December 17, 2011
More Erosion of PPACA
Two months ago, the Obama Administration dropped the PPACA provisions for long-term care insurance. Yesterday, the administration announced it would let each state define its own package of "essential health benefits." The politics are understandable--the administration now can deflect Republican charges that Washington is imposing a rigid, one-size-fits-all health care system on every state. However, we know from the country's experience with Medicare and Medicaid that state variations in government health care programs disserve the public. Perhaps, HHS can limit state discretion enough to ensure that PPACA still will provide good coverage throughout the country.
December 16, 2011
Guest Blogger Vickie J. Williams: More Coverage, Fewer Jobs
It has been widely reported in the mainstream news media that 2.5 million young adults who were uninsured are now insured because of the Patient Protection and Affordable Care Act (PPACA)’s requirement that children be allowed to stay on the parents’ health insurance until they are 26. As reported in USA Today, the Department of Health and Human Service (HHS) states the rise in coverage is attributable to the PPACA, because there was no such rise in the age group of 26-35-year olds, and no increase in Medicaid coverage for adults in the 19-25-year-old age group. HHS also noted that the timing of this increase (much of it in the spring) indicates that many young people took advantage of the law’s provisions as they graduated from school.
While the increase in coverage for this age group is good news, the fact that there was no increase in insurance coverage in the slightly older 26-35 year old group, and the timing of the increase for the 19-25 year old group, highlights the continued stagnation in the job market as much as it highlights a “success” of PPACA. The fact that a great many 19-25 year olds needed to get onto their parents’ health insurance upon graduating from high school or college is not a sign of a robust private insurance market, it illustrates that young adults either have no jobs, or they have jobs that do not come with health insurance benefits. As the parent of a college freshman and a high-school senior, I can tell you that the prospect of my kids being able to remain on my insurance plan until they are 26, so I can pay for their premiums (as well as likely welcoming them and their piles of dirty laundry home after they finish college and can’t find full-time jobs) does not exactly fill me with joy, although it does allow me to breathe a sigh of relief when they go rock-climbing or bungee-jumping or whatever high-risk activity they engage in.
If any good thing can come out of this tough job market, it may be a realization that continuing to tie health insurance to employment has outlasted its usefulness. As I wrote in my 2008 article, The Health Washington Initiative: Blue Ribbon Process, Red-Herring Result the employment-based health insurance system is a vestige of World-War II-era wage controls and has continued because of favorable tax treatment given to amounts spent by employers and employees for employer-based health insurance. In the 1940’s, and for many years afterwards, the prevailing model of a successful career was full-time employment with the same company for 35 years, with a gold watch and a pension upon retirement. Now, for those under 35, self-employment, temporary employment, and part-time employment often prevail over traditional full-time employment, sometimes by choice and sometimes by necessity. We applaud these efforts at creative productivity, to strike work/life balance, and to be entrepreneurial, but the employment-based health-insurance system works against the efforts of young people to forge their own productive paths.
An alternative to employment-based health insurance system does not have to be a single-payor system. Changes to tax policy that provided tax benefits for purchasing health insurance on individuals rather than employers, significant non-monetary incentives for people to purchase health insurance (like “no driver’s license without proof of insurance”), and strong regulation of the private insurance market on either the state or federal level to ensure level playing fields, affordable rates, and appropriate levels of expenditures by private insurers on the actual delivery of health care could ensure broad availability and purchase of individual health insurance.
By instituting a requirement that Medicaid programs cover childless adults, PPACA (provided it survives the current challenges in the U.S. Supreme Court) has taken a giant step towards debunking the notion that if you are an adult, you are somehow unworthy of receiving health care unless you work, or have a an excuse for not working that we deem “worthy” as a society. Now we need to take the next step and de-link health insurance from employment entirely. What are we really afraid of? That people will choose not to work if they can get health insurance without working? When PPACA’s individual mandate becomes effective, would it really be a disaster if purchasing individual health insurance became more attractive than employer-based insurance? Or would it allow people the freedom to change jobs, take risks in their employment, and innovate? And what could be more important to our economy in these times than allowing today’s “slackers” who are unable to find full-time jobs, to be tomorrow’s innovators, as long as they are not derailed by the inability to access quality health care when they need it?
Michael Jackson's Death Exposes Danger of Over-Broad Physician Prescribing Powers
This just in from Professor Jennifer S. Bard who will be returning as a guest blogger in the first part of the new year:
A jury in California has imposed criminal responsibility for Michael Jackson's death on a doctor who administered, in Mr. Jackson’s bedroom, a highly dangerous and potent drug never intended to be used outside of an operating room even though he had no training or experience in anesthesiology. This, thank goodness, is an unusual event. Perhaps lost in the saturation coverage of the trial is something that’s not unusual: Dr. Conrad Murray’s actions in prescribing and administering the drug were completely legal.
Every day, every hour, that medicine is practiced in the United States a physician is most likely prescribing a drug to someone in a dose, for a condition or to a patient never contemplated by the Food and Drug Administration (FDA) which has the sole authority of approving drugs for sale. There are many reasons for this, and most of them good ones, but if anything positive can ever can come out of another’s death, Michael Jackson’s could make us all safer by revisiting this outdated potentially highly dangerous situation. No one wants to hamper physicians’ efforts to relieve the pain and suffering caused by illness and injury nor would it be fair to place undue restrictions on the majority of doctors who prescribe responsibly based on the extremely poor judgment of the few, but there is no reason why every physician should be able to prescribe every drug.
The problem of unrestricted prescription powers is amplified by the explosion of available drugs. We are a nation of drug takers. Fifty-nine percent of all Americans, man, woman and child, and eighty-six percent of all seniors, take a prescription drug every day. In large part, this is a problem that comes from an over-abundance of innovation. In fact, there is no completely reliable count of the number of prescription drugs available to physicians but close estimates suggests between 10,000-20,000. We all benefit from remarkable drugs that ward off cancer, maintain normal heart function, and strengthen fragile bones.
Equally, no one would want to return to the days when few appreciated the importance of pain management and many lived, and died, in unnecessary agony, but the result, according to the Centers for Disease Control (CDC) is “at least a 10-fold increase in the medical use of opioid painkillers during the last 15 years.” Prescription drugs have surpassed illegal street drugs in terms of unintended injury and death. According to the CDC, "[d]rug overdose deaths were second only to motor vehicle crash deaths among leading causes of unintentional injury death in 2006 in the United States." Scientific America reports that in that same time period, there has been a 65% increase in hospitalizations due to prescription drug overdose.
The reason for providing unrestricted medical licenses is historical. One hundred years ago when states started licensing physicians, there were far fewer drugs available and physicians were far less specialized. As the number of drugs available has expanded and medicine has grown infinitely more complex, however, there has been no corresponding change to the medical licenses granted by each individual state. Without exception, they bestow a general privilege to practice any kind of medicine and, within, the confines of laws intended to control the street sale of narcotics, prescribe any kind of drug.
Keeping hospital based drugs in the hospital is a reasoned and measured first step towards promoting greater safety. Indeed, the current health care financing system which relies heavily on drug formularies has effectively already imposed for reasons of cost-cutting the kinds of limits proposed here for reasons of safety. Almost every measure to limit the prescribing powers of physicians is met by dire predictions of what would happen if “the government” tried to interfere with the doctor-patient relationship. But this makes no more sense than to speak of unwarranted government interference with the food-supplier/consumer relationship. There is no physician who needs the immediate ability to prescribe any drug on the market. Placing limits on the availability of some of the most dangerous is a measured response to prevent future tragedies.
Worth Reading This Week
Benjamin Ho & Elaine Liu, What's an Apology Worth? Decomposing the Effect of Apologies on Medical Malpractice Payments Using State Apology Laws, SSRN/Journal of Empirical Legal Studies
Efthimios Parasidis, Patients Over Politics: Addressing Legislative Failure in the Regulation of Medical Products, SSRN/Wisconsin L.Rev.
Nicole Huberfeld, Post-Reform Medicaid before the Court: Tension between Reinvention and Path Dependence, SSRN/Annals of Health Law
Kevin Outterson, Smoking and the First Amendment, NEJM
December 14, 2011
Secret Medical Prices: Free Market Triumph or Tragedy?
Can a market work when buyers are kept in the dark about the prices they’ll pay? That’s an increasingly urgent question for fans of consumer directed health care. In vogue during the administration of Bush fils, CDHC is reemerging as Obamacare’s opponents seek a standard to rally around (other than “laissez mourir“). In theory, consumers could force doctors and hospitals to compete by shopping around for services. But when the rubber hits the road, informed consumption is easier said than done, asJosh Barro describes:
Recently, my employer switched to a high-deductible health insurance plan, which means I’m paying at the margin for most of my health care. As a result, I have become more aware of the true cost of the care I receive—and more aware of how difficult it is to figure out that cost. . . . if you ask doctors how much a service costs, they tend not to know. I once had an argument with my doctor, who did not want to give me a blood test for fear that my insurer would deny the claim for the expensive test. I later found out that this test costs all of $9.48 at my insurer’s negotiated rates, despite a list price of $169. When I got orthotics, my podiatrist told me they would cost nearly $600. But that was the list price; the actual insured price was less than $250. . . .
It doesn’t have to be this way. We could legally obligate hospitals and medical practices to disclose their full price lists—both the inflated list prices and the rates negotiated with each insurer that the practice accepts.
A commenter on Barro’s blog retorts:
I’m a little surprised to see a blogger at the [National Review Online] suggest that the government “require” price disclosure from private market participants. This goes well beyond the market interference that some other odious “mandates” require. Why don’t we mandate that everyone disclose exactly what they pay each employee? . . . If you have an HSA or High-deductible policy, I would suggest it’s incumbent on the insurance provider to help you figure it out. If consumers want it enough the system should respond, right? Why not switch to an HDP that is more transparent?
The problem, of course, is that lots of parties have to agree to provide transparency, and there is a great deal of inertia. If all the other insurers aren’t transparent, there’s little reason for one of them to try to distinguish itself if it already has a steady customer base. And when it stirs itself to do so, it will find a wall of resistance from providers, who say “why should we give all this information to you—no one else is demanding it?” (Moreover, the “prices” don’t really exist except on paper on a “chargemaster,” and they’re practically meaningless (except as opportunities to gouge the unlucky). The real price is the negotiated price, and that’s generated out of iterative interactions.) Moreover, many interventions involve multiple providers, as a reader of Andrew Sullivan’s blog explains:
I am a pediatric subspecialist at a major academic medical center in New York City. Many times, patients call to find out the costs of procedures if we are outside of their network. As ridiculous as it sounds, we are universally unable to tell them. The prices are so opaque that no one at my institution will admit to being able to produce them.
For example, a pulmonary function test (really a group of tests) will involve a physician’s fee and a technical fee. The MD fee is generated from my practice and I have a list of fees that most patients are charged (though their insurances all pay different rates if they have insurance). The hospital owns the technical fee. A colleague of mine once spent three months trying to get an answer to the question of what the price is for a group of tests for a research grant she was planning. No one could or would tell her.
Perhaps the “free market advocate” would like to see a coalition of insurers band together to get enough bargaining power to demand transparency. (Query the point at which that consolidation becomes so great that it approaches monopolization, another enemy of free markets.) But the record of Group Purchasing Organizations in other parts of the health care marketplace is not promising. Such intermediaries are often tempted to put their own profits ahead of the entities they’re ostensibly serving.
It’s a bit like food nutrition labeling, which almost everyone now agrees is a good idea, but could only be catalyzed on a large scale by government intervention. The government may also need to limit the complexity of contracts in the area. As Uwe Reinhardt documented,
Relative to hospitals paid under the much simpler national health insurance schemes in other countries, the contracting and billing departments of U.S. hospitals . . . are huge enterprises, often requiring large cadres of highly skilled workers backed up by sophisticated computer systems that can simulate the revenue implications of the individual contract negotiations.
You’d think that, when US doctors’ administrative costs are four times that of Canada’s, consumers would at least get a clear picture of the financial landscape here. But instead, as with the labyrinth of self-serving complexity that constitutes the over-the-counter derivatives market, the complexity mainly serves to protect insiders. I predict that if CDHC advocates ask hospitals to reveal more, a plaintive chorus will respond that true prices are, in the words of Alan Greenspan, “irredeemably opaque.” For what is market freedom if it doesn’t include the freedom to contract into a dynamically multivariate payment scheme where the present value (or cost) or any given service cannot be calculated because it depends on a hundred other variables?
Doctors and insurers are not the only ones obscuring health care costs. As Steve Pearlstein noted recently, the prescription drug market “is renowned for its lack of transparency. Drug companies not only refuse to reveal their wholesale prices, but in contracting with pharmacy chains and PBMs they insist on contracts that prohibit either party from revealing prices to anyone else.” As Annemarie Bridy shows, a medical device manufacturer has claimed that “the actual prices its hospital customers pay for implantable devices, including cardiac pacemakers and defibrillators, are protectable as trade secrets under the Uniform Trade Secrets Act.” The B2B side of the business is shrouded in secrecy, as Reinhardt shows:
Whatever an insurer’s base for paying hospitals might be, the dollar level of payments is negotiated annually between each insurer and each hospital. Under a DRG system, for example, the item to be negotiated is the monetary conversion factor for the year and, possibly, some of the DRG weights. These actual dollar payments have traditionally been kept as strict, proprietary trade secrets by both the hospitals and the insurers. Recently Aetna announced that it will make public the actual payment rates it has negotiated with physicians in the Cincinnati area.20 That this small, tentative step toward transparency made national news speaks volumes about the state of price-transparency in U.S. health care. It remains to be seen whether that first step will trigger a larger industrywide move toward removing, at long last, the veil that has been draped for so long over the actual prices paid in the U.S. health system.
Fortunately for advocates of transparency, the Affordable Care Act has some provisions that require transparency. The ultimate solution is all-payer rate setting, which radically simplifies the negotiation games that are the root cause of so much health care opacity. Such rate setting may also pave the way to moreintegrated delivery systems, already contemplated in the parts of the ACA devoted to Accountable Care Organizations. When primary care doctors, specialists, imagers, etc., are all part of one organization, it’s much easier to estimate costs than when they are all independent actors.
But we should note that the problems here are much broader than health care. I predict a split in free market theory between those who enthusiastically endorse the propertization of prices, and those who see open information about them as a key to real competition.
X-posted: Health Reform Watch.