The Cavalcade of Risk

Another blog carnival’s moved into town, with all sorts of insurance and risk-related articles for your reading enjoyment. It’s here, hosted by The Digerati Life.

Are Baby Boomers Sicker Than Their Parents?

Rob Stein of the Washington Post published a thoughtful article last Friday on some recent research which suggests that baby boomers are moving into their elder years in poorer health than today’s seniors did.

The Post article concentrates on the health questions involved, and only touches lightly on what the political and economic implications might be if this finding is corroborated. Those implications are significant. If the largest generation in American history turns out to be more disabled and unhealthy than expected, the impact on society will be enormous.

And the implications for insurers could be substantial. Actuarial projections for the life insurance industry may need to be significantly revamped, causing reportable accounting changes under Sarbanes-Oxley. Risk projections for Medicare wraparounds and other projects will change. The economic prospects for disability insurers may already be changing.

For one thing, Social Security projections might need to be re-evaluated. Politicians have tried to raise alarmist questions about the Social Security system for a while now, although it looks to be solvent for several decades to come. While a decline in baby boomer health status might affect Social Security, it’s unclear at this point whether it would have a major negative effect on Social Security solvency, a minor one, or none.

It’s even possible that these figures might actually prolong the solvent life of Social Security, but at a high cost. If mortality rates jump for baby boomers – in other words, if they die sooner than expected – Social Security payouts could be less than projected. The actuarial estimates behind our budget projections will prove pessimistic if life expectancy figures turn out to be optimistic.

On the other hand, use of medical services could jump if baby boomers are sicker and require more care than their predecessors. That means a rise in public medical expenditures. The Federal government already pays for roughly two-thirds of all medical care in the U.S., and that figure could jump dramatically.

The pain would not be shared equally among all income groups, either. If out-of-pocket costs under Medicare aren’t reduced, poorer Americans will suffer more. And the other costs of disability – e.g., limited access to the activities of daily living – are already being disproportionately felt by lower income citizens. (See “Gradients of Disability Across the Socioeconomic Spectrum.”)

Before projecting the impact of this trend on other sectors of society, however, the question has to be asked: Is it true? Is the Baby Boom generation sicker or more disabled that its predecessors? Sadly, the tentative answer appears to be yes. The University of Michigan’s Health and Retirement Study, which is the main source of the Post article, seems to have made some compelling findings over the last several years.

My first thought (and possibly yours) was that these findings could represent higher expectations for health on the part of boomers, rather than lower actual health findings. While the results are self-reported, however, they don’t appear to be restricted to the wealthier segments of society where those expectations would probably exist. And they’ve been replicated by several other studies.

In other words, we’re not necessarily talking about latté-sipping yuppies. We’re talking about Americans across a broad range of income levels and social groups, born between 1948 and 1960, who are less healthy than their predecessors. Why?

For one thing, income levels between rich and poor is growing wider. That leaves more people working harder for less income, and less able to provide themselves with a healthy way of life. For another, people are working harder. While the economic data are difficult to interpret, there is reason to believe that employed people are working longer hours (while the unemployed are subject to the stress of financial uncertainty).

Even the latté crowd may not be immune from the ill health effects of wealth and technological change. Cell phones, laptops, and PDAs have created the longer hours, constant anxiety, and lack of true downtime that seem endemic in so many well-paying jobs these days. The health toll of 24/7 connectedness to high-stress jobs has yet to be measured, as far as I know, but it could be significant.

Which remains me of Lily Tomlin’s classic line, when she was in character as a high-achieving career person and “Supermom”: “If I had known what it was like to have it all, I’d have settled for less.”

Health trends among baby boomers at all income levels bear watching. They will have implications for everyone, not just the boomers themselves. And younger generations thought it was bad just having to listen to all that 80’s music …

(an abbreviated version of this item appears on The Huffington Post)

Chicken Soup for the Health-Wonkish Soul

The new Health Wonk Review is up.  Check out the latest musings by this “blog carnival” of health policy mavens.  There’s a lot of good material there, and plenty of food for thought …

Free IT For Doctors, Updated – New York’s Using It For Those Who Treat the Poor

I’ve written about the potential market for IT in the primary care physician arena before (here and here, for example). There is a substantial need for solutions in this arena, and for those that can serve other physician specialties too.

That’s apparently part of the thinking behind New York City’s $19.8 million grant for physician systems that integrate clinical and billing/administrative functions. They’re starting with docs who treat Medicaid patients and the uninsured. That’s a good place to start.

Washington DC has decided to do something similar, starting with eight community health clinics and moving into local hospitals.

I haven’t looked at these particular apps, and I worry about ongoing R&D and support under this model – but I’ll keep watching. And I’m betting there are creative ways to enhance an app of this kind that these programs haven’t yet considered.

The Trouble With IT Innovation – People Get Dependent on Tech Too Soon

The California HealthCare Foundation’s iHealthBeat summarizes several recent articles on problems with the massive IT/connectivity project now underway in the UK.  This is the next-generation version of a “PC’s for PCP’s” (primary care doctor) we managed in Hungary as part of a World Bank/USAID initiative in the early 90’s.

People have the tendency to become dependent on these new systems too soon and drop redundant processes (like paper calendars).   Apparently that’s happened in the UK, where some children reportedly missed scheduled vaccinations as a result of tech problems.

There also appears to be a healthy dose of classic government-contracting problems:  delays, slowdowns, failure to adequately manage the project.

Reformers, beware.

Provider Evaluation Tools For Health Care “Consumers”

The San Francisco Business Times notes the infrequent use of California’s new hospital rating site for consumers. I’m not surprised that usage is low, and I think the Business Times draws the wrong conclusions.

As I’ve said before, I think that simpler is better when it comes to organizing health information for the general public. The Times, and at least one of its interviewees, thinks otherwise. They suggest that simplicity may be one reason why the site isn’t being used.

I disagree. I think it isn’t being used because people don’t know it’s there – and because, as I’ve also suggested before, it’s not part of a larger site that addresses the many different contexts within which people will search for health information. Simplicity of organization and presentation, however, is what will make it comfortable and usable for people once they do find it.

Digging up this kind of health information isn’t like conducting a straightforward Google search (a fact that hasn’t gone unnoticed at Google). People don’t go looking for comparative data on hospital costs, because the idea itself hasn’t occurred to them. You have to bring it to where they are – metaphorically (in their learning process) and literally (in their browsing habits.)

That’s why I’ve been promoting the idea of ‘context-driven health data’ for all parties: consumers, doctors, employers, and administrators. The Times also mentioned Vimo.com, which is an interesting start-up designed along just those lines.

They’re in an early stage of development and have a lot of work to do. If they thrive, however, they’ll be going head to head against Steve Case’s Revolution Health. That could be interesting to watch.

A Brief History of Capitation, From Medieval Days to 21st Century Reform

Whatever happened to provider capitation? It was going to be a core element in the managed care strategy to revolutionize healthcare delivery – back when people thought managed care could revolutionize healthcare delivery. In fact, capitation has been around in one form or another in every attempt at healthcare reform since the Norman Conquest. Some even say an earlier variant existed in ancient China. We don’t hear much about it anymore. Where has it gone?

When Henry I assumed the throne of the newly-combined kingdoms of England and Normandy he initiated a sweeping set of healthcare reforms. Historical documents indicate that soon thereafter at least one “physician,” “John of Essex,”was receiving an honorarium of one penny per day for his efforts. As historian Edward J. Kealey explains¹, that sum was roughly equal to that paid to a footsoldier or a blind person. (Historically doctors haven’t always been the high earners they are today.)

I assume that John of Essex’s income was a form of “capitation” – that is, a flat payment for treating a fixed number of individuals whether they are ill or well. This is only an assumption, given the lack of better historical data, but I believe it’s a reasonable one.

There’s clearer historical evidence to suggest that American doctors in the mid-19th Century were receiving capitation-like payments. No less an authoritative figure than Mark Twain, in fact, is on record as saying that during his boyhood in Hannibal, MO his parents paid the local doctor $25/year for taking care of the entire family regardless of their state of health². That’s genuine capitation.

The reason why capitation payments made a comeback in the managed care field during the 1980’s is because fee-for-service medicine creates perverse incentives for physicians. As many people now understand, fee-for-service medicine pays doctors more for treating illnesses and injuries than it does for preventing them – or even for diagnosing them early and reducing the need for intensive treatment later.

That’s one of the reasons why I haven’t embraced “Medicare for all” as a meaningful model for healthcare reform. Most Medicare is provided on a fee-for-service basis, and our country has created a class of high-earning doctors under that system. Medicare attempts to control utilization as well as cost, but putting the entire population into the current Medicare system without addressing the fee-for-service issue could have unintended consequences.

Nevertheless, the managed care industry’s experience with capitation hasn’t been a good one. The 1980’s saw a number of HMO’s attempt to put physicians in independent practice, especially primary care physicians, into a capitation reimbursement model. The result was often negative for patients, who found that their doctors were far less willing to see them – and saw them for briefer visits – when they were receiving no additional income for their effort.

Attempts were also made to aggregate various types of health providers – including hospitals and physicians in multiple specialties – into “capitation groups” that were collectively responsible for delivering care to a defined patient group.

Americans aren’t collective people by nature, however, and these efforts tended to be too complicated to succeed. One lesson that these experiments taught is that provider behavior can’t be changed unless the relationship between that behavior and its consequences is fairly direct and easy to understand.

Still, fee-for-service medicine will pose a significant risk to any health reform effort. Does capitation play a role in reform? There are only four possible answers:

1. No. The HMO experience taught us it can’t work in the U.S. context, so we need to stick with fee-for-service medicine.
2. No. Only group model healthcare (e.g. Kaiser, the VA) can succeed in the U.S.
3. Yes. The HMOs didn’t get it right.
4. We don’t know. The topic warrants further discussion and research.

I’m going with #4. How about you?

As for the ancient Chinese, physicians such as Dong Feng treated people without charge in the Third Century AD³. I’ve heard it said that other Chinese physicians were only paid if their patients got well. But stories that the Emperors cut off the heads of their doctors if they failed to cure them are only legends, as far as I can tell.

In any case, that form of reimbursement is more commonly known as de-capitation.

¹Medieval Medicus: A Social History of Anglo-Norman Medicine. Kealey, Edward J. The Johns Hopkins University Press, 1981.
²The Autobiography of Mark Twain. Clemens, Samuel (Charles Nieder, ed.) Perennial Classics (pub. date unknown.)
³Guo, Z. “Chinese Confucian Culture and the Medical Ethical Tradition.” J Med Ethics, 1995.

The Health Reform Debate: Where Are the Doctors?

If substantial healthcare reform occurs at the national level, it will be the most significant overhaul of our medical/economic system since the creation of Medicare and Medicaid in 1965. The decades-long struggle for that legislation was marked by significant opposition from the American Medical Association and other doctor-based organizations. The pejorative expression “socialized medicine” was an AMA favorite in those years.

Back in 1961 the AMA funded a slick (if ultimately unsuccessful) anti-Medicare program whose highlight was an LP featuring the sonorous voice of Ronald Reagan, in his first foray into politics. (More on that here.) The AMA was also instrumental in blocking the Clinton Health Plan in the 1990’s. So far the it and other physician-centered groups have yet to adopt the same high-profile role they took in previous health policy debates.

As they used to say in old movies: “It’s quiet out there. Too quiet.” Are organized physician groups like the AMA about to turn up the heat on health reform? And if so, what will they say and how will it affect the debate? Policymakers and others with a vested interest in the topic should be aware of the changing role doctors may play in the ongoing national “conversation” over healthcare.

A number of societal factors have changed since the 1960’s, and even since the 1990’s. The medical profession is respected in most countries for its level of education and its historical dedication to the well-being of others. But postwar America held doctors in a form of reverence unknown elsewhere.

Doctors were not to be questioned or challenged. It was assumed that they were wiser than most others, and that they acted with only the interests of the patient at heart. Elderly Americans thought nothing of addressing a man (and it usually was a man) younger than their children as “Doctor” while he in return addressed them by first name.

Much has changed since then. Whatever negative feelings Americans may have about managed care, the process of finding health plan-approved doctors and seeking authorizations for treatment has made the public aware that there are wide divergences of opinion in the medical profession, and that doctors’ opinions are no more immune to criticism than other people’s.

Highly publicized medical malpractice cases have exposed the public to egregious medical errors, further puncturing the veil of infallibility that once encircled the medical profession.

As a result of these social changes, physician groups like the AMA can’t count on having the same impact on public opinion that they once had. The Norman Rockwell vision of the kindly physician bent over the ailing child has been replaced by a more complicated and sometimes bewildering array of images.

What’s more, there is much greater diversity of opinion among doctors about health reform these days. The AMA and like organizations found far greater resistance to its 90’s-era political efforts than it had in previous years, and the percentage of American doctors who were AMA members declined significantly.

The AMA takes a softer approach these days. Its website describes the organization as “committed to leading the response of America’s physicians to solve the health coverage crisis for all uninsured patients.” They say they are for “incremental measures” in the short term. For the longer term they support “a consumer-driven, market-based plan to expand coverage through tax credits and insurance market reforms.” This is similar to the Bush “reform” package – which is to say, it isn’t reform at all.

Another group of doctors is represented by Physicians for a National Health Plan. PNHP and its 14,000 members represent the other end of the spectrum, committed strongly to a national health plan and rejecting any public/private collaboration.

(I’ve had a lengthy and rewarding email exchange with PNHP policy analyst Nicholas Skala, who originally wrote me objecting to my criticisms of the “single payer or bust” position, and to my qualified support for the Edwards plan – a plan that includes a role for private insurers. Nick’s a very knowledgeable guy, and we’ve basically concluded we have differing tactics but the same goals. I hope to examine the issues raised by that discussion in print at some point.)

Doctors are far from a homogenous group these days, in any case. As with the rest of society, income disparities in the physician community are much greater now than they were in the 1960’s, and surged at the end of the 1990’s. Successful cardiac surgeons, for example, earn two or three times the amount that an internist or family practitioner may make.

That disparity between specialist incomes and those for primary care practitioners continues to grow, leading to a declining number of new physicians in primary care. That decline raises medical and policy concerns not unlike those of the 1980’s. In addition to having an impact on the policy debate, this gap in income likely to generate division within the physician community over the type and extent of reforms to be enacted.

The fact is that the interests of general practitioners and highly compensated specialists are different. The role of doctors in the reform debate will be shaped in part by these differences in motivation and interest.

Physicians remain the highest-paid professionals in the country(1), but the fact that physician income declined during the late 1990’s and early 00’s only adds to the potential for heated disagreement among physician groups.

In that sense, the current debate is not all that different from the debate about managed care that took place in the 1980’s. In those days I, a young consultant and data analyst, found myself welcome to speak to associations such as the American Academy of Family Physicians. My topics usually concerned managing the overall welfare of patients with data provided by the health payer (either the HMO, an insurance company, or a government agency).

These physicians hoped that managed care would increasingly use them as “gatekeepers” to other, more costly forms of medical service. Managed care specialists and health policy analysts hoped in turn that the “gatekeeper” model would increase the use of less costly (and more humane) “cognitive services” (i.e., talking to patients) instead of highly costly tests and surgeries that may not be medically necessary.

That was not to be, for reasons that are beyond the scope of this piece. The division between specialties is instructive, however, as we consider the role of doctors in a policy debate that’s just beginning.

Things will really begin to heat up when policy discussions move into more detailed examination of how to best manage the increasing costs of American healthcare. Doctors can stand together when it comes to attacking our system for its top-heavy administrative expenses. But when talk turns to the high rate of certain surgeries and other expensive procedures in this country – procedures that have not been shown to improve overall health – those old fracture lines will appear in the physician community once again.

To quote Bob Dylan: “Things should start to get interesting right about now.”

(1) Thompson, William; Joseph Hickey (2005). Society in Focus. Boston, MA.