Thursday, October 1, 2015
Today’s Managing Health Care Costs Number is $80 million
The scandal enveloping Volkswagen, AG, which has programmed its diesel autos to mislead emission checks and cause as much as 40 times more nitrogen oxide (NOX) pollution as advertised, is a reminder to us that environmental issues are themselves a driver of health care costs.
Michael Greenstone of MIT calculated that this additional pollution was probably responsible for about $80 million in extra medical costs since 2009. The New York Times estimated that the excess pollution led to about 106 extra deaths. Neither the costs nor the death tolls are huge in the context of our economy and our population. But, still. People died who didn’t have to, and health care cost more than it should have.
The Volkswagen story will stay in the news for years, as the company faces massive EPA fines and substantial liability from Volkswagen owners as well as shareholders. Air pollution has been shown to increase asthma, obstructive lung disease, and heart attacks, and cleaner air has added as many as 5 years to the lives of newborns in regions of West Virginia.
There is a tragedy playing out in Flint, Michigan, that will get far less attention – but will gravely impact children there for the rest of their lives. The city began to draw drinking water from the Flint River – and the water was corrosive. It leached heavy metals from pipes and seams, and delivered high doses of lead to unsuspecting families.
Lead is an awful toxin – it leads to severe loss of intelligence in children, and brain lead concentration is probably responsible for a substantial amount of violence. Many researchers believe that the dramatic drop in crime since the 1980s was largely due to a decrease in lead poisoning. Prohibiting leaded gas meant that lead levels in the air decreased by 92%. The new and totally preventable lead poisoning in Flint will cost millions in health care dollars, and will hurt residents and those around them for decades or longer.
Monday, September 28, 2015
Today’s Managing Health Care Costs Number is $130 million
There’s very little within the medical care that saves money. Much of the care we deliver is cost effective – meaning that we get quality adjusted life years (QALYs) for a reasonable price. We don’t get QALYs and cost savings for many medical services.
Immunizations are a shining counterexample. Each dollar we spend on childhood vaccinations saves as many as $21 dollars in medical claims costs. The list of cost saving medical services besides immunizations is scant. Statins are not cost saving; neither is cancer screening.
The Congressional Budget Office has reviewed Republican plans to defund Planned Parenthood – and they’ve reported that the next impact of disallowing any federal or Medicaid funding of services at Planned Parenthood would be increased cost to the federal government of $130 million over ten years – as opposed to savings. This is largely because more women denied access to effective contraception will have babies, and 45% of deliveries in the country are paid for by this federal/state program.
The CBO analysis understates the potential for increased costs, as it doesn’t consider costs borne by states or by individuals. The CBO assumed that over time women would be able to find alternatives sites of care – which is optimistic. Planned Parenthood provides services to 2.4 million – over a third of those who on government programs who receive contraception. There are simply not providers other than Planned Parenthood with the capacity to provide women’s health care to millions of Americans, especially in rural areas. So the CBO estimate of increased costs is likely low.
Federal funds that are directed to Planned Parenthood help us control the federal deficit!
H/T to Danielle Paquette who reported this for Wonkblog last week.
Thursday, September 24, 2015
Today's Managing Health Care Costs Number is 3
Kaiser Family Foundation and the Health Research Educational Trust released their annual report on employer sponsored health insurance on Tuesday - and the headline is that employee out of pocket costs continue to increase out of proportion to medical inflation.
· Premiums for employer sponsored health plans increased by 4% - substantially more than workers’ income (+1.9%) and general inflation (-0.2%)
· The portion of firms offering health insurance hasn’t changed significantly from last year.
· Worker contribution to health care costs increased more than employer contribution, although employers continue to pick up the vast majority of health care costs.
· 63% of workers at small firms and 39% of all workers have single deductibles of $1000 or more;
· 13% have single deductiles of $6000 or more.
Hillary Clinton came up with a two-pronged plan in short order to address the issue of escalating out of pocket costs. The first addresses patients who individually have catastrophic out of pocket costs, and the second offers relieve to relatively healthier people who are never likely to reach their deductibles, but who hate to be paying first dollar for those first few non-preventive office visits.
Clinton proposes to offer a refundable tax credit (up to @$2500 for individuals and $5000 for families) to those who pay more than 5% of their income on out of pocket health care. She would fund this by increasing taxes on the rich and on pharmaceutical companies. As Jonathan Allen of Vox notes in an explainer, this would require Congressional action, which is unlikely even in the first term of a Hillary Clinton presidency barring an unexpected Democratic wave election. From a public policy perspective -this offers the same type of out of pocket protection that the Affordable Care Act already affords to those with silver level exchange plans and income under 400% of the federal poverty level. It's a good idea - and the benefit would predominately go to those with serious or chronic diseases.
Clinton also proposes that three non-preventive visits a year be covered in full before patients have hit their deductible. This will impact a much larger portion of the insured population – but it’s more troubling.
· This will be hard to administer. The cost of the office visit often pales compared to the cost of related diagnostic studies – and if the diagnostic studies are not included there will be many folks who are deeply disappointed.
· This will increase costs – Clinton’s campaign says $100 per person per year although it could be substantially more than that
· Health plans will have to strip out costs from the care of those with more substantial illnesses to stay within the actuarial value that they have promised
· There is a timing issue- this needs to be done at last 18 months in the future, to allow integration into the medical cost and therefore premium
· Employers facing the 40% excise tax will be especially vigilant about offsetting this new coverage (for pretty healthy people) by cuts in coverage (which will have to come from the coverage of those with higher medical claims).
· Front end deductibles do lead more reluctance to seek care, and should lower the utilization of low value care. Office visits have been going down in recent years, perhaps because of deductibles. Making the first three visits exempt from deductibles will diminish
Here’s a link to NYT review of health policy experts’ responses to this proposal.
Rising out of pocket costs are a real problem for Americans with modest incomes– and it’s great that there is more attention to this issue. The Clinton plan might be a starting point, although the plan to offer a government subsidy for high out of pocket costs relative to total income makes good policy sense but is politically dead in the water. The plan to add “free” sick visits is more likely to prevail in the political world, but it’s more problematic and could paradoxically lead to less rich coverage for those with serious illnesses, especially if the excise tax is not overturned.
Tuesday, September 22, 2015
Today’s Managing Health Care Costs Number is 4.5%
Researchers from Harvard Medical School reported in JAMA Internal Medicine yesterday that Medicare Pioneer Accountable Care Organizations (ACOs), which accept the largest amount of financial risk for caing for their designated populations, decreased the use of low value services compared to colleagues in their geography who were not in Pioneer ACOs. The 31 low value services were from the American College of Physicians “Choosing Wisely” campaign, from US Preventive Services Task Force “D” recommendations, Canadian health technology assessments, and the published literature. All were by definition determinable by claims.
The researchers found that on average the Pioneer ACO patients received these services about 5% less than patients attributed to the non-ACO patients during the first year of the Pioneer ACOs (compared to just 4% a year earlier). The research included 700,000 ACO member years and 17 million non ACO member years – and the researchers used a “diff in diff” approach to compare the ACO and control groups. They adjusted for sociodemographics and illness.
This is good news – although by no means definitive proof that ACOs will add value. The researchers did not evaluate the use of high value services, so we don’t know if the total value of care increased. The cost decrease in the Pioneer ACO was lower in year two, but that data was not yet available to the researchers. The big issue is that the actual change was pretty small. I’ve recalculated from the provided data the use of low value services in the ACO and nonACO group for the graphic above. The researchers note that the cost of low value services was $256 per beneficiary – so a 1.9% difference in decline in low value care would yield under $5 bucks per beneficiary. This could be a signal of high value care throughout other categories, in which case ACOs will prove hugely beneficial. These claims codes are also somewhat “gamable,” so that if a low value care index was in widespread use, it’s likely that providers would choose to do claims coding to maximize adjustments and gain the best “score.”
In an accompanying editorial, Arnie Milstein of Stanford notes:
Comparisons of US health care spending with spending in other wealthy countries suggest that lowering population-wide health care spending and then perpetually slowing its growth without impairing quality of care will require more than decreasing low-value services. Decreasing spending will also require economically preventing costly health crises and lowering the cost of producing each unit of service.
We need efforts to lower the use of low value services – and this research shows that Pioneer ACOs appear to have done that in year one. However, we’ll need to address unit cost and prevention of health care crises to obtain the kind of health care cost savings that we need.
Monday, September 21, 2015
Today’s Managing Health Care Costs Number is $750
We’ve long known that there is no good way to constrain costs of unique branded pharmaceuticals. It’s hard not to cover a drug for which there is no substitute, and drugs covered by patents are rarely subject to substitution. The price the market will bear is pretty high, especially for oncology drugs.
We’ve also seen single and dual manufacturer generic drug manufacturers hiking prices like crazy in recent years. We’ve seen colchicine go from a low-priced commodity made by over a dozen manufacturers to a pseudo-brand made by a single generic manufacturer. Colcrys debuted at a scandalous $5 a pill. It’s now between $6 and $11 a pill, unless you use a coupon. As I’ve noted, coupons are a subterfuge to allow manufacturers to charge high prices for a drug while still successfully selling to more cost-conscious purchasers who are paying the bill out of pocket.
Today’s New York Times reports that Turing Pharmaceuticals has just hiked the price of pyramethamine from $13.50 a pill to $750 a pill. Pyramethamine is an antimalarial first licensed in 1953, and is critical to the treatment of the parasitic infection toxoplasmosis. The drug cost just a dollar a pill several years ago, before it was involved in multiple financial transactions which hiked the price. The manufacturer has also moved to “controlled distribution” which makes it difficult for competing generic companies to obtain samples necessary to bring a competing product to the market.
The Times quotes the CEO of Turing:
“This isn’t the greedy drug company trying to gouge patients, it is us trying to stay in business,” Mr. Shkreli said. He said that many patients use the drug for far less than a year and that the price was now more in line with those of other drugs for rare diseases.
But let’s be frank. We tolerate high costs of “orphan drugs” to encourage pharmaceutical companies to bring new agents to the market. Why should we pay specialty drug rates for a pharmaceutical product licensed in 1953?
Ezekiel Emanuel opined earlier this month that we might need price caps or government purchasing for specialty drugs, and there were angry letters to the editor decrying his proposals (including from former VT governor Howard Dean(!)). Price hikes like this make it more likely that the move to restrict drug prices will gain momentum.
Friday, September 18, 2015
Today’s Managing Health Care Costs Number is 26%
Call me confused.
Maryland approved a 26% rate hike for the most popular Obamacare exchange health plan offered by CareFirst Blue Cross, the dominant insurer in that state. That’s a big increase – the average increase in neighboring Washington DC (also served by CareFirst) is only 4%.
Maryland is home of two innovations in health care finance and delivery that should help control costs. Maryland’s all payer hospital rate setting has been heralded as saving $40 billion over three decades. CareFirst’s Patient Centered Medical Home Program is being credited with savings as large as 8.5% of medical pmpm cost (see slide 55 of this deck from CareFirst)
I understand that the cost savings from the all payer hospital rate settings have been under serious pressure in the last few years , and Maryland recently renegotiated terms with CMS in 2014 . The PCMH program doesn’t represent all primary care providers – although it does represent 80% of them. The actuaries could have just set rates too low in 2015 – even if the cost of care isn’t going up. CareFirst reported a $100 million loss on exchange plans, and it’s critical for health plans to have at least a small margin to support infrastructure investment and provide a cushion for years with unexpected bad experience.
Here are some possible reasons why costs of the exchange plans in Maryland are going up so much, and my perspective on them.
CareFirst had a severe adverse selection problem – where a disproportionate share of those with serious medical problems chose that health plan.
The CareFirst spokesman focused on this – saying that enrollees were older and sicker. But CareFirst represents over 75% of the Maryland exchange market – so it’s awfully hard to have adverse selection.
The exchange program in general had an adverse selection problem – where healthier residents of Maryland stayed away
The uninsured rate in Maryland is low, and decreased substantially. Source
Maryland population got sicker on average than the national population leading to more price increases
Maryland has 6 million residents, and there is no evidence of systemically more illness in the state.
Maryland’s providers started providing a series of new and expensive procedures at much higher rates
CareFirst wants to increase its profit margin so it jacked up the rates
CareFirst is pretty strictly regulated and is a non-profit. It must have a small operating margin, but there’s nothing to indicate that it’s looking to make an “unreasonable” profit.
The CareFirst actuaries priced the exchange products unrealistically low in the first place.
This could well be, although average cost of a silver plan in Maryland is not substantially lower than in other urban areas. Source
The PCMH program and the all payer hospital rate setting were built into the (low) baseline price. Their effectiveness at decreasing trend once they have impacted the baseline is limited
This might be true, but overall cost of care in Maryland is much more expensive than the US as a whole. Source
The PCMH program and the all payer hospital rate setting are not as effective as proponents have claimed.
I view this as a distinct possibility. Most rigorous academic studies of PCMH show savings only in the population of those with severe and chronic diseases, and the extra cost of this model is likely not offset by savings in a healthier population. I believe that the lower commercial health plan hospital rates under all payer rate setting were largely subsidized by higher Medicare reimbursement.
Tuesday, September 15, 2015
Today’s Managing Health Care Costs Number is 0.06%
Kaiser Health News reported yesterday that the Centers for Medicare and Medicaid Services has not saved any money in its Accountable Care Organization project to date. Here’s a link to CMS news release dated 8/25, titled aspirationally “Medicare ACOs Provide Improved Care While Slowing Cost Growth in 2014.”
From Kaiser Health News
Last year, Medicare paid $60 billion to 353 ACOs to take care of nearly 6 million Medicare beneficiaries. Some ACOs made significant strides in reducing use of hospitals and other costly resources. But patients at 45 percent of groups cost Medicare more than the government had projected based on their patients’ historic costs, records show. After paying bonuses to the strong performers, the ACO program resulted in a net loss of nearly $3 million to the Medicare trust fund, government records show.
The CMS news release notes $411 million in savings, on a base of $60 billion in payments, and even that is 0.06% savings. But the news release also notes $422 million in provider “shared savings” payments – so the net impact on CMS is that more was paid out than was saved. That’s because the 44% of ACOs which cost more than was projected lost a total of $707 million, which more than offset the savings that were not shared with the 56% of provider organizations with costs below CMS projections.
CMS’ data release is incomplete and the statistics in the news release are cherry-picked to show results in a rosy light. Quality metrics are shared for the Pioneer ACOs and not the Shared Savings ACOs. On the bright side, CMS has released a summary of savings or losses by ACO at this URL
Provider organizations have been reluctant to take risk on CMS ACOs – even the groups with large savings have generally opted to stay in the “shared savings” program, in which they have lower upside potential. Participation in the Pioneer ACO program, which is “full risk,” has shrivelled to just 18 organizations.
I’m still optimistic that appropriate provider accountability for both quality and cost of care of a population can lead to higher health care value. The CMS ACO project has substantial flaws.
· Providers get incomplete data late
· Beneficiaries are unaware of the program, and often seek care outside of their ACO.
· The overwhelming majority of provider “risk” is upside only.
But ACOs which are being pitched by health plans for the employer-sponsored health insurance look a lot like the CMS ACOs. Most are “attribution” model, where patients don’t have to designate a specific provider entity. Few include any sort of “downside” risk, and many pay substantial infrastructure payments, making total cost savings low unless the provider organization agrees to substantial cuts in fee schedule at the outset.
Provider organizations like Kaiser Permanente and Intermountain Health and Cleveland Clinic have been developing their infrastructure and their culture for decades or even generations. It’s not surprising that we don’t see huge savings from existing provider entities in the initial years as they drive toward greater accountability.