For those in the mood of a healthy dose of realism, Glenn Laffel’s Health Wonk Review is just the ticket. Glenn, a first-time host, brings a fresh perspective and great style.
Apr
16
Insight, analysis & opinion from Joe Paduda
Author: Joe Paduda
Apr
15
Argument two – Universal coverage would result in the government running the health care system making it worse than it is today – because the government can’t do anything right.
There are two separate statements here – first that UC will result in the Feds running the healthcare system, and second that the Feds can’t do anything right.
Let’s take the latter first – but in no way does that mean I concede the first statement is accurate.
I strongly disagree with the statement that government can’t do anything right. I’d also note that ‘the government’ is us; and if it can’t function effectively than we need look no further than the mirror. But it can, and does, work pretty well in many instances.
Among the numerous examples of relatively effective government are the Centers for Disease Control, US Coast Guard, National Oceanic and Atmospheric Administration, Head Start, AmeriCorps, NIH, the GI BIll, and the National Weather Service. No, none are perfect, but then again our private sector is not exactly stuffed with competence these days.
It is not the fact that an organization is ‘government’ or private that makes it competent or not, it is the leadership of that organization that is the determining factor.
But perhaps the best is the Veteran’s Administration health care system. As I noted last month,
– compared to commercial managed care plans, the VA provided diabetics with better quality care on seven out of eight metrics by NCQA.
– In 2005, VA hospitals were the highest-rated health system, outperforming other systems including the Mayo Clinic and Johns Hopkins.
– the VA achieves higher scores than private hospitals for patient satisfaction, staffing levels, surgical volume and other significant quality measures
– for six years running, VA hospitals scored higher than private facilities on the University of Michigan’s American Customer Satisfaction Index.
And costs haven’t increased nearly as fast as they have in the private sector. In the ten years ending in 2005, the number of veterans receiving treatment from the VA more than doubled, from 2.5 million to 5.3 million, but the agency needed 10,000 fewer employees to deliver that care – as a result the cost per patient stayed flat. (costs for care in the private sector jumped 60% over the same period).
The VA did this by closing down unneeded facilities, developing an industry-leading electronic health record system, opening clinics, and dramatically increasing the quality of care, especially for patients with chronic conditions.
Oh, and patients can access their own health records – securely – anytime on the web.
Sounds pretty good to me. But alas, universal coverage will not result in the Feds running the health care system. The current proposals under consideration keep providers private (for-profit and not-for-profit), brokers will keep broking, insurance companies doing their thing. Yes, there may well (and should) be a public insurance option, but there is precious little evidence to suggest that the public option will dominate the market. And the evidence that is touted is not compelling.
In fact, providers would not have to participate in a public option – they could refuse to sign up if reimbursement was too low or other terms not to their liking.
And, the governmental option would have to compete with what is already a very mature market, dominated by very few healthplans with overwhelming market share. Here’s just one statistic – In almost two-thirds of all HMO/PPO market areas, one healthplan has more than 50% market share.
Good luck to the Feds fighting for share in Texarkana where the Blues’ share is 97%, or Gadsden Alabama (95%).
Finally, those arguing against UC with the ‘government is incompetent’ meme must not have followed the accounts of healthplans canceling coverage for individuals without justification, employing medical underwriting to refuse coverage for any pre-existing condition, using skewed data to avoid paying what they should for out of network care, fraudulently enrolling seniors in Medicare Advantage plans, and slashing provider bills with the thinnest of justifications.
It would take a good deal of hard work to be more incompetent than some of the health plans out there today.
I’m thinking the VA stacks up awfully well against WellCare.
Apr
14
PMSI will be releasing their annual Drug Trends Report at RIMS in a couple weeks; they were kind enough to send a pre-release copy and give me permission to highlight a couple note-worthy items.
The lead story is cost. After moderating significantly in 2007, drug costs were up by over five percent in 2008, driven primarily by increased price. That is, while each injured worker got more drugs in 2008 than they received in 2007, most of the cost increase was driven by higher prices. But not for generics.
AWP, which remains the basis for drug unit pricing, went up over nine percent for brand drugs last year. (Generic inflation was negligible) With brand accounting for almost two-thirds of spend, the effect was rather significant in overall price inflation.
Interestingly, the introduction of new drugs had almost no impact on drug cost inflation in 2007 – but neither did the release of new generics.
There’s a lot more detail in the report, which should be available shortly. I’ll post a link as soon as it is.
Apr
14
PPOs, or Preferred Provider Organizations, have been around for a couple dozen years. They are networks of credentialed (with varying degrees of rigor) doctors, hospitals, and ancillary providers that have agreed to provide lower rates for ‘members’ in return for some measure of exclusivity/promise that patients will be directed to use them. I’d note that this ‘promise’ is often not fulfilled, at least in the eye of the provider. That’s a whole separate issue, one we will likely get to in a future post.
As one good friend puts it, ‘PPOs are a box of contracts’, and not many PPO firms do much more than recruit, credential, negotiate, and contract.
Their popularity waxes and wanes, roughly in line with the underwriting cycle (as cost trends decrease, PPOs tend to grow, as cost trends increase, buyers seek more controlled networks and medical management systems).
Typically PPOs are owned by a large group health plan or specialty company such as a workers comp managed care firm. Many PPOs were built to market/sell to health plans and workers comp payers – Rockport, Coventry, and Interplan are examples of ‘vended PPOs’, as opposed to those built for the exclusive use of a healthplan.
The problem
There can be several issues with PPOs; lack of direction by the payer, inaccurate data, failure to maintain credentialing standards and ‘stacking’ are some of the more prevalent.
But of late another issue has been appearing more and more frequently – providers claiming they are not subject to a PPO contract and therefore should be reimbursed at U&C, or in the case of workers comp in many states, the state fee schedule.
Digging into the disagreements that arise when payers assert the providers are subject to a contracted discount, it looks like there are a few contributing factors.
First, some providers have contracts with many health plans and networks, and it canbe tough to keep them all straight. And, the PPO may have changed its name, merged with another firm, or been acquired since the original PPO contract was signed.
Those are the easy ones.
A knottier issue is caused by the mechanism of ‘provider selection’. When the provider’s bill comes into the healthplan/bill repricer, it is ‘checked’ against a database to determine if it is from a contracted, or participating, provider (known as a ‘par’ provider). This checking could occur either at the health plan/repricer, or the bills could be electronically sent to the PPO for the PPO to check par status and apply the discount.
What determines ‘par’ status is often the source of the problem. For example, PPOs want as many ‘hits’ as possible, so they err on the side of counting a provider as par if at all possible. The more hits, the more money they make (often), and the better they look to the payer. Payers like more hits because then the managed care folks can show the savings they deliver due to the discounts. So the payer side of the equation is motivated to use logic that assigns as many bills as possible to the par bucket.
To do that, payers often use a provider TIN (tax identification number) as the only criterion to determine par status. If a bill is from a provider with a TIN that matches some contract somewhere in the PPO company’s database, than the discount is taken. Payers may also use address, provider first name last name, and/or phone, but most try to use as few criteria as possible.
But large provider groups and hospitals and health systems often use the same TIN for many different service areas – outpatient surgery, inpatient, rehab, pharmacy, hospitalists, occupational medicine. And they rarely offer the same discount deal across all service types and locations. Some service types may not even participate due to the internal structure and demands of the health system.
Here’s real world example, provided by a consulting client. A bill from an occ med clinic hits a payer, who determines it is a par provider due solely to the TIN match. A 30% discount is taken, and the check cut. But the occ med clinic is not part of the original contract, which specifically states that discount is for inpatient medical services only.
The provider complains to the payer, who contacts the PPO, who eventually pulls the contract, says ‘oh, yeah, here’s the problem’, asks the occ med clinic to resubmit the bill, after which the bill may – or may not – be paid correctly.
Now multiply this by the hundreds, and it is easy to understand why some providers, fed up by the paperchase, are getting downright litigious. This leads to providers suing payers over a few dollars on an office visit – not to get those few dollars, but to force the payer to apply the correct repricing methodology.
If the PPO is the one doing the repricing (as is often the case), there is considerably less incentive to fix the problem. The PPO doesn’t have to handle all the calls (although in many cases they are involved at some level), figures many providers will not fight it as it isn’t worth it, and even if they do that’s a small price to pay for all those fees.
And that’s one major reason there’s so much litigation in the PPO world these days.
Apr
12
I haven’t read their report in detail, the one that some are claiming proves a governmental healthplan option will quickly dominate all the private plans. But a couple of worthies have, and I suggest you peruse their thoughts if you’re interested.
Merrill Goozner’s take is “the Lewin study may have overestimated the shift to the public plan.”
Roy Poses highlights a potential conflict of interest: Lewin is owned by Ingenix which is owned by United HealthGroup.
I’d be remiss if I didn’t note that I’ve worked with several Lewin folks in the past, and been impressed by their capabilities and intellect. I don’t know what part, if any, they played in the report. I do know that they aren’t the type to slant findings.
But here’s the problem; Lewin’s study assumes the governmental plan would pay Medicare rates, which would enable the Feds to undercut private payers’ premiums by more than twenty percent.
That’s a huge assumption as providers would not have to accept Medicare rates. In fact, as I’ve pointed out before, they could refuse to participate at all, making it kind of hard for the Feds to sell a health plan with few physicians or hospitals in the book.
What does this mean to you?
Question your assumptions.
Apr
10
We’re going to start off the discussion about universal healthcare with one of the more common concerns voiced by opponents – Universal ‘coverage’ does not mean universal care, as it will lead to rationing of care, either overt or via extended waits for care.
Before we begin, lets not confuse ‘universal healthcare’ with ‘single-payer’. Single payer is one mechanism to deliver universal healthcare, but it is by no means the only one – as has been demonstrated by many European countries where private insurers are active and significant players in the market.
Let’s start with a key – if obvious – statement. No one I know would assume that universal coverage means anyone can get any medical service at any time from anyone they choose for free. Some ‘strict-intrepretarians’ may call that rationing, but the vast majority of people would undoubtedly say, “well, of course it isn’t!”
There’s a difference between rationing and appropriate buying behavior. According to Wikipedia, “Rationing is the controlled distribution of resources and scarce goods or services. Rationing controls the size of the ration, one’s allotted portion of the resources being distributed on a particular day or at a particular time.”
The operational word is ‘controlled’, and the question is by whom?
‘Rationing’ in today’s US health care system
In today’s non-elderly market, health plans ‘control the distribution’ of care; big insurance companies like United HealthGroup, Aetna, Wellpoint, CIGNA, Humana. Through their pre-certification processes, reimbursement arrangements, summary plan documents, provider agreements, and other business policies they try to make sure they only cover what they are legally required to cover (no cosmetic stuff) allow only those procedures that are appropriate for that condition delivered by an appropriate provider, and pay only what they have to for those procedures and services.
But there’s a big group of folks who don’t have access to any insurance (although they can access care on a limited basis through EMTALA) – the uninsured, a population that is likely pushing close to 50 million these days. Is their care ‘rationed’? No, they just can’t get any that’s not driven by an emergent condition. Hypertension medications, COPD treatment, asthma prescriptions are all not available (except in a few cases where provided by charity) unless and until the patient has to be admitted to an ER.
So, what do the data show? We’re living in a very expensive glass house. In 2007, Troy Brennan, Medical Director of Aetna, Inc, said “the (U.S.) healthcare system is not timely…” citing “recent statistics from the Institution of Healthcare Improvement … that people are waiting an average of about 70 days to try to see a provider. And in many circumstances people initially diagnosed with cancer are waiting over a month, which is intolerable…”
Conclusion? Today, Americans with coverage do not have unfettered access to any type of care.
‘Rationing’ in countries with universal healthcare
Opponents of universal healthcare often make the logical leap that somehow it will inevitably lead to extended waiting times. I’ve never understood the connection. How better access to care, leading to more preventive care, will lead to waiting lines for procedures has never been made clear to me. Moreover, the data refute that opinion.
The logic (an admitted misuse of that term) appears to go something like this: “In Canada (or the UK or France or wherever) they have universal healthcare and people have to wait forever for care, especially costly types of care”. We’ll leave aside the delays that exist in this country even for those with health insurance, the difficulty in finding a primary care doc who is still taking new patients, the waits to see specialists (god forbid you need specialty care from a chronic Lyme expert, the delays are months).
Or perhaps we won’t. In fact, A Commonwealth Fund study of six highly industrialized countries, the U.S., and five nations with national health systems, Britain, Germany, Australia, New Zealand, and Canada, found the United States ranked last on four measures of continuity of care and access problems reported by patients.
Here’s what a bit of specific data show (excerpted from the Commonwealth Fund report).
* The percentage of U.S. patients who waited six days or more for a doctor appointment when sick was not significantly different from the rate in Canada (23% v. 36%), the worst-performing country.
* Only 47 percent of U.S. patients were able to see a doctor on the same or next day when sick, versus 61 percent to 81 percent of patients in the four better-performing nations.
* U.S. patients were less likely than patients in Canada (12% v. 24%) but more likely than patients in Germany (4%) to wait four hours or more to be seen in the emergency department.
* U.S. patients were less likely than patients in four countries (except Germany) to wait four weeks or longer to see a specialist (23% v. 40%-60%) or to wait four months or longer for elective surgery (8% v. 19%-41%) (Schoen et al. 2005).
Another way to look at rationing is the volume of care delivered to those patients that actually receive care. Tom Lynch did a terrific comparison of the US to other OECD countries, within which he said this:
“Hospital discharges per 1,000 people in the US are 25% lower than the average for all OECD countries, and doctor visits are 42% lower.
Well, maybe people have significantly more intense and aggressive service while they are hospitalized in the US? One indicator of intensity is the average length of acute care hospital stay. In the US, the length of acute hospital stay is 5.6 days, which is less than all but eight of the other 29 OECD countries. But shorter stays could mean higher efficiency. A better way to look at it is to look at specific causes for hospital stays, like heart attacks, for instance. The US average hospital stay following acute myocardial infarction is 5.5 days, the lowest in the OECD.”
Clearly folks in countries with universal healthcare are not getting kicked out the door, or discharged “quicker and sicker” as we in the US do so well. Nor are they subjected to waiting times significantly different from those in the US.
What does this mean?
In several areas the US already has longer waiting times and poorer access to care than countries with universal healthcare. If the US adopts universal healthcare as practiced in other countries, the evidence indicates access will go up and waiting times may well go down.
Apr
9
TPAs and employers and insurance companies send out requests for proposal – to each other, to managed care firms, specialty providers, voc companies, IT providers, law firms. All have been on the receiving end of a voluminous, detailed, structured and rigorous RFP – so big that it clogs their virtual and/or physical mailbox.
The erstwhile vendor is initially happy. Hey, we made the cut, we’re on the list, we ‘get’ to respond. We have an opportunity.
Then the work starts. Even if the vendor is big, and has staff to help write the responses, and even if it has a ready-made library of canned responses, it is still a lot of work. We aren’t talking a couple hours here and there by a junior staff writer – every question has to be reviewed and assigned, then the answer checked for accuracy, grammar, and consistency with other answers. Then someone has to find all the reports and IT flow documents and disaster recovery plans and professional certifications and insurance coverage documents and CVs and make sure they have the right appendix numbers and are in the right format. Then it has to be collated, checked one more time, signed by an executive, and shipped out. All on the prospect’s schedule.
And that’s if it’s a big vendor; if it is a small company, the folks who are doing this work are also the folks who are supposed to be doing the ‘real’ work – handling the tasks that actually deliver value to customers and owners alike.
The point is there is a lot of work involved, and most of the vendors who are doing the work are not going to get anything out of it – at least in terms of revenue. No, they’re going to have to savor the joys of a job well done, even if not done well enough to actually win the business.
I know, the ‘customer’ has also put a lot of work into the process – no argument there. Just understanding what it is you want, what restrictions exist, what the timeline should be and who should be involved in the process from initial specs to final decision means meetings on top of meetings.
But just for a minute think about it from the vendors’ perspective. We’ll take your perspective on tomorrow.
The erstwhile vendors want to deliver for your company, they think they can do a better job of anyone else, yet they’re forced to only answer what they’re asked, not allowed to demonstrate their abilities and insights and expertise and knowledge. Yes, they may be able to – in response to the “is there anything else we should know, or other ideas you have”. But the responses to these questions don’t fit the scoring methodology. Even if they are creative and innovative and fresh, and look promising, it’s tough for them to see the light of day in the typical RFP process.
Now comes the waiting…and the waiting…and the waiting…
Sure, there’s a deadline. But more often than not, the deadline comes and goes, unmarked by the award, or announcement of a potential award. Instead, there’s news that the prospect needs more time to review the proposals, or more information has come in, or…
At the risk of being accused of unfairness, ask yourself – how often has an RFP process ended when it was supposed to, with a decision made, vendor selected, and losers notified, according to the original timetable?
I’ll go out on a very solid limb and say the answer is ‘not very often’.
Let me suggest this. The more a prospective customer delays the decision, the less credibility it will have, and the less willing potential vendors will be when the next RFP comes out. Some decisions are seemingly never made, until the queries from once-hopeful vendors trickle away.
If and when the award is announced, those potential customers who are willing to have the tough conversation with losers – despite what their lawyers say – are doing the right thing. This is a small world, and treating losing vendors professionally is just the right thing to do. It will also make them better when next they respond to the ‘customer’s’ RFP.
It is also a recognition of the work invested by all vendors, not just the winner. It provides the losing vendor with valuable input and knowledge, and delivers at least some return on all that effort.
What does this mean for you?
Do unto others.
Apr
9
There are many arguments advanced by the opponents of universal coverage, from the sublime to the ridiculous, the practical to the ideological, the informed to the ignorant. I’ve attempted to identify ten of the most common and acknowledge there is overlap amongst these objections.
That’s fine, as the purpose of this series is to confront the issue where it has the most traction – in the minds of the layperson.
After some considerable research, here is this year’s top ten list of reasons universal coverage is bad.
1. Universal coverage does not mean universal care, as it will lead to rationing of care, either overt or via extended waits for care.
2. Universal coverage would result in the government running the health care system making it worse than it is today – because the government can’t do anything right
3. Competition is what made this country great, and universal coverage is anti-competitive as the government is involved.
4. It’s unfair to ask the young and healthy to pay for the health care costs of the older and sicker.
5. Universal coverage will lead to a decrease in innovation.
6. Solutions such as ‘health status insurance’ can provide long-term, secure health insurance, obviating the need for universal coverage.
7. Even though every other industrialized country has some form of universal coverage, many are looking to add market mechanisms to their plans. This shows universal coverage doesn’t work.
8. The problems with the US health care system are not caused by the private market, but by over-regulation and over-involvement of the government in the current market.
9. It’s unaffordable.
10. Health care is not a right; if we are guaranteeing health care why not guarantee food, clothing, housing…
Apr
8
There’s little doubt hospital reimbursement methodology is going to change dramatically over the next few years.
We’re going to see a shift from fee for service to global episodic reimbursement, a shift that has already begun. I’ll get into that next week, but for now, there’s increasing evidence that private payers’ hospital costs are rising in large part due to several recent changes in reimbursement policies.
Over the last year, there have been three major changes in hospital reimbursement: the implementation of MS-DRGs (increase in the number of DRGs to better account for patient severity); a 4.8% cut in Medicare hospital reimbursement spread over three years; and the decision by the Centers for Medicare and Medicaid Services (CMS) to stop paying for ‘never ever’ events – conditions that are egregious medical errors requiring medical treatment.
The net result of these changes has been a drop in governmental payments to hospitals, the decision by several major commercial payers to not pay for never-evers, and increased cost-shifting from hospitals to private payers.
The implementation of MS DRGs and the accompanying decrease in reimbursement looks to be the most significant of the changes, and is already having a dramatic impact on hospital behavior patterns. By adding more DRG codes, CMS is acknowledging there are different levels of patient acuity – that performing a quadruple bypass on an otherwise-healthy patient takes fewer resources than doing the same operation on an obese patient with diabetes and hypertension. While these different levels were somewhat factored in to the ‘old’ DRG methodology, the new MS-DRGs better tie actual costs to reimbursement. (for a more detailed discussion, see here)
Here’s one example.
CMS projected that these changes would reduce Medicare’s total reimbursement for cardiovascular surgery by about $620 million, while orthopedic surgeries are projected to see an increase in reimbursement of almost $600 million.
Orthopedic reimbursement is increasing because there are now more MS DRGs for orthopedic surgery, and the additional DRGs will likely mean hospitals will be able to get paid more in 2009 and beyond than they were last year.
Hospitals are going to work very hard to get more orthopedic patients in their ORs, and they are going to carefully examine these patients to make sure they uncover every complication and comorbidity – because a ‘sicker’ patient equals higher reimbursement.
What does this mean for private payers?
Orthopedic costs will likely rise because hospitals will get better at allocating costs. But cardiovascular costs will also increase due to cost shifting.
Heads they win, tails you lose.
Apr
7
Way back in 2007 I did a series of posts on the top ten reasons universal coverage is bad. Back then the arguments against socialized medicine included:
1. We can’t afford it.
2. People aren’t insured because they choose not to be.
3. UC won’t help solve the health care crisis.
4. UC will give the government too much power.
5. UC is a devastating blow to personal liberty.
6. A mandate is not necessary as the free market will solve the problem.
7. If you give more people health insurance, they’ll use it, which will cause costs to increase. (the moral hazard argument)
8. It will drive up costs, which will inevitably lead to forced rationing.
9. It’s just a replacement for a failed Medicaid/Medicare system that should be covering those folks without employer-based insurance. Once we fix the ‘M’ programs we’ll be fine.
10. It’s socialist. And that’s bad.
Times have changed, more research has been done, and more arguments advanced pro and con – it’s high time to re-examine the topic, identify any new anti-universal coverage arguments, and separate the valid from the non.
The fun starts tomorrow.