Thursday, August 28, 2014

Medicare Spending Falling Short of Projections

Today’s Managing Health Care Costs

Number is $95 billion


The Congressional Budget Office has again reforecasted the cost of Medicare for the next decade, and the news continues to be good.   Above is the static image of an interactive graphic from the New York Times’ Upshot – which points out

The difference between the current estimate for Medicare’s 2019 budget and the estimate for the 2019 budget four years ago is about $95 billion. That sum is greater than the government is expected to spend that year on unemployment insurance, welfare and Amtrak — combined. 

There are multiple reasons for this improvement – and the debate roars on about how much of this slowdown is due to the Great Recession.  We’ll likely see some uptick in medical inflation going forward- but the Affordable Care Act Medicare cuts are playing a substantial role. 

What Should a Quality Adjusted Life Year Cost?

Today’s Managing Health Care Costs

Number is $50,000

Today’s New England Journal has a perspective article on the use of Quality Adjusted Life Years (QALYs). Peter Neumann and Joshua Cohen of Tufts Center for Evaluation and Risk in Health Care, and Milton Weinstein of Harvard School of Public Health, point out that there’s never been an especially good reason why public policy commentators chose $50,000 per QALY as the right “threshold” for coverage of health care services.  The health care system has often covered services that would cost far more.  Note that $50,000 per QALY in 1975 would be about $225,000 in 2014 dollars.  Two to three times the annual per capita income would be $110-160,000. 

The authors argue that the “right” threshold is probably more like $100-$150,000 – although acknowledge that no number is perfect .

Invoking thresholds, however, means acknowledging limits — and thus in some cases displacing currently provided interventions that have cost-effectiveness ratios exceeding the threshold. It also suggests that more of our spending should focus on underutilized interventions with ratios below the threshold; substituting more cost-effective interventions for less cost-effective ones could improve health outcomes and save money

We’ve focused on the population problem of coming up with the right threshold to offer coverage. I think the bigger challenge is that we’re entering a time of increased personalization in medicine – where each of us might be a population of one where the benefit of a service to us is markedly different than the benefit to someone else, even if we are similar demographically.   Most of the new genomic cancer medications work well for a small subgroup of patients – but looking at their benefit in QALYs over a larger population would obscure their potential positive value.

Decision-making will increasingly need to take into account enough different considerations that the heuristics used by individual clinicians will have to give way to decision-support tools that can consider more variables –a but these will seem like black boxes. Many of us will support using such tools in the abstract to improve decision-making, but we’ll continue to want to try “everything” if we or our loved ones are severely ill.   This is why incorporating these concepts into decisions about new drug approval or new capital expenditures and building appropriate aligned reimbursement methodologies is so important.  Creating the environment where it’s less likely we’ll get chemotherapy in our last 30 days of life is more likely to “work” than trying to externally impose limits on the care of individuals.

Tuesday, August 26, 2014

Modern Medical Miracles

Today’s Managing Health Care Costs

Number is 50

Decline in Cystic Fibrosis Mortality Rate

Source  (Note this shows mortality down 20% over a single decade)

Sometimes, it’s easy to miss the signs of enormous progress in medical care.

I sat across from an executive at a business meeting the other day – and was shocked when he identified himself as an adult with cystic fibrosis.  During my training, those with cystic fibrosis often died by their late teens.  Research published a week ago in the Annals of Internal Medicine predicts that if progress continues at the current rate a boy born with CF in 2010 will live to a median of age 50.

It’s been almost 10 years since Atul Gawande published “The Bell Curve” in The New Yorker, demonstrating the effectiveness of the disciplined (well, even punitive and dictatorial) efforts made by the most successful CF physician, Warren Warwick of the University of Minnesota. The increase in survival of adults with CF is due to technology (including lung transplants and improved pharmaceutical therapy) and better understanding of what it takes to convince adolescents and young adults with CF to make the difficult sacrifices to improve their health.  This is another huge medical care success.

On a similar theme, NPR’s Morning Edition had a story about adults with Down Syndrome being studied for ways to delay or prevent Alzheimer’s Disease. They are genetically programmed to create more amyloid deposits, and almost universally get dementia by their seventh decade.   Those with Down Syndrome only recently have a life expectancy that would have allowed us to even discover this.

Monday, August 25, 2014

Colonoscopy: Too Much Destroys QALYs

Today’s Managing Health Care Costs Number is $711,000


About 18 months ago, I listed to a sanctimonious gastroenterologist from a major New York teaching hospital tell a group of primary care physicians that he recommended colonoscopies for his patients every five years.  He said something like “this is what I’d want for my mother.”   I argued in favor of following the evidence-based guidelines.  All tests have complications and costs, including nonfinancial costs – and I wondered on the side whether he had ambivalent feelings about his mother.  

JAMA Internal Medicine published a simulation model last week which addresses this question.   The researchers’ assumptions are optimistic –there are no complications from colonoscopies without biopsies, and the cecum (highest part of colon) is visualized in 90% of colonoscopies.   The researchers also assumed that patients disliked the colonoscopy and prep (true, true), so they assumed a negative impact on quality of life for the day of and the day before the procedure itself.

The most important survival advantage is from getting colonoscopies every 10 years, following current recommendations.  This leads to over 33 discounted quality adjusted life years (QALYs) per 1000 people.   Decreasing the interval to 5 years yields a tiny incremental benefit (0.7 discounted QALYs per 1000 patients) – and costs $711,000 per QALY.   Put another way, 909 people have extra colonoscopies for each QALY gained.  Decreasing the interval to 3 years led to higher costs and a decrease in QALYs (i.e. we would pay more and have less quality adjusted life!).   Continuing colonoscopies beyond age 75 also led to fewer, not more, QALYs.

This is especially important because 4 in 10 Medicare beneficiaries who had a normal colonoscopy at age 55 have a followup in 7 years or less -  a waste not just of money, but also a waste of precious time for septuagenarians and octogenerians.

Prevention is good – but it’s important to follow the evidence based rules.   Too much screening can lead to higher expenses – andcan even lead to a decrease in quality adjusted life years.

We should even follow the evidence-based rules for our mothers!

Tuesday, August 19, 2014

A Trio of Stories of Providers Behaving Badly

Today’s Managing Health Care Costs

Number is $8.2 billion

A trio of articles over the last few days show the devastating role that providers can play in promoting waste and fraud in medical care.

The New York Times reported on Friday on medical compounding – where pharmacists are often blending a half dozen medicines (many or all generics) into a cream or ointment – and successfully charging insurance companies thousands of dollars a tube.   These medicines have never been formally tested together, and it’s not even clear the individual ingredients are effective when applied topically.   The drugs have no standard NDC number, so insurance companies have paid ridiculous fees for them. 

Pharmacists couldn’t do this on their own; doctors write the prescriptions.  Is there a doctor who really thinks it’s OK to give people a $4200 ointment for muscle pain instead of a nickel dose of ibuprofen or naproxen?

Steroids made for injections by the New England Compounding killed over 60 in 2012.   The creams and ointments in this article are far less deadly  - although there was a death of a five month old boy in Los Angeles who had bounced on his mom’s medicated knee.   Pharmacy benefit managers are stopping payment for these compounded medicines. They well should.

The Washington Post reported this weekend on the scooter scam – where criminals steal Medicare numbers, bundle vulnerable elderly into vans to have fraudulent medical exams that certify they need an electric wheelchair, and bill Medicare $5000 for the scooter – which usually remains in shinkwrap in their garage, and sometimes isn’t even delivered.   Those fraudulent medical exams – given by physicians – were sometimes even given in second floor walk up offices.

Authorities said the doctor at this clinic was in on the scam, too. He was paid to find the same problems, every time. The patient was too weak to use a cane. Or a walker. Or even a non-motorized wheelchair. Only a motorized wheelchair would do. Instead of making lame men walk, the doctor’s job was to make walking men lame — at least on paper.

Finally, Austin Frakt reports in The Incidental Economist that in response to risk adjusted payment for Medicare Advantage plans, reporting of high risk DRG diagnosis codes went up substantially. This is because physicians in these plans coded diagnoses far more aggressively than physicians.  Coding that a patient has diabetes with kidney disease can sextuple Medicare budgets. Here’s a link to a health plan “how to” guide.   Health plans have even sent providers to patient homes to capture diagnoses to increase Medicare payment.  It’s hard for those in Medicare Advantage plans not to encourage aggressive coding; if they do this less than competitors, their payment rates will decrease since all risk adjustment is net “cost neutral” to Medicare.

The American College of Physicians caught substantial flak for urging physicians to  "practice effective and efficient health care and to use health care resources responsibly."  This exhortation is more necessary than ever!


Thursday, August 14, 2014

Skinny health plan networks can lower costs

Today’s Managing Health Care Costs

Number is

Today’s New England Journal has an article reminding us that narrow networks can be very effective in lowering costs, and regulations forcing wider access might be great for choice, but terrible for affordability.  A McKinsey report says that 40% of exchange plans have narrow or ultranarrow networks (less than either 70% of 40% of area hospitals.  Provider sponsored networks are likely to be the narrowest of all.

US health care costs are the highest around largely because of price (and not utilization) – and there are a limited number of ways to control provider prices

·         Most developed countries have national fee schedules – which keep prices under control.  They can have other insidious effects including increased volume,  limited access, and decreased innovation. Price controls can even prompt the “red envelope,” required under-the-table payments to obtain care.
·         Exposing patients to price differences, which could involve reference-based pricing, can also help control costs. However, the costs of some services are so high that they far exceed out –of-pocket maximums.  Further, few people have the opportunity to direct their emergency ambulance to their “preferred” hospital.
·         The “market” can help keep prices down – but that requires full information and real competition.  Most provider markets are highly concentrated, and Medicare is such a large payer for hospitals that even large health plans have inadequate negotiating leverage when bargaining for prices with “must have” hospitals..  An exception is states with dominant health plans, that have been better able to control unit prices – although there are bad side effects of this as well.

Narrow networks work because they diminish hospital leverage – counteracting a dynamic where health plans cannot possibly exclude a hospital, so have to pay whatever it demands.   Provider organizations that sponsor health insurance plans can afford to offer lower prices to the extent that they increase market penetration, since hospitals have high fixed costs, and thus increase margin even with low prices as long as they can increase volume.

The NEJM commentator notes that narrow networks can also be a mechanism to select a healthier population.  That’s why premium risk adjustment is critical – so that health plans that recruit sicker patients have higher effective premiums.

The feds should be sure that narrow network plans include the full range of services patients need. This can include tertiary and quaternary services like transplants which are only available in high priced academic medical centers. But health plans should be able to offer these services on an “as needed” basis, instead of being forced to include expensive providers for all services.

Tuesday, August 12, 2014

More good news on smoking

Today’s Managing Health Care Costs

Number is 9%

Some of the most heartening stories in health care are related to smoking cessation – and the effective  campaign to make smoking “uncool” for teens.  The New York Times reported yesterday that the American Legacy Foundation, a nonprofit initially funded from tobacco settlements, is starting a new ad campaign . 

“In 2000, 23 percent of teens smoked,” it reads. “Today, only 9 percent of teens smoke. That’s less than the number of VHS tapes sold in 2013. It’s less than the number of landlines still in use. But the fight isn’t over.”

American Legacy’s previous campaign, which included young adults dumping body bags in front of the headquarters of Philip Morris, is estimated to have prevented 450,000 deaths.

Nine percent is an impressive number – this means that only half as many teenagers now smoke as Americans over 18!  That’s great news for public health, but terrible news for states that have sold complicated financial instruments to get front-loaded payment on the estimated $266 billion in tobacco settlement dollars through 2025.  Propublica reports in Sunday’s Washington Post that states (and DC and Puerto Rico) have agreed to future liabilities of as much as 76 times the initial payout in exchange for access to instant cash. 

The financial error made by states is bipartisan.  Refinancing tobacco bonds helped Chris Christie  pump $92 million into a single year’s budget.   This was part of a rescue of an earlier deal – and NJ has given up $406 million of remaining tobacco proceeds beginning in 2017.  In Ohio, then-Treasurer Richard Cordray (now the head of the Consumer Financial Protection Agency in the Obama Administration) got a one-time payment of $319 million in 2007, and the state will owe a $6.6 billion balloon payment.  Bankers made hundreds of millions in fees.  Bear Stearns had 21-person “Tobacco Securitization Group”.   All of these billions of tobacco bonds are now toxic debt –and these dollars are not available to help prevent future smoking deaths.

One bright spot in the Propublica report is that analysts had predicted cigarette sales would have declined at a rate of over 1.5% a year, but the actual yearly drop is 3-3.5%. That’s great news for public health and future medical expense, even if it’s terrible news for states that tried to cash in early and agreed to large future payments that will now come out of general funds instead of the tobacco settlement.