PNHP

Why Obamacare can’t lower costs

Why Obamacare can’t lower costs

By Kip Sullivan, J.D.
Truthdig, May 9, 2014

President Obama and the Democratic Party dug themselves into a deep hole by claiming the Affordable Care Act would cut the nation’s health care costs when in fact it will raise them. It’s the gift that will keep on giving to opponents of the law.

The ACA cannot cut costs because its proponents subscribed to the wrong diagnosis of the U.S. health care crisis. They accepted the conventional wisdom that overuse of health care services is the most important reason why per capita health care costs are double those of the rest of the industrialized world, and that overuse is caused by two chronic failings among American doctors: They routinely order services patients do not need and fail to provide them with obviously beneficial preventive ones that would keep them healthy and minimize later need for medical interventions.

This diagnosis is wrong. First, underuse is far more common than overuse, even among the insured. To cite one example, 80 percent of insured Americans showing telltale symptoms, such as shortness of breath, do not see a doctor. Second, preventive services usually raise spending because they cost more to supply than they save.

Predictably enough, the mistaken “overuse” diagnosis led ACA proponents to the wrong solution, namely, that doctors can be forced or induced to stop ordering unnecessary services and provide more preventive services if they are subjected to more control by insurance companies. But the premises upon which this solution is based are also false. It is not true that the methods that the insurance industry uses to control doctors are so precise that they reduce overuse without aggravating underuse. It is also not true that the insurance industry’s methods are so inexpensive compared with the savings due to reduced overuse that, on balance, costs go down.

The ACA’s failure to control costs might not have mattered if we were still in the 1940s or ’50s, when health care spending absorbed 4 or 5 percent of our national income. But it is 2014. Health care spending now eats up 17 percent of our income. Since the 1970s, observers across the political spectrum have agreed that America will never achieve and maintain a substantial reduction in our uninsured rate, never mind universal coverage, unless we reduce the cost of our health care system. As a candidate and as president, Barack Obama made it clear he understood that.

He made that clear, for example, in response to a question put to him by a woman at a town hall meeting in New Mexico in May 2009. The woman asked why “single payer has been taken off the plate.” Obama prefaced his response by emphasizing the importance of cost containment. “If we simply insured everyone under the current system we couldn’t afford it,” he said. “We’d go broke. We’ve gotta drive down costs.”

But in the rest of his reply, Obama made it clear he had no idea how to reduce health care spending. He said he didn’t support a single-payer system because it was “too disruptive,” and then went on to say there were other ways to cut costs that didn’t require the disruption allegedly caused by single payer. He characterized these other ways as “simple things we can do that will save money,” as if these other ways were as obvious as the nose on your face. He mentioned three examples of these “simple things”: “prevention and wellness programs,” “reimbursing doctors not just for treating people after they get sick but for helping people stay well,” and information technology to reduce “error rates” in physician decision making. 

The advisers that Obama selected also revealed his belief in the overuse diagnosis and the mantra that keeping people healthy is the solution to overuse. Tom Daschle (Obama’s first choice for Health and Human Services secretary), Peter Orszag (Obama’s budget director), and Ezekiel Emanuel and Nancy-Ann DeParle (his choices for health policy advisers within the White House) were all proponents of the overuse diagnosis and the prevention mantra. Orszag, perhaps the most influential of Obama’s advisers, once said, “Nearly 30 percent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas.”

Similarly, Obama’s enthusiastic endorsement of an article in the June 1, 2009, New Yorker by Atul Gawande revealed his firm belief in the overuse diagnosis. The article, entitled “The Cost Conundrum,” alleged that “across-the-board overuse of medicine” explains America’s high health care costs. The New York Times reported that Obama brought Gawande’s article into a meeting with senators and said, “This is what we’ve got to fix.”

To sum up, although Obama accepted the dictum that universal coverage in America cannot be achieved without cost containment, his thinking about how to cut costs was defective.

Let us consider first the evidence on overuse. Overuse does exist. The overuse of antibiotics is a good example. But underuse is rampant, and not merely among the uninsured, but among the insured as well, and not just with respect to inexpensive preventive services, but to expensive procedures like heart surgery. Here are some examples of underuse taken from papers published in the peer-reviewed literature. Note that the subjects of these studies all had insurance.

Eight in 10 insured Americans who suffer serious symptoms such as unexplained loss of consciousness, unexplained bleeding, or shortness of breath from climbing a flight of stairs do not see a doctor. Six in 10 seniors insured by Medicare who have been told they need gall bladder surgery don’t get it done. Half of all insured Americans who should have an angiogram to detect blocked coronary arteries don’t get one, and one-fourth of those who do have an angiogram that indicates they have dangerously blocked arteries do not undergo surgery to treat the blockages. Half of all insured people with high blood pressure are not being treated for it.

According to the best study of the rates of both under- and overuse (a 2003 paper in The New England Journal of Medicine), underuse occurs at about four times the rate of overuse – 46 percent versus 11 percent. Here is how the authors summarized their findings: “Underuse of care was a greater problem than overuse. [P]atients failed to receive recommended care about 46 percent of the time, compared with 11 percent of the time when they received care that was not recommended and potentially harmful.”

Once you realize underuse is far more serious than overuse, the claim that reducing overuse can cut costs loses its seductiveness. The question naturally arises, if our goal is to lower costs through better health, how do we improve the overall health of the populace while leaving all that underuse untouched? The logical answer is we can’t (and the moral answer is we shouldn’t). And if we decide we must eliminate or reduce underuse to improve health, how do we do that without spending a lot more money to provide the underused services? The answer is we can’t eliminate or even reduce underuse without spending a lot more money.

The inaccuracy of Obama’s and the establishment’s overuse diagnosis is compounded by the inaccuracy of their claim that prevention, such as smoking cessation treatment and mammograms, must inevitably lead to lower costs. It just isn’t true. A review of the literature on this issue published in The New England Journal of Medicine by Joshua T. Cohen et al. concluded, “Although some preventive services do save money, the vast majority reviewed in the health economics literature do not.”

The reason preventive services generally don’t save money is threefold. First, the preventive services cost money and have to be administered to millions of patients in order to prevent disease in a few of them. Second, like all medical services, preventive services are not 100 percent effective. Flu shots, for example, are effective in about half the people who receive them. Third, some preventive services turn up incipient diseases that require treatment. Colonoscopies and mammograms are examples. If they reveal cancer, patients receive surgery, chemotherapy and radiation, all of which in turn have side effects that can trigger more treatment.

Scholars have reached the same conclusion about a close cousin of prevention known as “disease management.” Whereas prevention aims to avert disease before it starts, disease management aims to prevent chronic diseases such as diabetes from getting worse. Numerous reviews of the literature have reported that most chronic diseases are so resistant to treatment that the savings achieved from better treatment of those diseases (usually in the form of reduced hospitalizations) are swamped by the cost of the additional treatment.

There are exceptions to this rule that prevention and disease management cannot save money. The insurance industry and its allies in business and academia love to talk about these exceptions as if they were typical examples of what prevention and disease management can do. Do not be fooled. They are exceptions to the rule.

Contrary to the conventional wisdom that seduced Obama and proponents of the ACA, the insurance industry’s methods are too crude to reduce overuse without aggravating underuse, and the industry has no secret formula for making patients healthier without spending more money. The industry’s methods for reducing overuse and making patients healthier fall into two categories: financial incentives, and direct interference in doctor-patient decision making.

The most commonly used financial incentive is known as “pay for performance” (P4P). Doctors are paid bonuses if they score well on report cards that purport to measure a tiny proportion of all the activities doctors engage in during the course of a day’s work. For example: the percent of diabetics who receive an eye exam once a year. The most commonly used method of interfering in doctor-patient decision making is “utilization review,” which means someone at the insurance company has to approve a physician’s decision, such as whether to hospitalize a patient or whether a patient must try a cheaper drug first before the doctor can prescribe the drug the physician and patient would choose if the decision were left up to them. But P4P and utilization review are far too crude to reduce overuse without increasing underuse. P4P, for example, cannot accurately measure which patients “belong” to which doctors, and how much of a bad “grade” is attributable to the patient’s health or income and how much is due to the doctor. Moreover, P4P induces “teaching to the test,” that is, it encourages overworked doctors and nurses to shift resources away from patients whose care is not being measured to those whose care is being measured, thereby aggravating underuse for the unmeasured patients.

Perhaps the single best evidence of the insurance industry’s inability to cut costs is its performance within Medicare, the nation’s program for the elderly and the disabled enacted in 1965. Although Congress established Medicare precisely because the insurance industry was avoiding the elderly, lawmakers have over the years (beginning in 1972) allowed the insurance industry to stick its nose further and further into the Medicare program. Congress bought the industry’s claim that its usurpation of physician-patient authority would somehow lead to less overuse and lower Medicare costs. Today 30 percent of all Medicare beneficiaries are insured through the so-called Medicare Advantage program, the privatized branch of Medicare.

But Medicare Advantage is raising, not lowering, Medicare’s total costs. According to the latest report from the Medicare Payment Advisory Commission, a panel established by Congress to prepare recommendations on how to improve Medicare, Medicare Advantage increases costs per enrollee by at least 4 percent compared with costs under the traditional program, and probably more (other estimates indicate the Medicare Advantage program raises costs much more than 4 percent). The reason for the uncertainty is that Medicare Advantage insurers “upcode” far more aggressively than do doctors treating patients under the traditional Medicare program. “Upcoding” means the insurance industry tells Medicare its enrollees are sicker than they really are in order to induce Medicare to pay them more.

Medicare’s experience with privatized insurance is a harbinger of what the country can expect from the ACA – more insurance industry control over doctors and hospitals, higher administrative costs, an aggravation of the underuse problem, and higher expenditures on health care. How soon will Obama and the Democrats figure this out? Again, Medicare suggests an answer. The superior performance of the traditional Medicare program over Medicare Advantage should long ago have caused Congress to terminate the Medicare Advantage program. But Congress has continued wasting taxpayer dollars on Medicare Advantage insurers for decades despite receiving numerous warnings from Medpac and other government agencies.

Why is that? The short answer is the insurance industry has the power to propagate the myths discussed in this article – overuse is the main problem, prevention will save money, and it has a secret sauce for reducing spending without aggravating underuse – and our political leaders, in the face of that power, are willfully gullible, gutless or both.

Kip Sullivan is an attorney, activist and writer whose work has appeared in The New York Times, The Nation, The New England Journal of Medicine and the Los Angeles Times.

http://www.truthdig.com/report/item/why_obamacare_cant_lower_costs_20140509#

First Million-Dollar Drug Near After Prices Double on Dozens of Treatments

By Robert Langreth
Bloomberg News, April 30, 2014

Earl Harford, a retired professor, recently bought a month’s worth of the pills he needs to keep his leukemia at bay. The cost: $7,676, or three times more than when he first began taking the pills in 2001. Over the years, he has paid more than $140,000 from his retirement savings to cover his share of the drug’s price.

“People with this condition are being taken advantage of by the pharmaceutical industry,” said Harford, 84, of Tucson, Arizona. “They haven’t improved the drug; they haven’t done anything but keep manufacturing it. How do they justify it?”

As the pharmaceutical industry, led by Pfizer Inc.’s proposed $100 billion takeover of AstraZeneca Plc, is in the throes of the greatest period of consolidation in a decade, one reality remains unchanged: Drug prices keep defying the law of gravity.

Since 2007, the cost of brand-name medicines has surged, with prices doubling for dozens of established drugs that target everything from multiple sclerosis to cancer, blood pressure and even erections, according to an analysis conducted for Bloomberg News. While the consumer price index rose just 12 percent in the period, one diabetes drug quadrupled in price and another rose by 160 percent, according to the analysis by Los-Angeles based DRX, a provider of comparison software for health plans.

Starting prices for new drugs are escalating as well. Today, a cholesterol-lowering treatment for certain rare cases costs $311,000 a year and a cystic fibrosis medicine — developed partly with funding from a charity — costs $300,000 annually. Fifteen cancer drugs introduced in the last five years cost more than $10,000 a month, according to data from Memorial Sloan Kettering Cancer Center.

Analysts, meanwhile, predict the first $1 million drug treatment may be just around the corner.

Pricing Power

The recent wave of acquisitions may push prices even higher, suggests Robert Kemp, an economist at the University of Louisiana at Monroe. The more drugs a company has in a specific therapeutic area, he said, the more ability it may have to maintain higher prices when negotiating with payers.

[The price of 73 drug brands increased 75 percent since 2007. See the data. Source: DRX; Graphic: Bloomberg Visual Data]

“In general, concentration has been shown to lead to higher prices in most industries,” Kemp said in a telephone interview. “That’s just basic economics.”

Desperation is one driver for the increases, with drugmakers raising prices on products that remain under patent to offset sales dropped from blockbusters that have lost patent protection. Opportunity is another, as companies with older drugs boost prices when rivals show up, either to match the price of the newer drug or to make up for lost prescriptions.

Generic Drugs

While generic drugs pushed by insurers and the government now make up 86 percent of all medicines used in the U.S., that hasn’t reduced total spending on prescription medicines. In 2012, Americans spent $263 billion, or 11 percent more than the $236 billion spent in 2007, according to U.S. government data.

“We have been consistently noticing that as manufacturers near the end of their product’s life cycle, they are seeking larger price hikes than they previously did,” said Sharon Frazee, vice president for research at Express Scripts Holding Co., one of the country’s largest pharmacy benefit managers.

Last year, increases in prices for existing branded prescription drugs accounted for $20 billion of the industry’s 2013 sales growth, offsetting $19.3 billion in revenue declines due to patent expirations, according to the IMS Institute for Healthcare Informatics. Discounts and rebates counteracted some of the price increases, according to the report.

Spending ‘In Line’

Drug spending growth is “in line” with other medical spending, said Lori Reilly, executive vice president for policy at Pharmaceutical Research and Manufacturers of America, or PhRMA, an industry association. When generic and brand-name drugs are put together, drug price increases have been slower than the growth of other health-care prices, she said.

“You have to look at the significant contribution that many of these medicines make to improving outcomes” and the fact that revenue from existing brand name drugs help fund new drugs still in testing, she said.

The downside is financial strain on patients. “Every day in my clinic there are patients who start discussing they can’t afford this drug or that drug” because it costs too much, said Hagop Kantarjian, a leukemia doctor at M.D. Anderson Cancer Center in Houston, who wrote an article in the medical journal Blood in which a group of 100 hematology doctors protested the “unsustainable” costs of leukemia drugs.

In some cases, insurers and pharmacy benefit managers are pushing back, by forcing some medicines onto reimbursement ledges that require patients to pick up more of their cost. Doctors, meanwhile, are for the first time exploring ways to better educate patients on the gains and costs they can expect from the drugs they prescribe.

‘Cost Effectiveness’

Last month, Bloomberg News reported that the world’s largest organization of cancer doctors, the American Society of Clinical Oncology, was working on an algorithm for rating the cost effectiveness of expensive oncology drugs, and will urge physicians to use the system to discuss the costs with their patients.

Numerous drugmakers had multiple drugs whose price rose at least 75 percent in the period analyzed by DRX, including Merck & Co., Novartis AG, and Eli Lilly & Co. Wholesale prices in the U.S. for some doses of nine drugs sold by New York-based Pfizer Inc. rose more than 75 percent since 2007, DRX found. That includes a former top-seller, the cholesterol medicine Lipitor which lost U.S. patent protection in 2011.

‘Necessary Incentives’

“We believe our prices reflect the value of our medicines and provide the necessary incentives for ongoing R&D investments,” said Andrew Topen, a Pfizer spokesman, in an e-mail. “Drug prices reflect many factors such as development risk, the ever-increasing cost of doing business, and their value to the health system.”

Additionally, Topen wrote that the list price doesn’t reflect discounts to government, managed care organizations, and other commercial health plans.

The economics of prescription drugs are unlike other markets. Patents protect against competition by copycat drugs for years and the U.S. Congress forbids one of the biggest buyers of medicines, Medicare, the U.S. health program for the elderly, from negotiating prices with drug companies directly.

The result: Drug price inflation “is about as fast as it has ever been for as long as it has ever been,” said Richard Evans, an analyst at SSR Health in Montclair, NJ.

‘Dirty Secrets’

How drug companies price medicines “is one of the industry’s dirty secrets,” said Bernard Munos, a former Eli Lilly executive who founded InnoThink Center for Research in Biomedical Innovation, an Indianapolis consulting firm. “Everyone is engaging in extreme prices because they can get away with it.”

The revenue from higher prices has helped companies hit by steep declines as patents ended on blockbusters, like Lipitor. Patients have also gained from important new treatments for diseases such as multiple sclerosis, cystic fibrosis and rare forms of cancer — including diseases that at one time were neglected because the patient populations were viewed as too small to be profitable.

The DRX survey examined average wholesale price, a benchmark based on wholesaler list prices that doesn’t include discounts negotiated by health plans. It is roughly equivalent to a sticker price a person might pay at a pharmacy if he didn’t have insurance, said Jim Yocum, executive vice president for DRX.

Negotiated Prices

Big health plans often negotiate prices that are 15 percent to 20 percent less than the wholesale price, he said.

Representatives for many drug companies, when asked for comment by Bloomberg News, said they don’t set the wholesale price and therefore couldn’t confirm the DRX numbers. Average wholesale price, though, is appropriate for comparing price rises as changes generally reflect real increases, Yocum said.

Prices for whole categories sometimes increase when expensive new drugs enter a market. It makes business sense for brand companies to match one another’s higher prices and price increases rather than to try to compete on cost, Kemp, the health economist, said.

Additionally, as products lose revenue because of competition, drugmakers will sometimes raise prices to make up the difference. For example, prescriptions for Biogen Idec Inc.’s multiple sclerosis drug Avonex have slowly declined in the U.S. in recent years because of competition. At the same time Avonex’s wholesale price has risen, growing by 147 percent to $1,363.50 per injection this year from $552.19 in late 2007, according to data from DRX. After discounts, the DRX analysis found a typical health plan pays around $1,177 per injection.

Price Increases

Thanks in significant part to price increases, Avonex’s U.S. sales grew 75 percent since 2007, reaching $1.9 billion last year. Avonex’s price “is comparable to other competing injectable drugs, if not a little lower,” said Kate Niazi-Sai, a spokeswoman for Biogen. The company invests in research in difficult neurologic diseases, she said.

Insulin products for diabetes had some of the bigger price increases, the survey found. The marketed is dominated by three companies. Since late 2007, U.S. prices have jumped at least 160 percent for various forms of Lilly’s Humulin, according to the DRX analysis.

When told that one concentrated form of Humulin more than quadrupled in price since 2007, a Lilly spokesman said it was equalizing the per-unit prices for the concentrated forms with the less concentrated forms.

During the same period, prices for Lantus, a long-acting form of insulin from Sanofi, have increased as much as 160 percent in the U.S. for one form, and 97 percent for another.

‘Market Conditions’

Sanofi “considers a wide variety of market conditions” in determining U.S. prices, said Mary Kathryn Steel, a spokeswoman for the company, in an e-mail. Some recent price increases have helped align the cost of Lantus within the market for other competing drugs, Sanofi Chief Executive Officer Chris Viehbacher said in a Feb. 10 interview.

Even cancer pills that were already among the most expensive medicines have experienced rapid price hikes.

Novartis AG’s Gleevec drug for chronic myeloid leukemia — the drug Earl Harford takes — cost $118.78 for a single 400 milligram pill in late 2007. This year, that same pill costs $306.43, according to the DRX analysis of average wholesale prices. After discounts, the typical health plan still pays around $264 per pill, according to the DRX analysis.

‘Competitively Priced’

Gleevec “remains among the most competitively priced drugs in its class,” said Eric Althoff, a spokesman for Novartis, in an e-mailed statement. Most patients on the drug pay less than $100 per month out of pocket, he said. Novartis has assistance programs for patients who cannot afford treatment, he said.

Some doses of another leukemia drug, Sprycel from Bristol-Myers Squibb Co., also doubled in price during that period, while prices for lung cancer drug Tarceva, from Roche Holding AG, rose 90 percent during that time, according to the DRX survey. Another commonly used dose of Sprycel rose 68 percent since 2008, DRX found.

Bristol-Myers prices its drugs according to the value they deliver to patients, and the investment required to support ongoing research, said Laura Hortas, a company spokeswoman, in an e-mail. Charlotte Arnold, a spokeswoman for Roche, said pricing is “based on many factors” including how well the medicine works and how much money the company needs to invest to keep discovering new medicines.

To contact the reporter on this story: Robert Langreth in New York at rlangreth@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Andrew Pollack

http://www.bloomberg.com/news/2014-04-30/drug-prices-defy-gravity-doubling-for-dozens-of-products.html

High cancer drug prices

High Cancer Drug Prices in the United States: Reasons and Proposed Solutions

By Hagop Kantarjian, MD, David Steensma, MD, Judit Rius Sanjuan, Adam Elshaug, MPH, PhD and Donald Light, PhD
Journal of Oncology Practice, May 6, 2014

The increase in cancer drug prices in the last 15 years has many contributing factors and is harming our patients and our health care system. It represents to many cancer experts a crossing of a moral line between reasonable profits and profiteering, in a situation involving a human catastrophe: patients who have developed cancer, and who may die because they cannot afford the treatment. With typical out-of-pocket expenses of 20% to 30%, the financial burden of cancer treatment would be $20,000 to 30,000 a year, nearly half of the average annual household income in the United States. Many patients (estimated 10% to 20%) may decide not to take the treatment or may compromise significantly on the treatment plan. This difficult situation poses three relevant questions: (1) Are cancer drug prices too high? (2) Are they hurting patients and our health care system? and (3) Can we do something about it? The answer to each is affirmative. It is also our obligation as cancer doctors to keep patients from “harm and injustice.” If high prices make drugs unaffordable and inaccessible, thus causing harm, then we should voice our concerns and advocate for solutions.

What would be a just price for a cancer drug? A simple answer would be a price that recognizes that most risks and costs of development are borne by the public through tax breaks and public funding, so that cancer drugs are affordable. The prices would maintain reasonable profits to drug companies but remain fair, accessible and affordable to patients and to the health care system.

What are some potential solutions? The United States is on the precipice of great change in how we measure value in health care. In a recent survey of US oncologists, 80% favored more use of cost-effectiveness data in coverage decisions. In 2011, the American College of Physicians outlined the position that “There should be a transparent and publicly acceptable process for making health resource allocation decisions with a focus on medical efficacy, clinical effectiveness, and need, with consideration of cost based on the best available medical evidence.” Several solutions could help reduce cancer drug prices. Reviewing and reducing the research bureaucracy and burdens could eliminate unnecessary steps that increase cost, delay timelines, and shorten drug patent times. Allowing Medicare to negotiate drug prices, eliminating pay-for-delay strategies; allowing importation of drugs from abroad for personal use; and allowing PCORI and other cancer advocacy groups, experts, or committees to consider cost in their recommendations, would all enhance the capacity of market forces to produce more reasonable cancer drug prices. Professional societies representing cancer specialists and advocating for cancer patients should be involved in reducing the hype around new cancer drugs that do not have a major impact on patient outcomes. They could also develop pathways and guidelines that incorporate estimates of a drug “value” (benefit, toxicities, cost, etc). A broad-based group representing cancer experts, PCORI, patients and their advocates, regulatory bodies, and pharmaceutical and insurance companies could review the new drugs for their cost and benefit after US Food and Drug Administration approval, and formulate cancer treatment pathways that incorporate the costs and benefits of cancer drugs. Such structures are in place in many other countries. These include, for instance, the Pharmaceutical Benefits Scheme in Australia, the Pharmaceutical Market Restructuring Act in Germany (AMNOG; affects prices in 31 countries), and others (Canada, United Kingdom, New Zealand, France, etc). These structures have been documented to result in more reasonable cancer drug prices (based on expected benefits), which improves affordability and promotes high levels of access for the population. For manufacturers, this creates predictable markets with strong drug penetration, and ultimately generates better profits to drug companies.

http://jop.ascopubs.org/content/early/2014/05/06/JOP.2013.001351.abstract

As this article indicates, there are many things that could be done to reduce prices of, not just cancer drugs, but all new drugs that enter the market with exorbitant pricing. Just think how much easier this would be under a single payer system.

Black, Puerto Rican, Hispanic and Asian Caucus advocate for single payer health care

By Matthew Dondiego
The Legislative Gazette (Albany, N.Y.), May 7, 2014

During a rally Wednesday on the Capitol’s Million Dollar Staircase in support of single-payer health care reform, the state’s Black, Puerto Rican, Hispanic and Asian Caucus formally announced its support for the New York Health bill.

The bill (S.2078A/A.5389) would implement a universal, single-payer health care system, accessible to all New Yorkers, free of premiums, deductibles and co-pays, regardless of a person’s income — health coverage would be publicly funded.

Federal funding for state health programs such as Medicare, Medicaid, Family Health and Child Health plus would be pooled together, along with state revenue, to be controlled by a newly established New York Health Trust Fund, according to language in the bill.

“A single-payer program will give us better care, more effective care at a lower cost and a cost that is more fairly distributed,” said Dick Gottfried, chair of the Assembly Health Committee and the Assembly sponsor of the bill. “Health care is a fundamental human right, a public good; it is not a commodity like a nicer car or fancier clothing.”

Gottfried, a liberal-leaning Manhattan Democrat, said he was “delighted” to receive the support of the caucus.

Advocates for health care reform say that while the Affordable Care Act, or Obamacare, has improved the nation’s health care system, minority and underserved communities are facing a health care crisis.

“If someone has to choose between milk and getting health care, rent and health care, the crisis is there,” said Anthony Feliciano, director of the Commission on the Public’s Health System. “The only way you can address health disparities is trying to get everyone insured, everyone, regardless of their status.”

Sen. Bill Perkins, the Senate sponsor of the bill, proclaimed, “Your health is your wealth” while calling on Gov. Andrew Cuomo to throw his support behind the movement.

One obstacle to enacting a single payer health care system, Perkins said, was the governor’s “benign neglect” of the issue and noted the governor’s political weight would help the movement reform the state’s health care network.

The issued has recently garnered impressive endorsements from a number of powerful unions such as the health care workers union 1199SEIU, a political powerhouse in the state; as well as 32BJ SEIU; the New York State Nurses Association; the Retail, Wholesale and Department Store Union; and the Communications Workers of America, among others.

Single-payer health care reform was introduced and passed in 1992, although failing to become enacted into law, the issue as not been introduced in either house since then.

http://www.legislativegazette.com/Articles-Top-Stories-c-2014-05-07-87858.113122-Black-Puerto-Rican-Hispanic-and-Asian-Caucus-advocate-for-single-payer-health-care.html

PNHP note: The Albany Times-Union has published the following collection of photos from the May 6 lobby day: http://www.timesunion.com/local/article/Photos-Single-payer-health-plan-5458475.php#photo-6268343

Economist touts savings of single-payer health care

By Bennett Hall
Corvallis (Ore) Gazette-Times, May 13, 2014

Gerald Friedman is an economist, and when he crunches the numbers on health care, he comes up with what he believes is an inescapable conclusion: a single-payer system is the way to go.

Based on his analysis, he believes that extending coverage to all U.S. citizens under Medicare, the government-backed insurance plan for Americans 65 and over, would generate well over $500 billion in cost savings the first year and about $2 trillion over a decade.

“You cannot come up with an economic policy that would have such a large, immediate effect on the U.S. economy,” said Friedman, a professor of economics at the University of Massachusetts.

Friedman will be in Corvallis on Friday and will discuss his views in a pair of free, public talks (see box). His visit is part of a weeklong Oregon tour, sponsored by Health Care for All-Oregon, that also includes appearances in Portland, Pendleton, La Grande, Eugene, Bend and Ashland.

“It’s an economist’s confirmation of what we have been saying — that it’s possible to cover everybody and do it at less cost,” said Mike Huntington, a retired Corvallis physician who runs the speakers’ bureau for the statewide health care reform group.

Much of the savings, Friedman says, would come from eliminating unnecessary layers of administration and lowering prescription costs through bulk purchasing of drugs. At the same time, putting all Americans in a single risk pool would shift some of the cost burden off the sick and the poor and onto the healthy and wealthy, who can afford to pay more.

“Many American hospitals have more people doing billing than they have beds,” he said.

“It’s a win-win-win for everybody except the insurance companies and the pharmaceutical companies.”

Friedman, who has served as a consultant to single-payer health care campaigns in several states, estimates that Oregon could save $8.4 billion in health care costs if it implemented such a system next year. Even with a projected increase in utilization expenses of $2 billion, that’s still a net savings of more than $6 billion.

The new federal health insurance law that came online this year is making some headway, he said, but he thinks those gains will be short-lived.

“There will still be 20 million people left uninsured under the Affordable Care Act, and millions more will be left underinsured,” Friedman said. “And the Affordable Care Act does very little to control health care costs.”

Eventually, he believes, spiraling cost increases will spur Americans to demand that Congress take action and implement some sort of single-payer system.

“In five years it will be clear that the Affordable Care Act is not fulfilling its goals,” Friedman said. “Push will come to shove.”

Friedman’s itinerary

Economist Gerald Friedman will give two free talks on the U.S. health care system in Corvallis on Friday, followed by an evening wine and cheese reception to benefit Mid-Valley Health Care Advocates. The schedule:

  • “Best Health Care? A U.S.-International Comparison,” noon, Room 115, Oregon State University Hallie Ford Center, Southwest 26th Street and Campus Way
  • “Can We Afford Health Care for All?,” 7 p.m., Dennis Hall, First Presbyterian Church, 114 S.W. Eighth St.
  • Reception, Dennis Hall, First Presbyterian Church, 114 S.W. Eighth St., $15, advance tickets available at Grass Roots Books & Music, Winestyles and mvhca.org

http://www.gazettetimes.com/news/local/economist-touts-savings-of-single-payer-health-care/article_c4bb5328-d7dd-11e3-ad40-001a4bcf887a.html?comment_form=true

Price competition in establishing provider networks – a very weak tool

More Insured, but the Choices Are Narrowing

By Reed Abelson
The New York Times, May 12, 2014

In the midst of all the turmoil in health care these days, one thing is becoming clear: No matter what kind of health plan consumers choose, they will find fewer doctors and hospitals in their network — or pay much more for the privilege of going to any provider they want.

These so-called narrow networks, featuring limited groups of providers, have made a big entrance on the newly created state insurance exchanges, where they are a common feature in many of the plans. While the sizes of the networks vary considerably, many plans now exclude at least some large hospitals or doctors’ groups. Smaller networks are also becoming more common in health care coverage offered by employers and in private Medicare Advantage plans.

Insurers, ranging from national behemoths like WellPoint, UnitedHealth and Aetna to much smaller local carriers, are fully embracing the idea, saying narrower networks are essential to controlling costs and managing care.

“We have to break people away from the choice habit that everyone has,” said Marcus Merz, the chief executive of PreferredOne, an insurer in Golden Valley, Minn., that is owned by two health systems and a physician group.

Nonetheless, for people who are directly picking plans in the open markets, insurers say price is turning out to be critical. People “are weighing affordability and breadth of network,” said Karen Ignagni, the chief executive of America’s Health Insurance Plans, an industry trade group. “What we’re finding is individuals are experiencing a preference for affordability,” she said.

****

White House defends cost-containment efforts in health-care reform bills

By Shailagh Murray
The Washington Post, November 26, 2009

Critics of the Democratic bills point to cost control as a chief deficiency. Karen Ignagni, president of America’s Health Insurance Plans, said the Senate bill includes only “pilot programs and timid steps” to reform the health-care delivery system, “given the scope of the cost challenge the nation faces.”

Unless lawmakers institute changes across the entire system, Ignagni said in a statement Wednesday, “Health costs will continue to weigh down the economy and place a crushing burden on employers and families.”

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/25/AR2009112503474.html

Comment:

By Don McCanne, MD

During the health reform process, AHIP health insurance lobbyist Karen Ignagni stated repeatedly that health insurance is not going to be affordable unless lawmakers do something to control health care costs. So is health care cost containment a function of the government or a function of private insurers? Let see how this is playing out.

According to Ignagni, in 2009 the Senate bill – the Affordable Care Act – contained only timid steps to control costs. It was clear that the government was not going to play any major role in controlling costs – certainly not in regulating health care prices, as they do quite successfully in most other wealthy nations.

The public sector uses administered prices. The private sector depends more on price competition within the marketplace. Because the government did not act, the insurance industry has to depend on private market approaches, even though Kenneth Arrow had shown long ago that market dynamics do not work in health care.

In markets, price competition is an important tool. But in health care, only at the margin can price shopping be effective. The private insurers have been inserted as our price shopping intermediaries. They force hospitals and physicians to compete on price, and they then exclude from their plans those that fall short of the lowest bids. Even though they claim that they select their networks based on quality, it is the lower prices that allow them to keep their insurance premiums competitive.

This process is not new. Establishing plan networks with contracted payment rates was the most important innovation during the managed care revolution. That did slow temporarily the rate of increase in health care costs. What is new is that the plans are trying to drive much harder bargains with providers that want to be part of their now narrower networks. In response, hospitals and physicians are now consolidating in order to be “must have” providers that insurers need for their networks. Of course, that weakens the negotiating position of the insurers. So we are seeing a loss of choice of health care professionals and institutions in exchange for only very modest reductions in health insurance premiums.

More recently, Karen Ignagni is claiming that consumers are choosing “affordability” (lower premiums) over “breadth of network” (greater choice of providers). According to the industry, it is the patients who elect to go the cheap – a classic example of blaming the victim. Most people buying insurance are relatively healthy but are concerned about the very high premiums, so they will choose plans with lower premiums, often not even knowing which providers are in the networks. But that does not mean that they would prefer to give up access to physicians and hospitals whom they trust and where they believe that they could get the best care.

Thus we can have distorted price competition in the dysfunctional health care marketplace with the self-serving insurers functioning quite ineffectively as our price shopping intermediaries as they take away our choices in health care, or we can have a single government entity that uses administered pricing in a system that allows us free choices in health care and makes it affordable for all through progressive public funding. Price competition in establishing provider networks is a very weak tool to contain costs, and losing choices in health care is too great of a price to pay.

We do not have to choose between affordability and breadth of network. We can make health care affordable for all of us while getting rid of the insurers and their restrictive networks, that is if we’re willing to quit playing the victim role.

Price competition in establishing provider networks – a very weak tool

More Insured, but the Choices Are Narrowing

By Reed Abelson
The New York Times, May 12, 2014

In the midst of all the turmoil in health care these days, one thing is becoming clear: No matter what kind of health plan consumers choose, they will find fewer doctors and hospitals in their network — or pay much more for the privilege of going to any provider they want.

These so-called narrow networks, featuring limited groups of providers, have made a big entrance on the newly created state insurance exchanges, where they are a common feature in many of the plans. While the sizes of the networks vary considerably, many plans now exclude at least some large hospitals or doctors’ groups. Smaller networks are also becoming more common in health care coverage offered by employers and in private Medicare Advantage plans.

Insurers, ranging from national behemoths like WellPoint, UnitedHealth and Aetna to much smaller local carriers, are fully embracing the idea, saying narrower networks are essential to controlling costs and managing care.

“We have to break people away from the choice habit that everyone has,” said Marcus Merz, the chief executive of PreferredOne, an insurer in Golden Valley, Minn., that is owned by two health systems and a physician group.

Nonetheless, for people who are directly picking plans in the open markets, insurers say price is turning out to be critical. People “are weighing affordability and breadth of network,” said Karen Ignagni, the chief executive of America’s Health Insurance Plans, an industry trade group. “What we’re finding is individuals are experiencing a preference for affordability,” she said.

http://www.nytimes.com/2014/05/13/business/more-insured-but-the-choices-…

****

White House defends cost-containment efforts in health-care reform bills

By Shailagh Murray
The Washington Post, November 26, 2009

Critics of the Democratic bills point to cost control as a chief deficiency. Karen Ignagni, president of America’s Health Insurance Plans, said the Senate bill includes only “pilot programs and timid steps” to reform the health-care delivery system, “given the scope of the cost challenge the nation faces.”

Unless lawmakers institute changes across the entire system, Ignagni said in a statement Wednesday, “Health costs will continue to weigh down the economy and place a crushing burden on employers and families.”

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/25/AR200911…

During the health reform process, AHIP health insurance lobbyist Karen Ignagni stated repeatedly that health insurance is not going to be affordable unless lawmakers do something to control health care costs. So is health care cost containment a function of the government or a function of private insurers? Let see how this is playing out.

According to Ignagni, in 2009 the Senate bill – the Affordable Care Act – contained only timid steps to control costs. It was clear that the government was not going to play any major role in controlling costs – certainly not in regulating health care prices, as they do quite successfully in most other wealthy nations.

The public sector uses administered prices. The private sector depends more on price competition within the marketplace. Because the government did not act, the insurance industry has to depend on private market approaches, even though Kenneth Arrow had shown long ago that market dynamics do not work in health care.

In markets, price competition is an important tool. But in health care, only at the margin can price shopping be effective. The private insurers have been inserted as our price shopping intermediaries. They force hospitals and physicians to compete on price, and they then exclude from their plans those that fall short of the lowest bids. Even though they claim that they select their networks based on quality, it is the lower prices that allow them to keep their insurance premiums competitive.

This process is not new. Establishing plan networks with contracted payment rates was the most important innovation during the managed care revolution. That did slow temporarily the rate of increase in health care costs. What is new is that the plans are trying to drive much harder bargains with providers that want to be part of their now narrower networks. In response, hospitals and physicians are now consolidating in order to be “must have” providers that insurers need for their networks. Of course, that weakens the negotiating position of the insurers. So we are seeing a loss of choice of health care professionals and institutions in exchange for only very modest reductions in health insurance premiums.

More recently, Karen Ignagni is claiming that consumers are choosing “affordability” (lower premiums) over “breadth of network” (greater choice of providers). According to the industry, it is the patients who elect to go the cheap – a classic example of blaming the victim. Most people buying insurance are relatively healthy but are concerned about the very high premiums, so they will choose plans with lower premiums, often not even knowing which providers are in the networks. But that does not mean that they would prefer to give up access to physicians and hospitals whom they trust and where they believe that they could get the best care.

Thus we can have distorted price competition in the dysfunctional health care marketplace with the self-serving insurers functioning quite ineffectively as our price shopping intermediaries as they take away our choices in health care, or we can have a single government entity that uses administered pricing in a system that allows us free choices in health care and makes it affordable for all through progressive public funding. Price competition in establishing provider networks is a very weak tool to contain costs, and losing choices in health care is too great of a price to pay.

We do not have to choose between affordability and breadth of network. We can make health care affordable for all of us while getting rid of the insurers and their restrictive networks, that is if we’re willing to quit playing the victim role.

Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending

Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending

By Laurence C. Baker, M. Kate Bundorf and Daniel P. Kessler
Health Affairs, May 2014

The share of US physician practices owned by hospitals more than doubled from 2002 to 2008. This trend toward vertical integration between hospitals and physicians means that more producers of complementary services that were once independent are now either commonly owned or related by contract.

Whether this trend has been good for consumers has been the subject of considerable debate. On the one hand, vertical integration has the potential to improve the quality and efficiency of care by reducing what are broadly described by economists as “transaction costs.” For example, closer ties between physicians and hospitals can improve communication across care settings and reduce wasteful duplication of diagnostic tests.

On the other hand, vertical integration may hurt consumers by allowing hospitals and physicians to raise prices. By employing or contracting with physicians, hospitals may increase their market power by amassing control over a larger bundle of services or by depriving their rivals of a source of or destination for referrals. In addition, vertical integration may increase physicians’ incentives to supply unnecessary treatments if such treatments are used as a vehicle to pay what are effectively kickbacks for inappropriate referrals.

Understanding how vertical integration of physicians and hospitals affects spending and the quality of care has become especially important in recent years. The Affordable Care Act creates incentives that are likely to intensify the historical trend toward vertical integration. The act rewards doctors and hospitals that join together in an accountable care organization (ACO) by making them eligible for cash bonuses from Medicare. In theory, ACOs affect only how providers relate to Medicare. However, most health policy analysts believe that in practice, these organizations will increase the extent to which doctors and hospitals bargain with private purchasers jointly instead of independently.

From the Discussion

Vertical integration can have both socially beneficial and socially harmful effects. There is almost universal agreement that greater coordination of care, especially between physicians and hospitals, would be in patients’ best interests. At the same time, health policy analysts have expressed the concern that integration can have unintended harmful consequences for consumers. According to economic theory, vertical integration has the potential to increase the market power of providers, especially hospitals, and to encourage physicians to supply inappropriate treatments by facilitating hospitals’ payments of kickbacks that would be illegal if they were made formally.

Our study had two key findings. First, in its tightest form, vertical integration appears to lead to statistically and economically significant increases in hospital prices and spending. This is consistent with the hypothesis that vertical integration increases hospitals’ market power. We found that a one-standard-deviation increase in the market share of hospitals that own physician practices was associated with significant increases in prices and spending of 2–3 percent. In comparison, a one-standard-deviation increase in the hospital Hirschman-Herfindahl index increased prices and spending by 4–6 percent.

Second, the consequences of looser forms of vertical integration were more benign and potentially socially beneficial. Increases in these forms of integration did not appear to increase prices or spending significantly and may even decrease hospital admission rates. This finding is consistent with the hypothesis that vertical integration can improve the coordination of care.

However, the effects on volume associated with these types of integration were small — so small that they did not generate a significant reduction in hospital spending. In addition, although our estimates of the effect of contractual integration on price were statistically indistinguishable from zero, the imprecision of our estimates limited our ability to confidently assess their true impact.

http://content.healthaffairs.org/content/33/5/756.abstract

Comment:

By Don McCanne, MD

An intent of the Affordable Care Act was to reduce health care spending through the establishment of more efficient integrated health systems, operating as accountable care organizations. The ultimate integration is for hospitals to assume ownership of physician practices. This study demonstrates that this form of vertical integration does not reduce prices and spending but rather increases them, likely through the anti-competitive effects of such consolidation. Looser forms of vertical integration (contracts rather than ownership) also failed to achieve a reduction in hospital spending.

One important aspect of this study that will likely escape the attention of the policy community is that they used data from Truven Analytics MarketScan – a data base of claims filed by privately insured people who obtained insurance through a participating employer. Thus the ineffectiveness in recovering through lower prices the efficiencies of the consolidated systems represents a failure of the private insurance industry, whether functioning as insurers or as administrators for self-insured employers.

So maybe vertically integrated systems, in which the hospitals own physician practices, have the market clout to prevent efficiency savings from being passed on to the purchasers of health care, but if we had a single payer financing system, our public stewards would ensure that we paid the right amount through administered pricing rather than being victim to unfairly leveraged market negotiations. We need to replace marketplace oligopolies with our own public monopsony – an improved Medicare for all.

Dr. David Himmelstein on ‘The Ed Show’

PNHP co-founder Dr. David Himmelstein appeared on MSNBC’s ‘The Ed Show’ on May 9, 2014 to discuss a study he co-authored that found that more than 7,100 deaths are likely from states’ rejection of the Medicaid expansion under the Affordable Care Act.

Dr. Himmelstein’s segment begins at the 9:58 mark. See the unofficial transcript of his comments in the excerpts below.

Transcript (excerpts)

Ed Schultz: I want to welcome Dr. David Himmelstein, public health professor at the City University of New York, and also with us tonight is E.J. Dionne, Washington Post columnist and MSNBC contributor. Doctor, it’s great to have you tonight, we’ll start with you. What’s your reaction to the response that Obamacare is getting across the country? Did you anticipate where we were in October that we would be where we are as a country right now here in May?

David Himmelstein: I think we’ve had more people sign up than we’d expected, and frankly we’ve been very disappointed that states are refusing to expand Medicaid, that the Republicans are blocking a Medicaid expansion that the federal government would pay 100 percent of, and denying 7.7 million Americans the coverage they need.

Schultz: In your survey [the Health Affairs Blog post on the health and financial harms of states opting-out of the Medicaid expansion], how accurate is it? How accurate is your research that this many people [7,000 – 17,000] could lose their lives because of not having access to this program?

Himmelstein: We used the latest and best medical research on how much lack of insurance leads to problems and the estimate is that about 2 people in every 1,000 will die each year because they don’t have health care coverage. And what that says is that the 7.7 million people who are being uninsured because the Republicans aren’t expanding Medicaid, that means 7,000, and as many as 17,000 deaths. We’re pretty confident in those numbers. The low side, frankly, is based on a study that my group published about 10 years back in the American Journal of Public Health. We’re pretty liberal, but a more conservative group said we were too conservative in that, that the 7,000 number is too low and that the 17,000 number is closer to the truth.
….

Schultz: Doctor, is there any way that Obamacare could be repealed? And I’m not looking at it from a political standpoint, but I’m looking at it, has the system gone so far and been implemented and affected so many people, it would be almost impossible to reverse it?

Himmelstein: I think it would be awfully hard to reverse, and I think that if anything there’s an appetite to go much further, to do a really thoroughgoing reform that we’d like to see – a single-payer reform, something I support and that 19,000 of my colleagues in Physicians for a National Health Program support. I think we need a Medicare-for-All kind of system, which would be even more efficient, better coverage, and do better for our nation than what we’ve got. But it’s going to be awfully hard to go backwards from here.

Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending

Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending

By Laurence C. Baker, M. Kate Bundorf and Daniel P. Kessler
Health Affairs, May 2014

The share of US physician practices owned by hospitals more than doubled from 2002 to 2008. This trend toward vertical integration between hospitals and physicians means that more producers of complementary services that were once independent are now either commonly owned or related by contract.

Whether this trend has been good for consumers has been the subject of considerable debate. On the one hand, vertical integration has the potential to improve the quality and efficiency of care by reducing what are broadly described by economists as “transaction costs.” For example, closer ties between physicians and hospitals can improve communication across care settings and reduce wasteful duplication of diagnostic tests.

On the other hand, vertical integration may hurt consumers by allowing hospitals and physicians to raise prices. By employing or contracting with physicians, hospitals may increase their market power by amassing control over a larger bundle of services or by depriving their rivals of a source of or destination for referrals. In addition, vertical integration may increase physicians’ incentives to supply unnecessary treatments if such treatments are used as a vehicle to pay what are effectively kickbacks for inappropriate referrals.

Understanding how vertical integration of physicians and hospitals affects spending and the quality of care has become especially important in recent years. The Affordable Care Act creates incentives that are likely to intensify the historical trend toward vertical integration. The act rewards doctors and hospitals that join together in an accountable care organization (ACO) by making them eligible for cash bonuses from Medicare. In theory, ACOs affect only how providers relate to Medicare. However, most health policy analysts believe that in practice, these organizations will increase the extent to which doctors and hospitals bargain with private purchasers jointly instead of independently.

From the Discussion

Vertical integration can have both socially beneficial and socially harmful effects. There is almost universal agreement that greater coordination of care, especially between physicians and hospitals, would be in patients’ best interests. At the same time, health policy analysts have expressed the concern that integration can have unintended harmful consequences for consumers. According to economic theory, vertical integration has the potential to increase the market power of providers, especially hospitals, and to encourage physicians to supply inappropriate treatments by facilitating hospitals’ payments of kickbacks that would be illegal if they were made formally.

Our study had two key findings. First, in its tightest form, vertical integration appears to lead to statistically and economically significant increases in hospital prices and spending. This is consistent with the hypothesis that vertical integration increases hospitals’ market power. We found that a one-standard-deviation increase in the market share of hospitals that own physician practices was associated with significant increases in prices and spending of 2–3 percent. In comparison, a one-standard-deviation increase in the hospital Hirschman-Herfindahl index increased prices and spending by 4–6 percent.

Second, the consequences of looser forms of vertical integration were more benign and potentially socially beneficial. Increases in these forms of integration did not appear to increase prices or spending significantly and may even decrease hospital admission rates. This finding is consistent with the hypothesis that vertical integration can improve the coordination of care.

However, the effects on volume associated with these types of integration were small — so small that they did not generate a significant reduction in hospital spending. In addition, although our estimates of the effect of contractual integration on price were statistically indistinguishable from zero, the imprecision of our estimates limited our ability to confidently assess their true impact.

http://content.healthaffairs.org/content/33/5/756.abstract

An intent of the Affordable Care Act was to reduce health care spending through the establishment of more efficient integrated health systems, operating as accountable care organizations. The ultimate integration is for hospitals to assume ownership of physician practices. This study demonstrates that this form of vertical integration does not reduce prices and spending but rather increases them, likely through the anti-competitive effects of such consolidation. Looser forms of vertical integration (contracts rather than ownership) also failed to achieve a reduction in hospital spending.

One important aspect of this study that will likely escape the attention of the policy community is that they used data from Truven Analytics MarketScan – a data base of claims filed by privately insured people who obtained insurance through a participating employer. Thus the ineffectiveness in recovering through lower prices the efficiencies of the consolidated systems represents a failure of the private insurance industry, whether functioning as insurers or as administrators for self-insured employers.

So maybe vertically integrated systems, in which the hospitals own physician practices, have the market clout to prevent efficiency savings from being passed on to the purchasers of health care, but if we had a single payer financing system, our public stewards would ensure that we paid the right amount through administered pricing rather than being victim to unfairly leveraged market negotiations. We need to replace marketplace oligopolies with our own public monopsony – an improved Medicare for all.

Should we pay for screening tests?

The Problem With Free Health Care

By H. Gilbert Welch
The New York Times, April 30, 2014

The Affordable Care Act does have its flaws. Here’s a big one: It favors screening over diagnosis.

While the distinction may seem arcane, it has real-world implications. Screening is what we offer to the well; it’s the effort to find abnormalities in those who do not have signs or symptoms of disease. Because screening is considered part of preventive care under the Affordable Care Act, it is provided at no charge.

Diagnosis is what we offer to those who do have signs or symptoms of disease. Because diagnosis is not preventive care, it is subject to deductibles and co-payments.

I wish money wasn’t such a powerful incentive in medical care. But the economists are right: Incentives matter. Right now they favor lower risk patients (those being screened) over higher risk ones (those with signs and symptoms).

They also encourage a feeding frenzy among providers to recategorize diagnostic testing as screening. Free screenings were seen as a way to get people through the door and ideally to find and address problems before they become more dangerous and expensive.

But in practice, it may not work this way. Some hospitals offer free screening knowing full well that the costs will be more than made up for by all the subsequent services required. More testing, false alarms and overdiagnosis are all part of screening. And if you make it free, patients are less likely to give proper consideration to these potential harms — not to mention the potential for a lot of out-of-pocket costs down the line.

Here’s the fix: Eliminate the incentive mismatch between screening and diagnosis. Treat them equally.

We need people to consider medical care carefully, and that’s what cost sharing is all about.

****

When Cost Deters Care

Letters, The New York Times, May 8, 2014

To the Editor:

H. Gilbert Welch is right to be concerned that patients will forgo diagnostic mammograms, colonoscopies and other kinds of care for serious conditions if they aren’t free, as “prevention” is under the Affordable Care Act (“The Problem With Free Health Care,” Op-Ed, May 1).

Studies show that even patients who need emergency care for a potentially serious problem will go without it if they are in a high-deductible health plan (although this increases their risk of subsequent hospitalization). And therein lies the problem. While cost sharing discourages overuse of medical care, it worsens a greater problem, that of underuse.

In an 11-nation survey by the Commonwealth Fund, more than a third (37 percent) of Americans reported not going to the doctor when sick or not filling a prescription because of cost, compared with a small percentage of people in Britain, Sweden and Norway. The difference: They have single-payer systems in which care is generally free at the point of service.

Ida Hellander

Chicago, May 2, 2014

The writer is director of health policy and programs for Physicians for a National Health Program.

****

Access, Affordability, and Insurance Complexity Are Often Worse in the United States Compared to 10 Other Countries

By Cathy Schoen, Robin Osborn, David Squires, and Michelle M. Doty 
The Commonwealth Fund, November 13, 2013

Synopsis

A 2013 survey conducted in 11 countries finds that U.S. adults are significantly more likely than their counterparts to forgo health care because of the cost, to have difficulty paying for care even when they have insurance, and to deal with time-consuming insurance issues.

http://www.commonwealthfund.org/Publications/In-the-Literature/2013/Nov/Access-Affordability-and-Insurance.aspx

USPSTF A and B Recommendations: http://www.uspreventiveservicestaskforce.org/uspstf/uspsabrecs.htm

Comment:

By Don McCanne, MD

H. Gilbert Welch has been a leading voice in warning us about the costs and adverse consequences of overdiagnosis. When there is little benefit but greater potential harm and expense for a given diagnosis, it usually would be better if that diagnosis had never been made. This is especially true when a screening test is done on a healthy individual if it leads to a diagnosis that will be of no help but could result in harm to the patient.

When should screening tests be done? The decisions should be made by patients after their health care professionals provide them with adequate information regarding the potential benefits and adverse consequences of the screening procedures. That advice should reflect the latest information available from sources such as the U.S. Preventive Services Task Force (USPSTF). In fact, the Affordable Care Act specifically covers, without charge, level A and B preventive service recommendations of the USPSTF. (Link above – USPSTF recommendations are updated as new information becomes available.)

Dr. Welch would add one other consideration. He would require patients to pay a portion of the costs for the screening tests just as they would for diagnostic testing used to evaluate specific symptoms or signs. It is well known that if people have to pay for screening tests that they should have, many will decline them simply because of the expense. This can result in adverse health outcomes or even death. If a screening test warrants an A or B USPSTF rating, its benefits do outweigh the potential harm, and it should be offered to the patient without placing it behind a “paywall” (deductible, coinsurance or copayment).

Dr. Welch has it backwards. We should eliminate the incentive mismatch between screening and diagnosis, but we should do that by removing the paywalls for diagnostic and therapeutic services rather than creating new ones for preventive screening.

PNHP’s director of health policy, Ida Hellander, has it exactly right. Rather than overuse, we have a much greater problem with underuse of beneficial health care services, and cost-sharing paywalls worsen that problem.

The Commonwealth Fund study that Dr. Hellander cites shows that the United States has a much greater cost-related access problem than do the other ten wealthy nations studied, yet those nations spend far less on total health care than we do, without the necessity of erecting these paywall financial barriers to care.

We can thank Dr. Welch for his great work in explaining to us the potential negative consequences of screening tests. With this information we can better inform the patient who has to make the decision on undergoing screening. But we can also thank Dr. Hellander for her great work on explaining to us why health care should be based on patient need rather than on the patient’s ability to pay.

Quite simply, patients should have the care that medical science dictates they should have, if they want it, but not denied that care because they feel they cannot afford it.