PNHP

Another Lesson From Colorado

Another Lesson From Colorado

By Dr. Marvin Malek
The Rutland Herald, Aug 5, 2012

Three hospitals in Colorado have announced that they will forgive the medical bills of the victims of the Aurora, Colo., mass shooting. A kind gesture. These individuals suffered serious gunshot wounds, and many will be left with lifelong disabilities. It seemed like this was enough suffering for these individuals and their families to endure.

These hospitals may forgive the bills of the victims of the shootings, but the care these patients received is anything but free. Teams of critical care nurses, trauma surgeons, physical therapists, and many others were there, and are always ready to handle victims of falls, crashes—and even mass shootings. The readiness of this team is a key part of the health care infrastructure.

It is safe to assume that the same day the shootings occurred, dozens of other people also utilized the services these three hospitals provide. Chances are that some have cancer, others heart disease, some may have neurologic disorders robbing them of the ability to think, to walk, to talk. These people did as much to cause their suffering as the victims of the shooting. But these individuals will not see their bills forgiven. Instead, innumerable bills will head their way. The worrisome letters from the insurance companies will arrive, possibly denying payment for all or part of their care. Some of these families will be taking out loans to pay the bills, a few will go bankrupt, others sell or foreclose on their homes. Hard not to think of this as kicking people when they’re down: If such patients become too ill to continue working, they may then lose their health care coverage at the very time they need it most, and their family members may become uninsured as well if they are included in the policy.

In every other developed country, major financial burdens are never imposed on individuals who take ill, and there is no country where loss of employment will lead anyone to end up without health insurance. Instead, the health care infrastructure is viewed as an essential resource.

This is what single payer health care is about. We all pay in when we’re well to support the health care infrastructure that will be there to care for us when we’re sick. To many Americans, this sounds utopian. But this pretty much describes the structure of health care financing in nearly every other developed country. And this is why their single payer health care systems are viewed as an essential benefit of civilized society. Not only is every citizen cared for when they’re sick, but these systems are far less costly compared to the complicated morass of a health care system we are forced to put up with here in the United States.

We’ve heard scare tactics against single payer health care for so long, that it must have come as a surprise to many Americans when one of the main highlights of the Opening Ceremony at the Olympic Games in London was a tribute to the British National Health Service. The idea of an American Olympics holding a tribute to our health insurance system would be viewed by any American as laughable.

So let’s have Vermont lead the way on single payer health care. Maybe the effort here in Vermont will be the first step toward America joining the rest of the developed world in creating a single payer health care system. Perhaps the way the shooting victims were treated in Colorado will be an inspiration. Caring for our neighbors. It’s a matter of basic decency.

Marvin Malek is an internist practicing at Central Vermont Medical Center in Berlin.

http://www.rutlandherald.com/article/20120805/OPINION06/708059911/1018/OPINION

Fireworks! Orchestras! and dancing doctors!

Fireworks! Orchestras! and dancing doctors!

Health Care – A Counter-Ceremony Honoring America’s Health Care System

By Kevin Horrigan
St. Louis Post-Dispatch, August 5, 2012

“Perhaps not surprisingly in a country where health care reform is so controversial, it was the high-profile presence of the NHS that stunned many American writers…. Certainly the U.S. equivalent, which would be dancing health insurance corporate executives, was hard to imagine.”

— Paul Harris, in The Guardian, June 28

Hah, hah, hah. Very funny. It’s not hard at all to imagine what the “U.S. equivalent” to your Olympic Opening Ceremony’s salute to Britain’s National Health Service would look like. I’m already working on it.

Sure, “dancing health insurance corporate executives” will be part of it. If you’d made that much money last year, you’d want to dance, too.

“Executives in the top spots at the country’s seven largest publicly traded health plans were paid a collective $87 million for their services in 2011,” American Medical News reported in May.

Picture this: It’s night in Florida. We’re in a darkened Raymond James Stadium in Tampa, jammed with 66,000 delegates to the Republican National Convention and their guests. A spotlight illuminates the stage. The seven top health care CEOs, carrying canes and dressed in white top hats and tails, prance on stage as the Mormon Tabernacle Choir sings “Puttin’ on the Ritz.”

Pretty nice, huh? And that’s just the start.

The spotlight widens to show 94 primary care doctors, in multi-colored scrub suits, forming a ring around David Cordani, the CEO of Cigna Health Care, bowing and scraping to honor the fact that at $19.1 million, Cordani made more in 2011 than all 94 of them combined.

The orchestra breaks into Gershwin’s “It Ain’t Necessarily So” as the stadium floor is lighted, revealing 400 actual health insurance bureaucrats wearing telephone headsets and sitting at small desks. They shake their heads back and forth in our “Salute to Rescission.”

The crowd erupts, because fans know that if Republicans repeal the Affordable Care Act, God will be in his heaven, all will be right with the world and insurance companies once again will be allowed to retroactively cancel coverage when someone needs it.

But now! What’s that? Lights around the stadium’s upper tier are forming a large donut, signifying the “Medicare donut hole” that will return once “Obamacare” is eliminated, thus insuring that drugs for anything between basic coverage and catastrophe are not covered. The orchestra swings into “Live and Let Die.”

Cannons in the end zones fire clouds of pills into the sky. As they fall to the floor, out of the stadium tunnels limp thousands of senior citizens who are allowed to scrounge for the pills. But only for three minutes, because it’s time for our….

Tribute to the ER! Giant video boards flash the image of former President George W. Bush uttering these immortal words in 2007: “I mean, people have access to health care in America. After all, you just go to an emergency room.”

The theme from the TV show “ER” comes up as sirens wail, ambulances and EMS trucks tear around the stadium floor, disgorging patients into the busy “emergency department” on center stage, already jammed with insured adults and children who have no primary care doctors.

Our ER “treats” them and send them on their way with big weights (symbolizing hospital bills) strapped to their backs, which they then pass to the people in the crowd — who are delighted to get them!

On guy-wires stretched across the top of the stadium a huge number “17.6” sparkles in gold and silver lights. It represents the percentage of the gross domestic product devoted to health care — 8 percent higher than the Brits. The music swells into Creed’s “Can You Take Me Higher?”

The crowd sings along, waving 66,000 foam “We’re Number 1” fingers, signaling America’s status as the nation with the most expensive health care in the world — 2.4 times more expensive than the silly Brits.

KA-BOOM! go the fireworks. We crane our heads skyward to see a giant figure “37,” symbolizing the World Health Organization’s ranking of the American health care system.

The big finale: With the crowd’s attention diverted skyward, volunteers — all of them from health insurance companies — have erected cardboard cutouts of men, women, children and babies around the floor of the stadium. There are so many of them — 45,000 — that they loop around the field in a squiggly line almost a mile long.

They represent the 45,000 Americans whose lack of health insurance contributes to their premature death each year, according to a 2009 study by the Harvard Medical School. Now riding into the stadium atop Rafalca, his wife’s Olympic dressage horse, is Mitt Romney, who will be nominated for president on the following night.

He guides the mare’s nose to the first cardboard figure. A simple nudge and, like dominoes, they topple over in spectacular sequence. The crowd goes wild.

http://www.stltoday.com/news/opinion/columns/kevin-horrigan/horrigan-fireworks-orchestras-and-dancing-doctors/article_3416f532-c574-5985-8ea6-802428691c1d.html

Comment: 

By Don McCanne, MD

Of course, depending on what happens in November, we could see an alternative “big finale.”

Obama could enter the stadium on his trusty steed “Single Payer,” and immediately run into the obscure maze of “Machinery Politics,” knocking Obama off of “Single Payer” who is immediately diverted to the glue factory as Obama remounts on “Pragmatic Incrementalist” who saunters over and nudges the first of 30,000 cardboard cutouts. The crowd goes wild (though only those sitting in the far left saw what really happened).

We’re going to have to do something about that crowd!

(They say that practical jokes have to be executed absolutely perfectly or you shouldn’t even try them. There is something about the domino cascade of 30,000 to 45,000 cutouts of American men, women, children and babies that just doesn’t sit well. Can we ever get the crowd to understand?)

Where ‘Socialized Medicine’ Has a U.S. Foothold

By UWE E. REINHARDT
Economix Blog, The New York Times, August 3, 2012

Last Friday’s exuberant celebration of Britain’s National Health Service during the opening ceremony for the 2012 Olympics, directed by the Oscar-winning filmmaker Danny Boyle, got me thinking about American attitudes about socialized medicine.

As might be expected, the event elicited a few tut-tuts from Conservative members of Parliament, and more stern rebukes from the commentariat in the United States, most vehemently by Rush Limbaugh.

Bashing the N.H.S. has become a favorite ritual during any debate on health care reform on this side of the Atlantic. As the disgraceful treatment of Dr. Donald Berwick, former administrator of the Centers for Medicare and Medicare Services, illustrates, any American remarking positively on the N.H.S. runs the risk of being declared unfit to serve in government and vehemently attacked in the blogosphere.

The most humorous illustration of American N.H.S.-bashing was supplied during the heated health reform discussions in 2009 by Investor’s Business Daily. In an editorial, the paper asserted, “People such as scientist Stephen Hawking wouldn’t have a chance in the U.K., where the National Health Service would say the quality of life of this brilliant man, because of his physical handicaps, is essentially worthless.”

Dr. Hawking, who has lived and worked in Britain all of his life, responded: “I wouldn’t be here today if it were not for the N.H.S. I have received a large amount of high-quality treatment without which I would not have survived.”

Eventually, Prof. Ara Darzi, a former minister of health, head of surgery at Imperial College in London and Britain’s ambassador for health and life sciences, and Tom Kibasi of McKinsey & Company, an honorary lecturer at Imperial College, gently lectured American readers on this amusing episode and on the actual modus operandi of the N.H.S. The episode also opened a lively and sometimes bemused blog traffic in Britain.

Although I personally have never advocated adopting an N.H.S.-style approach to health reform in the United States, I have been puzzled for decades by the almost instinctive habit among many Americans of incessantly running down every other country’s approach to health care and health insurance.

Is this habit born of the deep-seated insecurity that might naturally arise from the cognitive dissonance of boasting “ours is the best health system in the world,” all the while beholding daily the travails and hand-wringing over the sometimes glaring shortcomings of the American health care system?

I have found that one effective way I can stop N.H.S.-bashing dead in its track is to ask bashers this simple question: “Why don’t you like my son?” I posed that question to a congressman who had berated “socialized medicine” during a hearing on health insurance reform at which I testified.

In response to the stunned look this question invariably elicits, I go on: ”You see, our son is a retired captain of the U.S. Marine Corps. He is an American veteran. Remarkably, Americans of all political stripes have long reserved for our veterans the purest form of socialized medicine, the vast health system operated by the U.S. Department of Veterans Affairs (generally known as the V.A. health system). If socialized medicine is as bad as so many on this side of the Atlantic claim, why have both political parties ruling this land deemed socialized medicine the best health system for military veterans? Or do they just not care about them?”

I must note that there is a widespread confusion in this country over the terms “social health insurance” and “socialized medicine.”

Among policy wonks, “social health insurance” is understood to be health insurance to which the individual makes contributions on the basis of ability to pay, rather than on the basis of health status. Such a system can be coupled, and often is, with purely private health care delivery systems, including for-profit enterprises. Canada, Taiwan, Japan, South Korea, Germany, the Netherlands and Switzerland come to mind.

Socialized medicine refers to systems that couple social health insurance with government-owned and operated health care facilities, such as Britain’s N.H.S. or the Hong Kong Hospital Authority, a still-appreciated legacy of British colonialism. Socialized medicine also typified the health systems operated by the former socialist countries in the Soviet orbit. Evidently, the V.A. health system perfectly fits the definition of socialized medicine.

Occasionally one does come across an American politician who mutters something about privatizing the V.A. health system. I doubt this idea would have much political traction, either as part of a party’s platform or in the presidential candidates’ campaign repertoire.

In fact, I would dare presidential candidates professing a distaste for socialized medicine to call openly for abolition of the V.A. health system in favor of a purely privatized system – e.g., a defined contribution system such as that advocated for Medicare by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee.

So far I have not received a satisfactory answer from detractors of “socialized medicine” to my question of why we have the V.A. health system when socialized medicine putatively is so evil. Perhaps some commentators on this blog will enlighten me.

Before responding, however, readers might consider these readings, which can be found in an Internet search on “V.A. Health Care and Quality”: a book by Phillip Longman, “The Best Care Anywhere: Why V.A. Health Care Is Better Than Yours”; an article on V.A. health care in the American Medical Association’s amednews.com, and, finally, from the Rand Corporation’s nationally recognized team of experts on the quality of health care in the United States this eye-opening report.

http://economix.blogs.nytimes.com/2012/08/03/where-socialized-medicine-has-a-u-s-foothold/

Fireworks! Orchestras! and dancing doctors!

Fireworks! Orchestras! and dancing doctors!

Health Care – A Counter-Ceremony Honoring America’s Health Care System

By Kevin Horrigan
St. Louis Post-Dispatch, August 5, 2012
“Perhaps not surprisingly in a country where health care reform is so controversial, it was the high-profile presence of the NHS that stunned many American writers…. Certainly the U.S. equivalent, which would be dancing health insurance corporate executives, was hard to imagine.”
— Paul Harris, in The Guardian, June 28
Hah, hah, hah. Very funny. It’s not hard at all to imagine what the “U.S. equivalent” to your Olympic Opening Ceremony’s salute to Britain’s National Health Service would look like. I’m already working on it.
Sure, “dancing health insurance corporate executives” will be part of it. If you’d made that much money last year, you’d want to dance, too.
“Executives in the top spots at the country’s seven largest publicly traded health plans were paid a collective $87 million for their services in 2011,” American Medical News reported in May.
Picture this: It’s night in Florida. We’re in a darkened Raymond James Stadium in Tampa, jammed with 66,000 delegates to the Republican National Convention and their guests. A spotlight illuminates the stage. The seven top health care CEOs, carrying canes and dressed in white top hats and tails, prance on stage as the Mormon Tabernacle Choir sings “Puttin’ on the Ritz.”
Pretty nice, huh? And that’s just the start.
The spotlight widens to show 94 primary care doctors, in multi-colored scrub suits, forming a ring around David Cordani, the CEO of Cigna Health Care, bowing and scraping to honor the fact that at $19.1 million, Cordani made more in 2011 than all 94 of them combined.
The orchestra breaks into Gershwin’s “It Ain’t Necessarily So” as the stadium floor is lighted, revealing 400 actual health insurance bureaucrats wearing telephone headsets and sitting at small desks. They shake their heads back and forth in our “Salute to Rescission.”
The crowd erupts, because fans know that if Republicans repeal the Affordable Care Act, God will be in his heaven, all will be right with the world and insurance companies once again will be allowed to retroactively cancel coverage when someone needs it.
But now! What’s that? Lights around the stadium’s upper tier are forming a large donut, signifying the “Medicare donut hole” that will return once “Obamacare” is eliminated, thus insuring that drugs for anything between basic coverage and catastrophe are not covered. The orchestra swings into “Live and Let Die.”
Cannons in the end zones fire clouds of pills into the sky. As they fall to the floor, out of the stadium tunnels limp thousands of senior citizens who are allowed to scrounge for the pills. But only for three minutes, because it’s time for our….
Tribute to the ER! Giant video boards flash the image of former President George W. Bush uttering these immortal words in 2007: “I mean, people have access to health care in America. After all, you just go to an emergency room.”
The theme from the TV show “ER” comes up as sirens wail, ambulances and EMS trucks tear around the stadium floor, disgorging patients into the busy “emergency department” on center stage, already jammed with insured adults and children who have no primary care doctors.
Our ER “treats” them and send them on their way with big weights (symbolizing hospital bills) strapped to their backs, which they then pass to the people in the crowd — who are delighted to get them!
On guy-wires stretched across the top of the stadium a huge number “17.6” sparkles in gold and silver lights. It represents the percentage of the gross domestic product devoted to health care — 8 percent higher than the Brits. The music swells into Creed’s “Can You Take Me Higher?”
The crowd sings along, waving 66,000 foam “We’re Number 1” fingers, signaling America’s status as the nation with the most expensive health care in the world — 2.4 times more expensive than the silly Brits.
KA-BOOM! go the fireworks. We crane our heads skyward to see a giant figure “37,” symbolizing the World Health Organization’s ranking of the American health care system.
The big finale: With the crowd’s attention diverted skyward, volunteers — all of them from health insurance companies — have erected cardboard cutouts of men, women, children and babies around the floor of the stadium. There are so many of them — 45,000 — that they loop around the field in a squiggly line almost a mile long.
They represent the 45,000 Americans whose lack of health insurance contributes to their premature death each year, according to a 2009 study by the Harvard Medical School. Now riding into the stadium atop Rafalca, his wife’s Olympic dressage horse, is Mitt Romney, who will be nominated for president on the following night.
He guides the mare’s nose to the first cardboard figure. A simple nudge and, like dominoes, they topple over in spectacular sequence. The crowd goes wild.
http://www.stltoday.com/news/opinion/columns/kevin-horrigan/horrigan-fireworks-orchestras-and-dancing-doctors/article_3416f532-c574-5985-8ea6-802428691c1d.html

Of course, depending on what happens in November, we could see an alternative “big finale.”
Obama could enter the stadium on his trusty steed “Single Payer,” and immediately run into the obscure maze of “Machinery Politics,” knocking Obama off of “Single Payer” who is immediately diverted to the glue factory as Obama remounts on “Pragmatic Incrementalist” who saunters over and nudges the first of 30,000 cardboard cutouts. The crowd goes wild (though only those sitting in the far left saw what really happened).
We’re going to have to do something about that crowd!
(They say that practical jokes have to be executed absolutely perfectly or you shouldn’t even try them. There is something about the domino cascade of 30,000 to 45,000 cutouts of American men, women, children and babies that just doesn’t sit well. Can we ever get the crowd to understand?)

Single payer slips into CAP forum

Cutting Health Care Costs: Leading Experts Propose Bold Solutions

Center for American Progress
August 2, 2012

The Center for American Progress convened leading health policy experts—including current and former federal and state officials, executives of health insurers and hospital systems, physicians, and economists—to develop bold and innovative solutions. These solutions are designed to reduce overall health care spending for both public and private payers.

Please join us as we release alternative strategies that would protect Americans’ access to necessary care. Several of the experts will be on hand to present the solutions, lead a discussion of the issues, and answer your questions.

From the Q&A discussion:

Harvey Fernbach, MD, a practicing physician with Physicians for a National Health Program: Wouldn’t you think that many of the bold solutions would do better if we simply expanded and improved Medicare, and take the insurance companies which are profit oriented and the businesses out of the equation because they wouldn’t have to play a major role.  That’s why President Obama was for it. I believe… we believe that… (inaudible) …a related metaphor… single payer is the gold medal for health care. I’d like to get your opinion on it.

Tom Daschle: Let me start with that because that’s as much of a political question as it is a medical one, or a health related question. I personally believe that a Medicare for all approach would be terrific. I’d be very enthusiastic about it. The problem is the current political lay of the land prevents it. So we have to deal with what’s possible, and in dealing with what’s possible, it seems to me that taking the concepts that we know could work, redesigning them and improving what we’ve got may the the next step. The ACA is the next step. It creates a new infrastructure that allows for a lot of the things we know work well, to work better across the entire country. But one day, perhaps, we’ll be in a position to alter that political landscape to accommodate something a little bit more aggressive.

Harvey Fernbach: (inaudible) … ACA eventually to single payer.

Tom Daschle: I think ACA puts us on the thirty yard line in terms of what it is we have to do with seventy yards to go. (Audience laughter.) But we’ve got a good start.

Video of CAP forum:
http://www.americanprogress.org/events/2012/08/cuttingcosts.html

Comment:

By Don McCanne, MD

This is a followup to yesterday’s Quote of the Day message on a forum on recommendations to contain health care spending, sponsored by the Center for American Progress. It was noted that single payer advocates were once again excluded from the process. Well, not quite. PNHP’s Harvey Fernback was in the audience and asked a question that prompted Tom Daschle to proclaim that “a Medicare for all approach would be terrific” and he would be “very enthusiastic about it.”

Thanks, Harvey, for being there. It’s a lesson for all of us in our reform advocacy activities. Be there and do it!

Daschle says that we still have seventy yards to go, so let’s get with it.

Single payer slips into CAP forum

Cutting Health Care Costs: Leading Experts Propose Bold Solutions

Center for American Progress
August 2, 2012
The Center for American Progress convened leading health policy experts—including current and former federal and state officials, executives of health insurers and hospital systems, physicians, and economists—to develop bold and innovative solutions. These solutions are designed to reduce overall health care spending for both public and private payers.
Please join us as we release alternative strategies that would protect Americans’ access to necessary care. Several of the experts will be on hand to present the solutions, lead a discussion of the issues, and answer your questions.
From the Q&A discussion:
Harvey Fernbach, MD, a practicing physician with Physicians for a National Health Program:Wouldn’t you think that many of the bold solutions would do better if we simply expanded and improved Medicare, and take the insurance companies which are profit oriented and the businesses out of the equation because they wouldn’t have to play a major role.  That’s why President Obama was for it. I believe… we believe that… (inaudible) …a related metaphor… single payer is the gold medal for health care. I’d like to get your opinion on it.
Tom Daschle: Let me start with that because that’s as much of a political question as it is a medical one, or a health related question. I personally believe that a Medicare for all approach would be terrific. I’d be very enthusiastic about it. The problem is the current political lay of the land prevents it. So we have to deal with what’s possible, and in dealing with what’s possible, it seems to me that taking the concepts that we know could work, redesigning them and improving what we’ve got may the the next step. The ACA is the next step. It creates a new infrastructure that allows for a lot of the things we know work well, to work better across the entire country. But one day, perhaps, we’ll be in a position to alter that political landscape to accommodate something a little bit more aggressive.
Harvey Fernbach: (inaudible) … ACA eventually to single payer.
Tom Daschle: I think ACA puts us on the thirty yard line in terms of what it is we have to do with seventy yards to go. (Audience laughter.) But we’ve got a good start.
Video of CAP forum:
http://www.americanprogress.org/events/2012/08/cuttingcosts.html

This is a followup to yesterday’s Quote of the Day message on a forum on recommendations to contain health care spending, sponsored by the Center for American Progress. It was noted that single payer advocates were once again excluded from the process. Well, not quite. PNHP’s Harvey Fernback was in the audience and asked a question that prompted Tom Daschle to proclaim that “a Medicare for all approach would be terrific” and he would be “very enthusiastic about it.”
Thanks, Harvey, for being there. It’s a lesson for all of us in our reform advocacy activities. Be there and do it!
Daschle says that we still have seventy yards to go, so let’s get with it.

Remember Managed Care? It’s Quietly Coming Back

By ANNA WILDE MATHEWS
The Wall Street Journal, August 2, 2012

Under pressure to squeeze out costs, some of the U.S.’s biggest health insurers are quietly erecting more hurdles for patients seeking medical care.

The companies are in many cases reaching back to the 1990s and boosting the use of techniques that antagonized patients and doctors alike.

Today’s approaches are tweaked, but may feel familiar to many: Insurers are rolling out plans with more restricted choices of doctors and hospitals, and weighing new requirements for referrals before patients can see specialists.

UnitedHealth Group Inc., Cigna Corp. and others are increasingly requiring doctors to get prior authorization before patients can get certain care such as spinal surgeries.

Earlier versions of these practices were closely identified with the managed-care era of the 90s. They later receded in many parts of the country, as employers switched away from restrictive health-maintenance organizations, and insurers backed off some limits.

Health insurers say today’s versions of 1990s strategies are very different, and use new technology to focus closely on improving care as well as reining in expenses.

UnitedHealth, for one, said it is using prior authorization “surgically” to counter “extreme variations in quality and cost.” But doctors aren’t sure how much things have changed.

“There seems to be a return we’re hearing about to some of the old practices that have been very frustrating to physicians,” said Jeremy A. Lazarus, president of the American Medical Association.

In its 2012 analysis of medical billing claims, the AMA saw a 23% increase in the share that included an insurer pre-authorization review, to 4.7%. For certain types of procedures, the percentage is far higher, according to athenahealth Inc., which provides electronic health records. Still, the company said, only 4.9% of all the prior authorization requests it processed were denied in 2011.

Erica Swegler, a family physician in Keller, Texas, said the growing number of prior authorizations she has to secure for treatments such as high-tech imaging scans “costs me a tremendous amount of time.” The approvals typically take 48 to 72 hours, and sometimes longer if she needs to have a phone conversation with an insurer, she said. “It’s a huge headache.”

Insurers are responding to pressure from employers to tamp down costs and address evidence of disparities in quality. In recent years, employers have shifted a growing share of the expense of coverage onto workers, and companies are betting employees will accept trade-offs they rejected 15 years ago in order to prevent premiums from jumping even faster.

“This is back to the future,” said Eric Grossman, a senior partner at Mercer, a consulting unit of Marsh & McLennan Cos. Employers are interested in “rigorous, aggressive medical management,” including prior authorization, as well as limited networks of health-care providers, he said. Some insurers have promised savings of 3% to 5% from narrow-network plans, he said, and reductions of more than 10% if other restrictions are added, including even fewer choices of medical providers, strong pre-authorization, and requirements for patients to get a referral to access specialty care.

Managed-care limits “did slow the growth of costs in the 1990s,” said David Cutler, a Harvard University economist. But after consumers and doctors revolted, “managed care got neutered.” According to the nonpartisan Kaiser Family Foundation, private health spending flattened in the 1990s, adjusted for inflation, and decreased in one year, 1994, before surging back toward the end of the decade. The foundation’s analysts attribute the dip largely to managed-care practices.

In a move widely seen as a symbolic end of the era, UnitedHealth in 1999 said it would stop second-guessing doctors’ decisions before treatment, and adopted a “care coordination” process that wasn’t supposed to require formal preclearance.

But this spring, UnitedHealth’s insurance arm, the nation’s biggest, told employers that over the next 18 months, care coordination will generally be replaced by a new “prior authorization” process, according to company documents prepared for clients.

For certain services and tests, including joint replacements and spine surgeries, the documents said, “services determined to be not medically necessary” beforehand wouldn’t be covered.

The shift discussed in the documents is aimed at moving to a common standard, and some plans acquired after 1999 were already using forms of prior authorization, a UnitedHealth official said. Insurers also said they are working with doctor groups to smooth the process.

Other insurers are expanding prior authorization in some areas, which they say are targeted narrowly based on patterns of pricey care that doesn’t always match medical guidelines.

WellPoint Inc. is developing a program for certain cancer drugs and this fall will start one for tests that diagnose sleep-related conditions. Aetna Inc. said it generally expects to use the process “more in the future, not less.”

Cigna started requiring prior authorization for certain back surgeries last year, and is considering procedures in radiation oncology and cardiology.

“It’s very low friction, it’s clinical quality, and we lower costs,” said Alan Muney, chief medical officer at Cigna, which he said has also in the past eliminated the requirements in some areas.

Care, a health-advocacy firm based in Milwaukee, has seen an uptick in patients like Sandi Kane, a community education director in Shawano, Wis., who says her doctor’s office submitted a request for a machine to help treat her sleep apnea in mid-June, and it’s been tied up in red tape since then. The administrator of her employer’s insurance wanted more documentation for why she needed the pricier model, and she still hasn’t gotten an approval, she said.

“There are just so many steps that need to be taken,” Ms. Kane said, and she feels caught in the middle between the recommendation of her doctor’s office and her plan’s rules. Alliance Benefit Group Medical Services Ltd., which administers Ms. Kane’s coverage under the Auxiant brand name, said it declined to comment on “individual plan participant matters.”

Insurers have been experimenting with smaller provider networks for years, and are now rapidly ramping up, though they continue to simultaneously sell typical broad preferred-provider organization plans. The narrower plans can have closed structures that work like the classic HMOs. But they also have “tiered” designs, with patients facing bigger out-of-pocket charges if they go to providers that aren’t in the top category, then even-larger bills if they go completely out of network.

Plans that include fewer medical providers are seen as likely to appeal to people shopping for their own budget-conscious coverage starting in 2014, since consumers may only need to lock in access to their own favored doctors or hospitals, rather than the broadest variety.

Insurers can reduce costs with narrow networks because they can exclude the priciest doctors and hospitals. Also, they can wring rate concessions from medical providers that fear losing patients.

WellPoint is “rolling out a number of narrow and tiered networks” across its markets, said Ken Goulet, executive vice president. These networks involve around 30% to 70% of the company’s full list of providers, he said. They will be available in six of WellPoint’s 14 states by the end of this year, and are aimed at all of them by January 2014, the company said.

Aetna has long had tiers for specialists, and last year added a new version for hospitals, with the smaller group generally representing 50% to 60% of the insurer’s full network. This year it started creating even skinnier—and cheaper—options that generally include just 30% to 40% of Aetna’s specialists and hospitals, said Carl King, the company’s head of national networks and contracting services. Those will be available in more than 20 markets by the end of next year.

Another 1990s twist, forcing patients to get sign-offs from primary-care doctors before seeing specialists, also may see a comeback. UnitedHealth last year introduced in four states a plan design called “Navigate” that has such a requirement, and the company is expanding it to 16 states this year and more in 2013; the company said it helps build the doctor-patient relationship to “emphasize quality care and more efficient use of care.”

WellPoint’s Mr. Goulet said his company, which is starting to pay primary-care doctors more to help coordinate care, is also considering more plans with such rules; it already has them in some older HMOs.

Insurers said current versions of old approaches are driven by better information, which helps them focus on improving care, not just saving money. The doctors and hospitals in the narrow networks are selected based on quality measures as well as cost, they say, while data help them ensure they use prior authorization only where it is needed.

“Technology is fundamentally different from what it was in the 1990s,” said John Wilson, vice president of analytics at UnitedHealth Group’s OptumInsight unit.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

http://online.wsj.com/article_email/SB10000872396390444840104577552823507551472-lMyQjAxMTAyMDAwMjAwODI3Wj.html

Center for American Progress effort to contain health care spending

A Systemic Approach to Containing Health Care Spending

By Ezekiel Emanuel, M.D., Ph.D., Neera Tanden, J.D., Stuart Altman, Ph.D., Scott Armstrong, M.B.A., Donald Berwick, M.D., M.P.P., François de Brantes, M.B.A., Maura Calsyn, J.D., Michael Chernew, Ph.D., John Colmers, M.P.H., David Cutler, Ph.D., Tom Daschle, B.A., Paul Egerman, B.S., Bob Kocher, M.D., Arnold Milstein, M.D., M.P.H., Emily Oshima Lee, M.A., John D. Podesta, J.D., Uwe Reinhardt, Ph.D., Meredith Rosenthal, Ph.D., Joshua Sharfstein, M.D., Stephen Shortell, Ph.D., M.P.H., M.B.A., Andrew Stern, B.A., Peter R. Orszag, Ph.D., and Topher Spiro, J.D.
The New England Journal of Medicine, August 1, 2012

Although the Affordable Care Act (ACA) will significantly reduce Medicare spending over the next decade, health costs remain a major challenge. To effectively contain costs, solutions must target the drivers of both the level of costs and the growth in costs — and both medical prices and the quantity of services play important roles. Solutions will need to reduce costs not only for public payers but also for private payers. Finally, solutions will need to root out administrative costs that do not improve health status and outcomes.

The Center for American Progress convened leading health-policy experts with diverse perspectives to develop bold and innovative solutions that meet these criteria. Although these solutions are not intended to be exhaustive, they have the greatest probability of both being implemented and successfully controlling health costs. The following solutions could be implemented separately or, more effectively, integrated as a package.

PROMOTE PAYMENT RATES WITHIN GLOBAL TARGETS

ACCELERATE USE OF ALTERNATIVES TO FEE-FOR-SERVICE PAYMENT

USE COMPETITIVE BIDDING FOR ALL COMMODITIES

REQUIRE EXCHANGES TO OFFER TIERED PRODUCTS

REQUIRE ALL EXCHANGES TO BE ACTIVE PURCHASERS

SIMPLIFY ADMINISTRATIVE SYSTEMS FOR ALL PAYERS AND PROVIDERS

REQUIRE FULL TRANSPARENCY OF PRICES

MAKE BETTER USE OF NONPHYSICIAN PROVIDERS

EXPAND THE MEDICARE BAN ON PHYSICIAN SELF-REFERRALS

LEVERAGE THE FEDERAL EMPLOYEES PROGRAM TO DRIVE REFORM

REDUCE THE COSTS OF DEFENSIVE MEDICINE

Conclusions

These are the types of large-scale solutions that are necessary to contain health costs. Although many in the health industry perceive that it is not in their interest to contain national health spending, it is a fact that what cannot continue will not continue.

Americans therefore face a choice. Payers could simply shift costs to individuals. As those costs become more and more unaffordable, people would severely restrict their consumption of health care and might forgo necessary care. Alternatively, governments could impose deep cuts in provider payments unrelated to value or the quality of care. Without an alternative innovative strategy, these options will become the default. They are not in the long-term interests of patients, employers, states, insurers, or providers.

We present alternative strategies to contain national health spending that allow Americans to access necessary care. Our approach addresses the system as a whole, not just Medicare and Medicaid. It is the path to rising wages, a sustainable federal budget, and the health system that all Americans deserve.

http://www.nejm.org/doi/full/10.1056/NEJMsb1205901?query=TOC

And…

Bending the Cost Curve through Market-Based Incentives

By Joseph R. Antos, Ph.D., Mark V. Pauly, Ph.D., and Gail R. Wilensky, Ph.D.
The New England Journal of Medicine, August 1, 2012

In a market-based approach, open-ended subsidies to beneficiaries and price-controlled reimbursements to providers should be replaced with fixed dollar subsidies — effectively shifting Medicare from a defined-benefit to a defined-contribution approach. The business model would shift from one that is driven by the volume and intensity of services to one that rewards cost-effective and efficient care.

Under this approach, Medicare would adopt a premium-support model, which provides a fixed subsidy for each beneficiary’s purchase of insurance. Health plans, including traditional Medicare, would compete with each other on equal terms. Beneficiaries could purchase more expensive coverage if they felt the extra cost was worth it to them.

Similarly, the principle of defined contribution should be applied to the currently unlimited tax subsidy for employer-sponsored insurance. Employer contributions to health insurance are not counted as part of the employees’ taxable income. That subsidy encourages the purchase of health insurance, but it also provides an incentive to increase the amount of coverage, which helps fuel the growth of private health spending. Converting the current exclusion to a predetermined refundable credit would be a reform similar to premium support for Medicare. A less dramatic compromise would set a dollar limit on the tax exclusion that is indexed to grow more slowly than the trend in medical spending.

Well-functioning competitive markets are required for these types of decentralized approaches to work effectively. Objective, understandable information needs to be available so that consumers can make informed decisions about their choice of health plans. The plans need to be able to adjust their benefit offerings to respond to changes in consumer demand. This could be facilitated by public and private health insurance exchanges without limiting what plans can offer and what consumers may buy.

A defined-contribution approach to subsidies would help resolve the federal budget problem without limiting the way in which consumers are able to spend their own funds. Reliance on competitive markets rather than on regulatory controls provides strong incentives for more efficient delivery of the health care services that consumers truly value.

Conclusions

Policies that attempt to reengineer the health system without changing the underlying financial incentives that drive health spending will ultimately fail. The adoption of a defined-benefit approach to federal health subsidies can improve the understanding of both consumers and providers that resources are limited and choices must be made, but those decisions should not be dictated from Washington through regulatory controls. A market-based approach that relies on competition and financial incentives can promote efficient health care delivery, reduce the unit cost of care, and thus help resolve the federal budget problem without placing limits on how individuals choose to spend their own money. Consumers will decide for themselves whether more costly coverage buys them access to better care and more effective medical technology, and those decisions will ultimately determine the pace of health spending growth. Budget-driven fiscal targets that are inconsistent with public wishes and the capacity of the health system to deliver are not sustainable.

http://www.nejm.org/doi/full/10.1056/NEJMsb1207996?query=TOC

Comment:

By Don McCanne, MD

With some fanfare today the recommendations on containing health care spending, advanced by a group of experts convened by the Center for American Progress (CAP), are being presented at a forum for the media at CAP headquarters in Washington, D.C. The recommendations of these experts are being released in a NEJM article, along with another article representing a different approach to cost containment by authors known for their support of market solutions to health care cost escalation.

The two supposedly contrasting views are being reported as representing the conservativ
e Republican position on the one hand, and the progressive Democratic views on the other. This is not quite true since the Center for American Progress is a centrist organization and does not represent progressive/liberal views, even though it is more aligned with the Democratic Party. The point here is that the policy packages should be evaluated based on their soundness, and not on their alleged political leaning.

The proposal of Joseph Antos and colleagues can be summarized as a conversion of our health care financing to a defined-contribution approach, both for Medicare and for private health plans. It is based on the terribly simplistic concept that patients should select their insurance products and their health care based on what they have to pay out of their own funds. Supposedly this drives quality up and prices down. In reality, this erects greater financial barriers to health care, compounding physical suffering and financial hardship. It is astounding that these ideas have not yet been dumped on the trash heap of health policy failures.

The proposals by Ezekiel Emanuel and his colleagues are more of a laundry list of ideas intended to slow the increase in health care costs. Each one needs to be addressed separately, which we can’t do adequately in this message. Some of the ideas have been around for awhile and show little promise of having much impact on spending. Some are similar to a few of the measures in the Affordable Care Act which also provide little promise of containing costs without significantly restricting access because of issues of affordability or failure to adequately finance the health care infrastructure. Some are terrible ideas such as tiering of insurance products, or depending on patient-consumer price shopping. Protecting against malpractice claims by use of safe harbors depends on the fantasy that such harbors can be precisely defined when the variables in real-life clinical situations are too great. Competitive bidding can be disruptive to those that lose out in the bidding process, impairing access as losers leave the market.

Some of the better ideas such as reduction of administrative waste and global budgeting are commendable except for the fact that they are not recommending the fundamental repair of our health care financing infrastructure that would be required for these concepts to have any significant impact on future health care spending. Our fragmented, dysfunctional system is incapable of adapting such concepts in a broad manner.

CAP was part of the process that excluded single payer (improved Medicare for all) advocates during the reform process. Viewing the list of the CAP authors (above), it is clear that single payer advocates are still excluded. Many of the authors are fully aware of the superiority of the single payer model, but have bought into the concept that it is not politically feasible, whereas supporting our private insurance industry is. Some of the authors also seem to have neoliberal, pro-market views.

In sum, this effort to provoke a renewed interest in seriously addressing our American exceptionalism in our misdirected and wasteful spending in health care is a major disappointment. Other nations have been far more effective in achieving greater value in health care spending, and we know how they do it. It is a terrible shame that we are once again allowing committee-think to lead us down the wrong path.

Center for American Progress effort to contain health care spending

A Systemic Approach to Containing Health Care Spending

By Ezekiel Emanuel, M.D., Ph.D., Neera Tanden, J.D., Stuart Altman, Ph.D., Scott Armstrong, M.B.A., Donald Berwick, M.D., M.P.P., François de Brantes, M.B.A., Maura Calsyn, J.D., Michael Chernew, Ph.D., John Colmers, M.P.H., David Cutler, Ph.D., Tom Daschle, B.A., Paul Egerman, B.S., Bob Kocher, M.D., Arnold Milstein, M.D., M.P.H., Emily Oshima Lee, M.A., John D. Podesta, J.D., Uwe Reinhardt, Ph.D., Meredith Rosenthal, Ph.D., Joshua Sharfstein, M.D., Stephen Shortell, Ph.D., M.P.H., M.B.A., Andrew Stern, B.A., Peter R. Orszag, Ph.D., and Topher Spiro, J.D.
The New England Journal of Medicine, August 1, 2012
Although the Affordable Care Act (ACA) will significantly reduce Medicare spending over the next decade, health costs remain a major challenge. To effectively contain costs, solutions must target the drivers of both the level of costs and the growth in costs — and both medical prices and the quantity of services play important roles. Solutions will need to reduce costs not only for public payers but also for private payers. Finally, solutions will need to root out administrative costs that do not improve health status and outcomes.
The Center for American Progress convened leading health-policy experts with diverse perspectives to develop bold and innovative solutions that meet these criteria. Although these solutions are not intended to be exhaustive, they have the greatest probability of both being implemented and successfully controlling health costs. The following solutions could be implemented separately or, more effectively, integrated as a package.
PROMOTE PAYMENT RATES WITHIN GLOBAL TARGETS
ACCELERATE USE OF ALTERNATIVES TO FEE-FOR-SERVICE PAYMENT
USE COMPETITIVE BIDDING FOR ALL COMMODITIES
REQUIRE EXCHANGES TO OFFER TIERED PRODUCTS
REQUIRE ALL EXCHANGES TO BE ACTIVE PURCHASERS
SIMPLIFY ADMINISTRATIVE SYSTEMS FOR ALL PAYERS AND PROVIDERS
REQUIRE FULL TRANSPARENCY OF PRICES
MAKE BETTER USE OF NONPHYSICIAN PROVIDERS
EXPAND THE MEDICARE BAN ON PHYSICIAN SELF-REFERRALS
LEVERAGE THE FEDERAL EMPLOYEES PROGRAM TO DRIVE REFORM
REDUCE THE COSTS OF DEFENSIVE MEDICINE
Conclusions
These are the types of large-scale solutions that are necessary to contain health costs. Although many in the health industry perceive that it is not in their interest to contain national health spending, it is a fact that what cannot continue will not continue.
Americans therefore face a choice. Payers could simply shift costs to individuals. As those costs become more and more unaffordable, people would severely restrict their consumption of health care and might forgo necessary care. Alternatively, governments could impose deep cuts in provider payments unrelated to value or the quality of care. Without an alternative innovative strategy, these options will become the default. They are not in the long-term interests of patients, employers, states, insurers, or providers.
We present alternative strategies to contain national health spending that allow Americans to access necessary care. Our approach addresses the system as a whole, not just Medicare and Medicaid. It is the path to rising wages, a sustainable federal budget, and the health system that all Americans deserve.
http://www.nejm.org/doi/full/10.1056/NEJMsb1205901?query=TOC

And…

Bending the Cost Curve through Market-Based Incentives

By Joseph R. Antos, Ph.D., Mark V. Pauly, Ph.D., and Gail R. Wilensky, Ph.D.
The New England Journal of Medicine, August 1, 2012
In a market-based approach, open-ended subsidies to beneficiaries and price-controlled reimbursements to providers should be replaced with fixed dollar subsidies — effectively shifting Medicare from a defined-benefit to a defined-contribution approach. The business model would shift from one that is driven by the volume and intensity of services to one that rewards cost-effective and efficient care.
Under this approach, Medicare would adopt a premium-support model, which provides a fixed subsidy for each beneficiary’s purchase of insurance. Health plans, including traditional Medicare, would compete with each other on equal terms. Beneficiaries could purchase more expensive coverage if they felt the extra cost was worth it to them.
Similarly, the principle of defined contribution should be applied to the currently unlimited tax subsidy for employer-sponsored insurance. Employer contributions to health insurance are not counted as part of the employees’ taxable income. That subsidy encourages the purchase of health insurance, but it also provides an incentive to increase the amount of coverage, which helps fuel the growth of private health spending. Converting the current exclusion to a predetermined refundable credit would be a reform similar to premium support for Medicare. A less dramatic compromise would set a dollar limit on the tax exclusion that is indexed to grow more slowly than the trend in medical spending.
Well-functioning competitive markets are required for these types of decentralized approaches to work effectively. Objective, understandable information needs to be available so that consumers can make informed decisions about their choice of health plans. The plans need to be able to adjust their benefit offerings to respond to changes in consumer demand. This could be facilitated by public and private health insurance exchanges without limiting what plans can offer and what consumers may buy.
A defined-contribution approach to subsidies would help resolve the federal budget problem without limiting the way in which consumers are able to spend their own funds. Reliance on competitive markets rather than on regulatory controls provides strong incentives for more efficient delivery of the health care services that consumers truly value.
Conclusions
Policies that attempt to reengineer the health system without changing the underlying financial incentives that drive health spending will ultimately fail. The adoption of a defined-benefit approach to federal health subsidies can improve the understanding of both consumers and providers that resources are limited and choices must be made, but those decisions should not be dictated from Washington through regulatory controls. A market-based approach that relies on competition and financial incentives can promote efficient health care delivery, reduce the unit cost of care, and thus help resolve the federal budget problem without placing limits on how individuals choose to spend their own money. Consumers will decide for themselves whether more costly coverage buys them access to better care and more effective medical technology, and those decisions will ultimately determine the pace of health spending growth. Budget-driven fiscal targets that are inconsistent with public wishes and the capacity of the health system to deliver are not sustainable.
http://www.nejm.org/doi/full/10.1056/NEJMsb1207996?query=TOC

With some fanfare today the recommendations on containing health care spending, advanced by a group of experts convened by the Center for American Progress (CAP), are being presented at a forum for the media at CAP headquarters in Washington, D.C. The recommendations of these experts are being released in a NEJM article, along with another article representing a different approach to cost containment by authors known for their support of market solutions to health care cost escalation.
The two supposedly contrasting views are being reported as representing the conservative Republican position on the one hand, and the progressive Democratic views on the other. This is not quite true since the Center for American Progress is a centrist organization and does not represent progressive/liberal views, even though it is more aligned with the Democratic Party. The point here is that the policy packages should be evaluated based on their soundness, and not on their alleged political leaning.
The proposal of Joseph Antos and colleagues can be summarized as a conversion of our health care financing to a defined-contribution approach, both for Medicare and for private health plans. It is based on the terribly simplistic concept that patients should select their insurance products and their health care based on what they have to pay out of their own funds. Supposedly this drives quality up and prices down. In reality, this erects greater financial barriers to health care, compounding physical suffering and financial hardship. It is astounding that these ideas have not yet been dumped on the trash heap of health policy failures.
The proposals by Ezekiel Emanuel and his colleagues are more of a laundry list of ideas intended to slow the increase in health care costs. Each one needs to be addressed separately, which we can’t do adequately in this message. Some of the ideas have been around for awhile and show little promise of having much impact on spending. Some are similar to a few of the measures in the Affordable Care Act which also provide little promise of containing costs without significantly restricting access because of issues of affordability or failure to adequately finance the health care infrastructure. Some are terrible ideas such as tiering of insurance products, or depending on patient-consumer price shopping. Protecting against malpractice claims by use of safe harbors depends on the fantasy that such harbors can be precisely defined when the variables in real-life clinical situations are too great. Competitive bidding can be disruptive to those that lose out in the bidding process, impairing access as losers leave the market.
Some of the better ideas such as reduction of administrative waste and global budgeting are commendable except for the fact that they are not recommending the fundamental repair of our health care financing infrastructure that would be required for these concepts to have any significant impact on future health care spending. Our fragmented, dysfunctional system is incapable of adapting such concepts in a broad manner.
CAP was part of the process that excluded single payer (improved Medicare for all) advocates during the reform process. Viewing the list of the CAP authors (above), it is clear that single payer advocates are still excluded. Many of the authors are fully aware of the superiority of the single payer model, but have bought into the concept that it is not politically feasible, whereas supporting our private insurance industry is. Some of the authors also seem to have neoliberal, pro-market views.
In sum, this effort to provoke a renewed interest in seriously addressing our American exceptionalism in our misdirected and wasteful spending in health care is a major disappointment. Other nations have been far more effective in achieving greater value in health care spending, and we know how they do it. It is a terrible shame that we are once again allowing committee-think to lead us down the wrong path.

Acceleration of merger and acquisition activity

Dollar Volume of Health Care Mergers and Acquisitions Doubles in the Second Quarter of 2012, According to New Report from Irving Levin Associates, Inc.

Irving Levin Associates, Inc.
July 19, 2012

The increase in M&A activity (merger and acquisition) was spread across both the technology and services segments of health care. The $38.1 billion in health care technology transactions represented an 87% jump from the first quarter, while the $23.1 billion in health care services acquisitions was almost triple the dollar volume in the first quarter. In the health care services segment, long-term care and hospital acquisitions continue to dominate both the number of transactions and the dollar volume, with physician medical group acquisitions also very active as health care market participants try to get ready for the increase in Accountable Care Organizations. In the technology M&A segment, the number of e-health transactions has been growing and has averaged over 20 acquisitions per quarter for the past four quarters. “The fact that the Supreme Court decision validated most aspects of the Affordable Care Act means that providers and payers will be consolidating to be stronger players in the new market. Coincidence or not, there was a flurry of announced M&A transactions in the week after the decision,” stated Stephen Monroe, Partner at Irving Levin Associates and editor of The Health Care M&A Report.

http://www.levinassociates.com/pr2012/pr1207mamq2

Comment:

By Don McCanne, MD

Following the Supreme Court decision to uphold the fundamentals of the Affordable Care Act, merger and acquisition activities have accelerated within the health care industry. Is that what we’ve come to? An industry in which participants jockey for market position? Does anyone care about the patient anymore?

The answer to the last question is yes. But a health care environment created by MBAs cannot reproduce the professional milieu in which the patient is placed at the pinnacle. Corporations may have some of the same rights as people, but they can never have an inner being that understands, feels, and lives with empathy and caring like the professionals dedicated to the healing arts.

Corporations do have the power, and the money, and their rights, but caring isn’t on their list.

Acceleration of merger and acquisition activity

Dollar Volume of Health Care Mergers and Acquisitions Doubles in the Second Quarter of 2012, According to New Report from Irving Levin Associates, Inc.

Irving Levin Associates, Inc.
July 19, 2012
The increase in M&A activity (merger and acquisition) was spread across both the technology and services segments of health care. The $38.1 billion in health care technology transactions represented an 87% jump from the first quarter, while the $23.1 billion in health care services acquisitions was almost triple the dollar volume in the first quarter. In the health care services segment, long-term care and hospital acquisitions continue to dominate both the number of transactions and the dollar volume, with physician medical group acquisitions also very active as health care market participants try to get ready for the increase in Accountable Care Organizations. In the technology M&A segment, the number of e-health transactions has been growing and has averaged over 20 acquisitions per quarter for the past four quarters. “The fact that the Supreme Court decision validated most aspects of the Affordable Care Act means that providers and payers will be consolidating to be stronger players in the new market. Coincidence or not, there was a flurry of announced M&A transactions in the week after the decision,” stated Stephen Monroe, Partner at Irving Levin Associates and editor of The Health Care M&A Report.
http://www.levinassociates.com/pr2012/pr1207mamq2

Following the Supreme Court decision to uphold the fundamentals of the Affordable Care Act, merger and acquisition activities have accelerated within the health care industry. Is that what we’ve come to? An industry in which participants jockey for market position? Does anyone care about the patient anymore?
The answer to the last question is yes. But a health care environment created by MBAs cannot reproduce the professional milieu in which the patient is placed at the pinnacle. Corporations may have some of the same rights as people, but they can never have an inner being that understands, feels, and lives with empathy and caring like the professionals dedicated to the healing arts.
Corporations do have the power, and the money, and their rights, but caring isn’t on their list.

Concentration of health care spending

The Concentration of Health Care Spending

National Institute for Health Care Management
July 2012

Spending for health care services in the United States is highly concentrated among a small proportion of people with very high use. For the overall civilian population living in the community, the latest data indicate that more than 20 percent of all personal health care spending in 2009 — or $275 billion — was on behalf of just 1 percent of the population. The 5 percent of the population with the highest spending was responsible for nearly half of all spending. At the other end of the spectrum, 15 percent of the population recorded no spending whatsoever in the year, and the half of the population with the lowest spending accounted for just 3 percent of total spending.

With numbers like these, it is clear that per-person spending among the highest users is substantial and represents a natural starting point when thinking about how to curb health care spending. For instance, the average expenditure for each of the approximately 3 million people comprising the top 1 percent of spenders was more than $90,000 in 2009. The top 5 percent of spenders were responsible for $623 billion in expenditures or nearly $41,000 per patient. In contrast, mean annual spending for the bottom half of distribution was just $236 per person, totaling only $36 billion for the entire group of more than 150 million people.

Implications of Concentrated Spending

The concentration of health care spending has several implications for health policy, particularly as we think about how to control overall spending for health services. First is the obvious need to “follow the money.” With half of the population incurring just $36 billion in health care costs, it simply is not possible to realize significant contemporaneous or short-term savings by directing cost-control efforts at this group.
 
Strategies to improve management of chronic conditions, end-of-life care, and expensive episodes hold more promise, but raise challenges as well. To begin, accurate prospective identification of patients who can most benefit from disease management can be tricky since many of the same chronic conditions associated with higher spending are also present — and in the case of the elderly, highly prevalent — among lower-spending groups. Furthermore, even when these conditions are less prevalent for low spenders, the number of low spenders with the condition will be high simply because many more people are low spenders. Thus, interventions based solely on the presence of a chronic condition are bound to include a significant number of people who would not incur high costs, at least in the short term. Managing high spending at the end of life can also be problematic. Not all persons with high spending will die soon, and predicting timing of death and distinguishing between care that may extend life in a meaningful way and care that does little good is something that is often accomplished only in retrospect. Societal reluctance to discuss end-of-life care and fears of rationing only complicate the matter. Finally, although it might be possible to manage some of the expensive episodes more efficiently through use of clinical pathways, for example, it is virtually impossible to predict or avoid these random high-cost events.

A second implication of the highly concentrated spending pertains to the acceptance of risk by providers and payers. Emerging payment and delivery system reforms, such as accountable care organizations, rely on integrated provider organizations to accept some degree of risk for a defined patient population. These organizations will need a patient base that is large enough to balance out the sizeable downside risk of attracting just a few high spending cases. Additional risk-adjustment and other means of protection against high-cost outlier cases may also be needed. Similarly, in a world of community rating and guaranteed issue, insurers face a significant risk of adverse selection and negative financial implications if they happen to attract a disproportionate number of high spending patients. Here, too, adequate means of protecting against adverse selection and the risk posed by high spenders are required.

http://www.nihcm.org/images/stories/DataBrief3_Final.pdf

Comment: 

By Don McCanne, MD

The healthier half of our population accounts for only 3 percent of health care spending, whereas the top 5 percent was responsible for nearly half of the spending. This study also confirms the 20/80 rule: 20 percent of the population is responsible for 80 percent of health care spending. This concentration of spending is of great importance as we evaluate methods of containing costs.

Perhaps the most significant factor is that cost-containment strategies targeting healthier individuals will have very little impact on total health care spending since so little is spent on this sector in the first place. This explains why the current trend to increase price sensitivity through high-deductible health plans will produce very little savings even though it will act as a barrier to beneficial health care services. Reducing spending by 10 percent in the 150 million people who use only 3 percent of health care will reduce total health care spending by only 0.3 percent – a drop in the bucket of our national health expenditures. It is a small price to pay for being certain that people will seek appropriate care when they should.

What about high-deductible plans for the 5 percent who account for half of our health care spending? The costs for each patient would far exceed the deductibles, thus most care in this group – that provided after the deductible is met – would not be reduced since price is no longer a factor.

The brief mentions problems with other strategies to control costs in populations with skewed concentrations of health care needs.  Many strategies under consideration would be ill-advised, both because of the paucity of savings and because of the distortions in access and equity.

We really don’t need to look for inevitably-flawed strategies to try overcome these distortions. A single payer system – improved Medicare for all – is an ideal model to cover all appropriate health care expenses no matter how much they are skewed within a population.