Health Policy, Business, & Innovation
Recommended: A touching story by Perri Klass, M.D. in the New England Journal of Medicine about how it feels to carry a doctor’s responsibility. In the case of Dr Klass, a pediatrician, that means weighing a decision that’s probably trivial – but might be a matter of life and death … for a child.
It’s particularly useful for health management execs and health policy wonks like yours truly. It helps to keep the endgame – health, life, death – clearly in focus.
Ezra Klein spoke with Robert Zirkelbach of America’s Health Insurance Plans regarding Tier 4 medications. Mr. Zirkelbach’s response hits a few points:
National Conversation
That we need a “national conversation” about “whether drugs that cost ten or a hundred times as much as current treatment options are producing better outcomes.” (Whatever your opinion of Hillary Clinton, I’m not particularly grateful for the insertion of the phrase “national conversation” into the political lexicon. A little less talk, a little more action, as Elvis would say.)
In this case, I would say we don’t need a “conversation” about better outcomes. We need data. It’s a research question, not a political one. If these therapies are better than the alternative, then we need a conversation – but it has to be about our level of willingness to provide insurance that pays for the best available treatment. That’s a debate worth having, and it’s also where we need some of that transparency Jonathan Cohn calls for.
Generic Alternatives
Mr. Zirkelbach says we should encourage “generic versions” of Tier 4 drugs. But, as Ezra points out, they’re not likely to be available.
Comparing New and Current Treatment Options
Lastly, Zirkelbach suggests “we need a national system in this country that compares new drugs with the treatment options currently available in the marketplace.” That’s a good point. Even under single-payer coverage, we would still need to do cost/benefit analyses on very expensive therapies – and not just for pharmaceuticals. The more information that’s made publicly available, and the more education and debate that ensues, the better.
I still say there is a point at which “insurance” becomes a misnomer. What that point may be is somewhat subjective, but in theory it’s this: When the coverage being provided no longer protects individuals from severe financial harm as a result of loss.
And I’d add this thought to the “national conversation”: When plan designs are no longer made to change behavior, but simply to transfer high-cost items back to the insured party, that’s risk transfer and not benefit design. As a result, the insurance concept is being subtly modified – and arguably undermined.
Is health insurance even insurance anymore? The high cost of intensive drug therapies is being shifted back onto patients – and not because the procedures are considered “experimental.”
The New York Times’ Gina Kolata wrote a piece today about a new kind of financial catastrophe striking Americans who have – or think they have – health insurance. The problem is with so-called “Tier 4” drugs, which are typically prescribed for severe medical conditions. These medications are extremely expensive, and insurance companies have been exempting them from the usual rules (like fixed copays and out-of-pocket limits) that protect their members from financial shock. As a result, people who think their they’re protected financially are being hit by huge drug bills.
Patients aren’t bearing more of the cost for these medications because they’re experimental – a reason that’s often used for denying certain treatments. They’re bearing more of the cost because they’re expensive, at least as far as some quick research today could determine. And, as Jonathan Cohn of The New Republic observes, the political debate isn’t even addressing this part of the problem.
How bad is it? Take one breast cancer patient in the Kolata piece, for example, who lives on Social Security disability and has Medicare coverage:
(Her insurer) declined to say what Tykerb might cost, but its list price according to a standard source, Red Book, is $3,480 for 150 tablets, which may last a patient 21 days. Wellcare requires patients to pay a third of the cost of its Tier 4 drugs.
That’s nearly $400 every three weeks. Or, how about the MS victim whose Kaiser coverage changed unexpectedly, so she didn’t find out until she picked up her usual prescription?
Now Kaiser was charging 25 percent of the cost of the drug up to a maximum of $325 per prescription. Her annual cost would be $3,900 and unless her insurance changed or the drug dropped in price, it would go on for the rest of her life. “I charged it, then got into my car and burst into tears,” Ms. Steinwand said.
Ezra Klein’s not sure how Tier 4 drugs are designated. (But he got curious about it, too. See his post and my reaction.) Ezra writes:
(Kolata’s) article vaguely implies that Tier Four is simply composed of costly drugs that insurers are dumping on patients. My understanding of the situation is that Tier Four is actually composed of largely experimental and unproven treatments that don’t seem to offer benefits in line with their cost. If it’s the former, then this really is, as the article seems to suggest, a cruel and crazed practice. If it’s the latter, then it’s exactly what we need to be doing.
I wish Ezra was right, but he’s not. Here are a couple of examples of the logic used to transfer these costs to customers. Blue Cross and Blue Shield of North Carolina says Tier 4 drugs are “medications classified by BCBSNC as those which require special dosing or administering, are typically prescribed by a specialist and are more expensive than most medications.” That’s it: nothing about “experimental.” And the UPMC health plan, affiliated with the University of Pittsburgh health system, says this:
The fourth tier is for specialty drugs, which are high-cost medications and biologicals, regardless of how they are administered (injectable, oral, transdermal, or inhalant). These drugs also have the highest level of copayment. These medications are often used to treat complex clinical conditions and usually require close management by a physician because of their potential side effects and the need for frequent dosage adjustments.
These two descriptions are typical of the way insurers describe Tier 4 drugs. Defenders of the Tier 4 system will say that health premiums will become unaffordable if these costly treatments, which can exceed $100,000/year, are paid by insurance. There’s some truth to that. But here’s the problem with that argument: The function of insurance is to protect individuals from expenses they can’t afford. Once you start withdrawing that protection, it’s a misuse of language to describe the product you sell as “health insurance.” It needs to be called “health cost offset,” or “selective health cost mitigation,” or something else that doesn’t promise more than it can deliver.
If costs have become so high that the private health insurance system can’t provide affordable coverage that protects people from financial harm, then the entire system needs to be re-envisioned. Remember: In all the debate about “universal healthcare,” most politicians are really talking about “universal health insurance.” But if it isn’t really “insurance” anymore, what are they offering voters?
(Kevin Drum has also written about this issue)
A recent study suggests that Medicare’s Disease Management (DM) experiment has failed to cut medical costs. DM advocates argue that Medicare’s methodology was flawed. So what’s the answer? A New York Times article asks: Does Medicare DM cut costs, or should it be stopped?
That may be the wrong question.
As far the first part of the question is concerned, it wouldn’t be surprising if the answer turned out to be “no.” Revenues for disease management companies grew from $78 million in 1997 to $1.2 billion in 2005, according to the Disease Management Consortium, largely on the belief that DM programs cut medical costs and were therefore a good investment for private payers. Yet to date, no study has demonstrated conclusive medical cost savings from DM.
That doesn’t, however, mean that DM is a bad idea – especially for Medicare. 160,000 Medicare beneficiaries have been served by the Medical Health Support program, which provided chronic disease patients with periodic calls from nurses. The nurses give patients medical information, encourage them to seek treatment, remind them about their medical needs, and provide other forms of support.
The DM companies had financial incentives: Either achieve a 5% reduction in medical costs for their enrollees, net of service costs, or return their fees. When it became clear last year they weren’t going to make that goal, Medicare relaxed their requirements. Now, only a net savings is required in order for the vendors to keep their fees. It’s not clear if they’ll reach that goal, either. (The CMS pdf fact sheet politely describes the cost impact of these programs so far as “nominal.”)
It’s too early to draw definitive conclusions about this experiment, especially since the data are not yet publicly available. But here are some thoughts to consider:
Senators from the home states of the companies involved, including John Kerry and Lamar Alexander, think the experiment should be continued. The Times implies they’re just providing a constituent service to home state employers, but they may in fact be right. There is more to be learned about the role of DM in Medicare, and in the overall health system.
Overall, the DM industry is likely to experience a shakeout in the next year or two – for both private and public payers. Assumptions about its cost-effectiveness are likely to be overturned. The most likely end result? A re-engineered DM concept, which differs from today’s both in design and in outcome measurements. Medicare can play a vital role in DM research, discovering which elements work, which need to be added, and which can be discarded.
People keep trying to provide comparative cost information that health “consumers” can use to make their treatment decisions. Many of us have predicted that someone would try to be the Travelocity of health purchasing, and Carol.com says it wants to be exactly that (as reported in the Minneapolis Star Tribune).
I tried the site. It’s ambitious, and in its own way it’s also overtly political. “Competition has changed every market but health care,” the Flash introduction says. “That’s about to change.” Some would argue that there are many reasons why health care can never fit simple market models, including confusion about what exactly is being bought and sold. (Is it “wellness”? A fix for your specific health problem? Or just a set of individual treatments, none of which can be predicted in advance?)
I had some difficulty following the process for acid reflux, the condition I’d selected as a test. It came up with only one “price” of $213, from one provider – but what was it for? Diagnosis? Treatment? End-to-end cure? How much will I need to pay for pharmaceuticals? Will I need to return quarterly? Annually? Ever? If it’s just one office visit, it should say so. If it’s a treatment plan, it should say that.
This is not to knock Carol.com’s creators unfairly. They have an interesting take on this often-discussed idea, and according to the Star Tribune they’ve already affected some unit pricing in the area. And I love their attempt to use decision trees to help people figure out what they need. (Try it – it’s interesting.)
But they need to be cautious about over-promising, and they need to recognize that most of their users will be insured – which will make their pricing information misleading, if not irrelevant. Most of all, they need to define the commodity that’s truly being bought and sold in the health market. That’s the hard part.
Meanwhile, Kaiser Permanente seems to be pioneering an different model for Internet interaction with the health process. iHealthBeat summarizes the features of Kaiser’s new member portal (free registration required), as originally reported in the Sacramento Business Journal. Features include appointment scheduling, prescription refills, viewing lab results, and e-mailing doctors (who will presumably write back).
A staff model HMO like Kaiser is the obvious place to develop a successful service of this kind. All the needed information is present under one roof. Since doctors are employees and not independent businesses, they can take time to answer emails without losing income.
The logical next step is to develop a similar service for the majority of Americans who don’t belong to group or staff model HMOs. That will require some leg work and some cooperation, especially among physicians, laboratories, and other diagnostic providers. And it will require financial incentives for providers to participate, including a payment schedule for answering emails and a system for transferring medical information securely.
(Carol.com, on the other hand, charges providers to participate. That may alter the blend of participants away from the lowest-cost providers, especially on the physician side. And who makes sure data is updated?)
What else will it take to succeed? A thorough knowledge of the inner workings of our so-called health “system,” and a clear-eyed look at the motivation of the participants.
In related news, California is posting a list of hospitals willing to provide discounts to uninsured patients, along with a comparison-shopping tool. Two Michigan health systems are posting their prices for common procedures (but note – these are charges, not the payments they typically receive for these services. Caveat emptor and all that.)
Prediction: Not very many people will use these California or Michigan portals. There will be one or more sites that do become popular someday, but they’ll look like a cross between Carol.com, secure email, and a supercharged search engine.
The goal is to create the classic “knowledge pyramid”: Data needs to be organized into information, and information needs to be organized to become knowledge. If somebody builds it, they will come.
Add the fight against global warming to the list of political battles that impact the health arena. A long-term study of global warming’s impact on medical needs was conducted by Australian researchers in order to help that country’s single-payer system plan for the future.
According to the Sydney Morning Herald, researchers found that “heat waves – defined as a periods of three days or more in which the average temperature exceeded 35 degrees – produced a seven per cent increase in admissions to hospital and a four per cent increase in ambulance trips.” The Herald adds that “the number of people admitted for kidney disease increased by 17 per cent (during heat waves), and the number admitted for mental illness increased by seven per cent.”
Melbourne’s Herald Sun (ironic name, that) quotes the study’s lead researcher, Prof. Kevin Parton, as saying that mosquito-borne diseases will also be on the upswing as the result of warming trends.
There are those who will say these reports are “alarmist,” of course, although they rely of widely accepted climatological and medical research. The study is, unfortunately, not alarmist. On the upside, the long-term investment opportunities look good for related medical products – including antibiotics, antidepressants, dialysis technology, and bug repellent.
I wish I were kidding.
After dozens of ventures to create health sites for health consumers, most people still seek medical information through Google. That surprises some tech investors. What’s more, the very act of searching ticks off at least one doctor, and probably many more.
Dr. Scott Haig is aggravated by “Susan,” a patient he considers a “medical Googler” (as he writes in TIME Magazine and as covered in the New York Times). ” We had never met,” he begins, “but as we talked on the phone I knew she was Googling me.” Sounds a little defensive to me. That clackety-clack typing sound he heard could have been her making notes on the conversation, or Googling her health condition, or any number of other less personal activities. (Presumably she Googled him before she placed the call.)
It is rude to surf the Net while you’re on the phone – I’ve been busted for it myself. But no need to jump to conclusions.
Dr. Haig goes on to describe Susan’s irritating personality and seemingly inept parenting – as if those two were inevitable and inseparable characteristics of the “medical Googler.” But guess what? Studies indicate more than 130 million Americans sought medical information online last year. Are they all obnoxious jerks?
Dr. Haig’s reaction is indicative of a deeper trend that troubles many doctors: Patients are arming themselves with medical information and making their own decisions. In the abstract, that’s what they should do. But in practice, it results in a shift away from the doctor-centric model – physician as priest – that many practitioners understandably find more comfortable. And there are risks, which technology has been slow to address.
But here’s the bottom line: They’re here, they’re search-engine is near, get used to it.
If Dr. Haig’s description is accurate, Susan sounds like the kind of annoying patient doctors have had to tolerate since the dawn of the profession. Her ‘Googling’ doesn’t make her who she is – and she won’t change.
But physicians like Dr. Haig will have to adapt – or spend the rest of their careers in a state of heightened aggravation. The ‘Medical Googler’ (and her descendents on newer platforms) are the wave of a future that’s already here.
The California Health Care Foundation (CHCF) has published the results of a study to determine why its pilot program to develop a RHIO (Regional Health Information Organization) failed in Santa Barbara. The report is clear, well-written, and instructive.
The goal was admirable: CHCF wanted to create a centralized database of patient information that was readily available to hospitals, physicians, and other providers as they delivered medical services to area residents. It was hoped that this RHIO would become a model for similar efforts around the country.
In its summary, CHCF cites “lack of a compelling business case, distorted economic incentives, passive leadership among participants, vendor limitations, software delays, and privacy and security issues as factors that played a significant role in the project’s eventual closure.”
But the report itself (caution: pdf) is even more interesting. Dr. David Brailer, who led the software company engaged for the project, later went on to head President Bush’s technology initiative. One report described him as the man whose “job was to sell Bush’s rewiring of American medicine.”
Dr. Brailer is a brilliant and innovative man, and the authors say that the project suffered from the loss of his charismatic leadership after he went to Washington. But they also suggest that either he or his organization (CareScience) oversold their own capabilities and the available technology, and undersold the difficulties involved – no doubt unintentionally.
The authors also say that Dr. Brailer differed other stakeholders in CareScience over the extent to which the company should supplement CHCF’s initial investment as a form of R&D for its own products – which CHCF had hoped would result from this project.
Reading the report, a couple of other possible reasons for its failure come to mind – reasons that help explain that “passive leadership” and some of the other problems:
Failure to understand participants’ motives
Each of the participants in the health economy have reasons for participating in it. These are primarily, but not exclusively, economic. They also have well-ingrained behaviors. This extends from physicians and senior hospital administrators to ward clerks and front desk staff. Failure to examine the motives of each of the players led to an unwillingness to either assume new expense, which the authors note.
What they don’t note, but is also significant, is that these participants won’t change their behavior unless they are given reasons to do so that make sense to them – and speak to their economic, social, and personal motivations.
More research into these motivations is needed, and practical suggestions for changing them need to be developed.
The behavioral dynamics of medical care
It’s very difficult to persuade physicians – or patients – to change long-standing methods of interacting with one another. For the RHIO concept to be fully successful, physicians need to become comfortable with pausing to retrieve information from a computer. That may mean teaching them new behavior – or, emphasizing PDAs and other less-intrusive handheld technologies. As an alternative, office staff might be trained to retrieve the information and give it to the doctor before the patient arrives.
Further research in the sociology and anthropology of physician/patient behavior could help solve this problem.
Forgetting to heed the “cui bono” principle
Because the U.S. healthcare system is economically decentralized, changes in one area may result in financial benefits elsewhere. In this case, the theory behind the CHCF initiative was that care would improve and operating efficiencies would increase under a working RHIO.
But, as the lawyers ask, “Cui bono?” Who benefits? In this case, a broad array of private insurers could save money from better efficiencies and outcomes. But these payers weren’t brought in as stakeholders in the process. To complicate matters further, additional investment today may save future insurers money – and we can’t know who those future insurers might be. This is one of the reasons why wellness programs have taken so long to find a foothold.
Additional research should be conducted into alternative funding models for RHIOs that involve private and public payers.
One large-scale payer was involved as a stakeholder: The Santa Barbara County Health Care Initiative, which pays Medi-Cal claims in the area. The report’s authors don’t provide much detail on the Initiative’s role in this effort.*
The report’s authors do a fine job of detailing many other problems with the project, but these two areas might deserve further study at some point.
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* Conflict-of-interest alert: I worked as a Systems Analyst for the vendor that set up the Santa Barbara County Health Initiative under an HMO-like data model – way back in 1982.
The Veterans’ Administration has been promoting its effectiveness for some time, based on both administrative and clinical measures. As a result, some health reformers have even taken to touting the VA as a model for national health reform. Now their findings and the VA’s veracity are being challenged by a new report. The VA still has its defenders, but I have questions about other favorable studies of the agency (see below.)
They’ve done some things very well, but there’s no reason to believe the VA is a model for the nation. The issue should be resolved through a comprehensive analysis of their medical outcomes conducted by unbiased analysts.
An in-depth journalistic investigation now suggests that the VA has been misleading policymakers and the public about its accomplishments for some time. The gamesmanship reported by McClatchy ranged from the relatively trivial (e.g. changing request dates in the appointment system to make wait times appear shorter) to the more substantive.
Deceptions about appointment wait times and patient satisfaction are wrong, and overstating the availability of PTSD treatment is reprehensible. (Why not ask for the money to give vets what they need?) Still, in my opinion, skewing clinical data to overstate results is the most serious charge of all. A RAND study cited by the VA didn’t say what VA officials claimed it said: namely, that the VA performed better than 12 other systems. Officials went on to say that RAND had concluded that veterans “receive better health care than any other patients in America.” The RAND study was not designed for that purpose, and found no such thing.
McClatchy raises questions about the RAND study’s objectivity, given the fact that four of its nine authors were affiliated with the VA and the agency helped fund the study. RAND’s objectivity is well-regarded by me and others, so I’m less concerned about this issue.
The newspaper’s other question about the RAND study is far more telling: It was published in 2004, yet only used data from 1997 to 1999. In my consulting experience, unexpected date ranges raise a red flag – could the data have been cherry-picked to get the best results?
Something like that could well happen without RAND’s complicity – if they were engaged to study a certain data set, that’s what they would do. The selective use of data could occur when the client engaged the consultant/think tank to do the work. I’ve seen it happen a number of times in my data analysis work, although its more typical of the private sector.
Some people like Ezra Klein are still arguing that the VA’s quality is unsurpassed, based on pieces like the ones published in the New England Journal of Medicine. Yet I have similar concerns about the New England Journal pieces, as well. One such article (“Effect of the Transformation of the Veterans Affairs Health Care System On the Quality of Care”) was published in 2003 yet used essentially the same date range as the RAND study – and focused on a fairly limited number of conditions.
McClatchy notes rightly that the VA has performed very well in providing necessary tests and services. And Ezra and other are right to note its excellent performance in a number of areas. But analyzing health data is a tricky affair.
The VA may have more to say in its defense, but I found the explanations they offered to McClatchy unconvincing. Here’s the way to resolve the issue once and for all: fund a comprehensive review of the VA’s outcomes, conducted by independent analysts with full access to all of the VA’s data.
Until that happens, I’m not comfortable with any of the rosy reports on the VA’s effectiveness. They may well be doing a terrific job in outcomes, but there’s no independent verification of that fact. Until there is, I would argue that using the VA as a model for national reform should be put on hold.
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:
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 Sentinel Effect 