Health Business Blog

Yesterday’s New York Times (As Physicians’ Jobs Change, So Do Their Politics) highlights the political shift underway within the physician community. While doctors used to be mainly male small businessmen, who were a natural fit with the Republican Party, they’re now much more likely to be female and employed by larger organizations. According to the Times, that’s making doctors more likely to be out of sync with the GOP, and the article cites examples from around the country. The American Medical Association came out in support of the Patient Protection and Affordable Care Act, which was a surprise to many. State medical societies find themselves increasingly allied with liberal activist groups, and even historically “red meat” issues like malpractice reform aren’t that big a deal for those whose malpractice premiums are paid by their employers.

It seems to me there’s an important facet missing from the article. When I was growing up in the 1970s, being a doctor was viewed as one of the surest ways for an ambitious person to make money. That started to change as the advent of managed care made medicine less lucrative and the explosion of the financial services industry provided opportunities to make a lot more money in investment banking, hedge funds, private equity and venture capital. As I observe my own generation and those somewhat younger than me, it seems that those intent on making a lot of money aren’t as drawn to the physician path.

My father in law, of blessed memory, used to compliment certain physicians by saying, “he’s not a money doctor.” That really boiled it down to the essence.

On the whole, younger doctors –and older ones who are sticking with the profession– seem to have the patients’ interest increasingly at heart. And that’s no bad thing.

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The Hill (CBO: Defunding healthcare law could end drug benefits) has an interesting piece suggesting that if Republicans are successful in blocking funding to implement the Patient Protection and Affordable Care Act (PPACA) it could mean the end of two programs that are popular with Republicans and Medicare recipients: the Medicare Part D drug benefit and Medicare Advantage –which allows Medicare recipients to enroll in private coverage. The article is based on an analysis by the Congressional Budget Office.

I can’t imagine it will happen that way, but if it did it would be fine with me. Here’s the scenario:

Medicare Part D is a terrible addition to Medicare, a completely unfunded handout to seniors thanks to reckless Republican-led spending under President Bush. PPACA makes Part D even more generous by closing the so-called donut hole. If there are no funds to implement the revised Part D, Medicare won’t be able to sign contracts with providers. There’s no provision to revert to the previous program so the program would have to end.

Medicare Advantage plans are a nice perk for seniors. Despite the rhetoric about private insurers being able to drive down costs, these plans are significantly more expensive than government-administered Medicare and therefore are even bigger budget busters. PPACA imposes more discipline on these plans and reduces their costs relative to traditional Medicare. Similar to Part D, it would be difficult for the government to continue the program if PPACA implementation funding is cut.

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The Health Affairs blog has done a very nice job of curating the latest installment of the Health Wonk Review. You’ll find a roundup of posts on various health care topics including Medicare, health IT and ethics.

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Now is a good time to take a deep breath and entertain a serious discussion about the future of Medicare. Republicans just lost a special election in New York that should have been theirs. They lost largely due to their new-found embrace of Medicare cost containment. Democrats are rushing to exploit the unpopularity of the Republican approach, forcing Senate Republicans to go on record endorsing the Ryan budget. Former President Bill Clinton is worried about this approach and I agree:

“People made the judgment that the proposal in the Republican budget is not the right one,” Mr. Clinton said. “But I’m afraid that Democrats will draw the conclusion that because Congressman Ryan’s proposal is not the best one, we shouldn’t do anything. I completely disagree with that.”

Instead it would be nice if party leadership and voters would steer the debate in a more constructive direction. In my view, that would start with the articulation of a few consensus points, such as:

• The Medicare financial crisis is upon us now. Contrary to common belief, there is no Medicare “trust fund” –at least in the traditional sense of the word– that is paying for Medicare from now until 2024. Instead, 43 percent of Medicare is paid for by general revenue
• Medicare is fundamentally unfair to the younger generation of Americans. Current beneficiaries have not in fact paid into the program in a substantial way, even though they may feel otherwise. Their contributions have funded just a small minority of their expected payouts
• Medicare cost containment does not have to be a zero sum game. Considering the large per capita spend on Medicare and the imperfections in the US health care system, it should be possible to do more with less

Agreement on those points (and maybe there are others to add) could lead to the formulation of some more detailed policy positions. I’d like to see:

• A willingness to change Medicare for everyone, rather than exempting people who are already in the program or who are entering it soon
• Needs testing for Medicare beneficiaries. I see no reason not to tie Medicare premium costs to income and wealth levels
• An admission that we can’t afford everything, and the setting of an enforceable limit on spending levels
• More humility in predicting the effects of sweeping changes to health care delivery and financing. Experimentation at the state and local levels
• A change in consumer perception about the level of treatment needed. In other words, it would be good for people to develop a more conservative approach to medical intervention

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Massachusetts cities and towns face huge long-term health care financing challenges, thanks to ill-considered policies that allowed health insurance benefits for unionized jobs such as firefighters and teachers to get totally out of control. The legislature is finally taking some modest steps to let the municipalities control costs somewhat by moving into the very successful program run by the Group Insurance Commission (GIC). Unions have fought related reforms bitterly in the past but are now starting to relent, according to recent Boston Globe articles such as this one.

That’s a savvy move on their part. First, citizens of the Commonwealth are slowly starting to wake up to the fact that health care benefits for public employees and retirees are substantially more generous than those in the private sector. Second, moving to a GIC plan can keep benefits generous while controlling costs. Third, we’re already at the point where health care costs are crowding out spending on vital services such as education, and it won’t be long before the backlash begins.

No doubt some of the anti public union rhetoric from Wisconsin is encouraging the unions to be more flexible. Massachusetts is not on the verge of following the Wisconsin path, but the unions are smart to be conciliatory.

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Over the last decade, the United States has intentionally made itself less attractive to immigrants, forgetting that immigration has been a huge driver of the country’s economic success. In a recent article (America needs a 21st century immigration policy), leading entrepreneurs, executives and investors including Steve Case and Sheryl Sandberg said:

To some, the link between immigration reform and economic growth may be surprising.  To America’s most innovative industries, it is a link we know is fundamental.

The global economy means companies that drive U.S. job creation and economic growth are in a worldwide competition for talent.  While other countries are aggressively creating policies and incentives to attract a highly educated workforce, America has stagnated.  Once a magnet for the world’s top minds, America now faces a “reverse brain drain” and is no longer the first choice for many entrepreneurs creating new companies and jobs.

America needs a pro-growth immigration system that works for U.S. workers and employers in today’s global economy.  And we need it now.

Openness and encouragement of immigration is vital for the success of health care reform. Why?

1. Immigrants innovate and create economic growth. This growth is how the country gets wealthier and better able to support health care expenses without raising tax rates
2. Immigrants tend to be younger, so they mitigate the overall aging of the population, making it easier for the country to afford its commitments to older citizens
3. Immigrants can use their intellectual capital and training –whether acquired abroad or here– to fill health care jobs such as primary care physician, pharmacist, nurse that would otherwise go unfilled

President Obama actually understands this dynamic, but has to tread carefully since immigrant bashing is so popular on the right. But unfriendliness to immigration is all over in the place. For example in Massachusetts the state has decided –for short-sighted financial reasons– to exclude legal immigrants from subsidized health insurance. With luck, that decision will be overturned as unconstitutional by the state’s Supreme Judicial Court.

I agree with the Republican rhetoric of the need for a “pro-growth agenda.” Low taxes and limited regulation can certainly play a part. But policies that encourage immigration, especially of younger, well educated people, are absolutely essential. We need it for the economy as a whole and for the health care economy in particular.

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There’s been so much acrimony about health care on Capitol Hill that it’s easy to conclude that we’ll never find a political compromise on key issues. A month ago (Are we entering an era of political cooperation on Medicare?) I took the tack that there was reason for optimism. Until recently, Republicans showed essentially no concern for Medicare’s runaway costs, and used defense of the Medicare program’s status quo as a cynical way to turn seniors against health reform. Now that Republicans are starting to get real about government spending –mostly thanks to the Tea Party– their previous defense of leaving Medicare as is is starting to backfire.

I’m even more optimistic that I was a month ago that we’re going to get somewhere, at least on Medicare, and that Republicans won’t continue to make their whole health care policy simply an attack on the Patient Protection and Affordable Care Act. There are a few reasons for my enhanced optimism:

• In an upcoming special election Republicans are quite likely to lose what should be a safe seat in upstate New York, thanks to voter rejection of Paul Ryan’s budget plan, which restructures and cuts Medicare. That would be a well-deserved loss. It’s waking Republicans up to the fact that if they are serious about cost reductions they can’t do it alone. They need some bipartisan cover.
• Congressional Republican leaders including Ryan himself are now talking compromise rather than confrontation. Senate Republican leader Mitch McConnell, for example, said it’s time to have “an adult conversation” on health care costs. Ryan has reversed course, and now says he is open to settling things prior to the 2012 election.
• At least a couple Republican Presidential candidates are showing a willingness to discuss health care in serious ways and to disagree with their Congressional counterparts

We really do need an adult conversation about health care costs and especially Medicare. One topic that should be on the table is inter-generational equity. That means we shouldn’t start with the idea that everyone currently in Medicare can keep their benefits as they are for life. It’s unreasonable that millions of relatively wealthy senior citizens receive highly subsidized Medicare that is partly paid for by lower wage workers who can’t afford health insurance themselves.

When we’re ready for that conversation I’ll be excited to participate.

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Not so long ago being a pharmaceutical sales rep could be a lot of fun. Jamie Reidy laid it all out in Hard Sell: The Evolution of a Viagra Salesman, one of the more entertaining books on the topic. In this interview from 2005, Reidy talked about how much fun it was and how the old tools for control of reps included hiring people from the military and Mormons, who were presumed to be honest and hardworking:

Reidy: Everyone works from their house and then has their own sales territory. So, no one ever knows where you are.

Smith: So it’s kind of freelance, where you set your own hours, and kind of have to be self-motivated?

Reidy: Yeah, so it shouldn’t be like freelance — they want you to be working from 7:30 a.m. to 5 p.m. every day. But it’s freelance in the sense that nobody has any idea whether I’m doing that or not. So, they thought they could inherently trust former military officers as honest, hardworking guys who can be trusted to get up early and go do their job. And then the other thing that I learned later on is that military officers are also used to taking orders and Pfizer’s sales pitches were very drilled down from the top, and everybody was supposed to repeat the same thing all the time.

I remember Reidy describing various shenanigans in his book including how he and others gave out Viagra samples intended for the personal use of the physician and office staff in order to get in the door to pitch less sexy products.

Flash forward to today and BNET’s Drug Reps Fear iPad’s Spying; They Should Be Worried About Their Jobs article highlights the much diminished pleasures of being a pharmaceutical sales rep. The emergence of the iPad is the theme of the article, but it’s the broader context that’s more interesting. The author cites three trends driven by the iPad:

1. Pharma companies “buying iPads in bulk for their salesforces even if they don’t have presentation software to run on them.” Apparently they’re stockpiling them for when they’re ready, they’re so excited about it. This trend –if true– is pretty foolish, since those iPads will  be obsolete within a year or so. If anything, that sounds like the old pharma way of doing things, spending money freely without thinking things through.
2. More physicians using iPads themselves. That one is certainly true. It also means there’s less interest in seeing a rep’s snazzy new iPad if the doc has one, and can presumably also run whatever app the sales rep is using to see the info in his or her own time.
3. Sales reps are starting to realize that iPads are tracking their every move and reporting back to big brother, i.e., sales management. That’s a jarring disconnect from the world Reidy describes, but as reps reflect on it they may realize companies have been doing this tracking for a while, using GPS systems tied to their cars, etc. Only now it’s getting much harder to get around.

In addition to the 3 factors cited by BNET, there are three other challenges for pharma reps:

1. Fewer doctors will see them at all, thanks mainly to policies put in place by their institutions
2. Doctors’ power of the pen is less mighty than it was as formulary compliance rises thanks to the role of pharmacy benefits managers and e-prescribing
3. Companies like Pfizer haven’t been producing exciting new drugs like Viagra, so there’s less to pitch. And when it comes to generic competition it doesn’t really matter how persuasive the sales person is if you’re competition is charging 90% less

There’s still a role for sales reps, but they’re having to work a lot harder and smarter to earn their keep. These days a guy like Reidy wouldn’t even last long enough to build up enough stories to write a book.

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Bill Clinton was very successful in taking ideas from all sides and incorporating them into successful, popular programs like welfare reform. (He also balanced the budget and left office with budget surpluses as far as the eye could see –more on that at the bottom.) It drove Republicans nuts to see what they considered to be their own ideas co-opted by the Democrats.

In the last couple years Republicans at the national level have seemed to adopt a policy nearly opposite of what Clinton did. Not only do Republicans reject Democratic ideas, they increasingly reject ideas that once had bipartisan support or that originated in the GOP. The recent beatings that Mitt Romney and Newt Gingrich have taken over health care from their own party are indicative of this tendency. Romney understood what was in store for him and tried to dance around it. Gingrich, meanwhile, is still living in the Clinton era. He got confused and thought the old rules still applied. We’ll see if he’s able to jolt himself into the current era or even change the tenor of the debate.

The American College of Physicians finds itself unexpectedly caught up in the new Republican orthodoxy. From the ACP Advocate blog:

You’d think that ensuring that there will be enough primary care doctors would not become a partisan issue. If you are a Republican congressman from Texas, or a Democratic Senator from California, you’d want your constituents to have access to a primary care doctor, right?

Apparently not: in the hyper-polarized and ideological world in which we now live, even modest steps to support primary care have been caught up in the worst kind of partisanship. The Washington Post reported on Sunday that funding for a new expert commission authorized by the Affordable Care Act (ACA), which was to examine barriers to careers in primary care, has been blocked by Republicans.

I’m with the ACP on this one. The Republican stance is damaging the country and although it’s been effective politics for the last year or so, observations such as the ACP’s make me think it’s starting to backfire.

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I often hear from hospitals that they’re being squeezed greatly on cost and not getting paid enough by government and private payers. I have some sympathy for this argument, but on the other hand somehow this country outspends every other country by at least two to one, and hospitals are a big part of the reason.

So what gives?

An article in yesterday’s Wall Street Journal (One Way for Hospitals to Cut Costs of Tests), reporting on an Archives of Surgery study, provides part of the answer.

Making physicians aware of the costs of blood tests can lower a hospital’s daily bill for those tests by as much 27%, a new study suggests.

Researchers simply told the doctors what things cost.

“There was no telling anyone when, or when not, to order a particular test,” says Elizabeth Stuebing, a study co-author…

But she says it shows what can happen merely by giving physicians information they don’t usually have. “We never see the dollar amount of anything,” Dr. Stuebing says. “The first week I stood up and said that in the previous week we’d charged $30,000 on routine blood work and I could hear gasps from the audience.”

The situation doctors are in today is sort of like being sent to a store and told to get what they need, but not paying for the goods and not  knowing the prices of the items or even which items are expensive and which are cheap. That’s certainly a formula to run up the bill, even if inadvertently –which is what the “gasps from the audience” indicate.

The experiment was analogous to putting prices on the items in the store, but still letting the shopper buy whatever they thought they needed. That’s a step in the right direction but not exactly draconian from a cost control standpoint! (Of course there are some cost control measures hospitals impose centrally, which is different from my shopping analogy.)

I have mixed views on whether physicians should be exposed to what things cost. Pricing in hospitals is not like pricing in stores, because “charges” are often a small fraction of what’s ultimately reimbursed. I don’t know that I want doctors making tradeoffs based on faulty data or an incomplete understanding of patient preferences.

Still, letting doctors know what’s cheap, moderately priced and expensive is a good idea. In this case it seems to have held physicians back from ordering things that weren’t needed. And it does give a peek at how bloated expenditures in medicine are today.

It also underlines the fact that we are far from the point where consumers can control costs by having “skin in the game.” Do we expect patients to challenge daily blood draws on the basis of their cost and medical necessity? I don’t.

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