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POLICY: Joe Paduda on consumer spending restraint

Jul 12, 2005• 9

Joe Paduda has an article about Steve Case’s determination to piss away $500m changing health care. In it he correctly notes the problem with Colin Powell’s argument that buying health care services and buying TVs are about as simple as each other. (Actually I think buying a TV is very complicated but that’s another discussion). Joe has a very interesting case study about his own decision when concern for his daughter’s health over-rode concern for his pocketbook.

We are insured under a high-deductible MSA plan, so any charges would come out of our pocket. I thought about it for a few seconds, than agreed. I also agreed to have her brought over in an ambulance for the fifteen minute trip. I knew full well that the risk was minimal, the costs would be over $2000 for this “preventive” measure, and I would pay all that out of my own pocket. Was the very small risk worth the outrageously inflated cost? You bet your life it was.

Now the next question is, what if Joe were not a well educated and (I guess and I’m sure he’ll tell me if I’m wrong) a relatively wealthy consultant, but a single mother to whom that $2000 would mean not being able to pay the rent or put food on the table. That’s where the fallacy of an at the point-of-care economic decision by the consumer is demonstrated. And that’s where this isn’t like buying a TV.

Rational consumer-choice advocates (i.e. Alain Enthoven) tried to push this level of selection back up to the "sponsor" level. That meant that the health plan made the decision about treatment based on some level of cost-effective assessment about what was the best thing to do in each case. The UK now has a central body (the NICE) that hands down these guidelines. But no one who’s well versed in health policy seriously believes that these judgment should be made at the point of care, because the situation is totally uncertain, and the consumer almost always knows less than the provider and half the time is not in a coherent enough shape to make the decision.

There are plenty of places where there is a need for much better consumer-ist focus in health care — notably health plan and provider customer service. But making these types of decision at the point of care is not one.

POLICY: Individual insurance, sigh, with UPDATE

Jul 11, 2005• 12

The NY Times had a pretty decent article on what a pain in the ass the individual insurance "market" is and it also reminded me of one reason why the eHealthinsurance study last week was so flawed. That study compared apples to oranges when it looked at rates for 30 year olds in New York versus California. To wit:

In some ways, Mr. Forst was lucky because he lives in New York. It is one of the few states with guaranteed-issue laws, which basically ensure that all residents can buy coverage. In New York, the law means that if you have been turned down by the big national companies, any H.M.O. operating in the state would be obligated to sell you a policy. New York also has community pricing, meaning that everyone who applies from the same part of the state pays the same premium for the same plan, regardless of age or health. So it is easy to see why insurance tends to be more expensive in New York – at least for the young and healthy – than in other states. But the flip side is that some people living in other states cannot buy insurance.

Of course the other side of that is that individual insurance in New York is so expensive that many uninsured who could afford the cheap California policies can’t buy it. (And don’t forget employer group insurance is not covered by state laws because of the wacky world of ERISA). So the free marketers (like my commenter ~~Greg~~ Eric Novack) say, let them buy a California policy. (This is the basis of the AHP movement that our Dear Leader is so keen on). That would then immediately lead to the remaining healthy New Yorkers getting out of their state-regulated policies and buying cheap ones from out of state, with the result that those remaining in the New York plans — who couldn’t buy those out of state policies because they’re old or sick or both and the AHP’s wouldn’t be forced to sell to them — would be unable to afford their premiums and the plans would go belly-up.

So is community rating like New York’s a good idea? Well only if you enforce it on everyone, including groups and the uninsured — otherwise known as universal insurance. But it is a risk pool of sorts and the efforts of the so-called "free-market" lobby are helping to destroy what’s left of it, when what we need is everyone into it.

Meanwhile over at Signal Health Tom Hilliard spent the time that I didn’t in my post on the subject to really deconstruct the McKinsey study on CDHPs. And he comes to the same conclusion I did about whether it can be trusted.

UPDATE: Brian Klepper tells me that I’m being too tough on eHealthinsurance.com and should be thankful for baby steps.

I think you’re dwelling a little too much on the obvious by complaining that the eHealthInsurance study is flawed. Of course the costs are significantly different in states that have or do not have guarantee issue. And of course the market dynamics are completely fouled up by the games that every insurer plays in trying to limit exposure.Maybe I don’t get it, but I see the real value of the eHealthInsurance study in the fact that it shows clearly what the rates are for a particular type of individual. Typically, we don’t have this knowledge. You’re bellyaching because the underlying forces aren’t balanced, but that’s only a nuance to the analyst; the purchaser doesn’t have this luxury. And until we’re able to SEE the damned rates for what they are, controlled for who they target, we can’t do anything to course correct.That’s why its useful.

TECH: The Switch is the trouble with CPOE and EMR

Jul 11, 2005• 6

Last week I had two separate, but close to identical, conversations with software companies that claim to have found the solution to the problem of getting physicians to use the EMR. But in neither case did they perceive the problem to be exactly what I think it is. I don’t think the problem is the cost of the software, or the lack of ROI, or even the functionality of the current tools. I think the problem is the "switch". And trawling around the web today I found an interesting article on COPE in HealthImaging which basically makes my point.

John Fitzpatrick, MD, director of medical informatics at Forrest General Hospital (FGH) says the biggest barrier the hospital first encountered with CPOE was that it took too long to use and was not intuitive for physicians.<snip>…Fitzpatrick recommends that healthcare providers in private hospitals find a CPOE system that physicians can enter the orders in as fast as doctors can hand write them or else the chances of success will be slim. "If the system can be made faster than on paper, all you have to do is incentivise the doctors through the learning curve," says Fitzpatrick.

"We are paying the pilot physicians for a limited time frame for their efforts acknowledging that at least initially it takes more time than on paper," he continues. "However, as they become more comfortable with the system, they get faster and faster at entering orders. Our original incentive plan was structured based on an incremental target for percentage of orders entered spread out over six months. However, most of the physicians are entering more than 95 percent of their orders from day one, and are probably reaching paper neutrality within six weeks."

So "time breakeven" on the switch to CPOE is 6 weeks or about one eighth of a year. Unfortunately translated into private practice that means that moving to an EMR will cost a physician some considerable chunk of one-eighth of their income in lost productivity. Let’s say that number is 30% of their productivity for that time period and lets say that the average doc’s annual revenue is about $500K, and for the sake of easy math let’s say it’s a 5.2 week period of lost productivity. That translates into a $15,000 loss in practice income, ignoring the cost of the software and hardware. And there are no corresponding costs to be cut, so the upshot is that the average small practice doc is looking at taking $15K that as income loss.

And there alone is a good reason not to do this…which is why some kind of ~~bribery~~ incentive is required.

TECH/POLICY: Why health care costs so much, part 37

Jul 11, 2005• 1

Bend OR, pop 100,000, now has 8 MRI machines. That compares to the fact that all 97 million Canadians have to share one MRI in downtown Saskatoon that’s only available on Tuesday mornings when they take the cow that shares the barn they keep it in out for a walk. But don’t worry about that having any impact of practice patterns or health care costs — Oh no.

The idea that physicians will inappropriately order MRIs as a way to make money, said Jim Kronenberg of the Oregon Medical Association, is a bit of a leap in judgment.

Meanwhile the New York Times reports on the ongoing case of proper fraudulent medical embezzlement, rather than the legal kind going on in Oregon and the rest of the nation.

BLOGS: Hospital impact

Jul 8, 2005• 3

Hospital Impact is an interesting new blog that has several issue areas mostly, but not exclusively, of interest to hospital admin folks. Worth checking out. I can’t quite figure out who’s behind it, but it seems to have some connection to the HFMA…. or I might be imagining that.

HEALTH PLANS: Mckinsey on CDHPs

Jul 8, 2005• 9

McKinsey, a very smart firm that should be trusted about as far as it can be thrown in terms of putting its clients’ interests above its own, is out with what looks a pretty well researched report on CDHPs. My less well researched opinion is that the CDHP is an intermediate step on the employer’s retreat from offering health insurance, and that the HSA is a foolish tax-deductible sop to the people who would have put that money aside anyway. But then again I’ve got one, as there’s no better alternative.

Essentially the report says that the employees who had CDHPs (connected to HRAs not HSAs but it’s the same sort of thing) were more cost conscious in their health choices than they had been in the good old days of more generous plans, but that they were less satisfied with their health plans. However, the lower spending on care for patients is similar to the introduction of managed care back in the 1990s, other than initially managed care recipients were happier with their plans — as they had lower out of pocket costs than in FFS. One thing I do know is that high out of pocket costs correlates with higher patient dissatisfaction, so as the employees are left more and more on their own, dissatisfaction will likely increase. Still I suspect at least one of my commentators (can anyone guess who?) will tell me that I’m wrong.

And despite some long and complex correspondence with a couple of advocates I still can’t understand why an employer would give their healthy employees money for an HSA and then let them keep it if they didn’t spend it. (In an HRA, it reverts back at year end).

HEALTH PLANS/POLICY: Individual health insurance — going cheap!

Jul 7, 2005• 27

Two people have mentioned this report from eHealthinsurance.com, so I thought I’d better address it. The first is from "friend of THCB" Brian Klepper at the Center for Practical Health Reform. He writes:

Here’s a report, issued a couple days ago, that is a striking example of the power of transparency information, applied to current individual health insurance pricing. eHealthInsurance.com ran a study to determine the lowest quotes available to non-smoking 30 year olds who purchased a $1,000 max deductible, 20% co-insurance, $3,286 out-of-pocket max plan.

They did this around the country, and then selected the lowest premium available for this profile in each location. Long Beach, CA had the lowest monthly premiums, coming in at $54. The lowest 10 cities – 7 are in California, 2 are in Arizona and 1 is in Ohio – all come in at less than $59. Pricing goes up from there: My hometown of Jacksonville, FL is 29th at $89.03. Las Vegas is 34th at 113.38. Dallas, Miami, Boston and NYC are 47-50, at $146.42, $151.20, $267.57, and $334.09 respectively. (The authors note that Boston and New York are subject to state-mandated guarantee issue and community rating). Still, the Long Beach premium is 61% of Jacksonville’s, 37% of Dallas’, 36% of Miami’s, 20% of Boston’s and 16% of NYC’s.

It is difficult to believe that even the combined differences in care and regulatory costs can account for such huge disparities. This type of information is a starting point for inquiry and action by industry leaders, regulators, and legislators. Congratulations to eHealthInsurance for publishing this revealing look at the industry.

The other post about the study is from a new heath care blogger (but a regular blogger on other subjects), Elisa Camahort, how is getting sponsored to blog about health care from the consumer’s view point, by eHealthinsurance.com. The blog is called Healthyconcerns and has some discussion of the same study. Elisa figured out that she could have saved a little if she’d used her sponsor’s service.

Interestingly Elisa’s Pilates teacher who was unable to get coverage because of a pre-existing condition, managed to sneak in the backdoor into insurance coverage by using short term coverage….that’s not a real solution. First it deliberately excludes people with virtually any major disease, then it runs out after a year or six months and can’t be renewed with that company. You can usually renew it with another company, but over time you’ll run out of insurers. Finally, you’ll want to get onto more stable long term insurance.

I tired to do that via eHealthinsurance and my $70 quote became a $400 quote for the same coverage once they found that I’d had a prior knee surgery. So then I retreated to yet another short term insurance plan. I presume that I could have kept playing that game for a while, but in the end I opted for a $200 a month premium for the same coverage via a small business coalition in California called PacAdvantage. It’s not exactly a great rate, as everyone who can do better in the individual market is already in it, leaving a bunch of sickies in the pool, but I kid myself it’s better than the uncertainty of a short term policy. And of course if the short-term guys figure out that sick people are using them to get access to insurance, they’ll extend those "excluded" groups to include more categories of potentially sick people.

Brian is right, though. It’s good to have some transparency in pricing (although attempts to do that at the provider level are failing). But the issue remains that in insurance we’re not really discussing apples to apples. And if you look at real health care premiums in different places, including underwriting averages et al, then they don’t match the vast discrepancies seen in this study — even though they are vastly different because of the difference in underlying health care costs, which are explained by Wennberg, not eHealthinsurance.

And the idea behind these cheap health insurance products, promoted first by Blue Cross in California in the late 1990s, is theoretically to get more uninsured people into insurance. But of course while we want to get them into the risk pool, these products are not going to remain viable if they let sick people buy them. So that’s why they’re underwritten to death and why they’re not a solution to uninsurance. And of course you only really need health insurance if you’re sick. It’s the same old story of the bank only lending you the money if you can afford to pay them back — and then why would you want to borrow the money.

….and don’t start me on the impact of high deductible health plans on the community risk pool.

HEALTH PLANS: United not big enough, needs to buy Pacificare

Jul 6, 2005• 2

Some thing tells me that United thinks that the government trough for health plans will continue to overflow a while longer. Apparently it’s planning to buy Pacificare for a mere $7-8 billion. Pacificare shares jumped 10% and then were halted at around $82 on the news.

This means that despite Pacificare’s great run over the last year, United at least thinks, that government based plans (especially Medicare) will continue to see more than their fair share of growth. Pacificare’s stock was below $30 when the Medicare bill was passed and those fools who thought that HMO stocks were over the top then (i.e. me and Don Johnson at least), well it shows that we’re fallible!

Again, no one told me in advance, grump, grump.

In other buying news, Philips is adding to its PACS business by buying ASP PACS vendor Stentor.

PHARMA: What Peter Rost did over his holiday weekend

Jul 6, 2005• 2

While you were enjoying your burgers, beer and bangs, Peter Rost was writing a book review of his boss’ new book. And he decided to put in a very obvious place called Amazon.com. Here it is:

Pfizer’s CEO, Dr. Hank McKinnell has written an astonishing book in which he admits that he doesn’t always believe in what he’s saying [11], that drugs from Canadian pharmacies are safe [69] and that high US drug prices have nothing to do with past R&D expenses [46]. He also writes that "perhaps pharmaceuticals represent too low a percentage of total healthcare spending" [45] and he calls for "price controls to be lifted" around the world [64], because "It is time for Canadians and others to pay their fair share." [65]. He also calls for a doubling of drug patent life [185] which would result in a drastic reduction of new, low-priced generic drugs.

Dr. McKinnell starts his book with the surprising confession that he doesn’t always believe in what he’s saying. "They listened to my logic, but I could tell they weren’t convinced, and to tell you the truth, I wasn’t either." [11]

He also doesn’t shy away from embarrassing facts, "Branded drug prices are anywhere from 25-100 percent more expensive in the United States." [50] He even admits, "Drugs from Canadian pharmacies are as safe as drugs from pharmacies in the United States." [69]

But his impressive mea culpa doesn’t stop there. He slams everyone who makes a connection between drug prices and R&D. "It’s a fallacy to suggest that our industry, or any industry, prices a product to recapture the R&D budget spent in development." [46] Finally, in an astonishing intellectual somersault, Dr. McKinnell claims that "price controls always make prices higher in the long run." [64] And since he wants to give people lower drug prices, by eliminating price controls, he writes, "Starting with pharmaceuticals, I call for price controls to be lifted in Canada and elsewhere." [64] Dr. McKinnell ends his book with a wonderful quote by Gandhi, for those who desire change. "First they ignore you. Then they laugh at you. Then they fight you. Then you win." [193] Dr. McKinnell just doesn’t realize that he has become "them."

Here’s a little context from Jim Edwards at Brandweek.

POLICY: What is it that we wonks argue about?

Jul 6, 2005

Tom Hillard — a new contributor over at the transmuted SignalHealth (which is in someway an offshoot of John Rodat’s Health Signals New York) — has this beautiful line about the managed competition versus single payer argument.

For aficionados of universal health coverage, arguing over competing models is a zestful yet strangely abstract pastime, kind of like theologians debating over who takes out the garbage in heaven.

Or as they say in Australia, at the moment it feels like we’re two fleas arguing over who owns the dog.