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POLICY: Health Care Costs 101

Occasionally you see a really dumb article.  Not wrong, just dumb.  This one in the NY Times last week asks Who Controls Health Care Costs?.  It wonders why Republicans would promote private plans as a solution to controlling Medicare costs when it’s been shown that both Medicare and private costs increase at roughly the same rate over time. Leaving aside the fact that the Republicans are doing this for ideological reasons, it’s worth taking a little walk down memory lane on health care costs.

The reason costs go up so fast in this country is because of what Alain Enthoven calls "cost-unconscious demand" and a general pattern of Fee-For-Service medicine. Do more, get more, and no one really worries about the cost. That’s more or less what we still have, although it’s become much more sophisticated.   Even after 40 years of health care cost inflation, the same basics apply. There are only three real approaches to change this;

    1) Make individuals conscious of the entire cost of the system care–don’t disintermediate it via employers and insurance companies–including either having them pay all their insurance premiums or all cash out of pocket.
    2) Make consumers directly responsible for health care via a directly proportional tax (this is how it works in Belgium and is what Vic Fuchs proposed recently).
    3) Give responsibility for the cost of the whole ball of wax to someone else who has to manage the bottom line (almost always the government, as in the UK and Canada)

We are nowhere near any of those solutions in the US, so costs will keep going up (as will uninsurance and underinsurance, as there is a what economists call a price effect).

Meanwhile, the leading advocate for my third solution, otherwise known as single payer, Steffie Woolhandler, also got her own interview in the Times.

And for those interested in performance-based reimbursement, a group of health policy wonks who favor a market-based solution, including Enthoven, believe that Medicare could and should change the market by rewarding providers with pay for performance. Not a bad idea, but not realistic in the present climate.

PHARMA: The AMA goes out on a limb on DTC ads

While some doctors have been complaining about DTC ads for a while, surveys show that they don’t really mind too much, and that when patients ask for a drug the doctors often prescribe it.  Finally the AMA has come up with a revolutionary proposal: the ads should say what the drug is used for! Presumably doctors are fed up with answering that question to confused patients who’ve seen Levitra ads.

In fact DTC advertising has indubitally pushed up drug use and drug costs.  But it’s also increased understanding of various diseases among patients. So calling DTC advertising a major cause of increased health care costs when drugs represent less than 10% of all costs is a little over the top.  Of course the media companies do appreciate the $3bn a year that is dropped their way by the drug companies. Some of this was discussed by Art Caplan and Sherry Glied in Teri Gross’ Fresh Air show on NPR  this morning on the increase in health costs.

On a totally random aside, they can’t show DTC advertising in the UK.  Otherwise Glaxo might have slipped up in the way that GM screwed up by calling the Chevy Nova (Don’t Go) in South America (although apparently it’s an urban legend). After all the ad here says take Levitra if you’re having trouble staying "in the game"; they might have talked about trouble going "on the game", which is British slang for being a prostitute!

INDUSTRY: Tom Scully’s had enough

The New York Times is shocked, "shocked!" to find that a senior administration official is going to retreat to a bigger salary in the private sector. Even more amazingly the official concerned is Tom Scully the head of CMS. Frankly I think the NYTimes is stretching it to put this on the front page. Scully was the Washington guy for the for-profit hospital chains before running HCFA/CMS and was in the Bush pere White House before that. He’s not exactly the first official or Congressman to jump over to the "dark side" and, let’s face it, there’s barely a door to revolve through these days–it’s more like a transparent shower curtain. Anyway did the Times really expect him to sit around at CMS and implement the mess the Congress just left him?

QUALITY: Helmet doesn’t save young skier

A 13 girl died this weekend after skiing into a tree at Alpine Meadows near Lake Tahoe. I’m a very keen skier and snowboarder and, although I wasn’t close to dying, I tore 3 ligaments in my knee after snowbaording into a tree last year. So I have a deep personal interest in the subject and have been evaluating knee guards as I get back onto the slopes.  What surprised me is that the girl was wearing a helmet. You’ll find that many skiers are wearing them these days, but apparently they don’t help in every case.

QUALITY: Kaiser cheaper and better than the NHS, says NHS

A study in the BMJ said, apparently with the approval of the UK health minister John Reid, that Kaiser Permanete provided better care than the UK’s NHS at better overall value and similar cost! This follows an academic report that suggested that UK care standards should become more like American ones. No, they’re not thinking of importing our insurance industry, but this is suggesting that length of stay in the UK is too long and should be brought in line with best American practices.  That’s not too far wrong in my view.  LOS over here is too short, forced that way by per admission DRGs, but not grossly so. Whereas LOS in most other countries is 2-3 times as long and lowering it would mean that care could be better delivered in the community at lower cost–rather than in a SNF at higher cost as is often the case in too-early discharges here. (In Uwe Reinhardt’s argument this leads to higher than necessary average inpatient costs as the first day in a SNF actually costs more than the last day in a hospital). I  know something about international comparisons (as well as something about Kaiser and the UK), and there is a nugget in here which I’ll bring out more in the future. 

Meanwhile, think about this on the macro level;, the Brits are looking for ways to cut cost in their system and they’re spending less than half what we do! And consider one more thing–costs in Florida are twice what they are in Minnesota, so we could do the same thing if we wanted (and could be bothered to read Wennberg’s stuff).

Hat tip to the wonderful MedPundit for this story, although why is a good free-marketeer like Sydney trolling the news outputs of a nationalized monopoly business like The BBC? Maybe there’s something to that socialism thing after all??

PHARMA: Statins good but no better than aspirin?

Today’s NY times gets very excited about the ability of statins to lower cholesterol and therefore reduce the risk of heart disease. In particular they cite the improvement you get from getting LDL below the consensus "normal" levels. Of course as the article called Just how low can you go? points out, this is great news for the statin makers.  Only around 10% of those who seem to be indicated for statins are actually taking them.  On the other hand scaremongers (i.e. this blog and others) keep pointing out that there can be side-effects from statins, which include severe muscle pain and some say long-term amnesia.  While it’s OK for the NY Times to act as Pfizer’s PR company on occasion (and this may actually be one of them), and to correctly point out that the incidence of side-effects is very, very low, they might have noted another study out yesterday.  That study, in the British Medical Journal suggested that a new blockbuster drug you may have heard of called aspirin was found equally efficacious and far more cost-effective in preventing heart disease than statins. And not just a little more, but by a factor of 20.

The full paper admits that aspirin use does have side-effects (usually stomach bleeding), but obviously, as in the case of the Cox-2 inhibitors, the patients could be started on that regimen and switched to statins if they can’t handle the aspirin.  Overall this study should give pause to the statin manufacturers.  In the UK where the government already concedes that its paying too much for statins and is trying to move them OTC, this could be the start of a movement to replace them with a rather more mature and much cheaper product! In the US where cost-effectiveness is not a recognized concept, don’t expect too much attention to be paid. But as we eventually (i.e in ten years time) move into an era where the government and public starts to expect value for money from drug companies as well as miracle cures, this type of analysis will become more common and more important.

TECHNOLOGY: Medicare Bill’s impact on ePrescribing

Jane Sarasohn Kahn’s column in iHealthbeat about the impact of the Medicare bill on ePrescribing shows her being a touch cynical about the political process.  But don’t worry about it affecting her analysis. Jane explains in detail why nothing will really happen in terms of Federal ePrescribing before 2009, with only passing reference to the AMA, luddites and dinosaurs. She also has some interesting takes on activities on the state level, particularly in Massachusetts. I do think that its overly optimistic to think that this kind of voluntary effort can get more than a few cities or states well on the way to ePrescribing.  However, we should have some good answers within 18 months as to whether these efforts really save money.  If they do, pressure will increase on other providers to adopt ePrescribing too.

INDUSTRY: Better fewer, but better!

This barely needs repeating but, just in case you weren’t sure, the New England Journal of Medicine article called Surgeon Volume and Operative Mortality in the United States confirms that the more surgery surgeons do, the better they are at it. And of course the less likely their patients are to die.  Medrants has some opinions and comments about this, but it’s worth remembering that to my knowledge the Brits and the Canadians (and probably others) keep their number of surgeons and specialists artificially low. This has the side-effect of keeping them very, very busy. Given this report that appears to be a feature rather than a bug.

PS Small non-cash prize awarded to reader who can identify the author of the original title of this post. (Be honest now, NO Googling please!)

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