Jan

What we won’t see from the new GOP budget hawks

Posted by Joe Paduda on Tuesday, January 4th, 2011 | Comments

Many of the Republicans in the House have committed to cutting discretionary spending this year by $100 billion. That’s a pretty big chunk out of the $477 billion total, and because the Federal fiscal year is well under way, this would amount to a thirty plus percent cut in current spending.
(to track how they’re doing, bookmark PolitiFact’s Pledge-O-Meter)
Leaving aside the obvious…difficulty in cutting almost a third of current non-military, non-entitlement or debt discretionary spending, I’m struck by the rather dramatic change demonstrated by this interest in cutting spending, especially as much of it comes from the same guys and gals who voted for the Medicare Part D program, the drug benefit with no dedicated financing, no offsets and no revenue-generators – the entire cost – which is now around sixteen trillion dollars – simply added to the federal budget deficit.
Heck, the fiscal fighters in the GOP could cut $62 billion this year alone just by canceling Part D – but wait, that would alienate seniors, whose votes are critical, and getting more so.
Among the hawks – now salivating at the chance to show their fiscal responsibility credentials – who voted in favor of an unfunded $16 trillion addition to the deficit are current Speaker Boehner, Barton of Texas, Cantor, Issa, Hoekstra, Hensarling, Nussle, fiscal hawk Ryan, Rohrabacher and LaHood.
We have a problem – a huge, and growing problem. Cutting a hundred billion from current non-military, non-entitlement, non-veterans, non-debt service spending is a great political sound bite. It’s also fiscally irresponsible.
If these politicians are really interested in cutting the deficit, they should kill Part D.

Oct

The Blue Cross of Michigan suit – yes, it affects you

Posted by Joe Paduda on Tuesday, October 19th, 2010 | Comments

Yesterday the NYTimes reported the Justice Department is suing Blue Cross Blue Shield of Michigan for allegedly violating antitrust laws. BCBSMI is accused of requiring hospitals to give BCBSMI ‘most favored nation’ pricing, thereby increasing the prices paid by other health plans and stifling competition.
According to the Times, the Blues contracts had “clauses stipulating that no insurance companies could obtain better rates from the providers than Blue Cross. Some of these contract provisions, known as “most favored nation” clauses, require hospitals to charge other insurers a specified percentage more than they charge Blue Cross — in some cases, 30 to 40 percent more, the lawsuit said.”
Christine Varney, the head of the antitrust division in the Justice Department, said “Our lawsuit alleges that the intent and effect of Blue Cross Blue Shield of Michigan’s contracts is to raise hospital costs for competing health plans…”
The lawsuit also claims that Blue Cross agreed to pay higher prices to certain hospitals to get them to agree to the “most favored nation” clauses.
There are three issues here that deserve your attention.
First, there is no ‘free market’ in health insurance. Most markets are dominated by a single, or at most two, health plans. This is clearly an effort by the Feds to make a statement, to force big health plans and their co-operating health systems and hospital groups to back off and ‘let’ smaller insurers into the market. No one, least of all big insurance companies, likes to be sued by the Federal government, and this very public case has undoubtedly started many health plan legal departments scrambling to prepare briefs for their CEOs detailing their potential liability for the same ‘offenses’.
As a corollary, smaller health plans cannot compete with the big boys because they don’t have the medical dollars required for bargaining purposes. Why would St Tony’s Hospital give a big discount to Mom and Pop’s Health Plan? The answer is simple – they wouldn’t, because they don’t have to – Mom and Pop don’t have any patient dollars that they would (potentially) move to another hospital, so there’s no reason for St Tony to do a deal.
(This basic fact is lost on those politicians and pundits who think that selling health insurance across state lines is a panacea. Health plans’ costs are primarily, and overwhelmingly, determined by the medical costs in the areas they operate – and legalizing cross-border sales of insurance will do nothing to reduce premiums or improve access)
The suit is apparently an effort by the Feds to address this reality, and may well be part of a larger strategy to improve competition ahead of implementing health reform.
Second, many health plans and insurers have most favored nation clauses in their contracts – workers comp payers too. This suit may – and most certainly should – encourage those payers to reconsider the purpose of and risk in those clauses.
I hasten to add that the accusations against BCBSMI go beyond simple MFN clauses; according to the Times, “the Justice Department said that Blue Cross required two hospitals in Saginaw, Mich., to charge most other insurers at least 39 percent more than the hospitals charged Blue Cross. Likewise, it said, in the Detroit area, the contract required three hospitals to “charge Blue Cross’s significant competitors at least 25 percent more than they charge Blue Cross.”
Finally, this highlights the symbiotic payer – provider relationship that is the fabric of our current health system – dominant health plans and dominant health systems working very closely together. If we as a society decide this isn’t the health system we want, than we’re going to have to get very litigious for a very long time. It has taken a century for the system to evolve to this point, and will take decades for any material change. In some instances this works very, very well – think Geisinger, Mayo, Marshfield.
In others, it may well ‘stifle competition’ But lets get serious – how effectively could a newcomer, or even a second tier health plan, really compete without the huge dollars necessary for investments in IT; care management; provider contracting, analysis, and relations; marketing and brand development; and distribution?
It couldn’t, and it can’t.
Like it or not, competing in health insurance, as in many industries, puts a premium on size and scale.
What does this mean for you?
We can already see this, as smaller health plans are being snapped up by bigger competitors, their management all-too-clearly reading the writing on the wall that survival in the post-reform world will require size, and scale, and money far beyond the grasp of most smaller health plans.
Note – A subsidiary of BCBSMI is a consulting client of HSA. While I have no knowledge that in any way pertains to this action, I do know that as an organization BCBSMI is quite sensitive to and cautious about any actions that might be construed to harm competition or interfere in provider practice.

Sep

Health reform explained – simply!

Posted by Joe Paduda on Monday, September 27th, 2010 | Comments

Health reform’s complicated – but it can be easily explained. The good folks at the Kaiser Family Foundation have produced a terrific video – that’s entertaining to boot – laying out pros and cons, explaining the rationale behind and opposition to reform, and all from a neutral perspective.
Kaiser’s reform site also has an interactive timeline, detailing the changes by year, and a detailed, here-it-all-is view here.
If you’re interested in how reform affects Medicare, Medicaid, employes, taxes – whatever – the timeline page allows you to sort and select only what you want. Seniors concerned about death panels and reductions in the Medicare program would find a lot of comfort here.
One part of reform I’m really looking forward to – simplified administration. Here’s KFF’s synopsis:
Simplify health insurance administration by adopting a single set of operating rules for eligibility verification and claims status (rules adopted July 1, 2011; effective January 1, 2013), electronic funds transfers and health care payment and remittance (rules adopted July 1, 2012; effective January 1, 2014), and health claims or equivalent encounter information, enrollment and disenrollment in a health plan, health plan premium payments, and referral certification and authorization (rules adopted July 1, 2014; effective January 1, 2016). Health plans must document compliance with these standards or face a penalty of no more than $1 per covered life. (Effective April 1, 2014).
Good work by the good folks at KFF!

Sep

Patient confidentiality? Not in Texas

Posted by Joe Paduda on Tuesday, September 21st, 2010 | Comments

Q – When is it legal for someone to examine patient records?
A – when they are a legislator seeking to “defend doctors he believes were wrongly the subjects of misconduct investigations by the [Texas Medical} board, which licenses the state’s physicians.”
According to an article in the Texas Tribune, that’s exactly what happened in Texas. As a state legislator, former state Rep. Bill Zedler, R-Arlington, “had authority to obtain and review private patient and physician records. The Texas Medical Board provides such records — which also detail patient treatment — only by special request and solely for official legislative purposes.”
Wait. Did I just write that? How does a state law supersede HIPPA, which mandates confidentiality of patient records?
And it turns out Zedler did NOT review the records for legislative purposes, but rather to assist specific physicians, two of whom were – you guessed it – large campaign donors. According to the Texas Tribune, Zedler requested records from the Texas Medical Board for:
“Houston anesthesiologist Vladimir Redko and Dallas thoracic surgeon Dr. William Rea, neither of whom were constituents. According to the board’s disciplinary orders, both were ultimately sanctioned for “egregious” treatment violations ranging from performing invasive procedures to injecting natural gas and jet fuel into the patients in order to diagnose chemical sensitivities. Records show that the doctors gave Zedler a combined total of $25,000 in the past half-decade and that some contributions were made just weeks before Zedler requested their case files.”
Zedler reviewed the medical records himself; while he’s not a physician, or nurse, he was a medical equipment salesman, so “I know what appropriate treatment is and isn’t,” he says. “I sold equipment, so a lot of times my customers were doctors. I’ve been inside surgical suites before — that kind of stuff.”
Zedler didn’t limit his investigations to the Texas Medical Board. Again, according to the Tribune, “Physician investigators at a separate agency, the Division of Workers’ Compensation of the Texas Department of Insurance, recall that Zedler also took great interest in doctors who were under investigation at workers’ comp.[emphasis added] Dr. Bill Nemeth, the division’s former medical advisor, says Zedler had some success in stopping investigations of the doctors on whose behalf he intervened.”
On the basis of his experience selling medical equipment, Zedler took it upon himself to examine what would normally be considered confidential patient records, then contact the state regulatory authorities in an effort to get them to drop investigations of at least two physicians who were significant campaign donors.
And this guy is running for election.

Sep

Defensive medicine – a non-factor in health care costs

Posted by Joe Paduda on Tuesday, September 7th, 2010 | Comments

Medical malpractice is one of the cost drivers about which there is much disagreement, some contend it is a major contributor to overall system costs, while others view med mal as a relatively minor factor.
A new study [abstract only] reported in this morning’s Health Affairs makes a compelling case for the latter view, and adds valuable insight into what is a politically-charged issue, one rife with misinformation and sloppy math.
The study found “Overall annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending.” [emphasis added]
Recall total system costs are in excess of $2.2 trillion. While $55 billion is a lot of money, compared to total system costs of $2.3 trillion, it, well, isn’t much.
In fact, costs would be much higher if the real toll of medical malpractice – lousy care, incompetent providers, poorly managed facilities, was adequately accounted for. Solid research indicates the vast majority of medical malpractice problems are never litigated. One study indicated that the cost of ‘adverse events approached 5% of total health care costs; over a hundred billion dollars in today’s world.
The med mal reform issue has been raised by opponents of health reform, who contend the failure to include med mal reform in the Accountable Care Act was a missed opportunity to significantly reduce costs Of note, the study estimated the most significant cost associated with medical malpractice was defensive medicine, which accounted for $45.6 billion of the total, most of which was spent on hospital services.
In an email conversation, I asked the study’s principal author, Michelle M. Mello, PhD, to clarify the study’s findings re the impact of med mal on defensive medicine – the theory that physicians change the way they practice to protect themselves against medical malpractice by prescribing more tests and studies.
Here’s Dr Mello’s response.
“There are two ways to measure defensive medicine. One is to ask physicians, using surveys, how often they order extra tests, procedures, and referrals primarily because of liability pressure. We didn’t use this method because it has two major shortcomings: (1) physicians may consciously or unconsciously overreport defensive practices because they want to help build the case for taking action to solve what they perceive as a problem with the liability environment; and (2) they may not be able to separate out different motivations they have for ordering services. In many cases, they may feel that ordering an extra test is a good idea both because it’s in the patient’s best interest and because it helps them reduce their liability risk.
The other method — the one we used — is to compare rates of health services that we think are indicative of defensive medicine in areas of high and low liability risk. If rates are higher in high-liability areas, and we can rule out other explanations for the differences, we can conclude that there is an association between liability and physician practices. The main challenge associated with this method is adequately controlling for other factors that could explain the differences. Researchers have extensively documented that physicians in different geographic areas have different practice styles, and it is believed that this is due to many factors, of which liability concern may be one.
We based our defensive medicine estimates for hospital services on previous analyses by Dan Kessler & Mark McClellan. Having reviewed the literature extensively as it has evolved over the past decade, our firm belief is that the Kessler & McClellan analyses provide the best available figures. Their statistical design enabled the researchers to control for other sources of variation in physician practices.
The main weakness of the Kessler & McClellan analysis, as we discuss in the paper, is that it was based on a narrow range of health services (cardiac care services) provided to a specific type of patient (Medicare beneficiaries). Is it appropriate to generalize from these data to all services provided to all patients? We have some concern about that, and consequently characterize the quality of the evidence supporting our defensive medicine estimate as low. Other kinds of health services may be less subject to physician discretion over treatment intensity than the cardiac services that Kessler & McClellan studied, so it’s possible that extrapolating to all services yields an estimate of defensive medicine costs that is too high. Nevertheless, we believe Kessler & McClellan’s analysis of the strongest one available.”
The paper provides additional background on the methodology used, and the challenges with that methodology. While it isn’t perfect, one has to compare it to the methods used by others who contend the tort system is a major driver of health care costs. Those ‘methods’ are rather less rigorous.
What does this mean for you?
One has to view the cost of medical malpractice in context – and the fact is there’s far too much lousy medicine, and far too little accountability.

Aug

The cost of forgoing care

Posted by Joe Paduda on Tuesday, August 17th, 2010 | Comments

A new report documents the impact of the recession on the health care system, and for many Americans, the news is proof of what they know all too well – higher deductibles and copays are reducing their ability to access care.
The report [fee req] does not document whether the forgone care would have been necessary/appropriate/supported by evidence-based guidelines, and it is likely some of the forgone care was unnecessary. That said, it’s only ‘some’, and it is highly likely Americans with slimmer benefits, or no benefits at all, are skipping visits, medications, therapies, and operations that will over the long term will have very serious implications.
According to a piece in the NYTimes, the researchers reported “We find strong evidence that the economic crisis — manifested in job and wealth losses — has led to reductions in the use of routine medical care.” 26.5 percent of respondents reported reducing their use of routine medical care since the start of the global economic crisis in 2007.
The report adds more weight to the increasing evidence that the recession, coupled with the unique American health insurance system, has had a significant impact on Americans’ ability to access care.
The importance of primary care in prevention is well documented; [opens pdf] timely use of primary care tends to reduce the need for interventional procedures such as CABG, thereby reducing cost and improving long term quality of life. Delaying or forgoing primary care will likely have the opposite effect, increasing future health care costs.
Impact on workers comp
Over the short term, this ‘side effect’ of the recession will likely increase work comp costs and extend disability duration, as more injured workers will have poor health status due to forgone care. If diabetics aren’t controlling their blood sugar, asthma sufferers have more acute episodes, and hypertensives are taking their meds every other day, it is going to be more difficult, costly, and time-consuming to help these claimants recover functionality.
Over the long term, health reform will reduce work comp costs as many more individuals will have coverage. But until 2015 (or so), we won’t see this positive influence.

Aug

Managing health care costs – whose job is it?

Posted by Joe Paduda on Monday, August 16th, 2010 | Comments

We’re learning a lot from Massachusett’s experiment in universal coverage – and some of the lessons are rather enlightening.
Take this one.
According to Bestwire, Lora Pellegrini, president of the Massachusetts Association of Health Plans, said something along the lines of “That’s the problem with the new U.S. health care reform law… it offers millions of uninsured Americans access to health insurance but doesn’t address underlying medical costs, which are contributing to costly premiums.” [not a direct quote]
Wait.
Isn’t that your job? In return for getting millions of new members, aren’t health plans supposed to figure out how to manage care and control costs?
If health plans rely on the government to help control costs, exactly what value do they deliver?
In fairness, Ms Pelligrini noted the market share of some provider groups is a significant factor in insurers’ inability to negotiate favorable rates. There’s no question negotiating power has shifted back towards providers, and that shift is contributing to higher costs for health plans.
Doesn’t seem to be hurting profits, though; the industry is enjoying a stellar 17.4% return on equity after seven publicly traded health plans reported earnings above expectations.
Try as I might to sympathize with insurers, their complaints are besides the point.
Suppliers in any business seek to maximize profits. Smart buyers will figure out how to find more cost-effective suppliers, develop alternative supply chains, or in very tight supply markets even resort to vertical integration, setting up their own suppliers.
I see no reason health plans can’t do the same. There’s far too much ‘old thinking’ among health plans; they remain overly concerned with the size of their network directory, believing large provider networks are essential to success.
Clearly, nothing could be further from the case. Some health plans are beginning to experiment with smaller, more exclusive networks, and I have no doubt the lower costs will make them much more attractive than the ‘old school’ huge networks with high costs due to broad access. No, success will come to those payers who creatively figure out how to work closely with selected providers, establishing partnerships, paying fairly, sharing information, and providing feedback.
Otherwise they’re just administrators, and not very efficient ones at that. If health plans are going to rely on the government to control costs, what, precisely, are health plans for?

Jul

What works in wellness

Posted by Joe Paduda on Tuesday, July 13th, 2010 | Comments

Getting employees to change unhealthy habits, exercise, eat right, and do all the other little things that make for better health and lower health care costs is fiendishly difficult. As a nation, we’ve proven that if anything, trying to change behavior is a losing proposition.
But every now and then there’s a glimmer of hope, with evidence that some change is possible – and sustainable.
Earlier this week the Orlando Sentinel had a front page article about one company’s very successful campaign to help its workers shed some pounds. The company, Total Medical Solutions (HSA consulting client, altho I take no credit for this success), started a team-based weight loss program that has resulted in the disappearance of hundreds of pounds, bonded workers from different parts of the company together around a common goal, and led to some significant business for area clothing stores.
While the benefits for workers are apparent – better health, greater self-esteem, more energy – there are also long term benefits for TMS in the form of (hopefully) lower medical expense for costs associated with obesity. Diseases including hypertension and diabetes are strongly associated with obesity; returning to a healthy weight can dramatically reduce the chance someone will contract these conditions.
There’s another benefit – TMS grouped their workers together in teams, teams that crossed department and positional lines. Execs from one department found themselves allied with line workers from another area; accountants with call center staff, operations with marketing (now there’s an idea…) – all working together to lose weight.
I’ve got to believe that this sharing of a common goal will have other benefits, in the form of renewed commitment to corporate objectives, a better ability to work together, and a stronger sense of team.
Kudos to the folks at TMS for finding a creative way to help their staff get healthier.

Jun

Financial shenanigans and their impact on moms

Posted by Joe Paduda on Monday, June 21st, 2010 | Comments

Anne Zieger has written a brief, very compelling piece about how a certain large teaching hospital crossed (at least technically) ethical boundaries by telling a patient she was covered, then that she wasn’t, but only after she had a procedure that was billed at $25,000.
I don’t know why the insurer didn’t cover the procedure, or why the hospital didn’t tell her it wasn’t covered, just like I’m sure the patient has no idea how she’s going to come up with $25k. It could be a breakdown in communication at MassGeneral, or it could be the patient was told and can’t remember, or perhaps there’s some other explanation.
Regardless, it certainly points out – as if we needed more evidence – exactly how screwed up our financial reimbursement ‘system’ is.
Yecch.

Jun

The Medicare physician reimbursement ‘fix’

Posted by Joe Paduda on Monday, June 21st, 2010 | Comments

With the Senate’s passage of a bill preventing cuts to Medicare physician reimbursement for another six months, we’re only waiting on the House’s action to boot the problem further down the road, where it can grow, and fester and frustrate just in time for the New Year.
That said, it isn’t all bad news. The good news is the (short term) fix is paid for, it was the product of bipartisan action, and, for docs, it increases reimbursement by a touch above two percent.
With that said, this is so illuminating and so frustrating on so many levels, that it is worth exploring in detail.
First, the House may not pass the bill. Speaker Nancy Pelosi (D CA) has said that she’s got big problems with the narrow fix as it doesn’t address the House’s priorities in other areas including jobs and unemployment extension.
If the House doesn’t pass the fix early this week – like before Wednesday – expect physicians to go ballistic. CMS has already told their bill payers to start cutting checks to docs reflecting th 21% cut; each day that passes before those cuts are rescinded will increase the level of anger among physicians, which is already close to an all-time high.
Second, ‘fixing’ the current Medicare physician reimbursement price-setting process (known as the Sustainable Growth Rate (SGR) for the methodology in place today) will require Congress recognize a quarter-trillion dollar addition to the deficit.
Ouch. Hard to see how any politician will explain that to their constituents at a Town Meeting. Let me see, “Well, Mr X, in order to understand why I voted for a quarter trillion dollar addition to the deficit, let me explain how the SGR contributes to medical price inflation…” Can’t wait to see the headlines on FauxNews on that one…
Third, as I noted last month, “there’s an inherent problem with the SGR approach – SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also ‘values’ procedures – doing stuff to patients – more than listening to them.”
As Gail Wilensky wrote, “The primary problem with the SGR is that while it can control total spending by physicians (assuming it is actually implemented), it does not affect nor is it driven by the volume and intensity of spending of individual physicians. In fact, there is some concern that expenditure targets may actually exacerbate the incentives for individual physicians to increase the volume and intensity of services they provide.” [emphasis added]
Fourth, changes to Medicare physician reimbursement will impact group, Medicare Advantage, Medicaid managed care, and workers comp – both directly and indirectly. Many network contracts are based on or reference RBRVS, so changes to RBRVS can result in alterations in network reimbursement. The indirect impact may be more significant, as physicians alter practice and billing patterns to address revenue shortfalls and opportunities. With eventual cuts in reimbursement for surgeries and imaging likely, payers will have to carefully monitor practice patterns if they are to stay on top of potentially problematic trends.
Finally, Congress is indeed in a ‘fix’. Caught between the Scylla of budget deficits and Charybdis of an enraged and engaged physician community, it decided to prolong its agony until after the fall elections, in hopes that passage of a more permanent solution will come so early in the 2012 election cycle that other issues will overshadow it by the time the voters hit the booths in November 2012. That, and the Democrats may well be thinking they are going to lose a bunch of seats in both houses this fall, so any post-2010 election solution to SGR/RBRVS will require the Rs to make policy and not just hurl bricks. It’s one thing to point out problems, it is entirely another to come up with solutions, especially when any foreseeable solution will anger a powerful constituency.
What does this mean for you?
Watch what happens this week in the House. It will be a lesson in civics, if not civility.

Category: Health Care Issues