UNITE HERE report on ACA and worsening inequality

Posted by on Tuesday, Mar 11, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

The Irony of ObamaCare: Making Inequality Worse

UNITE HERE, March 7, 2014

The promise of Obamacare was the right one and the hope for extending healthcare coverage to the un- and under-insured a step in the right direction. Yet the unintended consequences will hit the average, hard-working American where it hurts: in the wallet. Currently a national dialogue is emerging by all political parties on the issue of income inequality. That is a debate worth having. The White House and Congressional Democrats are “resetting” the domestic agenda following the negative fallout from the rollout of the ACA. They plan to shift focus from health care to bread and butter issues of income inequality that have eroded the American paycheck for decades.

Ironically, the Administration’s own signature healthcare victory poses one of the most immediate challenges to redressing inequality. Yes, the Affordable Care Act will help many more Americans gain some health insurance coverage, a significant step forward for equality. At the same time, without smart fixes, the ACA threatens the middle class with higher premiums, loss of hours, and a shift to part-time work and less comprehensive coverage.

*  Transferring A Trillion Dollars in Wealth: Most of the ACA’s $965 billion in subsidies will go directly to commercial insurance companies, one of the largest transfers of public wealth to private hands ever. Since the ACA passed, the average stock price of the big for-profit health insurers doubled, their top executives were paid more than a half billion dollars in cash and stock options, and in the past 2 years, the top 10 insurers have spent $25 billion on mergers and acquisitions.

*  Strangling Fair Competition: Before reform, different types of health plans were regulated under different bodies of law. The Obama Administration has blocked many non-profit health funds from competing for the law’s proposed trillion dollars in subsidies by refusing to set fair regulations for different types of plans. The unbalanced playing field will give employers of people covered by these plans powerful incentives to drop coverage.

*  Moving to Part Time Work: The Administration’s experts say employers won’t follow the incentives and drop coverage. But they also told the nation that employers would not cut workers’ hours to get below the 30-hour per week threshold for “full time” work, even as 388 employers announced hours cuts since early 2012.

*  Cutting People’s Pay: If employers follow the incentives in the law, they will push families onto the exchanges to buy coverage. This will force low-wage service industry employees to spend $2.00, $3.00 or even $5.00 an hour of their pay to buy similar coverage.


For two years, labor unions and employer partners have patiently explained to the Obama Administration and Congress the potential damage that the ACA poses to these unique, successful non-profit health plans.

Having already made efforts to accommodate businesses, churches and congressional staff, it is ironic that the Administration is now highlighting issues of economic inequality without acting to preserve health plans that have been achieving the goals of the ACA for decades. Without a smart fix, the ACA will heighten the inequality that the Administration seeks to reduce.

We take seriously the promise that “if you like your health plan, you can keep it. Period.” UNITE HERE members like their health plans. UNITE HERE’s plans are ready to compete with the corporate giants of the health insurance industry if Washington will simply create a level playing field.


UNITE HERE is a union of service workers in hotels and other industries. Many of their members are insured through non-profit Taft-Hartley plans with joint union-management governance structures. This report shows how the Affordable Care Act can have a negative impact on the health care coverage and hours of employment of union members, in effect making inequality worse.

Some of their legitimate complaints:

*  Employers are not required to make available health insurance to employees who work less than 30 hours per week. Although the Obama administration denies that this will cause employers to reduce the hours that many of their employees work, it is already happening. Obviously that reduces the employees’ net incomes and may disqualify them from receiving insurance coverage.

*  Employers do not have to provide any health coverage at all if they do not have more than 50 employees. Many employers are taking measures to stay below the 50 full-time employee threshold.

*  Employer penalties for not providing coverage are far smaller than the employer costs of their health benefit programs. It is likely that many employers will elect to pay the penalties rather than support a health plan. Yet it is unlikely that employers will increase wages enough to compensate for the lack of an employee health benefit program.

*  Most UNITE HERE union members have wages low enough to qualify for subsidies to help pay for plans obtained through the state or federal insurance exchanges. Yet those subsidies cannot be used for employees in the UNITE HERE Taft-Hartley plans. (They do indirectly receive the tax benefit of deductibility for employer-sponsored plans, but at their income levels, this benefit may be negligible.)

*  More expensive plans will be subject to a 40 percent excise tax. The UNITE HERE Taft-Hartley plans may be subject to this tax, not because the benefits are too generous, but rather because health care costs are so high and because many of the employees in the service industry union are older with greater health care costs. This excise tax is borne by the employee through higher premiums and forgone wage increases.

*  All plans, including Taft-Hartley plans, pay taxes that are used to ease the financial transition of private plans offered on the exchanges. Though the union members ultimately pay these taxes, they receive none of the benefits since Taft-Hartley plans do not qualify for transitional financial support.

*  Self-funded plans, such as these Taft-Hartley plans, are prohibited from being offered to the public and thus cannot benefit from market competition as the exchange plans can.

*  ACA generously subsidizes private health plans with some of those funds going to overpaid executives and wealthy shareholders, thereby contributing to worsening inequality.

Although UNITE HERE calls for Congress and the president to level the playing field through legislation and rule making, a far better solution would be to establish a single payer national health program.

Under an improved Medicare for all, UNITE HERE union members would receive more generous benefits, with first dollar coverage, and with a net cost to them in taxes that would be significantly less than what they are currently paying in premiums and forgone wages. A single payer system would be more effective in reducing inequality than would tweaking the Taft-Hartley plans.

Medical bills and credit reports

Posted by on Monday, Mar 10, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

When Health Costs Harm Your Credit

By Elisabeth Rosenthal
The New York Times, March 8, 2014

Mounting evidence shows that chaos in medical billing is not just affecting our health care but dinging the financial reputation of many Americans: While the bills themselves frequently take months to sort out, medical debts can be reported rapidly to credit agencies, and often without notification. And even small unpaid bills can severely damage credit ratings.

A mortgage initiator in Texas, Rodney Anderson of Supreme Lending, recently looked at the credit records of 5,000 applicants and found that 40 percent had medical debt in collection, with the average around $400; even worse, most applicants were unaware of their debt. Richard Cordray, director of the federal Consumer Financial Protection Bureau, has noted that half of all accounts reported by collection agencies now come from medical bills, and the credit record of one in five Americans is affected.

The problem is accelerating for several reasons. Charges are rising. Insurance policies are requiring more patient outlays in the form of higher deductibles and co-payments. More important, perhaps, is that while doctors’ practices traditionally worked out deals for patients who had trouble paying, today many doctors work for large professionally managed groups and hospital systems whose bills are generated far away, by computer.


Our fragmented, dysfunctional system of paying medical bills is having a major impact on personal credit ratings. Half of all accounts reported by collection agencies now come from medical bills. The credit record of one-fifth of Americans is affected, and many of us are unaware of it. Are people so broke that they can’t pay their medical bills, or is something else going on here?

There are two major factors at play here. One is that with flat wages and increasing household costs, many people do have problems paying all of their essential bills, and medical bills are moved to the bottom of the stack. When payment of medical bills is postponed, or perhaps not paid at all, they are commonly sent to collection agencies, eventually appearing on the debtor’s credit report. Now that high deductibles are being used more to shift costs from payers (employers or government) to patients, this phenomenon is much more common.

The other factor is how people with good incomes who are meticulous with management of their personal finances end up with dinged credit reports because of medical bills. It is often due to the administrative complexity of the system we have of paying medical bills through private insurers who make payments based on whether the providers are in or out of network, on whether or not the products or services being billed are even covered by the plans, and on how much the deductible and coinsurance are and what charges can be credited against the deductible.

Typically the individual receives an explanation of benefits which is difficult to decipher often because some of these questions still remain unanswered. Billings may start to come in from various health care providers but without adequate explanation. When the patient inquires as to why the amount was not applied to the deductible, or why the amount seems to be for out-of-network providers when this provider is in-network, or for whatever  reason, the patient is often given a temporizing response. When more statements are received that failed to address concerns such as the deductible, further efforts to correct the problem are often met with reassurance. When nothing further is heard, the patient assumes the matter was cleared up. Only later when a collection agency begins to harass them or when they find their credit report includes unpaid medical bills do they discover that the matter never was resolved.

Add in further complexities such as when a person has primary coverage perhaps through Medicare and secondary coverage through a Medigap plan, or a person had a change in coverage coinciding with the medical services provided, straightening out who is responsible for which portions of the charges can be a monumental task.

These highly responsible individuals with previously excellent credit records are understandably angry. They tend to look elsewhere for blame – the physician’s office or billing service, the hospital’s billing department, the insurer’s claim processors, the credit agency’s disregard of registered protests, or perhaps the employer who provided such a screwed up health plan.

Single payer advocates know where most of the blame really lies. It is with our political leaders who insist on perpetuating this highly inefficient, fragmented system of financing health care instead of enacting a single payer national health program. This botched up system of medical billing is only one manifestation of the profound administrative excesses that permeate our system. Ironically, all of this extra administrative detail in handling medical billings doesn’t even work well. You would think that if we are going to be paying much more in administrative costs so that the insurers could do a “better” job than a single government payer in handling our claims, we would be demanding much better performance from them. But no, keep the government out and blame everyone else.

In typical D.C. fashion, our legislators continue to look for solutions that would increase regulatory oversight to prevent unfair damage to the credit ratings of conscientious individuals, though the legislators are receiving expected push back from the credit industry. What we do not need is more administrative oversight piled on top of an administrative boondoggle. Instead we need to replace it with an efficient improved Medicare, with first dollar coverage, that covers everyone. Credit scores dinged by medical bills then would become a quaint historical oddity.

Another ACA final rule – 335 pages

Posted by on Friday, Mar 7, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

HHS Notice of Benefit and Payment Parameters for 2015 under the Patient Protection and Affordable Care Act: Final Rule

Department of Health and Human Services, Centers for Medicare & Medicaid Services (CMS), March 11, 2014


This final rule sets forth payment parameters and oversight provisions related to the risk adjustment, reinsurance, and risk corridors programs; cost sharing parameters and cost- sharing reductions; and user fees for Federally-facilitated Exchanges. It also provides additional standards with respect to composite premiums, privacy and security of personally identifiable information, the annual open enrollment period for 2015, the actuarial value calculator, the annual limitation in cost sharing for stand-alone dental plans, the meaningful difference standard for qualified health plans offered through a Federally-facilitated Exchange, patient safety standards for issuers of qualified health plans, and the Small Business Health Options Program.

Final rule (335 pages)http://www.ofr.gov/OFRUpload/OFRData/2014-05052_PI.pdf

Any major legislation, once enacted, must then be subjected to a rule making process to have guidelines by which to administer the law. Legislation as complex as the Affordable Care Act (ACA) is expected to have an extensive set of rules, but this 335 page final rule on just a few aspects of the legislation demonstrates how unnecessarily complex ACA is.

The rule on risk adjustment, reinsurance, and risk corridors is a good example. Risk adjustment transfers funds from insurers who enrolled lower-cost, healthier individuals to insurers who had higher expenses because their enrollees had greater health problems (an almost impossible task to do fairly). Reinsurance is paying insurers a portion of their losses if they had higher than expected expenses for their enrollees. Risk corridors establish two levels of spending – one below which profits are excessive and the other above which losses are excessive – levels used to protect against inaccurate initial rate setting by the insurers.

The final rule is highly complex, which is not surprising since it is difficult to adjust for fairness after health care losses have occurred. It should be obvious that this administrative complexity is not to protect patients, but rather it is to protect the insurers. In fact, much of the profound complexity of ACA was based on making reform work for the insurers while sacrificing policy improvements that would be designed to work best for patients.

Under a single payer system, risk adjustment, reinsurance, and risk corridors would not even be necessary since you would not have competing private insurers that are each trying to game the system.

If you really want to understand better how our politicians selected the wrong model for reform, read the 335 pages of this final rule. Then read the thousands of other pages of final rules that also apply to ACA.

Yes, there would be rules under Improved Medicare for All, but they would be administratively efficient rules selected to make the system work better for patients, not for private insurers.

Progressive deterioration in health plans offered by major employers

Posted by on Thursday, Mar 6, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Survey for the National Business Group on Health

Towers Watson, March 6, 2014

The cost of providing employer-sponsored health care benefits is expected to increase 4.4% this year, a slight uptick from last year, when cost increases fell to a 15-year low, according to an annual survey by global professional services company Towers Watson and the National Business Group on Health (NBGH), an association of large employers.

The 19th Annual Towers Watson/NBGH Employer Survey on Purchasing Value in Health Care found that employer costs are expected to reach $9,560 per employee in 2014, an increase of 4.4% from $9,157 in 2013 (DM – but it would have been a 7.0% increase had employers not made changes to their plans that shifted more costs to their employees). The survey found the employees’ share of premiums increased nearly 7%, to $2,975, this year. Out-of-pocket costs also increased. The total employee cost share has climbed from 34.4% in 2011 to 37% in 2014. Employees now pay over $100 more each month for health care compared with just three years ago.

“Despite the moderation, health care costs continue to outpace inflation and remain a major concern for U.S. employers given the challenging macroeconomic environment,” said Ron Fontanetta, senior health care consultant for Towers Watson. “To find more effective ways to manage health costs, many employers are focusing on reshaping their health strategy for the next three to five years.”

Indeed, while the vast majority (95%) of respondents indicate that subsidizing health care coverage for active employees is a very important part of their rewards package, almost as many (92%) expect to make moderate to significant changes to their programs by 2018.

Contribution strategy for spouses changing: Nearly half (49%) of employers have increased employee contributions for dependent tiers at higher rates than for individuals. Another 19% expect to make this move next year. Only 56% of companies believe that subsidized health care for spouses will be very important for 2015 and beyond — down from over 70% today, an indication that the trend toward increased cost sharing for spouses will likely continue.

More employers embracing account-based health plans (e.g., HSAs): Nearly three-quarters of respondents currently offer these plans, with another 9% expecting to add one for the first time in 2015. Nearly one-third of all companies could offer ABHPs as their only option by 2015 if they follow through with current plans.

Employers looking at exchange options: Two-thirds of companies believe that private exchanges will offer a viable alternative to employer-sponsored coverage for active employees as early as 2015.

Retiree health: Nearly two-thirds of employers that offer access to a sponsored plan today say they are likely to eliminate those programs in the next few years and steer their pre-Medicare-age population to public exchanges.

Health and financial subsidies: Twenty-two percent of companies adopted outcomes-based incentives (other than for tobacco), and that figure could reach 46% by 2015 if companies follow through with their plans.

Value purchasing: The best-performing respondents are addressing key drivers of performance including pharmacy management, network delivery options and enhanced wellness strategies.


The most important reason that a more effective model of social insurance, such as single payer, was rejected in favor of a fragmented model of reform based on private health plans and public programs was that a majority of Americans were receiving their coverage through their employment and that was perceived as a segment of the market that was working well and should not be disrupted. “If you like the insurance you have, you can keep it.”

Not only was three-fifths of the population already covered by employer-sponsored plans, if this coverage were abandoned, the policy community working on reform would have had to devise a way of replacing the funds paying for this coverage – decisions that would likely provoke even greater public hostility than we saw with the enactment of the Affordable Care Act.

In the last half century, the best coverage has been provided mostly through large employers – those represented by the National Business Group on Health (employers with over 1,000 employees each and 55 million employees in total). These employers have been very concerned about rising health care costs, and now they know that they will have to live with our highly flawed version of comprehensive reform – the Affordable Care Act. They see very little in this Act that will provide them relief, so they are moving forward with their own measures.

We can now see where employers have been, where they have taken us, and where they are headed – on a downward spiral of ever inferior employer-sponsored health plans.

Some of the changes we are seeing, according to this and other reports:

*  Higher deductibles (shifting costs to those with health care needs)

*  Health savings accounts (not much help when they are underfunded or empty)

*  Increasing employees’ share of premiums

*  Reducing dependent coverage, especially spouses

*  Sending employees to private insurance exchanges (shifting to defined contribution)

*  Using narrower provider networks (taking away health care choices)

*  Using outcome-based incentives that effectively penalize those with health problems

*  Dumping retirees into public exchanges

*  Using value purchasing – a code term for managed care

How could employers be so crass as to dump on their employees like this? Quite simple. They now have a new standard to point to – the low actuarial value private plans that are being offered through the government exchanges – plans that are using many of of the same strategies that will be harming the physical and financial health of plan enrollees. In fact, two-thirds of employers believe that “private exchanges will offer a viable alternative to employer-sponsored coverage for active employees as early as 2015” – next year! These private exchanges will offer plans using the same devious measures that will shift more costs to patients, thereby impairing access.

Our observation of this rapid deterioration in plans offered by the nation’s largest employers should cause us to sound the alarms. We need to begin immediately preparation for transition into a single payer national health program – an improved Medicare that covers all of us. The Fortune 500 employers are not going to do it for us.

Cancer chemotherapy: Killing them not so softly

Posted by on Wednesday, Mar 5, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Associations between palliative chemotherapy and adult cancer patients’ end of life care and place of death: prospective cohort study

By Alexi A Wright, Baohui Zhang, Nancy L Keating, Jane C Weeks, Holly G Prigerson
BMJ, March 4, 2014


The use of chemotherapy in terminally ill cancer patients in the last months of life was associated with an increased risk of undergoing cardiopulmonary resuscitation, mechanical ventilation or both and of dying in an intensive care unit. Future research should determine the mechanisms by which palliative chemotherapy affects end of life outcomes and patients’ attainment of their goals.



Nexavar (sorafenib)
Bayer HealthCare and Onyx Pharmaceuticals

Nexavar is now indicated for the treatment of patients with locally recurrent or metastatic, progressive, differentiated thyroid carcinoma (DTC) that is refractory to radioactive iodine treatment.


Progression-free survival:

Median progression-free survival

10.8 months  Nexavar

5.8 months  Placebo

Overall survival:

Number of deaths

32% (66)  Nexavar

34% (72)  Placebo

Important safety considerations:

Most common adverse reactions reported for NEXAVAR-treated patients vs placebo-treated patients in DTC, respectively, were: Palmar-plantar erythrodysesthesia syndrome (PPES) (69% vs 8%), diarrhea (68% vs 15%), alopecia (67% vs 8%), weight loss (49% vs 14%), fatigue (41% vs 20%), hypertension (41% vs 12%), rash (35% vs 7%), decreased appetite (30% vs 5%), stomatitis (24% vs 3%), nausea (21% vs 12%), pruritus (20% vs 11%), and abdominal pain (20% vs 7%). Grade 3/4 adverse reactions were 65% vs 30%

(15 other important safety considerations are listed – available at the link)



Oncology “Top Five” List Identifies Opportunities to Improve Quality and Value in Cancer Care

American Society of Clinical Oncology, April 3, 2012

The Oncology Top Five List

1.  For patients with advanced solid-tumor cancers who are unlikely to benefit, do not provide unnecessary anticancer therapy, such as chemotherapy, but instead focus on symptom relief and palliative care.


For those whose lives are dedicated to the science and art of healing, this discussion on cancer chemotherapy at the end of life is one that we shouldn’t have to have. But apparently we do need to discuss it.

The new study on this topic published by BMJ confirms what we already knew. Those patients who receive often futile chemotherapy late in the course of their malignancies seemed to be programmed for a course that increases the risk of being subjected to CPR, to being placed on a ventilator, and to dying in an intensive care unit. Most in their rational moments would prefer the more humane approach of hospice care in their final days. Yet the fact that this study was done is further evidence that mostly inappropriate, aggressive, and quality-of-life reducing interventions are still being pursued.

Nexavar is a $96,000 cancer chemotherapeutic agent that was recently approved for certain progressive thyroid carcinomas. It had been previously approved for selected cases of liver and kidney cancer, though NICE (UK’s National Institute for Health and Care Excellence) did not recommend it since “available evidence does not indicate that it delays symptom progression or improves quality of life.” Regular readers may recall that Marijn Dekkers, Chairman of Bayer, said that this product was not developed for poor people in the Indian market but rather for Western patients who could afford it.

What is the evidence for its use in “locally recurrent or metastatic, progressive, differentiated thyroid carcinoma (DTC) that is refractory to radioactive iodine treatment”? Simply stated, when radiologists followed the tumors by measuring them, there was no progression for six months for those given a placebo, whereas those receiving Nexavar did not demonstrate progression until eleven months. This is a demonstration that successfully treating a test, but not the patient, is considered by some to be of therapeutic value.

But what about the overall death rates? They were the same with Nexavar and placebo. Okay, what about the quality of life? Looking at the list above, the incidence of several miserable side effects was much greater in the Nexavar treated group than it was in the placebo group. They experienced poorer quality of life and did not postpone death. If you extend the findings described in the article in this week’s BMJ, by being treated with palliative chemotherapy, they had greater odds of being subjected to CPR, to being place on a ventilator, and to dying in an intensive care unit rather than in hospice.

The American Society of Clinical Oncology certainly recognizes what is happening here. As one of the top five opportunities to improve quality and value in cancer care, they recommend that “for patients with advanced solid-tumor cancers who are unlikely to benefit, do not provide unnecessary anticancer therapy, such as chemotherapy, but instead focus on symptom relief and palliative care.”

We desperately need NICE care in the United States. We would have that under a well designed single payer national health program.

NICE: http://www.nice.org.uk

An extra: Roberta Flack – Killing Me Softly (Imagine the oncologist “singing my life with his words”) : http://www.youtube.com/watch?v=O1eOsMc2Fgg

Venture capitalists in the pharmaceutical industry

Posted by on Tuesday, Mar 4, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

The Calculus of Cures

By Robert Kocher, M.D., and Bryan Roberts, Ph.D.
The New England Journal of Medicine, February 26, 2014

Bringing a drug from bench to bedside is a risky and expensive proposition. The development of a new drug is estimated to cost many hundreds of millions of dollars; as a result, decisions about funding a drug-development program are based as much on economics as on science and medicine. Decisions to invest and reinvest at all stages of development are driven by the imperative to generate an attractive return on the capital invested, whether by venture-capital and public investors or by pharmaceutical companies.

It is not mysterious why projects get funded. As venture-capital investors, we evaluate projects along four primary dimensions: development costs, selling costs, differentiation of the drug relative to current treatments, and incidence and prevalence of the targeted disease.

Fortunately, much can be done to bring more drugs and a more diverse set of drugs to market. The two economic dimensions — development costs and selling costs — can be most easily improved. The most expensive step in creating a new drug is conducting clinical trials. Conducting a trial costs $25,000 or more per patient studied, and phase 3 trial programs consume more than 40% of a sponsoring company’s expenditures. Unfortunately, every patient is not equally valuable when it comes to clinical trials, and many clinical development programs are economically inefficient in that they are excessively large relative to the amount of information they yield, especially in light of the information-technology breakthroughs that have lowered the cost of data acquisition and analysis over the past 20 years.

High-frequency, material information about clinical efficacy and safety comes from the first few hundred patients studied in a trial. Unfortunately, most clinical development programs go far past the point of diminishing returns for frequent safety events, but they do not go far enough to permit detection of rare events. Statistically, it is only in the long tail of patient data that reliable signals of rare adverse effects can emerge and comprehensive safety can be established. Safety is critical, but studying the long tail of adverse events is not feasible from either a time or a capital perspective until after a new drug enters the market, especially if the drug is for a chronic condition.

Redesigning trials to include fewer patients, providing conditional approval of drugs, and requiring postmarketing surveillance could have a profound effect, allowing smaller development programs to achieve greater success. We estimate that development costs for drugs could be reduced by as much as 90%, and the time required by 50%, if the threshold for initial approval were defined in terms of efficacy and fundamental safety. Cutting costs and time, while requiring high-quality and transparent patient registries for independent safety monitoring, would be a more informative and cost-effective approach. With the widespread adoption of electronic health records and the introduction of many low-cost data-analysis tools, it is now feasible to develop mandatory postmarketing surveillance programs that make thousand-patient trials obsolete.

This approach to reducing drug-development costs would have the greatest effect on drugs for chronic conditions such as cardiovascular disease and type 2 diabetes, since such drugs currently require the largest trials. Moreover, our ability to identify rare side effects and take action to protect patients would be substantially improved when many more patients are being followed, albeit in the absence of a control group. We believe this approach would have no adverse effect on the trend in the development of drugs for orphan diseases and cancers, since those drugs will continue to have low development and selling costs and substantial differentiation from existing treatments. Yet, this approach would make it attractive to pursue drug candidates for many more disease conditions and would lower the threshold for financing a drug’s development so that more drugs would be brought forward.

Another major factor is selling costs. It is far more cost-effective to sell a drug when it is either prescribed by specialty physicians or commonly used in hospitals, both of which effectively aggregate patients. Moreover, it is easier to predict the level of adoption by these customers on the basis of the drug’s clinical differentiation and pharmacoeconomics. Sales of drugs prescribed by primary care doctors depend on a mixture of expensive sales representatives and advertising and can cost hundreds of millions of dollars annually.

While scientists work hard to increase the rate of scientific discovery, the rest of us should do our part to improve the other variables that figure into the calculus of which cures are brought to market. Such improvement would be good for patients and would represent good economic policy, since drug prices could be lowered even as investors generated the returns necessary to finance more discoveries.



PNHP Data Update

September 29, 2000

The new editor of the New England Journal of Medicine, Jeffrey Drazen, M.D. was cited by the FDA last year for making “false and misleading” statements about the asthma drug, levalbuterol. Drazen received $7,000 from the drug’s maker, and has ties to another 20 drug firms (USA Today, 5/31/00). “Academic researchers should be able to own substantial stock in a company or accept sizeable consultant fees and still accept research support,” according to Drazen. (California Healthline, 5/26/00).

(Note: Though this was written in 2000, Jeffrey Drazen is still the editor of NEJM.)


One of the most serious defects of the U.S. health care system is that we not only allow but we encourage the participation of passive investors. For those who believe that the free market is what makes America so great, the opportunity to glom onto some of the $3 trillion that we spend each year on health care cannot pass the attention of the entrepreneurial mind. Venture capitalists in the pharmaceutical industry are a case in point.

The venture capitalists who authored this article in The New England Journal of Medicine have diagnosed a major problem with the U.S. pharmaceutical industry and are providing a solution – a solution for investors that is.

They have decided that clinical trials of new drugs are too expensive. They note that you can determine clinical efficacy from the first few hundred patients in the study and that adding many more patients goes far past the point of diminishing returns. As far as determining drug safety, we can use the computerization of health records to detect adverse events, taking advantage of the very large number of patients receiving the drug after it has been released for marketing. By reducing these research costs, and by moving products to the market earlier so they can begin providing returns, the venture capitalists then would have more funds to invest in even more new products. See, the market really works.

We have seen the tragedies of products rushed to the market, with the inadequacies of post-marketing surveillance, resulting in great harm to patients, even death, while the pharmaceutical industry pays massive fines that they pass off as simply a cost of business. When passive investors are involved, the investors must be taken care of first, certainly before the patients, and these guys writing this article want a greater piece of the action.

Why would one of the world’s most prestigious medical journals publish an article promoting the interests of venture capitalists in the pharmaceutical industry? The answer might be found in the views of the editor of NEJM, Jeffrey Drazen, MD, who in the past expressed the opinion, “Academic researchers should be able to own substantial stock in a company or accept sizeable consultant fees and still accept research support.”

It is sad when the pursuit of money contaminates even the paragons of health care, and yet those involved seem to be totally insensitive to the fact that there is even an issue here.

What does this have to do with single payer? When our own public purchasers of health care products and services enter the marketplace on our behalf to negotiate the acquisition of our health care, they can refuse to pay the money lenders who personally provide no value to our health care. If research funds are needed we can provide them ourselves though our own National Institutes of Health. Such an investment would have the goal of determining efficacy and safety – benefitting patients – and not on how fast you can turn a buck.

Disruption in the financing of primary care

Posted by on Monday, Mar 3, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

New Law’s Demands on Doctors Have Many Seeking a Network

By Abby Goodnough
The New York Times, March 2, 2014

Dr. Sven Jonsson, a primary care physician in this rural community, is seeing a steady tide of new patients under President Obama’s health care law, the Affordable Care Act. And so far, it is working out for him. His employer, a big hospital system, provides expensive equipment, takes care of bureaucratic chores and has buffered him from the turmoil of his rapidly changing business.

About 25 miles away in the more affluent suburb of Crestwood, Dr. Tracy Ragland, 46, an independent primary care physician, is more anxious about the future of her small practice. The law is bringing new regulations and payment rates that she says squeeze self-employed doctors. She cherishes the autonomy of private practice and speaks darkly of the rush of independent physicians into hospital networks, which she sees as growing monopolies.

(Dr. Ragland) said that she embraced the goal of extending health coverage to far more Americans, but that Medicaid paid too poorly for her to treat any of the new enrollees. And while she is accepting some of the private plans sold through Kentucky’s new online insurance exchange, she has rejected others — again, because she considers the payment too low.

Dr. Jonsson owned his practice in Louisville for a decade — and did not accept Medicaid, for the same reasons that Dr. Ragland generally does not — but sold it in 2010, months after the Affordable Care Act passed. He did so, he said, expressly out of concern that the law and related requirements were about to ratchet up the pressures and expense of private practice. In particular, he dreaded having to buy and learn how to use an electronic records system, not only because such systems are expensive but because doctors’ productivity slows down while they are learning the computerized systems, threatening tight margins.

Only about 40 percent of family doctors and pediatricians remain independent, according to the American Medical Association — and many, including Dr. Ragland, feel that harsh economic winds that were already pushing against them have been accelerated by the Affordable Care Act.

Dr. Jonsson is less mired in the daily worries of running a medical business. His hospital system (Baptist Health), with far more bargaining power than a private practice, negotiates with insurers on his behalf, pays his overhead and malpractice insurance, and handles much of the ever-expanding paperwork. It provides him with an X-ray machine and a costly system for keeping digital patient records, a move encouraged by the new law. He has been able to take his first long vacations in years, including a recent month in his native South Africa.

Since the passage of the act in 2010, hospital systems have been acquiring physician practices to shore up their market positions and form networks to take advantage of incentives under the new law. For now, Baptist is taking a financial hit by putting so many doctors on staff: Moody’s Investors Service downgraded its credit rating in September, citing “increased losses from an aggressive and rapid physician employment strategy.”

Baptist enlisted about a dozen of its primary care providers in the Louisville region to take on new Medicaid patients, officials there said, both to get more paying customers in the door and, as a nonprofit system with a stated charitable mission, to help more of Kentucky’s poor get medical care under the law.


The primary care practices of Dr. Sven Jonsson and Dr. Tracy Ragland described in this article are not merely anecdotal. They are truly representative of major changes taking place in the financing of primary care today. Is this change a disruptive innovation that will deliver on the promise of an expanded primary care infrastructure with higher quality and lower costs? Let’s take a closer look.

How disruptive is this? Both Dr. Jonsson and Dr. Ragland practice in free standing clinics with only a few associates. They see similar patients with acute and chronic care needs. Previously they both felt that they could not afford to accept Medicaid patients because of the very low payment rates under their state Medicaid program. Since becoming employed by Baptist Health, Dr. Jonsson now includes Medicaid patients in his practice, whereas Dr. Ragland, who continues with her traditional primary care practice, still does not accept Medicaid patients and, furthermore, does not accept patients who are now insured through certain plans in Kentucky’s new insurance exchange – plans that have payment rates which she considers too low for her practice.

Although their practices are very similar, Dr. Jonsson is the more contented physician. He simply practices medicine without the economic concerns that he formerly faced. Dr. Ragland still has these concerns.

The difference is that Dr. Jonsson, along with his Medicaid patients and patients covered by exchange plans, are benefiting from the consolidation that is taking place in the health care delivery system in which hospitals and physicians are merging. These consolidated systems are able to extract greater concessions from the insurers since they become “must have” organizations when the insurers establish their provider networks.

Dr. Jonsson’s association with Baptist Health – a nonprofit health care organization with a charitable mission of caring for the poor – seems to be an ideal arrangement for meeting the health care needs of the community. So what could be wrong?

The obvious reason that Dr. Jonsson is personally financially secure in spite of seeing Medicaid patients is that Baptist Health is paying him more than he would be receiving from Medicaid or the exchange plans. How is that working? Moody’s Investors Service has downgraded Baptist Health’s credit rating citing “increased losses from an aggressive and rapid physician employment strategy.”

Under our current fragmented, dysfunctional financing system, when hospitals and physicians are trying to do the right thing, it still isn’t working in spite of the enactment of the Affordable Care Act. The current flux in primary care financing is highly unstable and likely will continue to be disruptive to traditional primary care practices. For those who say good riddance, realize two things: 1) prices are higher in the consolidated systems and will not be tolerated for long, and 2) traditional primary care practices, including community health centers, provide essential community health care services in regions often not attractive to large, consolidated health systems.

If we switched everyone to Medicare right now, the system would work, though many problems would remain because of the deficiencies in Medicare. On the other hand, if we created a well designed single payer system (an improved Medicare for all) our financing problems would be solved, and we could get on with repairing our health care delivery system – one in which both Dr. Jonsson and Dr. Ragland would take pride in their ability to meet the health care needs of their patients.

Fallacy of global cost containment through “bundled payments”

Posted by on Friday, Feb 28, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Inpatient Hospital Prices Drive Spending Variation for Episodes of Care for Privately Insured Patients

By Chapin White, James D. Reschovsky, Amelia M. Bond
National Institute for Health Care Reform, February 2014

When including all care related to a hospitalization — for example, a knee or hip replacement — the price of the initial inpatient stay explains almost all of the wide variation from hospital to hospital in spending on so-called episodes of care, according to a study by researchers at the former Center for Studying Health System Change (HSC) based on 2011 claims data for 590,000 active and retired nonelderly autoworkers and dependents. For example, average spending for uncomplicated inpatient knee and hip replacements ranged across 36 hospitals from less than $17,500 to $37,000 for an episode of care that included all services during the inpatient stay and all follow-up care within 30 days of discharge. The pattern of spending variation for knee and hip replacements held true for other conditions, with hospital inpatient price differences accounting for the vast majority of spending variation rather than differences in spending on physician and other non-hospital services during and after discharge or spending on readmissions. Moreover, hospitals’ case-mix-adjusted relative spending per episode for different service lines — for example, orthopedics and cardiology — tend to be highly correlated with each other. Understanding why spending for episodes of care varies so much among hospitals can help private purchasers accurately target ways to control spending. This study’s findings — inpatient prices drive the bulk of episode-spending variation and hospitals with high spending for one service line tend to have high spending for other service lines — indicate that private purchasers can focus on hospitals’ overall inpatient price levels rather than pursue bundled payments for episodes of care or service-line-specific purchasing strategies.

To Bundle or Not to Bundle…

In Medicare, there is a compelling case for bundled payments — wide variations in post-acute care use are the main factor behind differences between high- and low-spending geographic regions and between high- and low-spending hospitals. Moreover, Medicare patients often have multiple chronic conditions that are complex to manage. But the results of this analysis show that the case for bundled hospital payments for the privately insured is much weaker — post-acute care and other ancillary services account for a relatively small share of overall spending on hospitalization episodes, and they account for almost none of the variation in episode spending from one hospital to another.

Implications for Private Purchasers

It remains to be seen whether, going forward, the tools available to private purchasers — tiered benefits, reference pricing, and so on — can counteract hospitals’ significant market power. Other more dramatic interventions, such as state-based hospital rate setting, or offering a “public option” that uses administered pricing through the state health insurance exchanges are options, albeit unlikely in most states to gain traction.


Rather than relying on proven methods of controlling health care costs through government administered pricing, the Affordable Care Act (ACA) relies on private sector integration of the health care delivery system through entities such as accountable care organizations. One of the mechanisms promoted by ACA is bundled payments – paying a single pre-set amount for all services associated with a single hospital episode of care such as a joint replacement. Will bundled payments adequately control our health care spending?

This study shows that, for private patients, the upper end of the wide variation in spending between hospitals is driven by high prices which permeate all of the hospitals’ service lines. For those services amenable to bundling, such as joint replacement, most of the services provided are related to the specific episode and thus do not vary much between hospitals. Post-acute care and other ancillary services which might otherwise be pared back with bundling are such a small part of the overall services that bundling cannot save money by reducing the volume of services connected to the episode.

Since it is the high prices of the standard services that are a problem, attacking only those services that are bundled will not save much since high prices throughout the rest of the hospital are left undisturbed or even increased some to offset any price concessions for the bundled services.

This article mentions that there is a case for bundled payments under Medicare since these more complex patients have wide variations in acute and post-acute care, providing more flexibility in controlling the volume of services. Prices are already controlled through the Medicare prospective payment system, which, to a limited degree, represents a form of bundling (think DRGs).

Other nations, even if using private insurers, utilize rigid government price setting through one form or another. The authors of this report suggest that state-based hospital rate setting or government administered pricing would not likely gain traction. Yet “bundling” all hospital spending through global hospital budgets (like fire or police department budgets), as part of a single payer system, is precisely what we need. Let’s give it traction.

Paean to the “empowered consumer:” Truthiness in health policy

Posted by on Thursday, Feb 27, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Connected health and the rise of the patient-consumer: How to achieve better care at a lower cost?

By William Frist
Health Affairs, February 2014

America’s health care delivery sector stands at a tipping point—a convergence of a growing, graying, and highly consumptive population with increasingly limited financial and human capital resources.

Policy makers naturally gravitate toward government to provide the framework for solutions to this worsening scenario…. I’ve spent about equal time in government and the private health sector, and I believe there are two other levers that are more likely to be effective.

The first lever is the rapid ascent of the newly empowered consumer, equipped for the first time with actionable knowledge that can affect his or her health. The second consists of magnificent advances in information technology (IT). The exponential growth and application of these technologies are revolutionizing, in a very short period of time, the automation, connectivity, decision support, and mining of health information and data, which together will radically transform and improve health care delivery.

These two forces are just beginning to come of age. Neither was a significant driver of health care value just three years ago. Today their potential is enormous. Together, the empowered consumer and rapidly advancing health IT will channel our chaotic, fragmented, and wasteful health care sector toward a more seamless, transparent, accountable, and efficient system. They will answer the underlying question of how we will get better care for less cost. They will be the primary keys for game-changing, value-driven reform, where provider compensation and payments are determined not by the type and number of specific services rendered but by the quality and outcomes of care provided.

…. Government is slow to change and even slower to self-correct. …But what America needs now is more health for less money…. And in that effort, the newly empowered consumer is likely to lead the way.


In this article, William Frist, a former Republican senator from Tennessee, claims “the newly empowered consumer” will play the leading role in health care reform. According to Frist, “consumers” recently acquired immense power thanks to “magnificent advances in information technology (IT).” The “empowered consumer” aided by health IT will lead us to a “more seamless, transparent, accountable and efficient system.”

Why couldn’t Frist lower his decibel level a notch and simply call our attention to recent developments in HIT that have some potential to improve health and perhaps lower costs? Why all the undocumented hype?

In Frist’s case, it appears his conservative ideology is at work. He notes early in his paper that government is pokey and cannot be expected to play a leading role in health care reform. If he can draw readers into his fantasies about patients with the powers of comic book figures, readers might be less likely to ask government to play a leading role in solving the health care crisis.

But Frist’s conservative values can’t be the entire explanation because thousands of American health policy experts with no discernible political leanings, and many Democrats, talk just like him. Frist’s article represents a common style of argument utilized by American health policy researchers as well as the politicians who listen to them. Hillary Clinton, Tom Daschle, Newt Gingrich and Tommy Thompson are other examples of politicians who have been influenced by managed-care speak.

In the rest of this comment I will use Frist’s paper as a case study with which to elucidate three key elements of this style.

First, the subjects of discussion – the mechanisms that will allegedly ameliorate the crisis – are described so abstractly it is difficult to know how to refute or confirm the claims made for them. The “accountable care organization” is a prominent example. The “empowered consumer” is another. Frist offers us not one example of how any of us would know if we fall into the category of “empowered,” and he is vague about how “rapidly advancing health IT” will confer “power” upon patients.

If Frist had simply argued that Americans are becoming more knowledgeable about their health, we might quibble about how true that is but we wouldn’t be baffled by his argument. But he speaks of more “power,” not more knowledge. Does he mean that thanks to growing access to medical records via computers, for example, that patients now have the power to browbeat insurance companies into paying for their medical care if the insurance company refuses? Does he mean that because of the numerous apps one can buy to monitor calories consumed, steps walked per day, etc. that patients have the power to force drug companies and hospitals to lower their prices?

A second characteristic of managed-care speak is the use of value-laden labels to refer to the aforementioned amorphous concepts. As Ted Marmor has noted on numerous occasions, and as he and Jonathan Oberlander noted in a recent paperhttp://www.ncbi.nlm.nih.gov/pmc/articles/PMC3514994, the vague concepts advanced by American health policy experts often bear labels designed to persuade rather than enlighten. “Empowered consumers” and “seamless” care are two examples from Frist’s paper. “Accountable care,” “coordinated care,” and “integrated delivery systems” are common examples one could find in myriad other articles. What do those labels mean? And who could be in favor of their opposites, for example, “unaccountable care” or “disempowered patients”?

A third common feature of the style I’m talking about is the confidence with which conclusions are asserted even though no evidence is marshaled to support the claim, or the evidence cited is incomplete, cherry-picked, or flat wrong. In Frist’s case, he could have limited his argument to a simple statement that the spread of electronic medical records and mobile phones and the invention of numerous apps might create a better informed patient among the segment of the population that can afford access to the Internet and myriad apps. But he did not do that. Instead he got out his trumpet and heralded the coming of a new age.

Those three features – poorly defined concepts, value-laden names for these concepts, and exaggerated claims for them – coupled with their ubiquitousness are lethal for busy readers, especially busy politicians who don’t have time to give definitions a reality check and to read papers cited in endnotes to see if they say what the writer said they said. The net effect is a form “truthiness,” to borrow Stephen Colbert’s wonderful label for claims that seem to be true but aren’t.  http://www.merriam-webster.com/info/06words.htm

This “truthiness” – the illusion that what experts like Frist say is based on science – is a major obstacle to a productive public debate about how to solve the health care crisis, and to the enactment of a single-payer system. It lends cover to politicians who want to take single-payer off the table.

Is the medical home a business model or a patient-service model?

Posted by on Wednesday, Feb 26, 2014

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Association Between Participation in a Multipayer Medical Home Intervention and Changes in Quality, Utilization, and Costs of Care

By Mark W. Friedberg, MD, MPP; Eric C. Schneider, MD, MSc; Meredith B. Rosenthal, PhD; Kevin G. Volpp, MD, PhD; Rachel M. Werner, MD, PhD
JAMA, February 26, 2014


Importance:  Interventions to transform primary care practices into medical homes are increasingly common, but their effectiveness in improving quality and containing costs is unclear.

Objective:  To measure associations between participation in the Southeastern Pennsylvania Chronic Care Initiative, one of the earliest and largest multipayer medical home pilots conducted in the United States, and changes in the quality, utilization, and costs of care.

Design, Setting, and Participants:  Thirty-two volunteering primary care practices participated in the pilot (conducted from June 1, 2008, to May 31, 2011). We surveyed pilot practices to compare their structural capabilities at the pilot’s beginning and end. Using claims data from 4 participating health plans, we compared changes (in each year, relative to before the intervention) in the quality, utilization, and costs of care delivered to 64 243 patients who were attributed to pilot practices and 55 959 patients attributed to 29 comparison practices (selected for size, specialty, and location similar to pilot practices) using a difference-in-differences design.

Exposures:  Pilot practices received disease registries and technical assistance and could earn bonus payments for achieving patient-centered medical home recognition by the National Committee for Quality Assurance (NCQA).

Main Outcomes and Measures:  Practice structural capabilities; performance on 11 quality measures for diabetes, asthma, and preventive care; utilization of hospital, emergency department, and ambulatory care; standardized costs of care.

Results:  Pilot practices successfully achieved NCQA recognition and adopted new structural capabilities such as registries to identify patients overdue for chronic disease services. Pilot participation was associated with statistically significantly greater performance improvement, relative to comparison practices, on 1 of 11 investigated quality measures: nephropathy screening in diabetes (adjusted performance of 82.7% vs 71.7% by year 3, P < .001). Pilot participation was not associated with statistically significant changes in utilization or costs of care. Pilot practices accumulated average bonuses of $92 000 per primary care physician during the 3-year intervention.

Conclusions and Relevance:  A multipayer medical home pilot, in which participating practices adopted new structural capabilities and received NCQA certification, was associated with limited improvements in quality and was not associated with reductions in utilization of hospital, emergency department, or ambulatory care services or total costs over 3 years. These findings suggest that medical home interventions may need further refinement.



The Medical Home’s Impact on Cost & Quality: An Annual Update of the Evidence, 2012-2013

By Marci Nielsen, PhD, MPH, J. Nwando Olayiwola, MD, MPH Paul Grundy, MD, MPH, Kevin Grumbach, MD
Patient-Centered Primary Care Collaborative, January 2014

A summary of key points from this year’s report include:

1.  PCMH (Patient-Centered Medical Home) studies continue to demonstrate impressive improvements across a broad range of categories including: cost, utilization, population health, prevention, access to care, and patient satisfaction, while a gap still exists in reporting impact on clinician satisfaction.

2.  The PCMH continues to play a role in strengthening the larger health care system, specifically Accountable Care Organizations and the emerging medical neighborhood model.

3.  Significant payment reforms are incorporating the PCMH and its key attributes.

Although the evidence is early from an academic perspective, and this report does not represent a formal peer-reviewed meta-analysis of the literature, the expanding body of research provided here suggests that when fully transformed primary care practices have embraced the PCMH model of care, we find a number of consistent, positive outcomes.


Imagine doing away with all primary care professionals. Patients would select a specialist depending on their specific presenting symptoms: an otolaryngologist for a cold, a surgeon for a minor laceration, a neurologist for a headache, or a gastroenterologist for an acute diarrhea. Of course, that’s ridiculous. Primary care is not a concept that we have to sell to the public. Virtually everyone accepts it as a given.

So what is the Patient-Centered Medical Home (PCMH) and how does it differ from primary care? This RAND study published in the current issue of JAMA provides enough information that we can say that, for practical purposes, there is no difference.

The primary care practices studied by RAND received a stamp of approval from the National Committee for Quality Assurance (NCQA) and received bonuses for accomplishing that goal. Other than that, when compared to similar practices, they proved to be slightly better on only one of eleven quality measures and showed no reductions in utilization of hospital, emergency department, or ambulatory care services or in total costs over the 3 years of the study.

Various commentaries on this study have suggested that the reason that the study group did not do better was that the PCMH is more appropriate for people with complex, chronic problems. Only then would we expect to see improved outcomes. Really? If this effort to reinforce our primary care infrastructure is to be designed to take care of the sickest patents only, then where do the relatively healthy go? Directly to the specialists?

It has also been speculated that the practices volunteering for the study were already high-performing practices and thus did not have much room for further improvement. If that were the case, then why did the control practices do just as well?

Rather than criticizing the disappointing performance of the NCQA-recognized primary care practices, we should acknowledge that the comparison practices were providing the same efficiency and quality of care that was being provided by these selected practices. Although some might quibble with the terminology, our primary care practices are already functioning as patient-centered medical homes!

It is true that we need to reinforce primary care. The latest report from the Patient-Centered Primary Care Collaborative suggests that we can strengthen primary care, though the improvements that they report have not been subjected to “a formal peer-reviewed meta-analysis of the literature.” But more important, the reinforcement that we urgently need is to expand the primary care infrastructure, both geographically to provide better access, and through the greater use of non-physician primary care professionals, especially nurse practitioners.

Another interesting observation about this RAND study is that it was conducted using our multi-payer system – a system well documented to be inefficient, and one that is driven more by business interests rather than patient-service interests. Although we need more than just a single payer system to improve our primary care infrastructure, it would be a gigantic and crucially important first step in establishing a single public system that would enable further improvements in primary care, where patients come first.

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