Jane Sarasohn Kahn gave THCB readers a sneak preview of the meeting last week to launch the Federal govenrment’s new NHII plan. Here’s her much more detailed take in her iHealthBeat column.
Above the Fold
HEALTH PLANS/PHARMA: Politics is all there is….
Sometimes you can sleep safe at night thinking that your elected representatives are going to leave some things alone. But in the last couple of days it’s become apparent that political motivations are the only motivations left for those in government. was as good as his word . Now that’s not as bad as it sounds for the merger as a few years ago California set up a Department of Managed Health Care to regulate HMOs (which for some arcane reason had not been under the insurance commissioner but under the department of Corporations). The Department of Managed Health Care is part of the executive under Arnie the Guvornator, who is of course a Republican and in the pocket of state business interests (or at the least has taken a bunch out of their pockets– but as he says they’re "powerful interests" not "special interests"). So Managed Health Care’s approval, which OKs the sale of Blue Cross’ main health insurance businesses was a shoe-in, after a modest bit of back and forth. Garimendi only has authority over the smaller Life and Health business which writes short-term indemnity policies and a few life insurance policies. It can be easily jettisoned, but not before Wall Street had a fit about the ruling and knocked Wellpoint down 7% Monday morning. Given that Garimendi said his decision was final, expect this division to carved out and sold to someone else–there’s too much at stake for the Wellpoint and Anthem leaders to allow this to derail the whole thing. the front page of the New York Times. The Administration argument that has been actively pursued since 2002 is that essentially the FDA makes the best decision possible, hence you shouldn’t be able to sue a manufacturer for a product defect.
The first example is the Wellpoint Anthem merger. There was a lot of fuss in California about the egregious package given to top executives at Wellpoint, and Democrat john Garimendi the insurance commissioner basically said he would not approve the merger unless Wellpoint paid out over $600m into public programs. And on Friday he
But you could tell exactly what was going to happen by who had power over what, and by what their political affiliation was. But if you didn’t think that that ruling should have been so politicized (after all this is post-conversion and as part of its original conversion Blue Cross handed mega-billions over to the state for a couple of huge Foundations), you probably wouldn’t have thought that even this Administration would change the better part of a century’s practice and intervene in product liabiliy suits on behalf of big pharma. But there it is on
Allowing consumers to sue manufacturers would "undermine public health" and interfere with federal regulation of drugs and devices, by encouraging "lay judges and juries to second-guess" experts at the F.D.A., the government said in siding with the maker of a heart pump sued by the widow of a Pennsylvania man. Moreover, it said, if such lawsuits succeed, some good products may be removed from the market, depriving patients of beneficial treatments.
Quite how that reconciles with the ability of the FDA to admit it made a mistake or didn’t have enough information when it first made a decision, I do not know. (Remember Rezulin perhaps?). But it’s only the Administration’s politics (and the interests of its funders which amount to the same thing) taken to the extreme. And of course it’s not as if we’ve set up a rational system of Socratic dialogue to replace the legal system, we’re just now using the might of the Federal government to attempt to remove access to it from people attacking its friends. It does make at least TCHB somewhat nostalgic for the days when apparently some decisions in government were made for vaguely commonsense reasons. But I suppose that era has passed.
W,F&A: Bizarre big fraud in southern California
Totally wacky frauds often pop up in health care, and unnecessary surgery at the recently sold Redding Medical Center was the downfall of Tenet. But I can’t remember a case of healthy people voluntarily undergoing surgery for a bribe, as happened in one facility in Southern California. The surgery clinic’s operators were charged today with bilking more than $97m from insurance companies. Apparently over 5,000 people from all over the country were recruited, took the bribes (which were only between $300 and $1,000), had some surgery and then their insurers were billed through a series of shell companies. Apparently the state laws that demand that claims are paid within 45 days meant that many insurers who didn’t have pre-authorization just paid up when they got the bill.
Funnily enough, I had surgery in early April (also in California) and my insurer which also didn’t require pre-authorization, demanded information from me and from several of my providers several times before it would process the claims. After getting the insurer everything it needed, (including a form it told me it needed but had not yet sent me or asked for!) it started processing the claims last week — that’s nearly 120 days later. Given this fraud, perhaps they had a point?
Hatip to California Healthline for this one.
TECHNOLOGY: The Ten Year Plan — American health care IT goes Stalinist
So following in the footsteps of like-minded Lenninists Stalin and Mao, HHS secretary Tommy Thompson announced a 10 year plan for health technology on Wednesday. Speaking as a Lenninist (or at least someone who agrees that it’s usually better fewer but better) I can now say that I approve of something the Adminstration has done. For the guts of David Brailer’s (the new Health IT Czar–not such a Lenninist title I guess!) speech come several new initiatives–detailed in this article. The associated report has serveral overall reccomendations:
The report identifies four major collaborative goals. With these goals are 12 strategies for advancing and focusing future efforts:
Goal 1: Inform Clinical Practice. This goal centers largely around efforts to bring EHRs directly into clinical practice. Three strategies for realizing this goal are: Strategy 1. Provide incentives for EHR adoption. The transition to safe, more consumer-friendly and regionally integrated care delivery will require shared investments in information tools and changes to current clinical practice. Strategy 2. Reduce risk of EHR investment. Clinicians who purchase EHRs and who attempt to change their clinical practices and office operations face a variety of risks that make this decision unduly challenging. Low-cost support systems that reduce risk, failure, and partial use of EHRs are needed. Strategy 3. Promote EHR diffusion in rural and underserved areas. Practices and hospitals in rural and other underserved areas lag in EHR adoption. Technology transfer and other support efforts are needed to ensure widespread adoption. Strategy 1. Regional collaborations. Local oversight of health information exchange that reflects the needs and goals of a population should be developed. Strategy 2. Develop a national health information network. A set of common intercommunication tools such as mobile authentication, Web services architecture, and security technologies are needed to support data movement that is inexpensive and secure. A national health information network that can provide low-cost and secure data movement is needed, along with a public-private oversight or management function to ensure adherence to public policy objectives. Strategy 3. Coordinate federal health information systems. There is a need for federal health information systems to be interoperable and to exchange data so that federal care delivery, reimbursement, and oversight are more efficient and cost-effective. Federal health information systems will be interoperable and consistent with the national health information network.
Goal 2: Interconnect Clinicians. Interconnecting clinicians will allow information to be portable and to move with consumers from one point of care to another. This will require an interoperable infrastructure to help clinicians get access to critical health care information when their clinical and/or treatment decisions are being made. Three strategies for realizing this goal are:
Goal 3: Personalize Care. Consumer-centric information helps individuals manage their own wellness and assists with their personal health care decisions. Three strategies for realizing this goal are: Strategy 1. Encourage use of Personal Health Records. Consumers are increasingly seeking information about their care as a means of getting better control over their health care experience, and PHRs that provide customized facts and guidance to them are needed. Strategy 2. Enhance informed consumer choice. Consumers should have the ability to select clinicians and institutions based on what they value and the information to guide their choice, including the quality of care providers deliver. Strategy 3. Promote use of telehealth systems. The use of telehealth — remote communication technologies — can provide access to health services for consumers and clinicians in rural and underserved areas.
Goal 4: Improve Population Health. Population health improvement envisions improved capacity for public health monitoring, quality of care measurement and bringing research advances more quickly into medical practice. Three strategies for realizing this goal are: Strategy 1. Unify public health surveillance architectures. An interoperable public health surveillance system is needed that will allow exchange of information, consistent with privacy laws, to better protect against disease. Strategy 2. Streamline quality and health status monitoring. Many different state and local organizations collect subsets of data for specific purposes and use it in different ways. A streamlined quality-monitoring infrastructure that will allow a complete look at quality and other issues in real-time and at the point of care is needed. Strategy 3. Accelerate research and dissemination of evidence. Information tools are needed that can accelerate scientific discoveries and their translation into clinically useful products, applications, and knowledge.
While we can all agree that these are laudable goals, which should have been pushed by the government long ago, the obvious reaction is along the lines of "Show me the money!" In iHealthBeat’s excellent roundup George Isham, chief medical officer for Minnesota-based HealthPartners said the 10-year plan is "awfully ambitious" and will "take a lot of money and a lot of time," but is "needed. I hate to mention it here but the equivalent of what the Brits will spend on their 10 year Health IT plan in US dollars per population is about $100 billion and they are starting from 80% use of ambulatory EMRs by their GPs! And of course if you adjust that spending per capita spending on health care, you’d need to spend more like $250 billion or $25 billion a year. (Brief Editorial: My proposal is that we stop blowing the $25 billion a year we waste on the Drug War and spend it on this instead!)
Now that’s not exactly a fair comparison as American private sector spending on IT is going to be the driving force here, but there is still a need for government funding and pump priming. So what was the atmosphere in DC Wednesday, and are we likely to get that pump priming? For that here’s some comments from the ever wonderful Jane Sarasohn Kahn:
Carolyn Clancy’s (head of AHQR) assertion that, "The framework ROCKS!" was indicative of the level of excitement and passion around Dr. Brailer’s report that, in the words of Secretary Thompson, "launches the decade of health IT." Dr. Brailer introduced the day by invoking the image of Neil Armstrong walking on the moon (as I was thinking good karma all the while for the other Armstrong of the day, Lance). The day was full of gravitas lent by Senator Frist and Rep. Nancy Johnson, and Patrick Kennedy had a front-row seat waiting to introduce his legislation for comprehensive electronic health system in ten years’ time. The morning had the key Federal health care leadership all committing to the plan, from the VA and DoD (both far ahead of the private sector, which you can do with scale and one large purchaser) to AHRQ, the FDA, and the eloquent Elias Zerhouni of NIH. The afternoon was quite interesting: on the private sector vendor panel, Neal Patterson (Cerner) spoke about railroads and the Federal input on "gauge." But it was Dan Garrett of CSC who made Mr. Patterson’s blood pressure boil as Garrett waxed lyrically about open standards, with our old friend Neil deCrescenzo of IBM echoing the same. In fact, open standards are crucial to Dr. Brailer’s vision of interoperability and could be the friction point for moving forward. But Tommy Thompson wants to take no prisoners in this effort and is very aggressive on the topic of the health IT decade. Even Mark McClellan of CMS is pushing forward with a Medicare Internet portal in Indiana later this year to roll out nationally after they learn what they need to learn. And he’s also pushing eRx sooner rather than the MMA mandate suggests.
So keep your eyes on this. After 40 years of activity towards electronic health records the Feds have finally called for the building of a Railroad, and the train may begin to leave the station sooner rather than later….
PBMs: Something old and something new
You may not know this (I admit I didn’t) but there’s a trade association for PBMs called the Pharmaceutical Care Management Association which yesterday was one of the first to come out and laud the Administration’s call for improving the Nation’s Health Care Information Infrastructure. That reminded me of something old and something much more recent about PBMs. I’ve written pretty widely about PBMs in THCB, with the much shorter version being that despite the fact that they have totally failed in their stated mission to keep the lid on drug prices, and for that matter haven’t really done much to advance care management (or "health improvement"), they have made a business out of being decent claims processors and by inserting themselves firmly in the financial dealings between their clients and their "partners" in the pharma world. filed Monday against Caremark:
No wonder that the biggest PBM, Medco, is starting its first ever PR campaign. There’s no question in my mind that PBMs need to find what we consultants call a new value proposition–but then I’ve been thinking that for a while. What that new value prop is and whether they can get away with doing what they’ve been doing for a while longer while they figure it out is of course up in the air.
It’s interesting that the PBMs are now loudly backing the new health IT initiative (more on that from THCB tomorrow when I hear back from my spies in DC) as the data processing part of their business was indeed launched by the last major change to Medicare. That was the ill-fated Medicare Catastrophic Act which was passed in 1988 and repealed in 1989. One thing that its passage caused was the installation of what ended up being NDC and PCS’ pharma claims and editing transaction systems. So now when you go to the drug store, your claims and co-pay information is right there for the pharmacy tech to read off to you–no, you didn’t notice that happening in the doctor’s office! So it looks like PBMs have decided that the new Medicare "Modernization" Act with its somehow associated IT initiative will do something equally good for its business in the future.
They’d better hope so. Whatever the future holds, their present continues to come under increasing attack. THCB has mentioned before the attempt by large employers to go around the PBMs in negotiating rebates, and several of the bigger PBMs have been settling with trial lawyers and their customers over the extremely opaque nature of their rebate mechanisms. I thought that the plaintiff’s attorney put it rather well in a further lawsuit
The lawsuit says that Caremark keeps discounts from drug makers and pharmacies instead of sharing them with members of the Morrell benefit plan. It says Caremark secretly negotiates rebates for drugs and keeps that money. It also says that the company provides plan members with expensive drugs, instead of cheaper alternatives, to get rebates.
TECHNOLOGY: Are consumer health plan web sites finally taking off? Matt Quinn doubts it!
Interesting blurb on consumer use of health plan web sites from Manhattan Research. Matt Quinn writes:
I haven’t read the whole study, but I feel that it significantly overstates the case: 21.9 million Americans using health plan web sites for anything isn’t critical mass… and significant hurdles (specifically in the area of of organizing and providing access to information) still exist with the vast majority of plan web sites to make them useful for what most consumers want (the ability to make decisions on cost, among other things).
I feel that the principal difference between plan websites today and a couple of years ago is the amount of stuff that they provide for their members. There is a lot more of it on most sites. The jury is still out as to whether the stuff that they are providing is accomplishing any of the goals of e-health: making consumers loyal to their plans, achieving administrative efficiencies by reducing call center volume, making patients healthier, or attracting new employer customers through competitive differentiation (an employer chooses a plan based on its e-health offering vs. strictly on price). Although it’s a managed care organization and not a plan, per se, but Group Health Cooperative is doing many of the above and is actively differentiating with its e-health offering.
Maybe things have radically changed in the couple of months since I was knee deep in this stuff, but I don’t think so.
TECHNOLOGY: Buyer beware when biotech doesn’t live up to its promise
There have been many miracles from biotech but there have also been some rash promises made that haven’t panned out. One of these is featured in this Boston Globe story about Biopure. Biopure is a company that has been trying to approve and market a substitute blood product. Given the problems with infections in the blood supply and the interest from the military in transportable blood with a long room temperature shelf life, Biopure’s prospects looked good. Back in 2001 I heard a stock analyst, who’s name–luckily for him–I’ve forgotten, pitching the stock at a pharma conference. The price was around $25 a share, and when the FDA approved its product Hemopure it was sure to go into the stratosphere. But the approval never came, and the Street.com ran a series of articles (correctly) forecasting that the approval never would come and the company would run out of cash. Sadly for me, I’d listened to the analyst and bought in before I read the Bears’ version of events. I keep the few hundred now almost worthless shares in my portfolio to remind me that a) analysts are there to sell stock trades and not tell you reality, and b) that it’s better to take a small loss than a big one! While my minor financial woes are good for a giggle at this distance, Biopure’s story is a salutary reminder that medical miracles are risky and demanding, and that the world of the genome and biotech which promise so much are not certain to deliver in every instance.
BLOGS: Apology to Brian Towell
Last week I published an article from Industry Veteran responding to an article posted by Brian Towell. On re-reading the Veteran’s piece in a more grounded manner, he went over the line from being rude about Brian’s ideas to being rude about him personally. My aim in THCB is to provide a place where I and others can air strong opinions about the health care marketplace. I welcome contributions from the Veteran and others, and it’s in the nature of this blog that sometimes posts are more like a late night bar conversation than scholarly articles. But there’s enough really bad stuff going on in the world without adding more personal invective. So I apologize to Brian for publishing the Veteran’s piece. I’ll employ a slightly heavier use of my editorial discretion in future and hope that we can now get back to more constructive consideration of the issues. By the way, Brian’s piece on what pharma has to do about its overall marketing strategy, which is long and thoughtful, is here, and the Veteran will be back doing what he does so well later.
POLICY: Free Market Medical Care, by Andy Ribner, M.D.
THCB has a new contributor today; Dr Andrew Ribner, a cosmetic surgeon who wrote to me originally in praise of my opinions about a piece I wrote about Regina Herzlinger a while back. After a bit of back and forth, Andrew figured out that despite my call for an intellectually honest backer of health care consumerism, I wasn’t a true believer in the power of the market. Cosmetic surgeons know something about the role of the free market in health care, so Andy sent me this: Free markets are the most efficient mechanism for exchange of goods and services because they promote the features and price at which willing sellers and buyers agree to exchange. When free markets are present, the price and features of goods or services offered respond to the desires of the aggregate of buyers. Knowledge on the part of buyers as to what sellers are offering and on the part of sellers concerning what buyers want is necessary. Perfect knowledge is desirable but rarely present. Completely free markets are difficult to achieve, and perhaps not necessarily desirable or practical under all conditions. Government controls and laws often limit the complete freedom of the market place. We have laws against fraud, age requirements to purchase certain products and certain guarantees concerning product quality which protect consumers. We even intervene with the evolution of markets to keep them from being under the excessive control of a single seller in a market monopoly. Rarely, we do protect sellers when the purchase in a market is dominated by one buyer, as in monopsony. At the present time there is not a free market in the purchase of health care. This is the consequence of several factors. First of all, the user of the service in most cases is not the purchaser of the service. During the period of wage-price controls in World War II, companies devised a new way to compete for scarce labor by introducing employer purchased health insurance as a benefit of employment. This continues to the present day. When the buyer of a product or service is not the end user, this creates non-alignment of incentives between buyer and user. The market cannot respond to the preferences of a user who is not a payer. Only the flow of dollars will modify the features of goods or services offered. On the other side of the coin, a buyer not pressured by the constraints of price or budget will have an unlimited demand for goods or services. This was the fatal defect of a third party payment system. This was further exacerbated by years of labor union demand for "first dollar" coverage of medical care. The health insurance industry response to rising costs was first to increase premiums. However, payers preferred reduction in coverage to increasing costs, and thus managed care (read reduced care) was born. Health care users predictably resented gatekeepers and denial of care which has become a mainstay of insurance company strategy. Although HMOs have begun to disappear, insurance companies are still active participants in treatment decisions through their approval process. Free markets also cannot exist in the presence of a single dominant seller or small group of sellers who have so much leverage that they can control market price and features offered. "Trust busting" was the solution to that problem when it was identified under President Theodore Roosevelt. Monopoly may be more common, but monopsony, the situation of a single powerful buyer distorting a free market, is equally as destructive to free market function. Today, huge health insurance companies have become monopolies (more accurately oligopolies) as sellers of health insurance. With competition so diminished it is no wonder buyers can no longer get the features and price they seek. In addition, these same insurance carriers exercise monopsony power in the purchase of health care services, controlling price paid and scope and nature of services covered. Hospitals have joined together in ever larger groups in order to maintain market power in negotiation with insurance companies. Physicians, on the other hand, have not been permitted to negotiate as large groups with few exceptions. Consequently, during this time of double digit health care cost increases, physician reimbursements have been flat or gone down. Medical practice has become a high volume exercise just to keep up with overhead. Adam Smith would predict that as you pay less and less for a service, the motivation to be available at all hours to provide that service disappears. What to do? Some have suggested "managed competition" to create agreement between insurers, doctors and government would control costs and improve quality. "Managed competition" is an oxymoron right up there with jumbo shrimp and would more likely result in the insurance industry using its considerable political clout to influence government decisions to the detriment of both patients and physicians. The best prescription for a responsive and responsible health care system is a free market. Medical Savings Accounts (MSAs) are a good first step toward market discipline. MSAs would be funded by pre-tax earnings and would be used to pay the high deductible of a catastrophic or stop loss type of health insurance policy. Money placed in MSAs could be used to pay any health expense and would be a less painful way to meet a high insurance deductible. By allowing the individual to roll over money in the plan from one year to the next, it would provide a motivation to spend the money carefully and shop for price as well as features of service. Tax treatment of health insurance premiums would change. Health insurance premiums would no longer by tax deductible to employers, but would be either a tax deduction or tax credit to individual purchasers. An employer could pay its employees in salary what it had spent on health insurance. Overnight, employers would stop providing insurance to its employees, and the purchasers of health insurance would be the end users. Portability of insurance coverage would no longer be an issue because health insurance would be individually purchased. In the scenario of individually purchased health insurance would force insurance companies to at least respond to buyer preferences for features. Change in tax treatment to individuals would certainly maintain price responsiveness on the part of buyers, but it would allow the working uninsured to purchase insurance as individuals. We can encourage healthy lifestyle and reduce overall health care costs if we permit underwriting of risk factors as is done in automobile insurance. The current argument against this practice is that it would make insurance unaffordable for those who are chronically ill and likely to incur high expenses on an ongoing basis. That group of patients would be eligible to receive federal subsidies for their insurance premiums. This is by no means a perfect solution to our health care problems. But, it is a step in the right direction to encourage the free market to find the solutions to our current dilemmas in the provision of health care. Those of you looking for an alternate view of MSAs/HSA’s may be interested in Paul Krugman’s views in his NY Times op-ed last week. I’ll reply to Andrew later this week, but my concerns about the consumer directed health plan movement have been voiced in THCB before.
POLICY: In Florida not all the nuts grow on trees
In Florida, the state Supreme Court has decided in its wisdom that its should put competing initiatives on the November ballot about medical errors and malpractice. Both of these are mutual nitpicky tit for tat assaults by the trial lawyers on the doctors and vice versa. Believe it or not these will get to change the state Constitution!
And we still let this state stay in the Union, despite the screw-up that they made of it in 2000. As Charlie Brown said, "Good Grief!"
