Health Business Blog

The latest edition of the Health Wonk Review blog carnival is up at Colorado Health Insurance Insider. This edition focuses on health care reform.

Share

In Europe, reimbursement decisions for drugs often include explicit consideration of cost effectiveness and a comparison of the efficacy of the new drug with products that are already available. In the US, such considerations are excluded, at least for Medicare, which is the biggest payer. In the latest Health Affairs, Joshua Cohen, Ashley Malins and Zainab Shahpurwala conclude that the European approach leads to lower costs, better access to therapy for patients, and better outcomes –at least in some cases.

I asked Cohen –a senior research fellow at the Tufts Center for the Study of Drug Development– to comment on some of the findings.

Why did you base your research on patient access rather than market availability?

I’ve been studying patient access for over 10 years. I try to distinguish between key dimensions of patient access. Broadly, patient access is a function of: i. market availability (off-label uses are an exception to the rule); ii. coverage by payers; iii. patient out-of-pocket costs. Market availability captures one element of access. It is a necessary, but insufficient condition of access given that the vast majority of cancer drugs are paid for by third party payers.

From the patient standpoint, what are the advantages and disadvantages of the US v. European approaches?

The biggest advantage in the U.S. versus Europe with respect to cancer drugs is faster market availability of a greater number of drugs. Two rather stunning facts stood out: 1. None of the common subset of 29 drugs were approved in Europe before the U.S. And in most instances the lag was at least 4 months. 2. At the same time, for drugs licensed by the EMA and approved for reimbursement by the national health authorities there were hardly any out-of-pocket costs for patients in Europe. Contrast this with co-insurance percentages of as high as 40% for some drugs in the US. There are medications with annual price tags of over $20,000 –and 40 percent of  $20,000 is a lot of money to shell out, especially for those on fixed incomes.

The comparative outcomes information you cite in the article is very old and excludes drugs approved since 2002. Why is this the case? Is there any way to look at more recent information?

The articles themselves are not old. They are recent publications (2009, 2010, 2011). However, if one looks carefully at the time period during which survival data were being measured it becomes clear that the newer vintage drugs were not included in the studies. Hence, one cannot conclude that better survival statistics for a number of cancers in the U.S. are due to better access to newer cancer drugs. Until we have data showing survival that can indeed be attributed to better access to newer drugs, we are left to speculate. My hunch is that better access in the U.S. to newer cancer drugs (i.e., faster and greater numbers of approvals, as well as fewer coverage restrictions) has been beneficial to some patients, as has improved screening and earlier diagnostic work-up.

In the timeframe you considered, 41 oncology drugs were introduced in the US but only 31 in Europe. Are there clinically significant products that make it to market in the US but not elsewhere? Can you provide an example?

Provenge (sipuleucel-T) comes to mind as a drug with a lot of fanfare in the U.S. It was approved in 2010 by the FDA, yet still not approved in Europe. At the same time, it should be said that there are certain differences in regulatory mechanisms that have benefited market uptake of a number of drugs in Europe, including Iressa (gefinitib). Iressa has led practically a moribund existence in the U.S., while in Europe, as a result of EMA approved of a companion diagnostic in 2009 – an EGFR mutation test kit – sales have increased steadily.

—–

By David E. Williams of the Health Business Group 

Share

The Affordable Care Act (aka ObamaCare) requires health plans to spend at least 80 or 85 percent of premiums on medical expenses and quality improvement –80 percent for small groups and individuals and 85 percent for large groups. This minimum Medical Loss Ratio (MLR) rule means that health plans must squeeze all their administrative costs and profits into the remaining 15 or 20 percent.

Health plans are making adjustments. Not surprisingly they are looking at ways to cut administrative costs, just as the law intends. One easy target is commissions for agents and brokers, and those commissions are in fact being cut. From LifeHealthPro:

“The (MLR) requirements contained in the Patient Protection and Affordable Care Act continue to have a devastating financial impact on the country’s approximately half-million licensed professional health insurance agents and brokers, as well as on all of their employees and their millions of employer and individual clients,” stated Janet Trautwein, CEO of The National Association of Health Underwriters (NAHU).

Trautwein explained that the MLR requirements significantly and negatively impact access to health insurance agents and brokers at the very time our economy is the weakest and health care consumers need the most help.

She noted that the Congressional Budget Office (CBO) reported that agents and brokers often serve as de facto human resources departments for many small firms — negotiating premiums, processing claims and enrolling employees.

Brokers are pushing to have the MLR rules exclude agent compensation and they’ve picked up some allies in the Senate.

I totally understand why agents are unhappy and why NAHU is pushing for this change, but I don’t believe a change is justified. The current compensation structure has brokers working on behalf of the health plans to sell coverage. If agents and brokers are really working as HR departments for small firms –as Trautwein contends– then those firms would be better off paying for such services directly rather than paying a health plan to pay a broker to do the work.

The easiest short term path for the broker community will be to keep pushing to change the legislation. But in the long term it will be healthier for all if employers rather than health plans pay for brokers’ consultative and HR services.

Share

I think everyone believes that Texas Governor Rick Perry is sincere in his opposition to the Affordable Care Act (ACA aka ObamaCare). But this still doesn’t explain why he’s refusing the expansion of Medicaid that the law brings.  From The Hill’s Healthwatch blog:

Texas Gov. Rick Perry (R) doubled down Monday in his opposition to expanding Medicaid under President Obama’s healthcare law, even though opposing it could cost his state $90 billion.

At a press conference where he was flanked by other conservatives, Perry argued expanding the health insurance program for the poor would make Texas “hostage” to the federal government.

“It would benefit no one in our state to see their taxes skyrocket and our economy crushed as our budget crumbled under the weight of oppressive Medicaid costs,” Perry said at the state capitol.

The last paragraph in particular is a head scratcher. The federal government will be paying 100% of the cost of the expansion over the first few years of the program and then downshifting slightly to around 90%. This is a much better deal for the states than the base Medicaid program, which Texas continues to participate in. Perry’s argument seems to be premised on the idea that the feds won’t live up to their promises  –in particular that the 90% federal share in the out years somehow won’t come true or that even if it does the extra 10% will play havoc with taxes and the Texas economy. Even if we give Perry the benefit of the doubt on this point, why not take the 100% for now and then throw all the extra beneficiaries off the rolls later? The idea that accepting the Medicaid expansion will be crushing financially is laughable.

In addition to Texas losing out on the $90 billion or so of federal funds mentioned in the article, Texas employers may face federal “shared responsibility payments” in the range of $300 to $450 million per year as a result of Perry’s obstinance. According to Jackson Hewitt Tax Service, employers are generally not penalized if their employees are on Medicaid. But if Texas rejects the Medicaid expansion, some employees who would have qualified for Medicaid will end up enrolling in the premium assistance tax credits provided by the ACA instead. And in that case their employers will be subject to substantial penalties.

Those shared responsibility payments will flow from Texas to the federal government, and the federal government will also spend billions less on Medicaid expansion in Texas. That’s good news for taxpayers in states that are accepting the Medicaid expansion, but I don’t see how it helps the people of Texas, whom Governor Perry is supposed to represent.

MCOL has a good infographic showing the impact of this provision on various states, including Texas.

You’ve heard the expression “Don’t Mess with Texas” –which originated as an anti-littering campaign– but in this case Texas it messing with itself.

By David E. Williams of the Health Business Group.

Share

The Boston Globe published a graph showing that Massachusetts’ birth rate for mothers aged 15-19 is 17.1 per thousand compared with a nationwide average of 34.2. They didn’t mention where we stand against other states but a review of CDC data indicates that only our neighbor, New Hampshire has a lower rate. Vermont and Connecticut are also low. The highest rates of more than 50 per thousand are found in Mississippi, Texas, New Mexico and Oklahoma.

I’ll let others speculate on the causes of these disparities in birth rates. But I will say that having a low teen birth rate is a blessing for Massachusetts and indirectly allows the state to afford universal health care. Instead of having babies and often ending their formal education, women in Massachusetts are staying in school longer and ending up with higher levels of educational attainment. Boys/men also have a greater opportunity to stay in school when they are not burdened with paying for a child’s upbringing.

A population with more education attracts employers who pay higher wages. And these higher wages enable employers to offer health insurance and state governments to raise tax revenue that can be spent on education, health care and public health. It’s a virtuous circle.

Massachusetts, New Hampshire, Vermont and Connecticut are also in the top 10 states in terms of percentage of residents with health insurance. Of the states with a high birth rate, they all rate 36th or lower.

—

By David E. Williams of the Health Business Group.

Share

Fast food chains, which employ many low-income, uninsured adults, have been worried that the full implementation of the Affordable Care Act (ACA) aka ObamaCare next year will be unaffordable for them. Some political opponents in the industry have been strident in their critiques and doomsaying.

But as 2014 draws closer the green eyeshade types are speaking up, and the message is more reassuring. ObamaCare actually won’t cost each Wendy’s restaurant $25,000 per year as previously estimated. The new estimate is down 80 percent to $5,000 annually. The average Wendy’s has revenues of $1.4 million, so we’re talking here about less than 0.4 percent of sales.

According to the Wall Street Journal (Restaurant Chains Cut Estimates for Health-Law Costs), other restaurant chains have been making similar pronouncements:

They say many employees will decline company-offered insurance, either because they can get insurance through Medicaid or a family member, or because they prefer to pay the penalty for not having health insurance. The penalty next year will be as low as $95 next year, much less than most employees will be asked to pay through company-sponsored insurance plans.

As long as restaurants and other employers offer plans that meet ACA’s requirements they won’t be penalized for lack of employee uptake.

The new estimates are good news for the restaurant industry, and demonstrate again that ObamaCare is actually a moderate law, not a sweeping takeover of the health care economy. It’s not so great, though for those workers who will still be without coverage. Penalties go up gradually over time, which may increase worker participation somewhat. In any case it will give some time for kinks in the law to work out and for the provider and payer community to absorb the new entrants into the system.

Once the dust settles we’ll see where we are and maybe there will be a need for further tweaking. In any case there should be a significant increase in the number of people with coverage and no threat to the chains’ ability to offer bargain menus.

Of course ACA is about a lot more than forcing restaurant owners to offer insurance. The cost and quality improvement elements are important, too, and with time and good will there is the potential to realize significant overall changes for the better in the health care system. Putting health care on a sustainable path will be good for the restaurant industry and others, and 10 years from now we are likely to look back on 2014 as no big deal.

Share

The Saturday Evening Post has published a provocative article (How Doctors Die) by retired physician Ken Murray, making a strong case that over-treatment is rampant at the end of life. He describes anecdotes of physicians serenely accepting their death sentences and making the most of their last months and weeks compared with the average person who suffers needlessly and racks up a big bill in the process. Doctors understand the limitations of medicine in ways that typical patients don’t, he says, but have not been in a position to provide more appropriate care due to patient pressures, legal concerns, and the nature of the medical system. Hospice patients may live longer anyway, he adds.

I’m mainly on Dr. Murray’s side. I believe that over treatment is a big problem and that hospice care is underutilized. I understand the concept of never wanting to be put on life support. I am angered and saddened that the nonsensical “death panel” argument was used as a cudgel against ObamaCare by invoking the prospect of rationing of care.

And yet I’m uncomfortable with the article. First, to what extent should we accept the author’s anecdotes as evidence of the general state of physician perspectives? I don’t see a lot of systematic evidence for his contentions. Second, even if doctors feel that way should patients necessarily ratchet down their demands for services? I would say no.

My concern as a patient, caregiver or family member is about being written off when it’s not warranted. For example (since anecdotes seem ok, here) doctors discouraged a family member from chemo for leukemia due to his age, even though as I discovered the advice wasn’t really evidence based. He had chemo anyway thanks to our insistence, tolerated it well, and lived an extra year. It’s hard to figure out what tradeoff is reasonable to make between suffering and the potential to extend life even when all the information is in hand, which it rarely is.

And while it’s easy to oppose heroic, frequently futile measures and suffering in general, when it gets down to specific situations I’m not nearly as comfortable. Who’s to say a patient shouldn’t be willing to suffer in order to live a while longer and have a few more weeks or months with their grandkids?

The general point of the article –that those with the most knowledge of the limits and possibilities of medicine seek less of it than the general public in certain circumstances– is certainly worth contemplating. But I haven’t changed my own views after reading the piece.

Share

You should read Dr. Scott Gottlieb’s (The Doctor Won’t See You Now. He’s Clocked Out) opinion piece in the Wall Street Journal. He argues that ObamaCare is making independent physician practices obsolete by forcing physicians to work for big hospitals as part of Accountable Care Organizations (ACO), is  imposing high costs for information technology on those who try to remain independent, and that the Administration’s policies will have the ironic consequence of driving up costs since employed physicians are less productive.

There’s a lot of truth in the article. As I have written recently, fees sometimes rise when hospitals buy physician practices and tack on facility fees. And in my prediction for 2013 published by InformationWeek I predicted that physicians will struggle to stay independent.

But although I mainly agree with Gottlieb’s observations, I’m more optimistic than he is, and less eager to point the finger at ObamaCare. In particular:

• The trend toward hospital employment has been going on for a long while now, as Gottlieb acknowledges. One could say ObamaCare encourages this trend but from my perspective the bigger factors are the desire to join with a bigger entity to negotiate better rates with managed care, a generational shift as younger doctors decide they want balance between life and work (especially women, who now comprise the majority of medical students), and the rising overhead involved in running a practice. Ironically, physicians I’ve spoken with have cited the cost of health insurance for staff as a reason for joining up with the big boys!
• ObamaCare does not require anyone to be in an ACO and does not require them to be run by hospitals. Physicians could organize their own ACOs and I hope in the future more do, even if that hasn’t been the way things have gone so far
• Health IT is a drag on small office but also for big hospital based systems. Those inefficiencies will take a few years to work out but I’m optimistic that a new generation of systems will empower the small physician practice, the way technology has made it possible to operate smaller professional services firms in consulting, law and other fields
• Costs are becoming a bigger and bigger focus, and the country just won’t tolerate health care prices that go up and up. The facility fee issue and Steven Brill’s article in Time on costs are two examples. It’s commercial health plans, not government programs, that have been tolerating higher costs. Buying up physician practices may help hospitals negotiate hard with commercial health plans but Medicare and Medicaid are not going to be impressed. In the long run –maybe 10 years– hospital systems that fail to generate greater efficiency from buying up practices will lose ground to new types of entities, especially those that are virtually integrated through technology. As Gottlieb pointed out, we’ve been through the cycle of physician acquisition by hospitals before, and it was reversed due to lagging productivity
• ObamaCare represents a great big target to shoot at, and easy to criticize in a vacuum. But we have to compare it with what came before, which was hardly a panacea.

Share

It’s the golden era for health wonks. Affordable Care Act implementation is proceeding apace while opponents keep up their attempts to maim it, Steven Brill’s article on medical costs in Time has the masses up in arms about topics near and dear to our wonky hearts, my Health Business Blog turned eight, and the giant HIMSS meeting in New Orleans has just closed up.

So it’s fitting that I received so many high quality submissions for today’s Health Wonk Review.

On the Health Affairs Blog, former Surgeon General David Satcher eulogizes former Surgeon General C. Everett Koop, who passed away recently at age 96. He praises Koop for his courageous response to the AIDS epidemic and continuing the fight against tobacco use.

“Given the sexual, racial, and drug-related issues around the transmission of HIV…, he demonstrated unusual courage and fortitude in bringing these topics to the attention of the American people in the face of resistance within both Congress and the White House.  The major resistance to his report on HIV/AIDS stemmed from the need to explicitly discuss how it was transmitted heterosexually and homosexually.”

Steven Brill’s high-profile Time article on medical costs garnered attention from two bloggers.

In Sight (while admitting a bias in favor of hospitals) contends that Brill’s focus on chargemasters, which represent hospitals’ rack rates for services, is a distraction. Few pay the chargemaster rate and hospitals are not nearly as profitable as Brill claims.

Meanwhile Health Access California notes that California addressed this issue back in 2006 with the Hospital Fair Pricing Act, and that the chargemaster does in fact affect people.

Affordable Care Act, aka ObamaCare partisans continue trying to sway us.

Insure Blog rags on ObamaCare, with a somewhat curious argument that insurers will price the bare bones policies in the exchange high to discourage adverse selection. A commenter makes a reasonable point that adverse selection is much more likely with the richer plans, not the bare bones ones, since high end plans are a better deal for the sick who use a lot of benefits.

Colorado Health Insurance Insider is skeptical about health insurance exchanges, in particular whether a government agency can provide the kinds of customer service that consumers have come to expect from commercial health plans, insurance agents and financial institutions.

Managed Care Matters addresses criticisms of ObamaCare re: cost control, expense of the program, socialism, injection of the government into doctor/patient relationships. Conclusion:

“It is a lot better than what we had before. Which, for those with short memories, was a completely out-of-control health system with declining numbers of insureds and rapidly rising costs.”

Healthinsurance.org interviews Medicare Payment Advisory Commission (MedPac) vice-chair Michael Chernew, who discusses most of the ObamaCare issues described above.

A couple of our bloggers favor giving providers more control of packaging and pricing.

Diners wouldn’t think of telling a restaurant manager how to package and price his menu offerings, and so  John Goodman’s Health Policy Blog suggests letting providers package and price their services rather than expecting third-party payers to dictate how it’s done. The post makes its point, but the restaurant analogy is a bit strained. There’s usually no third-party payer in the restaurant, people go voluntarily, and there are many choices.

On the other hand, it reminds me of a story from my first job out of college. A colleague who had been a starving student for years was enjoying the third-party payer opportunity posed by having our employer pick up the tab for dinner. When at a restaurant he would joyfully scan down the price column of the menu saying “@max, @max, @max” –mimicking the Lotus 1-2-3 function– to find the most expensive item, which he would invariably order and enjoy.

Wright on Health touts one of my favorite ideas: direct health care providers, and this post’s use of the term “menu” is more apt.

“These direct providers are able to combat many concerns through price transparency, easy access and lower costs as they establish what is basically a menu of cash only services. Further, these one-on-one scenarios improve decision-making between patient and physician and take out the need for insurance and proof of citizenship.”

Nearly 35,000 people (me included) were at the Healthcare Information Management Systems Society (HIMSS) conference in New Orleans last week, but I just got one submission.

Healthcare Talent Transformation encourages us to stay patient on cost savings from health IT adoption.

“Technology usually brings with it a falling cost curve. But the reality is, for now, we are still undergoing the transformation stage and the transition is rocky and costly.”

Since this section is surprisingly light I’ll go ahead and toss in my own post on HIMSS: What’s new at HIMMS? Airbnb. Although we may need to wait for IT to bring cost savings to health care, Airbnb has used consumer Internet tools to radically transform the lodging industry. I personally saved hundreds of dollars in New Orleans in one night.

We don’t get enough pharmaceutical related entries these days, so I’m happy to have these two.

Drug Channels chronicles the rapid growth of preferred pharmacy networks for Medicare Part D, and looks into why CMS says it is “concerned” about the trend.

Healthcare Economist investigates whether recent court rulings will hobble FDA’s ability to regulate the off-label promotion of pharmaceuticals.

When bad things happen, our bloggers are there to tell us about it.

Health Care Renewal is not pleased to see for-profit methadone clinics owned by Bain Capital, and says its practices appear to be enabling diversion of drugs to others, some of whom have overdosed.

“I submit that putting patient care into the hands of organizations whose leaders relentlessly seek profits ahead of all else is a bad idea.  True health care reform would ensure that health care is only directly provided by health care professionals and non-profit organizations which are directly responsible to their communities and the public.”

This one’s a little removed from health policy, but since I can’t imagine a Health Wonk Review without a post from Workers’ Comp Insider, I’m sharing this one commemorating the third anniversary of a mine explosion that killed 29 workers and reporting on the latest developments in the investigation.

Ending up with Big Data.

Disease Management Care Blog –in its typical trenchant style– takes a deep dive into the Big Data pool to provide a definition that’s relevant for health care and to offer up a few caveats.

—-

The next edition of the Health Wonk Review will be hosted by Healthcare Economist on March 28.

Share