Gilead Profit Triples, Hepatitis C Drug Revenue Reaches $2.3B

Fox Business, April 22, 2013

Gilead Sciences Inc (GILD), which ignited a fierce debate over prescription drug prices, said its new $1,000 hepatitis C pill generated quarterly sales of $2.27 billion, helping the company’s quarterly net profit nearly triple.

http://www.foxbusiness.com/industries/2014/04/22/gilead-profit-triples-h…

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MIA In The War On Cancer: Where Are The Low-Cost Treatments?

By Jake Bernstein
ProPublica, April 23, 2014

Increasingly, Big Pharma is betting on new blockbuster cancer drugs that cost billions to develop and can be sold for thousands of dollars a dose. In 2010, each of the top 10 cancer drugs topped more than $1 billion in sales, according to Campbell Alliance, a health-care consulting firm. A decade earlier, only two of them did. Left behind are low-cost alternatives, including generics, that have shown some merit but don’t have enough profit potential for drug companies to invest in researching them.

The predominant focus of cancer drug development today is on “targeted therapies” that are both innovative and lucrative. These drugs block the growth and spread of cancer by interfering with specific molecules involved in tumor growth. Fashioning these targeted therapies involves costly molecular and genetic experimentation, but once patented the investment can translate into enormous drug company profits.

http://www.propublica.org/article/where-are-the-low-cost-cancer-treatments

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Healing Medical Product Innovation

By Steven Garber, Susan M. Gates, Emmett B. Keeler, Mary E. Vaiana, Andrew W. Mulcahy, Christopher Lau, Arthur L. Kellermann
RAND Corporation, April 22, 2014

Previous studies aimed at reining in spending on technology have focused on changing how existing medical technologies are used. But what about also encouraging the creation of technologies that could improve health and reduce spending, or that provide large-enough health benefits to warrant any extra spending? A recent RAND study focused on policies that could help change which medical products—drugs, devices, and health information technologies—get invented in the first place.

To spur inventors to create medical products that lower health care spending and promote health, policymakers need to address the perverse financial incentives that lead inventors and investors in the opposite direction. Currently, large profits are most often available from creating increasingly expensive products that boost spending, whether or not they also substantially improve health. In contrast, inventors face relatively weak incentives to create products that would help decrease spending.

The RAND research team developed ten high-priority policy options that could change the costs, rewards, and risks that inventors and investors face. We synthesized information from scientific, trade, and popular literature; conducted interviews with more than 50 national experts from a variety of fields; sought input from a panel of accomplished technical advisors; and developed illustrative case studies of eight medical products.

Ten Policy Options for Healing Medical Product Innovation

1.  Enable More Creativity in Funding Basic Science

2.  Offer Prizes for Inventions

3.  Buy Out Patents

4.  Establish a Public-Interest Investment Fund

5.  Expedite FDA Reviews and Approvals for Technologies That Decrease Spending

6.  Reform Medicare Payment Policies

7.  Reform Medicare Coverage Policies

8.  Coordinate FDA and CMS Processes

9.  Increase Demand for Technologies That Decrease Spending

10. Produce More and More Timely Technology Assessments

Because the stakes in reining in health care spending are so high, and the need to get more health benefits from the money we spend is so great, we believe all of these options should be considered—the sooner the better.

RAND Research Brief: http://www.rand.org/pubs/research_briefs/RB9767.html

New technology and drug development is being driven by profits in the private sector – massive profits. Even those of us fortunate enough to not have to use the new technology are still paying for it through taxes to support government health programs and through higher premiums for private insurance plans.

As the nation with the highest health care spending it has become an imperative that we do something about this. The drive to obtain lower prices in health care will not come from the private sector since its first priority is massive profits. Change will have to come from our government.

RAND has published a Research Brief listing ten policy options for “healing medical product innovation.” The list includes some reasonable concepts and some ideas that perhaps are not so hot. What is important is that policy wonks are thinking about the problem and pushing us to do something about it. Especially important is the concept that innovation should be targeted to reducing costs when possible, not to deliberately designing products to be more expensive.

RAND’s suggestions do include a major role for the private sector, but give them too much control, in my opinion. More control should lie with government entities such as the NIH. The private sector wants better products at higher prices whereas the government should incentivize better products at lower prices. As long as the private sector would be willing to provide us with greater value, they should receive legitimate costs plus fair margins.

The benefits of medical product innovation should accrue primarily to the people, both as improvements in health technology, and as reductions in costs. It is the consumers who ultimately pay for the development costs who should be reaping most of the benefits – not Wall Street, Madison Avenue, passive investors, nor the superabundance of administrators that permeate our health care system.

The point is that we can do something about this misdirection of our funds. We need to place a priority on the ethics of health care spending – the same type of priority that would also lead to a single payer financing system – thereby creating much greater value in health care for all of us.

Acceleration Is Forecast for Spending on Health

By Eduardo Porter
The New York Times, April 22, 2014

The Affordable Care Act may well be on track to meeting its primary goal of providing coverage for most uninsured Americans and protecting everyone against the risk of losing their insurance. But for all its innovative proposals to flush waste out of the system, reining in health care spending still appears well beyond the grasp of Obamacare.

“We have been consistently bending the cost curve over the last 20 years, but the kinds of things that we do don’t tend to be permanent,” said Charles Roehrig, who runs the Center for Sustainable Health Spending at the Altarum Institute, a nonprofit based in Washington. “It will take a lot of work just to stay on the same curve we have been on for a while.”

The evolution of the American medical-industrial complex has been driven by two critical dynamics. The first is the development of new technologies. The second is our willingness to pay for them.

Most health care economists agree that the Affordable Care Act, along with other forces, will help reduce waste, pushing the industry to drop the “fee for service” model that encourages doctors and hospitals to spend more whether it is useful or not.

Last November, President Obama’s Council of Economic Advisers issued a hopeful analysis, which posited that structural changes flowing from the act were helping push the growth in health care spending to its slowest on record.

David Cutler of Harvard points to studies that suggest that straightforward changes, such as improving the dismal management of American hospitals, could cut health care costs by 25 to 50 percent. “Getting better is not rocket science,” he said.

But that optimism might be premature. Mr. Roehrig argues that the decade-long slowdown in spending growth reflects a response to the two recessions that provided the economic bookends to the first decade of the new century; not a fundamental shift in the way the system operates.

During that period, employers pushed workers to take insurance with higher out-of-pocket payments, which discouraged use. Medicaid in financially troubled states has cut provider fees and limited access to high-cost services. And, of course, many unemployed workers who lost their company health insurance cut back on visits to the doctor.

These effects, Mr. Roehrig noted, have by now mostly petered out. As the economy recovers, spending growth will resume its climb, reinforced even more by the understandable demands from the eight million newly insured Americans under the health law for services they couldn’t afford previously. He forecasts that health spending will grow substantially faster than G.D.P. in the near future, but expects the gap to shrink gradually to below one percentage point over time. In the long run, he projects that health care spending could consume 30 percent of G.D.P.

Mark McClellan, a former administrator for the Centers on Medicare and Medicaid Services under George W. Bush, and Alice Rivlin, a former vice chairwoman of the Federal Reserve, point out that innovations that improve health or reduce the cost of medical services may also increase demand.

“It would be a mistake to assume that slow growth in health care spending will continue,” they wrote, “or that spending reflects high-value care and therefore, health care delivery reform is no longer an urgent priority.”

Over the last 40 years or so, health care spending has been growing 2.4 percentage points faster than the economy, on average.

But that slowdown still isn’t good enough. By 2032, health care will consume almost a quarter of the nation’s economic production, taking an even bigger bite from workers’ wages and either forcing taxes up to pay the government’s share, adding more to the national debt, or squeezing other important public services.

So, if Americans really want to win the health care spending war, it may take more than reform. It may still take a revolution.

http://www.nytimes.com/2014/04/23/business/economy/forecasting-the-scale…

There has been much speculation about the causes of the recent slowdown in health care spending, but, more importantly, about whether the more recent uptick indicates a return to greater health care inflation and, even more importantly, whether new innovations – especially those in the Affordable Care Act (ACA) will be capable of slowing the increases in spending.

Nobody can reliably predict the future. But the policy community can take a careful look at the facts we do have on hand and make decisions that would improve the odds of achieving a goal of more efficient spending in health care.

Almost every article supportive of the cost containment measures in ACA mentions vague concepts such as no longer paying for volume in health care services but paying for quality instead. If they make an attempt to explain how we might do that, they often invoke accountable care organizations, which, at best, seem to be more loosely designed managed care organizations that so far have failed the tests of greater efficiency and higher quality, other than a few reports of positive but negligible impacts that could never “bend the cost curve” nor truly improve quality.

What we do know is that our administrative waste is profound and that the excesses are readily recoverable – a crucial point that was omitted from this and most other current articles on the causes of our high health care costs. A single payer system would have a major impact on reducing waste in health care spending. We also know that health care prices in the United States are outrageous, and public administration through a single payer system would bring prices down to a level that pays legitimate costs plus fair margins.

We do know that there are excesses in high tech medicine. Again, a single payer system could use objective data, such as comparative effectiveness studies, to make decisions on eliminating payment for useless or harmful services. Also, capital planning can reduce excess capacity which would ameliorate its supply side-driven overutilization. The savings may be offset by improving access to beneficial services for underserved populations, but that spending would increase the overall quality of care provided by the health care delivery system – quality meaning getting the right care to the right people at the right time.

So, as far as predicting health care cost containment in the future we know that a single payer system would have a dramatic effect. But we can also predict quite reliably that dinking around with the meager wish-list policies of ACA will only distract us from moving forward with single payer policies that would really work.

Eduardo Porter writes that it may take a revolution to win the health care spending war. The battle would be between the American people and the economic elite that drive policy (Gilens and Page) and concentrate wealth (Piketty). Obviously non-violent civil action through the democratic process would be vastly preferable to a violent coup, but people are going to have to get off their duffs and initiate citizen action.

Outpatient Care Patterns and Organizational Accountability in Medicare

By J. Michael McWilliams, MD, PhD; Michael E. Chernew, PhD; Jesse B. Dalton, MA; Bruce E. Landon, MD, MBA, MSS
JAMA Internal Medicine, April 21, 2014

In this study of 145 organizations participating in the Medicare ACO programs, over one-third of beneficiaries attributed to an ACO in 2010 or 2011 was not assigned to the same ACO in both years. Thus, in any given year, a substantial share of patients for whom an ACO is held accountable may be newly or transiently assigned. Although healthy beneficiaries using little primary care contributed to this instability, unstably assigned beneficiaries were more likely than stably assigned beneficiaries to be in several high-cost groups that may be targeted for care management, including the top decile of total spending.

Much of the outpatient specialty care for patients assigned to ACOs, particularly higher-cost patients with more office visits and chronic conditions, was provided by specialists outside of patients’ assigned organizations, even among more specialty-oriented ACOs. In contrast, leakage of office visits with PCPs for ACO-assigned patients was minimal. In addition, less than 40% of outpatient Medicare spending billed by ACO physicians was for care provided to beneficiaries assigned to the billing ACO. This percentage was much lower for specialty-oriented than for primary care–oriented organizations, suggesting that ACOs currently provide substantial amounts of specialty care to patients receiving primary care elsewhere. Thus, at least initially, incentives in traditional Medicare for organizations participating in ACO programs may continue to be largely fee-for-service in nature, particularly for outpatient specialty care.

https://archinte.jamanetwork.com/article.aspx?articleid=1861039

In this study of Medicare Accountable Care Organizations (ACO), 66.7% of office visits with specialists were provided outside of the assigned ACO, especially for higher-cost patients with more office visits and chronic conditions. That hardly represents a model designed to control costs.

Some suggest that tighter relationships need to be established between Medicare patients and ACOs, but that already exists in the Medicare Advantage plans – a model proven to increase costs. It is clear that the nebulous ACO concept has only been a wish on the part of policymakers that physicians and hospitals could somehow organize themselves to provide better, cheaper care. But we now have enough evidence to state that ACOs also are a failure.

The vested interests have indicated that they are going to continue to try to improve the model when it really needs to be replaced. The direction that they are headed is towards more managed care. What we need instead is a financing model that is already proven to reduce waste and improve quality – a single payer national health program. The ACO advocates need a strong dose of disruption, or they will continue leading us down the wrong path.

Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens

By Martin Gilens and Benjamin I. Page
Perspectives on Politics, April 9, 2014, forthcoming Fall 2014

Abstract

Each of four theoretical traditions in the study of American politics – which can be characterized as theories of Majoritarian Electoral Democracy, Economic Elite Domination, and two types of interest group pluralism, Majoritarian Pluralism and Biased Pluralism – offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented.

A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. This paper reports on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.

Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.

American Democracy?

Each of our four theoretical traditions (Majoritarian Electoral Democracy, Economic Elite Domination, Majoritarian Interest Group Pluralism, and Biased Pluralism) emphasizes different sets of actors as critical in determining U.S. policy outcomes, and each tradition has engendered a large empirical literature that seems to show a particular set of actors to be highly influential. Yet nearly all the empirical evidence has been essentially bivariate. Until very recently it has not been possible to test these theories against each other in a systematic, quantitative fashion.

By directly pitting the predictions of ideal-type theories against each other within a single statistical model (using a unique data set that includes imperfect but useful measures of the key independent variables for nearly two thousand policy issues), we have been able to produce some striking findings. One is the nearly total failure of “median voter” and other Majoritarian Electoral Democracy theories. When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.

Interest groups do have substantial independent impacts on policy, and a few groups (particularly labor unions) represent average citizens’ views reasonably well. But the interest group system as a whole does not. Over-all, net interest group alignments are not significantly related to the preferences of average citizens. The net alignments of the most influential, business oriented groups are negatively related to the average citizen’s wishes. So existing interest groups do not serve effectively as transmission belts for the wishes of the populace as a whole.

Furthermore, the preferences of economic elites (as measured by our proxy, the preferences of “affluent” citizens) have far more independent impact upon policy change than the preferences of average citizens do. To be sure, this does not mean that ordinary citizens always lose out; they fairly often get the policies they favor, but only because those policies happen also to be preferred by the economically elite citizens who wield the actual influence.

What do our findings say about democracy in America? They certainly constitute troubling news for advocates of “populistic” democracy, who want governments to respond primarily or exclusively to the policy preferences of their citizens. In the United States, our findings indicate, the majority does not rule — at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S. political system, even when fairly large majorities of Americans favor policy change, they generally do not get it.

A possible objection to populistic democracy is that average citizens are inattentive to politics and ignorant about public policy; why should we worry if their poorly informed preferences do not influence policy making? Perhaps economic elites and interest group leaders enjoy greater policy expertise than the average citizen does. Perhaps they know better which policies will benefit everyone, and perhaps they seek the common good, rather than selfish ends, when deciding which policies to support.

But we tend to doubt it. We believe instead that – collectively – ordinary citizens generally know their own values and interests pretty well, and that their expressed policy preferences are worthy of respect. Moreover, we are not so sure about the informational advantages of elites. Yes, detailed policy knowledge tends to rise with income and status. Surely wealthy Americans and corporate executives tend to know a lot about tax and regulatory policies that directly affect them. But how much do they know about the human impact of Social Security, Medicare, Food Stamps, or unemployment insurance, none of which is likely to be crucial to their own well-being? Most important, we see no reason to think that informational expertise is always accompanied by an inclination to transcend one’s own interests or a determination to work for the common good.

Despite the seemingly strong empirical support in previous studies for theories of majoritarian democracy, our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts. Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise. But we believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.

http://www.princeton.edu/~mgilens/Gilens%20homepage%20materials/Gilens%2…

Martin Gilens and Benjamin Page present historical data that show that average Americans, even when represented by majoritarian interest groups, have negligible influence in shaping public policy. In sharp contrast, the economic elites and their business-oriented interest groups wield tremendous influence in public policy.

Thomas Piketty and Emmanuel Saez have shown that the flow of income to the top has resulted in a concentration of wealth that is not only self-sustaining but likely to perpetuate the transfer of more wealth to the wealthiest, at a cost to everyone else.

This combination – a concentration of wealth at the top with the domination of policymaking by the economic elite, does not bode well for new policies that would be established for the common good.

In health care reform, the common good would have been served by improving coverage through the removal of financial barriers to care and by expanding coverage to everyone. Instead, the interests of the economic elite were served by increasing the market for private insurance products that, for the majority, increased financial barriers to care and reduced choice of providers, while leaving tens of millions of the most vulnerable without any coverage. More wealth moves to the passive investors at the top, while the deterioration in coverage requires average Americans to spend more out-of-pocket through higher deductibles.

We desperately need a well-designed single payer system if we want everyone to have the health care that they should have. At this point it appears that the economic elites are not going to allow single payer, and we will have no say.

Even though our Constitution laid the plans for a democracy, by fiat we now have a plutarchy (plutocratic oligarchy). Although Gilens and Page have shown that our Majoritarian Electoral Democracy has “only a minuscule, near-zero, statistically non-significant impact upon public policy,” perhaps the people can still change that. Although recent history demonstrates citizen inertia, that does not necessarily lock in the future. Think of Social Security, Medicare, and the Civil Rights Act.

A decade ago, in a book review for the NEJM on “Universal Coverage: The Elusive Quest for National Health Insurance” by Rick Mayes, I wrote the following: “Mayes does give us hope. Although he acknowledges that critical junctures are rare, he notes that they do occur, especially in response to unmet social needs. Perhaps the deterioration in insurance coverage that has taken place may have brought us much closer to our next critical juncture than most of us realize.” (http://www.pnhp.org/news/2005/july/rick-mayes-on-the-elusive-quest-for-n…)

So what can we do to reverse the process under which “policymaking is dominated by powerful business organizations and a small number of affluent Americans”? Will citizen action through education, coalitions and grassroots efforts be adequate? In spite of such ongoing efforts, we have certainly fallen short so far.

History has taken us to a point wherein the economic elite rules. Can the people revitalize democracy, or is the wealthy ruling class too powerful? If the elite are not responsive to our needs, will our nation be ripe for civil unrest? At the moment, citizen inertia continues to empower the economic elite.

IFHP publishes 2013 Price Report

International Federation of Health Plans, Accessed April 18, 2014

The International Federation of Health Plans (IFHP) today released its 2013 Comparative Price Report, detailing its annual survey of medical prices per unit. Designed to showcase the variation in healthcare prices around the world, the report examines the price of medical procedures, tests, scans and treatments in nine countries. This year the survey also shows pricing for five specialty prescription drugs.  As in prior years, the survey data shows that the United States continues to have the highest fees of those countries surveyed for drugs and various medical procedures.

IFHP’s Chief Executive Tom Sackville explained why he believed to the data to be important.

“First, it gives the lie to the idea that some countries spend more on health as a result of higher utilization. It is all about unit price,” he said. “Second, we have looked here at a number of procedures and products which are identical across the markets surveyed. The price variations bear no relation to health outcomes: they merely demonstrate the relative ability of providers to profiteer at the expense of patients, and in some cases reflect a damaging degree of market failure.”

Prices examined in the study included those from Argentina, Australia, Canada, England, Netherlands, New Zealand, Spain, Switzerland and the United States. The data for the report was gathered from participating IFHP member organizations in each country.   Prices in the U.S. were based on prices negotiated between private health plans and health care providers.

http://www.ifhp.com/1404121

2013 Comparative Price Report:http://static.squarespace.com/static/518a3cfee4b0a77d03a62c98/t/534fc9eb…

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These 15 charts show our health care prices are totally insane

By Sarah Kliff
Vox, April 17, 2014

(The International Federation of Health Plans) published Thursday its annual look at international variation in health care prices. For all but one item they studied, from Nexium to MRI scans to bypass surgery, the United States is always the most expensive.

Americans spend more for health care largely because of the prices.

Most other countries have some central body that negotiates prices with hospitals and drug manufacturers. Tom Sackville (chief executive of the International Federation of Health Plans) who used to work for Britain’s health care system, recalls that it would have a unit of 14 people whose whole job was getting drug manufacturers to give the country a better deal on prescription medications.

That unit of 14 is essentially buying in bulk for a country of 63 million people – and can successfully ask for steep discounts in return.

The United States doesn’t have that type of agency. Every insurance plan negotiates individually with hospitals, doctors and pharmaceutical company to set their own prices. Insurers in the United States don’t, as these charts show, get a bulk discount. Instead, our fragmented system means that Americans pay more for every type of health care that IFHP measured.

“You could say that American health care providers and pharmaceuticals are essentially taking advantage of the American public because they have such a fragmented system,” said Sackville. “The system is so divided, it’s easy to conquer.”

http://www.vox.com/cards/health-prices/america-is-getting-gouged-on-heal…

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Cost of Treatment May Influence Doctors

By Andrew Pollack
The New York Times, April 17, 2014

Saying they can no longer ignore the rising prices of health care, some of the most influential medical groups in the nation are recommending that doctors weigh the costs, not just the effectiveness of treatments, as they make decisions about patient care.

The shift, little noticed outside the medical establishment but already controversial inside it, suggests that doctors are starting to redefine their roles, from being concerned exclusively about individual patients to exerting influence on how health care dollars are spent.

In practical terms, new guidelines being developed by the medical groups could result in doctors choosing one drug over another for cost reasons or even deciding that a particular treatment — at the end of life, for example — is too expensive. In the extreme, some critics have said that making treatment decisions based on cost is a form of rationing.

Traditionally, guidelines have heavily influenced the practice of medicine, and the latest ones are expected to make doctors more conscious of the economic consequences of their decisions — even though there is no obligation to follow them. Medical society guidelines are also used by insurance companies to help determine reimbursement policies.

Generally, Medicare is not supposed to consider cost effectiveness in coverage decisions, and other government attempts to do so are susceptible to criticism as rationing. Insurers do perform cost analyses, but they also risk ire from patients and doctors.

Dr. Steven D. Pearson, a visiting scientist in the ethics department at the National Institutes of Health, said the move by some societies to incorporate economic analysis “heralds an important shift in the way doctors in America are talking about cost and value.”

He said that having societies do such evaluations was better than having a doctor make such trade-offs while treating an individual patient, which is sometimes called bedside rationing.

Still, it is unclear if medical societies are the best ones to make cost assessments. Doctors can have financial conflicts of interest and lack economic expertise.

The cardiology societies, for instance, plan for now to rely on published literature, not commission their own cost-effectiveness studies, said Dr. Paul A. Heidenreich, a professor at Stanford and co-chairman of the committee that wrote the new policy.

They plan to rate the value of treatments based on the cost per quality-adjusted life-year, or QALY — a method used in Britain and by many health economists.

The societies say that treatments costing less than about $50,000 a QALY would be rated as high value, while those costing more than $150,000 a QALY would be low value.

“We couldn’t go on just ignoring costs,” Dr. Heidenreich said.

http://www.nytimes.com/2014/04/18/business/treatment-cost-could-influenc…

The International Federation of Health Plans represents private health insurers in 25 nations. Its members include several U.S. health insurers plus AHIP – the powerful insurance lobby in the United States. Although many would argue that it is this industry that is tasked with the responsibility of negotiating fair prices for health care services and products, in this release they contend that the very high prices in the United States “merely demonstrate the relative ability of providers to profiteer at the expense of patients, and in some cases reflect a damaging degree of market failure.”

What a remarkable statement. We are paying the insurers massive sums for their very expensive administrative services while they inflict tremendous administrative burdens on the health care delivery system, plus they take away from patients their choices in health care, especially choices of their health care professionals. They concede that they cannot control the “ability of providers to profiteer,” nor can they correct this market failure. They have become a profoundly expensive but useless appendage to the health care system – an appendage that should be severed.

Nevertheless, prices are still too high in the United States, so what can be done? Consolidation of hospitals and physicians has been anti-competitive, but prices were already high before the recent wave of consolidations began. Some providers offer services that make them “must have” participants in the insurer networks. They have a greater ability to stand firm on high prices, thus it is unlikely that antitrust enforcement could have more than a negligible impact on reducing prices.

Physicians seem to be more sensitive to cost barriers for their patients than do the hospitals and pharmaceutical firms, though both of the latter do have programs for selected indigent patients. The New York Times article describes how physician organizations are beginning to address the issue of high prices, though much of the effort seems to target the pharmaceutical firms rather than the physicians themselves. What is really remarkable though is that some physicians are now willing to look at assigning a monetary value to a quality-adjusted life-year (QALY).

Do physicians really want to assume the role of telling their patients that they will deny care that may be of some benefit but exceeds an arbitrary cost threshold assigned to a QALY? Physicians traditionally have not been the payers for their own patients’ health care. That is usually an insurer, the government, or the patient paying in cash. Shouldn’t the payer be making the spending decisions instead of the physician?

The insurers have a terrible track record – often paying too much, but also creating access barriers to care. The government has done a better job with Medicare, but with Medicaid they have often underfunded care which also creates financial barriers to care. With today’s very high health care costs, most patients are unable to pay cash if they face major medical expenses, so a third party payer is required.

Some models today would place the physician at least partially in the role of insurer. What is surprising is the relative silence on the ethical violation that such a role entails. The physician should never be placed in a position in which he profits by withholding beneficial health care. The MBAs in health care do not seem to understand the fundamental ethical compromise of such an arrangement.

The IFHP report on international health care prices does show that other nations are much more effective in controlling prices. They all have in common the fact that the government plays a major role in administering or tightly regulating prices. In general, governments seem to get it right. If we had a single payer system, we would get it right as well. In doing so we would also eliminate the profound waste caused by the private insurers, and we would ensure that financial barriers to care are removed for everyone.

What about defining the value of a QALY as ranging from $50,000 to $150,000? That should not be the role of the physician who should always be in a position to advocate for what is right for the patient. That should be the role of the public administrator who negotiates health care prices. A better term than negotiation would be price administration, implying that the government should have an “unfair” or unbalanced clout when it comes to getting prices right. Right prices means legitimate costs plus fair margins. No other country will be paying $84,000 for a twelve week course of Sovaldi to treat hepatitis C. We wouldn’t either if we had a single payer system.

Medpac struggles to define “medical home”

Medicare Payment Advisory Commission (MedPAC) Public Meeting, March 6, 2014

>From the transcript:

DR. [JULIE] SOMERS: Good afternoon. In this session, [Medpac staff] Kevin [Hayes], Katelyn [Smalley], and I would like to explore with you the idea of creating a per-beneficiary payment for primary care practitioners in the fee-for-service Medicare program. [p. 239]

…. [T]he Commission recommended establishing a medical home pilot [in 2008]. Variants of the recommendations for a primary care bonus and a medical home pilot were established under PPACA. … The [primary care bonus] program expires at the end of 2015, so we’d … like to hear the Commission’s views about extending the current program or replacing it with a per-beneficiary payment for primary care. [p. 240]

MR. [GLENN] HACKBARTH [MEDPAC CHAIR]: Okay. …. I am the one to blame if you don’t like this topic. I’m the instigator behind this, and I wanted just to say why that is. Why take this up now when there [are] … a number of medical home demonstration projects underway, some of which include Medicare? …. Why not just wait for the end of the medical home demonstrations?

There are two reasons for that. First … is the existing primary care bonus expires at the end of 2015…. Do we want to continue the existing bonus, or do we want to reconfigure it and do something like this?….

The second reason … is that I’ve become increasingly concerned about the medical home demonstrations on a number of different grounds. First of all, I am a little bit worried that the medical home model has … become gold-plated, and that in order to meet all of the NCQA requirements, et cetera, there are a lot of bells and whistles that have been added to it…. [M]y impression is that not all of them have really been validated as adding value, but they add cost, and so I’m worried that maybe the medical home model has a real cost disadvantage…. [pp. 251-253]

http://www.medpac.gov/transcripts/0314MedPAC_transcript.pdf

If you endorse a vague plan based on conventional wisdom rather than evidence and it doesn’t work, how do you revise it? Upon what evidence, by what logic, do you alter this or that part of the plan? The Medicare Payment Advisory Commission (Medpac) struggled with that problem at its March 6 meeting in the course of reviewing the performance of the “patient-centered medical home” (PCMH), an amorphous concept Medpac endorsed in 2008. The struggle did not go well. Commissioner after commissioner raised serious questions about the PCMH, but none of their questions triggered a productive discussion, the rationale for Medpac’s 2008 endorsement of the PCMH was never mentioned much less reviewed, and when the meeting was over it was impossible to say whether or how Medpac will propose changing the definition of the PCMH.

Revisiting the PCMH concept was Chairman Glenn Hackbarth’s idea. Hackbarth explained to his fellow commissioners that he wanted the commission to consider yet another PCMH experiment  because a temporary bonus for Medicare primary care doctors, authorized by the Affordable Care Act, is due to expire at the end of 2015. (The bonus is measured as a percent of each claim submitted by primary care doctors for Medicare patients.)

Mr. Hackbarth posed three questions to his fellow commissioners:

(1) Is it a good idea to extend the bonus beyond 2015?

(2) If so, should Medpac recommend that the bonus be extended as is or should the bonus be converted to a per-patient-per-year (capitation) payment?

(3) If the commission recommends converting the bonus to a capitation payment, should doctors be required to meet all the requirements of a “patient-centered medical home” (PCMH) established by the National Committee for Quality Assurance (NCQA)?

Commission members seemed unanimously to support extending the bonus, and 13 of the 17 commissioners expressed support for converting the bonus to “home” payments. But not a single commissioner offered an answer to Hackbarth’s third question – what requirements, if any, in the current definition of the PCMH should be stripped out?

Commission members made it clear they are concerned about the performance of the PCMH. Hackbarth opened the discussion by stating he believes the PCMH has become “gold-plated” – burdened with so many requirements (“electronic medical records and … 24-hour coverage and a long list of other requirements,” as he put it) that it can’t save money. (p. 267)

Other commissioners concurred. Scott Armstrong (CEO of Group Health Cooperative) and Dr. Rita Redberg observed that giving patients expanded access to doctors via e-mail has greatly expanded “virtual visits” without lowering face-to-face visits. (Armstrong added that “a lot” of what patients talk about in their e-mails “is useless.”) (pp. 275-276) Vice Chair Dr. Michael Chernew said he thought the “administrative requirements” currently imposed on the PCMH were a “hassle” and could outweigh any benefits the PCMH could achieve (p. 288). Willis Gradison said “adding too many requirements … to the structure of primary care” was driving doctors “into the arms of the hospitals.” (pp. 269-270)

Dr. David Nerenz suggested that the PCMH’s problem is more serious than merely being “gold-plated.” He questioned one of the most fundamental premises of the PCMH and all other managed care fads, namely, the claim that “care coordination … pays for itself [through] fewer admissions, fewer readmissions, fewer complications, fewer ED visits, fewer this, fewer that.” [p. 283]

John Christiansen (p. 279) and Peter Butler (p. 306) noted that the large systems that are buying up physician practices may not use PCMH payments for primary care, and Jack Hoadley observed that doctors may not be aware of the small capitation payments most PCMH programs pay to cover “home” services (p. 302).

Drs. Chernew (p. 291) and Rita Redberg (p. 278) noted that a growing body of research questions the conventional wisdom that the PCMH can cut costs by improving quality. Redberg, the editor of JAMA Internal Medicine, noted that she is seeing “a lot of manuscripts” that demonstrate the PCMH is not working as well “as one had hoped.”

Totally missing from this critical review of the PCMH was any discussion of Medpac’s justification for endorsing the PCMH in the first place. By a 16-0 vote, Medpac endorsed the “medical home” in its June 2008 report to Congresshttp://www.medpac.gov/chapters/Jun08_Ch02.pdf . But there was nothing in that report that resembled an evidence-based rationale for the PCMH. The “rationale” the Commission did offer exhibited the features typical of all managed care manifestos: The concept it purported to endorse was extremely vague, it was not supported by evidence, and it was oversold.

The 2008 report listed the usual string of vague attributes “homes” are supposed to have, including “use health IT” and “maintain 24-hour patient communication and rapid access,” the two features Mr. Hackbarth objected to. The report went on specifically to recommend that Medicare impose pay-for-performance schemes on “homes,” and that “homes” be required to use e-mail as a method of maintaining 24-hour access. But the report failed to offer any justification for its recommended list of PCMH features, and cited not a single study in support of the list or any item on the list. The report seemed to say Medpac relied on interviews with “experts” to derive this list, but even that is unclear.

Is it any wonder, then, that Medpac commissioners and staff did not revisit Medpac’s 2008 report for guidance on how to alter the definition of the PCMH in 2014?

Medpac has repeatedly made it clear it endorses the PCMH for the same reasons the American Academy of Family Physicians and other primary care groups did in 2007http://www.aafp.org/dam/AAFP/documents/practice_management/pcmh/initiati…  – as a means to bring more resources into primary care and to cut costs. The PCMH is probably not going to cut costs, and consequently it may backfire as a method of strengthening primary care. If we want to strengthen primary care and cut costs at the same time, we will have to enact a single-payer system.

Geographic Imbalances in Doctor Supply and Policy Responses

By Tomoko Ono, Michael Schoenstein, James Buchan
OECD Health Working Papers No. 69, April 3, 2014

Doctors are distributed unequally across different regions in virtually all OECD countries, and this causes concern about how to continue to ensure access to health services everywhere. In particular access to services in rural regions is the focus of attention of policymakers, although in some countries, poor urban and sub-urban regions pose a challenge as well. Despite numerous efforts this maldistribution of physician supply persists. This working paper first examines the drivers of the location choice of physicians, and second, it examines policy responses in a number of OECD countries.

The choice of practice location is complex, but across the examined OECD countries, several key factors have emerged in studies of doctors and medical students in recent years. First, the relative unattractiveness as places to live and work is the root of an unequal distribution of physicians across regions and areas. Second, the mode of employment and payment for physicians set the frame for their options for location choices. Third, while incomes for general practitioners in rural regions are higher than those in urban regions in some counties, it may not be sufficient compensation as they work for longer hours and in generally more difficult working conditions. Furthermore, professional prestige plays a role as more prestigious specialties tend to be concentrated in urban areas and by default making rural practice less attractive. Finally rural origins and experience in rural settings are influential factors as doctors who are from rural regions are much more likely to go and practice in rural setting compared to those with an urban upbringing.

While a truly comprehensive regional development policy is helpful to tackle the maldistribution of physicians across regions, policymakers in the health sector have three broad strategies to respond to imbalances in physician distribution.

* The first strategy is to target future physicians to maximize the pool of physicians available for practice in relatively underserved regions. This means increasing the number of qualified physicians who are interested in practice in underserved regions, and/or the number of working hours they are willing to provide. The crucial focal point of action for this strategy is the selection and education of medical students.

* The second strategy is to target current physicians to maximise the share of physicians in the health system who practice in underserved regions. This requires a suitable incentive system, which may include both “carrots and sticks”, i.e. not only financial incentives, but also suitable regulatory measures to influence physicians’ location choices.

* The third strategy is to do with less, i.e. accept that staffing levels will be lower in some regions and focus on service re-design or configuration solutions. This can be done through expansion of involvement in health service delivery by non-physician providers. Service delivery innovations can also make a difference, by the use of technology (e.g. through better use of telemedicine), better management of human resources and their workload, or a combination thereof.

Policymakers in most countries will have to blend a range of elements of these three strategies, and review this mix over time. The best mix of such strategies will depend on various factors: patient needs, demography of the population and the physician workforce, health system characteristics, the budgetary situation, and the overall health reform context. While broad characteristics of interventions can be identified, more robust evaluations are required to improve the evidence basis for these policies and strategies in order to support policymakers to make better informed choices.

http://dx.doi.org/10.1787/5jz5sq5ls1wl-en

All OECD countries experience maldistribution of the physician supply. Of particular concern is the distribution of primary care physicians, especially the lack of their presence in underserved regions. This OECD working paper describes the problem and suggests some approaches to improve distribution.

Currently I am in San Francisco, participating in the National Conference on Primary Health Care Access presented by the Coastal Research Group. The chief of adult medicine of a highly respected California family medicine residency that is noted for training physicians who would more likely practice in community health centers in underserved communities told me that though their program is initially very successful, their graduates experience burn-out, typically after about three years of practice. This is a very serious problem that obviously requires the attention of public policymakers. This OECD report suggests some strategies that could help.

The fact that all OECD nations experience these problems indicates that the health care financing system alone cannot be expected to correct these deficiencies. However, a public financing system, such as single payer, should improve the flexibility to work with the health care delivery system to drive improvement in the distribution of health care professionals. Our current fragmented financing system provides little opportunity to incentivize strategies that might help.

We do need a single payer national health system, but also we need to elect public officials who believe in better health care for all. Although correcting maldistribution will always remain a challenge, there is much that can be done, but we need people in charge who will want do it.

Structuring Incentives Within Organizations: The Case of Accountable Care Organizations

By Brigham Frandsen, James B. Rebitzer
NBER, April 2014

Accountable Care Organizations (ACOs) are new organizations created by the Affordable Care Act to encourage more efficient, integrated care delivery. To promote efficiency, ACOs sign contracts under which they keep a fraction of the savings from keeping costs below target provided they also maintain quality levels. To promote integration and facilitate measurement, ACOs are required to have at least 5,000 enrollees and so must coordinate across many providers. We calibrate a model of optimal ACO incentives using proprietary performance measures from a large insurer. Our key finding is that free-riding is a severe problem and causes optimal incentive payments to exceed cost savings unless ACOs simultaneously achieve extremely large efficiency gains. This implies that successful ACOs will likely rely on motivational strategies that amplify the effects of under-powered incentives. These motivational strategies raise important questions about the limits of ACOs as a policy for promoting more efficient, integrated care.

http://www.nber.org/papers/w20034

The growth in the number of accountable care organizations (ACOs) has been phenomenal considering that they are primarily only a wish on the part of the policy community and bureaucrats that such organizations would increase efficiencies to reduce health care spending, especially when earlier results have been very disappointing. This study has added to the doubts about ACOs by showing that incentive payments that they receive will exceed cost savings unless the ACOs “achieve extremely large efficiency gains” – an extremely unlikely outcome.

The policy literature is saturated with these “wish they would work” reports and recommendations to further expand the use of ACOs. The experiment has already failed, and we are meandering back into the disdained managed care organization model disguised as ACOs. The tragedy is that this has distracted our politicians and bureaucrats from moving forward with a model that actually would increase efficiencies, not to mention meeting other goals such as universality and removing financial barriers to care – a single payer national health program.

Health-care changes seem to be paying off in B.C.

By Keith Baldrey
Surrey Now, April 8, 2014

Have we finally wrestled that voracious gobbler of tax dollars – the public health-care system – to a standoff, if not to the ground? By that I mean the days of the system automatically devouring increasingly large amounts of money every year to feed itself may be drawing to a close, at least in British Columbia.

Of course, I don’t mean the health-care system will stop being the biggest area of government spending by far (the health-care budget this year is pegged at $16.9 billion, out of a budget of $44.4 billion).

But the rate of growth in spending is slowing down significantly. The annual hike is down to 2.6 per cent this year, compared to just several years ago when it was above five per cent.

Now, there are those who think this is bad news. After all, shouldn’t we be plowing even more money into the system rather than less? If we don’t, won’t health-care standards suffer? The answers are: a) not necessarily and b) no.

The ideological defenders of the public health-care system (who think the answer to everything is to blindly spend gargantuan amounts of more money) think the only measuring stick worth anything is per capita spending. In other words, B.C. should spend more dollars per person than anywhere else, and things will take care of themselves.

But those with experience in the system, who study it and come up with good ideas for change, point to another and far better measurement: health outcomes.

And in that regard, B.C. ranks the highest in the country. While we sit second-to-last in per-capita spending, (only Quebec ranks lower) we beat most other provinces in all kinds of areas: best cancer survival rates, lowest heart attack rate, longest life expectancy, lowest smoking rate, lowest infant mortality rate, etc.

When it comes to wait times for certain surgeries (an admittedly frustrating situation for many people on those wait-lists), they’ve been mostly going down and not up. The median wait time for a hip joint replacement has declined to 13 weeks from 19 weeks over the last 10 years, while a knee joint replacement has gone from 25 weeks to 18 weeks over the same time period.

None of this is to suggest the health-care system does not need constant up-keeping and reform (crowded emergency rooms, for example, seem to be a chronic problem, and we could always use more nurses). But it is encouraging that blind yearly spending hikes are being replaced by newer, innovative ways of spending that are both efficient and lead to healthier outcomes for the users of the system.

Not being able to count on big increases in funding every year has brought some much-needed discipline to the system, and employing some different models has also helped.

One of the most significant changes that is paying off is the government’s relationship with doctors.

In the past, physicians were viewed as costly, self-interested cogs in the system.

Now, however, they are viewed as equal partners who have real responsibilities when it comes to running the health-care system.

For example, several joint committees have been established with the Doctors of B.C. (formerly called the B.C. Medical Association) where doctors and the government shape policies that are aimed at improving patient health, rather than protecting the financial interest of either party.

One committee is for general practitioner services (overseeing improvements to the primary care system), another is for specialist services (aimed at improving access for specialist care) and a third is for shared care (focused on better integration of all levels of care).

As well, something called the Divisions of Family Practice has been created. It links family doctor practices and is designed to improve common healthcare goals in a particular region (improved maternity coverage, for example).

Committees such as these were unheard of a decade ago. They appear to be improving patient care by focusing on smart, evidence-based decisions rather than on simply demanding more money, either for doctors’ pay packets or a health authority’s budget.

The Canada Health Accord between the provinces and the federal government died last week. It means Ottawa will be cutting in half its annual transfer of money to pay for health care.

The fact the B.C. government hardly said a peep about the accord’s demise is evidence of how much the system has changed in the past few years.

http://www.thenownewspaper.com/opinion/baldrey-health-care-changes-seem-…

Evidence based health care. Why should that be controversial? Yet it is. It provokes accusations of “cook book medicine,” or “bureaucrats interfering with your health care.” Current efforts in British Columbia can provide us with a more rational perspective than is being provided by these negative memes.

Physicians from the B.C. medical association (Doctors of B.C.) and the government are cooperating on efforts to improve patient health in manners other than by simply increasing spending (though that should not be neglected when there is an obvious imperative). Such efforts to spend better rather than simply spending more will be particularly important now that the federal government is being run by individuals who promised to protect Canada’s medicare but instead cut federal spending on the program in half.

Although single payer systems are often criticized for being bogged down by government inflexibility and laggardly progress, the activities in B.C. demonstrate that such processes need not be an inevitability. In fact, B.C. is showing us that their single payer system does have the flexibility to make needed improvements.

In the United States we are currently using models, such as accountable care organizations, supposedly to achieve higher quality at a lower cost. Unfortunately, the model seems to have been misdirected away from efforts to improve health care based on evidence to efforts granting nominal awards based on penny pinching and a few negligible teach-to-the-test measures. Under our fragmented, multipayer system it is difficult achieve widespread adaptation of systemic improvements, simply because it is our unique, dysfunctional financing system that is so inflexible.

This is not to belittle the efforts of AHRQ toward expanding the use of evidence based medicine. Rather it is to make the point that government efforts such as those of AHRQ can be more effective if we get the dysfunctional financing system out of the way, especially the intrusive private insurers, and allow AHRQ and other public entities to cooperate more effectively with the people actually delivering health care.

Does Winning a Pay-for-Performance Bonus Improve Subsequent Quality Performance? Evidence from the Hospital Quality Incentive Demonstration

By Andrew Ryan, Matthew Sutton and Tim Doran
HSR, April 2014

To test whether receiving a financial bonus for quality in the Premier Hospital Quality Incentive Demonstration (HQID) stimulated subsequent quality improvement.

Under the HQID, hospitals received a 1 percent bonus on Medicare payments for scoring between the 80th and 90th percentiles on a composite quality measure, and a 2 percent bonus for scoring at the 90th percentile or above.

We found little evidence that hospitals’ receipt of quality bonuses was associated with subsequent improvement in performance. This raises questions about whether winning in pay-for-performance programs, such as Hospital Value-Based Purchasing, will lead to subsequent quality improvement.

http://www.hsr.org/hsr/abstract.jsp?aid=49319522092

Quality derives from dedicated professionals, working within a well-designed health care infrastructure, striving to obtain the best health care for their patients.

Politicians and the policy community seem to miss this point as they continue to look for administrative gimmicks that are essentially managed care innovations. What we don’t need in the United States is more administrative excess. Pay-for-performance (P4P) continues to fail as an incentive for true quality improvement, even if some studies have shown almost worthless teach-to-the-test increases in scores.

If we really want quality, we need to work on our health care infrastructure, beginning with implementing a financing system that drives quality – a single payer national health program.