focus solely on reducing disparities among sociodemographic subgroups may miss larger opportunities to improve care" – unfortunately presents a false choice.  Policymakers are not confronted with the question of whether to prioritize efforts to reduce inequality, or efforts to improve overall quality. Rather, these problems are inextricably linked.  The persistence of healthcare disparities is a clear warning that systemic problems plague our health systems. Moreover, many of the same interventions that will reduce disparities – such as promoting the broader use of evidence-based guidelines and public reporting of hospital quality scores by patient race, ethnicity, and primary language – will help to improve quality for all patients.

Progressive health care advocates should seize upon health care disparities as a key political issue and an argument for stepped-up quality improvement efforts. Unequal health care is not only wrong, it’s one of many signals that American health care is reeling from systemic problems that hamper the best efforts of hard-working physicians, nurses, administrators, and others to provide the best quality care.  Our concern and focus should be on raising the quality of care for everyone, with particular attention to those who are least well served.

POLICY/PHARMA: Yup some do benefit from Part D. This is not news! And politically it won’t matter. with UPDATE

• 3

After all the yarling and snapping of the introduction of Part D, there was a curious article in the New York Times on Sunday suggesting that "For Some Who Solve Puzzle, Medicare Drug Plan Pays Off." Of course this is not exactly news. Several of us said at the time that the plan would improve the financial well being of lower-income people not poor enough to Medicare who were heavy Rx users and would now have catastrophic coverage. A real study funded by Kaiser FF said exactly that in 2004. In fact it’s headline was

LOW-INCOME MEDICARE BENEFICIARIES CAN EXPECT SUBSTANTIAL HELP FROM
PRESCRIPTION DRUG LAW, BUT OTHERS WILL GET LESS ASSISTANCE

And that report’s summary said:

Low-income people with Medicare
who sign up for new Part D drug plans and receive the additional subsidies – an
estimated 8.7 million people – are projected to pay 83 percent less for
prescription drugs in 2006 than they would have spent if the Medicare drug law
had not been enacted, according to a new report released today by the Kaiser
Family Foundation. Those who enroll in the new drug benefit but do not receive
the low-income subsidies – an estimated 20.3 million people — are projected to
pay on average 28 percent less out of pocket for their prescription drugs as a
result of the new law, the analysis finds.

Of course that all was based on a higher forecast of enrollment than it looks like we’re currently seeing.  But that means that if you enrolled and you fit into that category, then you will be paying less. In fact an independent pharmacist quoted in the NY Times article gets it basically right.

Todd E. Pendergraft, owner of a Medicine Shoppe pharmacy in Broken
Arrow, Okla., outside Tulsa, said the new drug coverage was
"significantly beneficial" to one-third of his 750 Medicare patients,
"marginally beneficial" to half the patients and "no benefit at all" to
the remainder.

Because it’s of no benefit to most, and will eventually mean a reduction in employer retiree benefits, on a purely political basis I advocated Kerry running heavily against the bill in 2004. While he never really mentioned it (and my meager attempts at the time to get Democrats to pick up on it were ignored), it’s still a hot issue in 2006, and one that now will be picked up on politically. Of course because of the incompetence shown during the transition to the new program, it’ll be run on in the Katrina/Iraq incompetence meme, rather than the "destruction of Medicare" meme.

But the flat answer is that, yet again, because not everyone is put in the same pool (i.e. seniors are not forced to buy into Part D) there will be adverse selection amongst those who do. That adverse selection is coming from the people who are now better off (because they wouldn’t have bought it if they didn’t think they would be). Eventually in a couple of years the PDPs will start losing money, jacking up their rates and upsetting their senior customers — and the  subsidies hidden in the bill for those PDPs start reducing at around the same time. Just as happened with Medicare HMOs in the late-1990s.

If you really wanted to run a proper drug benefit using private plans, you ought to force everyone to join so that you have a universal risk pool. But of course Congress would never dare have done that politically after the experience of Medicare Catastrophic in 1988 nor would they have forced the employers to pay into the pool for their retirees. So we get the hodge-pot we’ve got, with all the confusion and angst it’s caused amongst seniors.

And of course we’ve got two calendar issues coming up. The first formulary switch and the first donut hole "approachees".

Beneficiaries could face new problems in coming months. Insurers can
impose stricter limits on access to certain drugs after March 31, when
a 90-day transition period ends. In addition, some beneficiaries will
have to pay more at the pharmacy counter, because most drug plans have
a gap in coverage after a person’s total drug costs reach $2,250. The
gap lasts until the beneficiary incurs total drug costs of $5,100.
Beyond that point, Medicare pays about 95 percent of the cost of each
prescription.

The argument in favor of the formularies is that this is how private sector drug plans work. But CMS isn’t going to make much headway with the line that "formulary restrictions are how the private sector PBMs work" because seniors are rather more interested in their health care than working-age Americans. Somewhere at the end of this calendar is an election, I recall. And I can see the Ad now "Part D is worse than Medicare and those Republican bastards forced me into it."

And did you know that the very law creating Part D bans Medicare from negotiating with those evil bloodsucking pharma companies, even though the VA is allowed to? I suspect you did, and if you don’t you will by November!

CODA: You might want to see my other post this morning for a link to much more discussion about Part D.

UPDATE: And then there’s the power of the headline. Of course the entirely disinterested AHIP Solutions SmartBrief newsletter puts a slightly different spin on the story:

More praise from Medicare drug program
beneficiariesDespite reports of some problems with the Medicare prescription drug
program, some customers say the benefit was worth the sometimes confusing and
complex process of enrolling. People in places such as Tulsa, Okla., who were
more removed from the political debate about the program, say friends and family
helped them with the choices and the outcome is satisfying.
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