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Genetic Testing and Insurance: One Datum

Feb 3, 2012• 4

By DAVID FRIEDMAN

Reductions in the cost of genetic testing and improvements in what we know about what it tells us produce obvious benefits; if you know you are likely to have some particular medical problem, you may be able to take precautions against it. But they also have at least one potential downside.

The more is known about the chance of bad things happening to us, the less able we will be to insure against them.

A solution to this problem that is sometimes proposed is to permit individuals to have their genes tested but forbid insurance companies to require testing as a condition of insurance or to use the information it produces. The problem with that is adverse selection. If the customer knows his risk and the insurance company doesn’t, high risk and low risk customers are charged the same price, making insurance a good deal for the former and a bad deal for the latter. Insurance companies, realizing that most of those who choose to buy their insurance are bad risks, will charge accordingly, driving more of the low or average risk customers out of the market. In the limiting case, insurance is bought only by high risk customers, at a high risk price. A famous description of the problem is Akerlof’s article “The Market for Lemons.”

If we allow both insurance companies and their customers to make use of genetic information, then both high risk and low risk customers can buy insurance, but at different prices. The risk of having genetic variants that make you more likely to suffer some expensive medical problem is uninsurable, although you can still insure against the risk that, given those genes, the problem will actually appear.

Thinking About the Bipartisan Policy Center Report on Health IT

Feb 3, 2012

By Jane Sarasohn-Kahn

There are few issue areas within the Beltway of Washington, DC, that have enjoyed more support across the political aisle than health care information technology. In 2004, George Bush asserted that every American would/should have an electronic medical record by 2014. Since then, Democrats and Republicans alike have supported the broad concept of wiring the U.S. health information infrastructure.

With the injection of ARRA stimulus funds earmarked in the HITECH Act to promote health providers’ adoption of electronic health records, we’re now on the road to Americans getting access to their health information electronically. It won’t be all or even most U.S. health citizens by 2014, but it will millions.

Just how solid is political support for health IT these days, then? An important report, Transforming Health Care: The Role of Health IT, from the Bipartisan Policy Center Task Froce on Delivery System Reform and Health IT published in January 2012, talks about the gaps and obstacles to achieving an interoperable, accessible health IT infrastructure.

Care Innovations Summit

Feb 2, 2012• 9

By Kent Bottles, MD

Anyone who is concerned about the future transformation of the United States clinical delivery system should pay attention to the Care Innovations Summit. The selection of presentations as well as the content that was discussed says volumes about where CMS believes payment is headed. Speaker after speaker stated that decreasing the per-capita cost of health care and increasing the quality patients receive is the dominant political, social, and economic issue for all Americans.

Marilyn Tavenner, the new Acting Administrator for the Centers for Medicare and Medicaid Services, outlined what she saw as the major accomplishments of the past few years. Her list included providing partial relief for 3.8 million seniors who hit the prescription drug “doughnut hole,” creating high risk pools for 45,000 Americans, creating a consumer website, allowing young adults to stay on their parents’ health care insurance until age 26, eliminating denial of coverage for patients with pre-existing conditions, eliminating lifetime and annual health care insurance maximums, increasing the coverage of many prevention measures, creating pilots to explore how to base payments on quality not volume, and getting the Innovation Center up and running.

Atul Gawande, MD, the Harvard surgeon and New Yorker author, presented the morning keynote. Gawande, the author of three books on health care (Complications, Better, and The Checklist Manifesto), said the “cost of health care is destroying the American dream.” In Massachusetts the state government sent nearly a billion dollars to local schools to pay for smaller class sizes and better teachers’ pay, but every dollar was diverted to covering higher health care costs. For each dollar added to school budgets, the costs of teacher health benefits consumed $1.40.

Gawande listed three causes of our current health care problem: business interests, government bureaucracy, and the sheer complexity of delivering clinical care in a broken system. He focused on the last of these causes and noted that there are at present 13,600 diagnoses, 4,000 medical procedures, and 6,000 medications. In 1970 the average patient saw two physicians for their medical conditions; today the average patient has more than 15 physicians consulting on their care. He also stated that the health care system “trained and hired physicians to be cowboys, when what we really need are pit crew team members.” He is also hopeful because the health care systems that have the best results are not the most expensive.

It Takes a CEO to Save the U.S. Health-Care System

Feb 2, 2012• 22

By Darrell Moon

Forget Washington and the political debate over Obamacare. The real battle for the future of health care is being fought in the world of business, where tens of thousands of companies have seen their financial well-being undermined by skyrocketing employee health costs.

Although few people realize it, employee health costs have now become the third-largest expenditure for U.S. businesses today, constituting a whopping 8 percent of total compensation. And they are rising fast, more than doubling in just the last decade to more than $15,000 a year for family coverage. Of that cost, 73 percent is paid by the employer.

Yet most chief executive officers are curiously passive, failing to employ even the most basic management tools and market incentives to deal with the problem. Employees and employers alike — but first and foremost the boss — need to be held accountable for reducing the cost burden that is damaging so many companies’ bottom lines.

Here are seven things that CEOs can do:

No. 1: Give incentives to insurance brokers.

Most employers buy their health insurance through brokers who make more money when the plan costs more. Not exactly a smart way to get market forces working in your favor. Better to pay brokers on a fee-for-service basis. Better still to offer them a bonus tied to the amount by which they can reduce a plan’s costs, not a plan’s benefits.

No. 2: Give incentives to your managers.

Every CEO learned in business school that if you want to achieve a key business objective — be it launching a new product or reducing company health costs — you need to provide incentives to managers to help you succeed. Yet rare is the boss who offers bonuses to human-resources and benefits managers who reduce claims costs for the company. It’s long past the time for CEOs to get the incentives working in the right direction inside their companies, as well.

The Latest Big Pharma Scandal

Feb 2, 2012• 3

By Shannon Brownlee

Imagine yourself in front of your computer, looking up information about a drug prescribed by your doctor. Your Internet search tells you that there is a cheaper, maybe even a generic version available, but you have just paid top dollar for the brand name drug. You also learn that another treatment may be safer than the prescription you just filled. Now imagine you discover that your doctor gets paid by the manufacturer to promote the drug to other doctors.

There are various words for this sort of financial transaction, when, say, a radio disk jockey is paid by a recording studio to play a song or a broker is paid to tout a stock — both of which, by the way, are illegal. In medicine it’s called a financial conflict of interest, although “pharmapayola” is in some ways more accurate. It’s perfectly legal, and it’s rampant. In a survey published in the Archives of Internal Medicine in 2010, 28% of physicians reported that they received some kind of payment from a drug company to serve on a speaker’s board, as a consultant, or on an advisory board. Other bennies handed out by companies included free drug samples, tickets to sporting events, meals at five-star restaurants and all-expenses paid trips to medical meetings in nice locales.

As of this year, doctors who accept gifts and payments from drug and device makers will see their names on the web, the result of the 2010 Physician Payment Sunshine Act, one of the most controversial provisions in the health care reform law. Companies will be required to report any gift or payment to a doctor or academic researcher over $10, whether it’s in the form of stock options, speaking fees, box seat tickets, knickknacks for the doctor’s office or travel to a medical conference. Doctors will also be required to disclose payments and gifts.

Congressional Research Service: Courts Could Force HHS to Implement CLASS Act, Despite Its Insolvency

Feb 1, 2012• 6

By Avik Roy

Today, the U.S. House of Representatives will vote on H.R. 1173, the Fiscal Responsibility and Retirement Security Act of 2011, sponsored by Rep. Charles Boustany (R., La.). This two-page bill would repeal the fiscal disaster known as the CLASS Act, Obamacare’s new long-term care entitlement, which was “suspended” by the Obama Administration because Health and Human Services Secretary Kathleen Sebelius could not certify that the entitlement was fiscally sustainable. Why, you might ask, should Congress bother to repeal CLASS, given that Sebelius has suspended its implementation? Because, according to the Congressional Research Service, courts could force her to implement the new entitlement, despite the fact that it will blow up the deficit.

According to the text of the Affordable Care Act, Secretary Sebelius is required to “designate a benefit plan as the CLASS Independence Benefit Plan” by October 1, 2012. Back in November, the House Energy and Commerce Committee asked CRS to evaluate the question: based on this language, could advocacy groups file suit against HHS for failing to implement the program? Would a court be likely to side with these plaintiffs? According to CRS, it’s a real possibility.

“If the Secretary does not designate a plan by October 1, 2012,” write the CRS staffers, “this failure to act would appear to be the type of agency action that could be challenged under the judicial review provision for agency action unlawfully withheld.” A court could grant deference to Sebelius’ finding that the program was unsustainable, but it could also force implementation of CLASS by “declaring the Secretary in violation of 5 U.S.C. § 706(1) or issuing a write of mandamus to compel agency action, thus requiring the Secretary to renew her efforts to create a plan that is consistent with the statutory requirements.”

Why Hospitals Continue to Fail in ‘Connecting the Dots’ With Their Data, and What They Can Do to Change

Feb 1, 2012• 11

By Russ Richmond, MD

The world is awash in data. It is estimated that the amount of digital information increases ten-fold every few years, with data growing at a compound annual rate of 60 percent. The big technology company Cisco has forecast that by 2013, the amount of traffic flowing over the internet annually will reach 667 exabytes. Just to put that in perspective, one exabyte of data is the equivalent of more than 4,000 times the information stored in the US Library of Congress.

This data explosion – now rather imprecisely dubbed “big data” – is both an opportunity and a curse. Having all of that information makes it possible to do things that were previously never even imaginable. Last year, the McKinsey Global Institute (MGI) conducted a major research study on big data, calling it “the next frontier for innovation, competition, and productivity.” The MGI study noted that big data is becoming even more valuable as our analytical and computing abilities continue to expand.

On the “curse” side of the big data phenomenon, the growing mountains of information also pose massive challenges to those who need to manage it. Having ever greater volumes of data to sift through to find critical insights (the proverbial needle in the digital haystack), is a growing problem for companies, organizations, and governments the world over. Sometimes, there really is such a thing as too much information.

The data deluge is especially urgent for hospitals, which are factories of data. In the typical hospital, data flows from every department and function – from emergency department admission records and HR systems, to purchasing and billing information. But, hospitals are not exactly known for effectively managing data. The healthcare provider sector is probably 20 years behind other major industry domains in terms of how its uses data. Many hospitals fail to realize the value of the data they do have – or they are overly focused on EMRs.

Why the Pilot Programs Failed

Feb 1, 2012• 12

By John Goodman

Just about everybody in the health policy blogosphere has noted with disappointment the failure of Medicare’s demonstration projects to reduce the costs of care. Recall that these are critical to President Obama’s challenge “To find out what works and then go do it.”

If nothing works, the fallback weapon in Obama Care is to reduce fees paid to doctors and hospitals. Yet the Medicare actuaries tell us that squeezing the providers in this way will put one in seven hospitals out of business in the next eight years, as Medicare fees fall below Medicaid’s. Under this scenario, senior citizens may be forced to line up behind welfare mothers, seeking care at community health centers and in the emergency rooms of safety net hospitals.

I believe this is the only blog that has confidently predicted that health care costs will never be controlled by running pilot programs and trying to “copy what works.” (Note, however: the Congressional Budget Office has shared our viewpoint from the beginning; see their previous conclusions here and here.) I’ll explain why I predicted failure all along below. First let’s review the latest results.

Over the past two decades, Medicare’s administrators have conducted two types of demonstration projects.

Disease management and care coordination demonstrations consisted of 34 programs that used nurses as care managers to educate patients about their chronic illnesses, encouraged them to follow self-care regimens, monitored their health, and tracked whether they received recommended tests and treatments. The primary goal was to save money by reducing hospitalization. With respect to these efforts, the Congressional Budget Office (CBO) finds:

On average, the 34 programs had little or no effect on hospital admissions.
In nearly every program, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program.

Nursing Shortage: Is it a Case of Crying Wolf?

Jan 31, 2012• 19

By David Williams

How many times have you read about the staggering shortage of nurses? It’s routine to see numbers in the hundreds of thousands tossed around – representing the seemingly insatiable demand for nurses from an aging population. I’ve always been suspicious of these estimates. First, it’s not how the economy works. We’re not really going to have 260,000 unfilled nursing positions in 2025. Either supply will rise, demand will fall or there will be a substitution of other kinds of labor or capital. Second, these numbers often come from interested parties, usually advocates for higher nurse pay and benefit or people who are running nursing schools and would like them to expand.

So I was struck by an article today that mentioned a glut of nurses, even in places like California that mandate minimum nurse staffing ratios. The situation is blamed on the recession, which depresses demand as hospitals and other nurse employers seek to control budgets, and also increases supply as nurses delay retirement, seek more hours, or return to work when a spouse is laid off. I’m sure there’a lot of truth to this, but if there is really such a big shortage it shouldn’t turn into a glut so quickly.

I don’t think employers of nurses are quaking in their boots due to the prospect of a gaping shortage of nurses. Although they might not say so openly (since everyone loves nurses) the forward thinking hospitals are planning for the day when nurses comprise a substantially smaller portion of their costs than they do now. They’ll do it with better decision support systems, workflow tools and robots that will take over many routine and high-skill nursing functions. Hospitals may seem capital intensive now, but I really believe there will be even more substitution of capital for labor in the future.

So if you’re betting on a giant nursing shortage in the year 2025 my guess is you’re going to lose.