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POLICY: No on Prop. 72 ad busted for faking it

Proposition 72 is a referendum on the California pay or play bill that passed in the waning days of Gray Davis ill fate-second term before the Governator swept all before him a year ago. The Yes on 72 bill has been out with some TV commercials–most of their money comes from Unions while the players like Wellpoint are neutral. The opponents are the large fast food chains who would be forced to provide health care coverage to their workers. I listed out who was pro- and con a while back, with the those opposing having raised much more money, of course.

The bill won’t do too much about California’s uninsurance crisis–maybe putting 1.4 million out of 6 million uninsured into coverage. The problem is concentrated in smaller firms, who politically can’t be forced in providing coverage. But a band-aid on a wound is better than nothing for supporters of universal insurance. My feeling is that big businesses that do not offer benefits (e.g. the Walmarts of the world)are competing unfairly with those who do–while the taxpayer picks up the tab. A RAND study shows that 95% of businesses with more than 50 workers already offer insurance to their employees. (I mean offer insurance that is taken up, as offering insurance that the worker can’t afford is a cop out). But 15% of all workers in that size of firm do not get coverage, mostly because they can’t afford (see chart 9). The bill maxes out the workers premium share at 20%.

So it’s the big businesses paying low wages (i.e. fast food) that are being targeted here. And most of them can’t easily move, unless Los Angelinos are prepared to drive to Phoenix for their burgers. Of course the No on Prop 72 folks are keen to suggest that this bill will put mom & pop businesses under, but the bill doesn’t apply to businesses with fewer than 50 employees. So it’s a little amusing that the “No on 72” guys got caught faking their most seen ad. It was supposed to be a poor immigrant restaurant owner. But the restaurant in question wouldn’t be affected by the bill, and the “owner” was an actress. Oops.

For more on this and other California propositions see the California HealthCare Foundation site.

POLICY: HSAs Redux, and “A short response on a short bit of logic”

A couple of days back in a piece on HSAs I challenged someone, anyone to speak up for HSAs against this criticism from Don McCanne. While I’m not a straight single payer advocate like Don, we both believe in one risk pool/universal insurance. And HSAs destroy that concept. Here’s Don’s logic in full:

Imagine everyone having a health savings account (HSA) and a low cost, high deductible insurance plan. Now let’s fund our entire health care system, currently at $1.8 trillion, with the HSAs and high deductible plans. Keep in mind that 80% of health care costs are used by the 20% of individuals with serious acute and chronic disorders.

Current contributions for HSAs are capped at $2600 for individuals and $5150 for families. For illustrative purposes only, let’s assume that each individual has $2000 in an HSA. That means that the 294 million U.S. citizens would have $588 billion in HSAs. For the 20% with significant needs, their $117 billion would be rapidly depleted, having been spent of health care. The healthy 80% might use an average of $300 per person in incidental health care costs, depleting their accounts of $70 billion. The “beauty” of HSAs is that the $401 billion remaining in the HSAs of the 80% who are healthy will be converted into retirement pensions. That’s a great deal for the majority of individuals who remain healthy. But that removes about $400 billion from the $1.8 trillion that we are already spending.

HSAs will have funded $187 billion of the $1.8 trillion, leaving costs of $1.61 trillion for the catastrophic care of the 20% of individuals with greater needs. But after the HSA funds are removed from the equation, there is only $1.21 trillion left to pay for care that currently costs $1.61 trillion.

Where will the $400 billion shortfall come from? Not from most of those with greater needs since current health plans already fail to provide adequate financial security, and this would add an average additional burden of $6800 per person. The only practical solution would be to increase the premiums for the high deductible coverage to a level that would fund the full balance of the $1.8 trillion that we are spending.

There are two significant consequences of this. First, the low cost, high deductible plans would no longer be low cost. Second, there is a perversity of the fundamental principle of health insurance, in which funds of the healthy normally help to pay for care for the sick, in that, with HSAs, the funds of the sick help to pay for the retirement accounts of the healthy.

Landon Alger (the government employee you may recall from his contributions a few weeks back) took up the challenge, and just to really annoy The Industry Veteran, I’m printing it here. Interestingly enough there is a teensy bit of common ground between him and McCanne, the single payer advocate. I’m coming over all moderate and centrist. Perhaps I’d better go sit down. Here’s Langdon’s piece:

Single payer lunatic Don McCanne provides a simple example of what can happen when HSAs are applied on a macro-scale. The healthy 80% realize savings not just on health insurance premiums, but also on actual healthcare costs. They are definite winners (therefore implying a loser) that get a nifty new savings vehicle-a health pension. These individuals have no need for the single payer paradigm and would not benefit from such a system. For these 80%, the single payer system introduces inefficiencies and would add to our national healthcare expenditures.

The remaining 20% that need 80% of the healthcare dollars (these ratios are not set in stone and one of the goals of national healthcare policy should be to flatten the curve) are now definitely losing out at this point. They need the taxpayer subsidized single payer type system and aggressive, outcome-incentive based disease management programs on a national level. While it is surely difficult to implement a system where individuals must qualify into the “single payer system” (yes, I know, it’s really not pure single payer anymore), there is no definite exclusiveness of HSAs and single payer. McCanne isn’t wrong, just incomplete.

Additionally, current HSA law does have a few flawed provisions. The HSA should only be able to be used for healthcare costs, and not simply another IRA once a person gets to age 65. And at death any remaining HSA balance should be forfeited into the single payer system.

QUALITY: Wennberg’s Dartmouth team shows enormous variation even in the “best hospitals”

More just astonishing research from Wennberg and his team. The latest study shows that whatever the US News and World Report’s ranking of a hospital, some top centers do lots more to a patient close to the end of life than others. In other words the immense practice variation that Wennberg unveiled in the early 1970s continues, even within the elite hospitals in the nation.

And the differences within this elite group are very large. To get a quick summary look at the this AP story. For example, at Mt Sinai in New York LOS was twice that of the Mayo Clinic, while at Cedars-Sinai in Los Angeles, sick patients stayed in the ICU three times as long as at the Mass General in Boston. There’s much more in the full article in Health Affairs. Something is clearly wrong when the best medicine in America is so different from the best medicine in America.

Another article from part of the same Dartmouth group (led by Elliott Fisher, and including Jack’s son David Wennberg) looks at the impact of ICU services in those same elite hospitals on patient outcomes, and it comes up with this pretty stunning conclusion:

Major U.S. AMCs differ dramatically in the overall intensity of services they provide to similar patients. The increased intensity does not appear to be associated with higher quality of care or to result in better survival. Patients in the higher-intensity hospitals simply spend more time in the hospital and intensive care unit (ICU); have more frequent physician visits (especially in the inpatient setting); have more specialists involved in their care; and receive more imaging services, diagnostic testing, and minor (but not major) procedures. The similar results achieved with markedly different levels of resource inputs imply large differences in the longitudinal efficiency of chronic disease care across these hospitals.

Given that they are handing out Nobel prizes at this time of year, is there a more important body of work in economics that has yet to be recognized? In case you wondered, here’s a list of Nobel prize winners in Economics and even though his formal training wasn’t in economics, I think Wennberg would fit right in with this group.

PHARMA: Marcia Angell rips big Pharma a new one

So Marcia Angell’s talk at the commonwealth Club was all that I expected. She is witty and charming and she really laid into big Pharma. Big pharma to her has no redeeming qualities. Everything they do is wrong and all they do is run biased clinical trials, and pay off the doctors (majority) and the politicians (minorly). A review of her book in the NEJM(BTW you can go to BugmeNot to break into these password protected sites, shh!!) from a Canadian Medical Association doc echoes her points, even though rational people (i.e. me) think that she was a little over the top.

I hope that there is a middle ground. Drugs save huge amounts of other health care costs and they do keep people alive who would otherwise be dead. If you read on in the review you get to this passage.

Angell’s concluding chapter, the least convincing one in an otherwise fascinating and penetrating book, contains the solutions, all of them predictable (and probably unattainable): control me-too drugs, re-empower the FDA, oversee Big Pharma’s clinical research, curb patent length and abuse, keep Big Pharma out of medical education, make company financial statements transparent (so we can tell what the costs of research really are, as distinct from marketing), and impose price controls or guidelines. Granted, the problems are so prevalent and the corporate tentacles so entwined with our way of being that it is hard to see what else to recommend.

But perhaps Angell is right. We must change the way we manage research and the development and distribution of new drugs. Not only are health and health care at risk, but so are the research enterprise and the reputations of universities and governments. The integrity of scientific research is too important to be left to the invisible hand of the marketplace.

The problem is that this logically leads to the idea that the only solution is heavy government regulation or even the total nationalization of the pharma business. Realistically, that’s not going to happen. So if you go to that extreme, all you can expect from pharma is a circling of the wagons and an attempt to keep paying off their servants in Congress and the Administration.

There needs to be a middle way, and I gave some ideas earlier this week about what that looks like. I don’t think Angell’s approach will get us there, even if 90% of what she says is true.

TECHNOLOGY: Very short memories in the PHR space

REDMedic is a start-up building a personal health record prodcut aimed directly at end-user consumers. Their wrinkle in the space is that people can take a key-fob or card with them so that if they get into an accident an emergency room nurse can look up their information online via an emergency log-in screen. (Full disclosure: I discussed a possible consulting role with REDMedic a year or so ago but never did anything with them). Nothing wrong with this idea. I thought it was pretty good when i-Beacon (my company) did it in 2000. Dr Koop thought they had it down when they did it in 1998, and Medicalogic had the same conclusion in 1999 with their PHR. Of course the same was true for PersonalMD, HealthAtoZ, iMetrikus and about 35 other companies, including WellMed which survived and is now part of WebMD. Note that they survived and everyone else didn’t. Which may give you a hint about what I told REDMedic were the dangers in their business model.

I have no problem with REDMedic claiming this is a revolutionary idea (although it isn’t as PersonalMD had exactly the same ER room access to the web/fax “emergency card” in 1999)–after all every start up should blow its own horn. What slightly annoys me is that they’ve convinced a not very worldly journalist at Information Week of the same thing in an article called Digital Health Records Move Closer To Reality. Come on team, 2000 wasn’t that long ago. Surely someone apart from me remembers it?

I genuinely hope that REDMedic’s service aimed at consumers takes off, though at $36 a year and no one using PHRs, they are at the very bottom end of the “S” curve adoption, and likely to stay there for some time. Recasting their service as a web-based Medicalert bracelet may even work, as people are more web savvy than they were a few years back. But the same issues that stopped the other 35 companies from having success–such as the unwillingness of providers to get data from their systems into the PHR, and health plans deciding that they didn’t have to improve their web service to their consumers in order to keep them as members–have not gone away to any appreciable extent. However, the online PHR, like online banking, is one of those things that will take off at some point, and whoever is alive and kicking in the space then may make out well.

Meanwhile, if you want to get into this business easily, there’s some very nifty software sitting in a box in San Francisco that I could get into your hands cheap!

HOSPITALS: A southern hospitals CEO roundtable, with UPDATE

“Tennessee, Tennessee, there ain’t no place I’d rather be” sang the Greatful Dead back in the day. Why that bunch of stoned hippies wanted to go 1,500 miles away from the good stuff from Humboldt I’ll never know, but Knoxville, Tennessee is a very typical second-tier American town with typical hospital issues. And what are those issues? Well the Knoxville News Senitnel had a CEO Roundtable to tell y’all.

No prizes for guessing them, and they are a fair reflection of the state of the nation’s hospitals.

A. We need more money from the government and everyone else.
B. We have too many uninsured patients and they won’t go away.
C. We can’t get enough nurses and other staff.
D. This new IT is very expensive and no one will let us charge for it.
E. We like our gentlemanly southern ways and we really hope that no specialty hospitals comes to town to break up all this gentility. Cos then we’d get mad.
F. And if you build too many new hospitals too quickly and can’t fill them, you’re going to lose money

UPDATE: Hope Morrison from the Appalachia Alumni blog informs me that I am “unaware that there’s a Humboldt in Tennessee. I know because I spent about half of my formative years a stone’s throw away from there, in Jackson.” Of course with the Dead that might well have been a “stoner’s” throw away.

Which reminds me… Ian McLagan, keyboard player of legendary English bands The Small Faces and The Faces and later perennial sidesman with The Rolling Stones tells that the story of when he was offered him a gig touring with the Dead at $300K a year. He was excited as he was down on his financial luck and he asked for a tape as he didn’t know their stuff. He told the interviewer: “it was such a pity. I couldn’t play with them because I thought their music was bloody awful!”

HEALTH PLANS: Destiny Health’s survey says 8 out of 10 Health Plan CEOs said their cats customers preferred it

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Just in case you thought I only publicized the potential problems with HSAs, there are some people in America happy to see them. Destiny Health, which is now offering its consumer services via other health plans has put together a survey quoting several health plan CEOs as saying that CDHPs will be the savior for their clients, and (not that they mentioned it) give them something else to sell that essentially allows their customers to offer worse benefits to their employees. In this context CDHP stands for “consultant-driven-health plan”.

However, the rah-rah approach is a little derailed by Destiny’s CEO:

Scott Spiker, CEO of Destiny Health, the company that conducted the survey, commenting on new study that revealed that Americans’ interest in Health Savings Accounts (HSAs), a key component of the recently passed Medicare bill, is strong, but knowledge of the accounts is surprisingly low. “However, it’s clear that consumer education is vital for their full power to be reached because HSAs alone cannot change consumer behavior when it comes to healthcare spending,” he said.

True words indeed. I await the backlash from consumers when they find out what consumer-directed really means in terms of benefits from their employers, and how ready the provider side of the industry is with its soon-to-be-transparent pricing.

Of course single payer lunatic (well they all are, aren’t they?) Don McCanne explains why HSAs can’t work on a macro-scale in this post. Ten years after I first heard this notion I still await an HSA advocate to explain to me why McCanne’s logic is wrong.

PHARMA: Reimportation, corporate villains and the likely outcomes

So it’s become apparent to THCB readers and anyone else following the reimportation issue that Pharma is, as the Christian Science Monitor puts it, the new corporate villain. And it isn’t playing its hand very well. The one person in big pharma who has gone off the reservation is the Pfizer exec Peter Rost. Here’s his very positive review of Marcia Angell’s book on Amazon. (BTW before they start I can dispel the rumors–Peter Rost is not The Industry Veteran!). But Pfizer’s lawyers have already visited Rost in a way that really didn’t show much subtlety.

To be fair, those attacking the pharma industry are also being a little over-aggressive. Marcia Angell was on a NPR radio show last week in which she attacked the pharma business over the creation of me-too drugs. (The drug discussion is about 5 minutes into the show here). Rost makes a cameo appearance and a flack from PhRMA also defends their touch position. The show is well worth a listen, but it’s worth trying to distinguish among the “me-toos” that Angell is attacking.

There are “me-toos” that are second to market for whatever reason, but usually because of the research process (e.g. Crestor developed later in the race after Lipitor). It may or may not be OK to have another statin on the market, but that type of competition in development is the American way. Furthermore, as the Vioxx mess shows, not all “me-toos” have identical clinical effects (or at least Pfizer is hoping like hell that that’s true!)

The thing that Angell should be going after is the set of other “me-tooisms”, such as

While much of this bad behavior is in the past, it doesn’t exactly help that DCI, a lobbying group for pharmaceutical companies (and by the way the publisher of the supposedly academically neutral Tech Central Station) was reported by The Hill a few days back to be “offering healthcare consultants almost $4,000 each to find senior citizens who are willing to speak out in favor of the Medicare drug discount card and write letters to Congress thanking members for saving them money on pharmaceuticals.” So I think it’s helpful to try to distinguish between the bad behavior and the market failure. My problem with Angell is that she sees no good in the industry at all, and that leads to the industry just circling the wagons and saying “screw you” to other approaches.

However, there are some vague signs that calmer heads may be able to prevail, even if they aren’t close to doing so yet. Most of this really bad behavior on the pharma industry’s part is in the past. Meanwhile, an interesting but very small survey being conducted on the Pharma-Marketing List-Serv suggests that a big section of that pharma audience realizes that reimportation is a) inevitable and b) not likely to be that harmful. Last week the NEJM had an article that more or less agreed with the CBOs analysis that reimportation won’t have that big an impact on prices. The author, Richard Frank a Harvard health economist, argues that:

The Congressional Budget Office has also suggested that direct negotiations would have a “negligible effect on federal spending.” But direct government negotiation may realize savings on brand-name drugs that have little competition — cases in which prescription-drug plans would be unable to negotiate lower prices by taking advantage of competition among similar products for positions on drug formularies. Paying VA prices for the drugs used by Medicare beneficiaries would benefit the federal budget. Of course, lower prices would also affect the revenues of pharmaceutical companies. For drugs that are unique, prescription-drug plans will have little ability to negotiate prices. Thus, higher prices would most likely be paid for the most innovative products. Yet it would not be politically acceptable simply to let the industry name its price. Thus, at a minimum, some direct price negotiation by the government is likely to occur regardless of which candidate is elected.

He goes on to suggest that as a consequence of re-importation prices will lower here and increase sharply in Europe, but that we’ll get to a place where we can have a rational discussion about how to fund the research for innovative products.

So is it too much to see if we calmer heads can start that conversation, as after the election it’ll have to happen anyway? Well tonight I’m going to see Angell talk live, so I can report back as to whether there is any middle ground. I actually have a spare ticket, so if any locals are looking for a hot date, let me know quick. (You think I jest? I actually took a date to see my colleague Paul Saffo once. It was pretty much our last date!)

POLITICS: Real survey companies know that it’s a tie

So after the debate on Thursday, which didn’t feature health care, it looks like the Presidential election is back in a tie. Newsweek has Princeton Survey Research’s post-debate poll with Kerry leaving 47-45%, with a 4% margin of error. When Nader is taken out Kerry’s lead increases slightly. This is similar to the Harris poll that was released a couple of weeks back.

Now Bush may be feeling like the SF Giants on Saturday (who lost the NL West by giving up 7 runs in the bottom of the 9th) but in truth he was never as likely to win in a cruise as some pollsters have suggested. Worst offender here was Gallup which does the CNN/USA Today poll and has been consistently showing the Republicans doing better than most other pollsters. Gallup frankly (speaking as an ex-pollster myself) in the past few years has done its business some harm by not moving into Internet polling and now is engendering severe doubts about its political polling methodology (Having a former CEO who is an evangelical Christian when 8 out 10 evangelicals are on Bush’s side doesn’t exactly help their PR whether or not it has any influence over their methodology. By the way, Humphrey Taylor, chairman of the Harris Poll, has never taken US citizenship after 30 years of being here because he’s never wanted the possibility of his voting to impact his polling in any way). Speaking as someone who has commissioned polling from both Harris (and later worked there) and Princeton, and who also has looked at a lot of other polling organizations, I know that I’d tend to be more comfortable with them (and with Field in California) than most others. All Gallup really has left is the most famous name.

But what this all means is that the election is still as close as its been all along. So that means that turnout is the key and there are signs that the Democrats have done better in registering new voters. That of course doesn’t mean that they’ll get them to vote. However, anyone in health care assuming a straight Republican win should do some quick scenario planning about what happens if Kerry gets in. Particularly as the MMA gives the FDA (i.e. the Administration) the right to allow the importation of pharmaceuticals with no further Congressional action. When that was passed last year it looked fairly safe for the pharma business for some time. Right now they need to be thinking about plan B. (Of course I don’t think reimportation would be too dramatic and I have some ideas for Plan B that don’t lead immediately to Marxism).

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