Speaker – Page 619

The value of $100,000 drugs

UK medical group rejects new skin cancer treatment

By Maria Cheng
Bloomberg Businessweek, October 14, 2011

An independent British medical watchdog says the first treatment proven to help people with the deadliest form of skin cancer is too expensive to be used by the U.K.’s health care system, a recommendation critics called a potential death sentence.

The drug, Bristol-Meyers Squibb’s Yervoy, has offered some hope to people with advanced skin cancers, though a recent study showed it only worked in a small segment of patients studied, and they lived just four months longer than patients given older medications.

The National Institute for Clinical Excellence, or NICE, advised Friday that at a cost of 80,000 pounds ($126,600) Yervoy “could not be considered a cost-effective use” of health funds. A final decision is expected next month after a public consultation.

In the U.K., most medicines are paid for by the government, as long as they’re recommended by the cost-efficiency watchdog. The agency commonly rejects expensive drugs, including recently advising against new treatments for prostate cancer, breast cancer, and multiple sclerosis, though patients and doctors are increasingly protesting the decisions.

The government usually adopts NICE’s recommendations, meaning doctors in the government-funded health service cannot prescribe Yervoy without NICE’s approval.

In its decision, NICE said it was not convinced by the evidence, saying the data for Yervoy, which works by stimulating the immune system to fight cancer, did not compare it to older drugs used to treat melanoma. NICE also said the trial was too short to know how long the drug’s effects would last and raised concerns about the drug’s side effects, including diarrhea, rash, fatigue and nausea, which they said could affect a patient’s quality of life.

“We need to be sure that new treatments provide sufficient benefits to justify the significant cost (the health care system) is being asked to pay,” said Sir Andrew Dillon, NICE’s chief executive, in a statement.

Patient groups and charities slammed the decision, labeling it a “death sentence” for people with advanced skin cancer.

http://www.businessweek.com/ap/financialnews/D9QC77O00.htm

And…

U.K. Agency Rejects Bristol-Myers Skin Cancer Drug

By Jonathan D. Rockoff and Sten Stovall
The Wall Street Journal, October 14, 2011

Yervoy is expected to be a blockbuster for Bristol, with more than $1 billion in yearly sales. The therapy was approved in the U.S. in March and in Europe in July. It had $95 million in sales during the second quarter. Bristol CEO Lamberto Andreotti recently said the company was “very happy with the results so far” from the drug’s uptake.

“The price of Yervoy reflects the value of Yervoy,” Mr. Andreotti added, at the Pharmaceutical Strategic Alliances conference in New York last month.

http://online.wsj.com/article/SB10001424052970204002304576630891235750606.html

And…

Melanoma (stage III or IV) – ipilimumab: appraisal consultation document

National Institute for Health and Clinical Excellence (NICE)
October 12, 2011

Key conclusion

Ipilimumab is not recommended for the treatment of advanced (unresectable or metastatic) malignant melanoma in people who have received prior therapy.

The Committee was satisfied that ipilimumab meets the criteria for being a life-extending, end-of-life treatment and that the trial evidence presented for this consideration was robust.

The Committee acknowledged that few advances had been made in the treatment of advanced melanoma in recent years and ipilimumab could be considered a significant innovation for a disease with a high unmet clinical need.

Despite the combined value of these factors the Committee considered that the magnitude of additional weight that would need to be assigned to the QALY gains (quality-adjusted life years) for people with advanced (unresectable or metastatic) melanoma would be too great for ipilimumab to be considered a cost-effective use of NHS resources.

http://guidance.nice.org.uk/TA/WaveCRS2/48/Consultation/DraftGuidance

Comment:

By Don McCanne, MD

Should a $126,000 drug (Yervoy, ipilimumab) that produced only a very minimal benefit in a small segment of patients studied, yet caused significant side affects, be included in program that we finance? Is there no limit as to what we should add to coverage when our national health expenditures are already challenging individual, business and government budgets?

When the CEO of the manufacturer of this drug says, “The price of Yervoy reflects the value of Yervoy,” we should take a serious look at what constitutes value. That’s precisely what NICE did. Their fairly detailed report should be read before endorsing “anything goes” health care.

There is a limit. When we are picking up the tab, either through taxes for government programs or through premiums for private plans, we should be very concerned about how are funds are being spent.

Additional comment from Merton Bernstein:

Shouldn’t we also question the validity of the price assigned by the manufacturer? The likelihood is that its development was aided by some public funds. If a useful drug is out of reach for those who need it, should not the patent owner modify normal cost calculations to bring it within the reach of more people? It seems to me that pricing drugs should include element reflecting who bore the cost of development and who bears the cost of its unavailability because of cost considerations.

The value of $100,000 drugs

UK medical group rejects new skin cancer treatment

By Maria Cheng
Bloomberg Businessweek, October 14, 2011

An independent British medical watchdog says the first treatment proven to help people with the deadliest form of skin cancer is too expensive to be used by the U.K.’s health care system, a recommendation critics called a potential death sentence.

The drug, Bristol-Meyers Squibb’s Yervoy, has offered some hope to people with advanced skin cancers, though a recent study showed it only worked in a small segment of patients studied, and they lived just four months longer than patients given older medications.

The National Institute for Clinical Excellence, or NICE, advised Friday that at a cost of 80,000 pounds ($126,600) Yervoy “could not be considered a cost-effective use” of health funds. A final decision is expected next month after a public consultation.

In the U.K., most medicines are paid for by the government, as long as they’re recommended by the cost-efficiency watchdog. The agency commonly rejects expensive drugs, including recently advising against new treatments for prostate cancer, breast cancer, and multiple sclerosis, though patients and doctors are increasingly protesting the decisions.

The government usually adopts NICE’s recommendations, meaning doctors in the government-funded health service cannot prescribe Yervoy without NICE’s approval.

In its decision, NICE said it was not convinced by the evidence, saying the data for Yervoy, which works by stimulating the immune system to fight cancer, did not compare it to older drugs used to treat melanoma. NICE also said the trial was too short to know how long the drug’s effects would last and raised concerns about the drug’s side effects, including diarrhea, rash, fatigue and nausea, which they said could affect a patient’s quality of life.

“We need to be sure that new treatments provide sufficient benefits to justify the significant cost (the health care system) is being asked to pay,” said Sir Andrew Dillon, NICE’s chief executive, in a statement.

Patient groups and charities slammed the decision, labeling it a “death sentence” for people with advanced skin cancer.

http://www.businessweek.com/ap/financialnews/D9QC77O00.htm

And…

U.K. Agency Rejects Bristol-Myers Skin Cancer Drug

By Jonathan D. Rockoff and Sten Stovall
The Wall Street Journal, October 14, 2011

Yervoy is expected to be a blockbuster for Bristol, with more than $1 billion in yearly sales. The therapy was approved in the U.S. in March and in Europe in July. It had $95 million in sales during the second quarter. Bristol CEO Lamberto Andreotti recently said the company was “very happy with the results so far” from the drug’s uptake.

“The price of Yervoy reflects the value of Yervoy,” Mr. Andreotti added, at the Pharmaceutical Strategic Alliances conference in New York last month.

http://online.wsj.com/article/SB10001424052970204002304576630891235750606.html

And…

Melanoma (stage III or IV) – ipilimumab: appraisal consultation document

National Institute for Health and Clinical Excellence (NICE)
October 12, 2011

Key conclusion

Ipilimumab is not recommended for the treatment of advanced (unresectable or metastatic) malignant melanoma in people who have received prior therapy.

The Committee was satisfied that ipilimumab meets the criteria for being a life-extending, end-of-life treatment and that the trial evidence presented for this consideration was robust.

The Committee acknowledged that few advances had been made in the treatment of advanced melanoma in recent years and ipilimumab could be considered a significant innovation for a disease with a high unmet clinical need.

Despite the combined value of these factors the Committee considered that the magnitude of additional weight that would need to be assigned to the QALY gains (quality-adjusted life years) for people with advanced (unresectable or metastatic) melanoma would be too great for ipilimumab to be considered a cost-effective use of NHS resources.

http://guidance.nice.org.uk/TA/WaveCRS2/48/Consultation/DraftGuidance

There is a limit. When we are picking up the tab, either through taxes for government programs or through premiums for private plans, we should be very concerned about how are funds are being spent.

Additional comment from Merton Bernstein:

Shouldn’t we also question the validity of the price assigned by the manufacturer? The likelihood is that its development was aided by some public funds. If a useful drug is out of reach for those who need it, should not the patent owner modify normal cost calculations to bring it within the reach of more people? It seems to me that pricing drugs should include element reflecting who bore the cost of development and who bears the cost of its unavailability because of cost considerations.

The fundamental flaw with the IOM recommendation on benefits

Essential Health Benefits: Balancing Coverage and Costs (2011)

Institute of Medicine

“The committee concludes that the EHB (Essential Health Benefits) should be defined as a package that will fall under a predefined cost target rather than building a package and then finding out what it would cost.” (Section 4, page 7)

http://books.nap.edu/openbook.php?record_id=13234&page=85

Comment:

By Don McCanne, MD

When the Institute of Medicine (IOM) released its recommendations on the method for determining essential health benefits for the private plans to be offered in the state insurance exchanges called for in the Accountable Care Act, advocates of comprehensive health care for everyone were quite disappointed, to say the least. When looking through this 300 page report for an explanation as to why they recommended such intolerably skimpy benefits, the one sentence above stands out.

By predefining a specific cost target and then defining a benefit package to fit those costs, the committee explicitly has recommended that the new standard for health insurance in America should be a defined contribution rather than a defined benefit.

This concept, which is permeating our public and private social programs, has been one of the most destructive to our unifying stance of social solidarity. Many have seen their pensions based on defined benefits being converted into individual plans in which contributions are defined but benefits are no longer guaranteed, being dependent on the variables of investment returns and, more importantly, the gamble that you won’t outlive your personal account. (Of course, the annuity industry is quite willing to take a major portion of your account in exchange for guaranteeing you less generous payments for the remainder of your life.)

The privatization health care schemes, such as the proposed voucher program for Medicare, also would provide a defined contribution to be used to purchase a skimpier, ill-defined benefit package, unless the individual contributes more personal funds that many simply do not have.

The IOM recommendation for the exchange plans does the same. The standard defined contribution would be subsidies provided toward the price of a skimpy plan with inadequate benefits. If the individual wants a plan with adequate defined benefits, an additional personal contribution to the premium would be required to buy up to a better plan, again with the questionable assumption that the person has the funds.

The media keep reporting that participants in Occupy Wall Street and similar demonstrations throughout the nation don’t seem to know what they want. That is blatantly untrue. They want our economy to work not only for the top 1 percent, but for the other 99 percent of us as well. Taking away our defined benefits and substituting an inadequate contribution is precisely the the type of activity that has left middle-income Americans behind.

Let’s take a stand. Let’s immediately let President Obama and Secretary Sebelius know that we won’t tolerate this injustice. Then let’s expand the protests into a national movement that returns America to the people. We may have to have a dialogue with the Tea Party people as to just what that means. It doesn’t mean abandoning government, but rather it means taking control of our government so it works for the benefit of all of us – a defined benefit, if you’ll permit.

The fundamental flaw with the IOM recommendation on benefits

Essential Health Benefits: Balancing Coverage and Costs (2011)

Institute of Medicine

“The committee concludes that the EHB (Essential Health Benefits) should be defined as a package that will fall under a predefined cost target rather than building a package and then finding out what it would cost.” (Section 4, page 7)

http://books.nap.edu/openbook.php?record_id=13234&page=85

Killing Medicaid the California Way

By BRUCE C. VLADECK and STEPHEN I. VLADECK
New York Times, October 13, 2011

VIRTUALLY all of the debate over the health care legislation enacted last year has focused on the constitutionality of the individual mandate, the requirement that, by 2014, nearly all Americans either purchase health insurance or pay a fine if they fail to do so. The Supreme Court now seems likely to decide the fate of the mandate, perhaps as early as June.

But last week the court also heard oral arguments in another case that could, indirectly, have a far greater impact on whether the act can meet the goal of expanding health care access by broadening eligibility for Medicaid, by 2014, to 15 million people.

One of the central substantive requirements of the Medicaid program, which serves more than 50 million poor and disabled Americans, is what’s known as the equal access mandate, which requires states to set the rates at which they reimburse Medicaid providers at levels sufficient to ensure an adequate supply of providers. As both Congress and the executive branch have understood since Medicaid’s creation in 1965, there would be little incentive for providers to participate in Medicaid if their payments were too far below market levels.

Nevertheless, in response to vast budget shortfalls, the California Legislature in 2008 enacted an across-the-board 10 percent cut in reimbursement levels for Medi-Cal, the state Medicaid program. Three groups of Medicaid beneficiaries and providers sued the state, arguing that the categorical reduction was inconsistent with, and therefore pre-empted by, the equal access mandate. On the merits, three federal appellate panels agreed and halted the rate reduction.

In the case it heard last week, Douglas v. Independent Living Center of Southern California, the Supreme Court will not resolve whether those decisions were correct: the incompatibility between California’s rate reduction and the equal access mandate appears to be settled. Instead, the justices agreed to consider a technical but critical question: whether private parties, be they Medicaid beneficiaries or providers, may even bring such suits in the first place.

When Medicaid was enacted, the possibility of private suits to enforce its provisions could be taken for granted. In the past decade, however, the Supreme Court has held federal statutes to an increasingly restrictive standard in deciding whether or not they may be privately enforced. The result has been clear: most of the lower courts facing the issue in recent years have held that the equal access provision can no longer be enforced in suits by beneficiaries or providers.

But if beneficiaries or providers can’t enforce the equal access provision, who will? The answer, according to both California and the Obama administration, which filed an amicus brief in support of California in the Douglas case, is the United States Department of Health and Human Services. What they fail to acknowledge, however, is that the department utterly lacks the financial, legal, logistical and political wherewithal to enforce the provision. (We helped write an amicus brief in support of the plaintiffs.)

First, the department doesn’t have the resources to oversee compliance with the equal access provision. As Justice Anthony M. Kennedy pointed out at the oral argument last week, only 500 employees supervise nearly $400 billion in Medicaid expenditures. Indeed, the department’s budget for the administration of Medicaid declined by 44 percent between the 2008 and 2010 fiscal years, even as Medicaid costs have kept rising.

Second, even if the department sought to expand enforcement of the equal access provision, it would encounter the additional hurdle that its enforcement budget — unlike the bulk of the Medicaid program — depends on annual appropriations. Medicaid must compete annually with the National Institutes of Health, the Food and Drug Administration, the Centers for Disease Control and Prevention and other agencies.

Third, even with proper funding, the department has repeatedly admitted that its authority to enforce the equal access provision and to provide remedies for violations is limited, practically and legally. When states fail to comply with the equal access mandate, the department’s options are either to reject a state Medicaid plan up front or withdraw financing after the fact — both of which punish Medicaid beneficiaries at least as much as they punish the offending states. As a result, the department has focused instead on trying to cajole rather than coerce states into complying.

Despite these reservations, only Justice Kennedy seemed outwardly concerned during last week’s oral argument in Douglas about whether exclusive federal enforcement could be effective. If the rest of the justices hold that the equal access provision cannot be privately enforced, that will open the door for other states with budget shortfalls to enact similar across-the-board cuts in Medicaid reimbursement rates. From there, it would be only a matter of time before providers abandoned Medicaid beneficiaries for private consumers en masse, thereby vitiating the animating purpose of the Medicaid program.

Of course, even if the justices rule for California, Congress is free to respond by clarifying that Medicaid beneficiaries or providers should be able to enforce the equal access provision. But given the politics of the moment, and the reality that violating the equal access mandate saves money for states and the federal government, a true legislative fix seems unlikely.

Thus, even as it vigorously defends the constitutionality of the individual mandate, the Obama administration may be complicit in eviscerating Medicaid — and setting back the broader goal of ensuring that all Americans have access to quality health care.

Bruce C. Vladeck was the administrator of Medicare and Medicaid from 1993 to 1997. Stephen I. Vladeck is a professor of law at American University.

How Doctors Could Rescue Health Care

By Arnold Relman
New York Review of Books, October 27, 2011

1. The US is facing a major crisis in the cost of health care. Corrected for inflation, health expenditures in the public sector are nearly doubling each decade, and those in the private sector are increasing even more rapidly. According to virtually all economists, this financial burden, which is now consuming about 17 percent of our entire economic output (far more than in any other country), cannot be sustained much longer. The federal share, including payments for Medicare and Medicaid, was 23 percent of the national budget in 2009 and is a prime cause of the deficit.1

There is no current prospect of raising taxes. If the federal long-term debt is to be reduced, government health expenditures on Medicare and Medicaid must be controlled. However, there is no agreement in Washington on how that can or should be done. Both parties claim to have the answer but, as I will make clear, no initiatives proposed by either party have much chance of significantly slowing the rise in federal health costs without reducing access to needed services. Major reform will be required, but that is not even under consideration. In any case, health legislation is currently stalled by a bitter political deadlock. No initiatives to improve health care will come out of Congress until after the 2012 elections and, unless the results are unexpectedly decisive, probably not even then. Still, as I will explain here, there is a chance that new developments in the way physicians are organizing themselves to deliver care might improve the currently dismal prospects for action on major reform and cost control.

2. In his September 8 address to Congress, the President spoke of the urgent need to control the costs of Medicare. To do this he is relying principally on the Affordable Care Act, passed by Democrats in March 2010. The Act expands insurance coverage but, as already explained in these pages,2 it is not likely to slow the rise of costs significantly. Republicans in Congress are seeking to stop it from being implemented and their potential candidates for president are demanding its repeal, while state governments that are controlled by Republicans are challenging its constitutionality in federal courts. They question the Act’s mandate that all citizens not covered by public or private insurance plans be required to purchase private insurance or incur a tax penalty. The Republican legal challenge has so far received a divided reception in lower courts and will probably reach the Supreme Court next year. The mandate is a critical part of the Act because private insurers will not offer coverage at affordable prices to all applicants, as the Act assumes, unless everyone—young and healthy included—is required to be insured. Whatever the Court’s decision, it will not have much effect on health costs because the law does very little or nothing to address some of the most important causes of the high cost of care and its rapid inflation.3

First, the Act does not replace—but expands—the investor-owned private health insurance industry. According to the actuary for the government’s Center for Medicare and Medicaid Services (CMS), this industry’s overhead and profits currently add over $152 billion to the cost of care.4

Second, the Act does not change the method of payment for most medical care, which is based on fees for each procedure and therefore encourages specialists to use expensive procedures excessively, while giving all physicians strong financial incentives to provide more services than needed.

Third, it does nothing to change the current fragmentation of medical care. This allows specialists to practice in isolation without restraints on cost, causes duplication and disorganization of services, and discourages the use of primary care physicians. The latter are essential to cost-effective care because they help patients avoid unnecessary, expensive procedures. But with specialists earning much higher incomes per unit of working time, primary care doctors are disappearing. The Act addresses this problem, but only by providing minimal financial incentives to primary care doctors; they are unlikely to make much difference.

In the absence of effective general solutions for these causes of rising costs, there is little chance that the Act will “bend the curve” of medical inflation as Democrats hope. The law does, however, propose to cover the cost of adding millions of beneficiaries to Medicaid and to private plans over ten years. It does this by cutting payments to the private “Medicare Advantage” plans now chosen by some 12 million Medicare beneficiaries, and by eliminating tax exemptions for expensive insurance coverage offered by employers to favored employees. Apart from two ill-conceived and probably unworkable exceptions, the Act offers no other broad initiatives directly aimed at reducing costs.

The first exception, in Section 3022 of the Act, proposes to share any Medicare savings with so-called accountable care organizations (ACOs). ACOs are defined as federally certified multispecialty groups of physicians that collaborate with one or more hospitals and contract with Medicare to provide comprehensive care to a designated group of patients on a fee-for-service basis. ACOs would in principle have incentives to control costs because the government would give them a share of any savings they produced by using fewer resources in delivering good care. But the 126 pages of regulations proposed to govern this program, published by the Department of Health and Human Services on April 7, 2011,5 threaten to undermine it. The regulations were considered so onerous and impractical, and the benefits to participating ACOs so dubious, that almost all multispecialty medical groups have indicated they would not participate.6

Even if the regulations are substantially modified before they are fully adopted, the CMS, which would administer the program, probably could not handle the extra work required to manage more than a relatively small number of participating ACOs. This program is therefore not likely to have much effect on health care costs.

Section 3403 of the Act is often cited as a powerful tool for controlling costs, but there is much reason to be skeptical. It establishes an Independent Payment Advisory Board (IPAB), a presidentially appointed independent committee of fifteen full-time members. If government spending rises too rapidly, the IPAB must offer proposals for cost control, and Congress must act on them or enact its own measures for equivalent savings. However, the law stipulates that the IPAB cannot reduce Medicare benefits or increase Medicare premiums, and it defers any proposed reductions in payments to hospitals for a few years. The IPAB would thus be limited to suggesting cuts in payments to physicians, payments for some ambulatory services such as emergency room visits, and payments for Medicare Advantage plans and Medicare Part D prescription drugs.

Unless the IPAB were to recommend some limitation to their total income, physicians could easily respond to reduced fee schedules by providing more services, such as performing more diagnostic tests. Physicians’ average incomes have not kept pace with the rising costs of managing an office, and there is widespread unhappiness among the profession over the threat of cuts in payment that have been mandated by past legislation. Some physicians are now refusing to see new Medicare patients for this reason, so I doubt there would be support in Congress for much further reduction in fee schedules.

Moreover, payments to physicians account for only about a fifth of total health expenditures. The other four fifths consist largely of costs of hospital and nursing home care as well as payments for drugs and other medical products, and the overhead costs of private insurers. A realistic reduction of payments to doctors could at most save one
or two percent of total costs, and wouldn’t necessarily slow inflation. The other cost-saving options left open to the IPAB are also limited in scope and would have relatively little effect on “bending the curve.” Furthermore, and most importantly, there will probably be fierce Republican opposition in Congress to IPAB appointments and funding, which will hamstring its function. The IPAB’s prospects for success are therefore dim.

3. Republicans in Congress have pretty much limited their health policy to an unyielding opposition to “Obamacare,” to calls for reform of malpractice litigation, and to their traditional reliance on “market forces.” Their latest initiative is the proposal by Representative Paul Ryan of Wisconsin to privatize Medicare and change federal support of Medicaid by substituting fixed grants for its current open-ended commitment to paying a large share of costs to the states. Under his proposal the Medicare system covering most of the medical costs of elderly citizens would be gradually replaced by a federal voucher system. Starting in 2022 each new Medicare beneficiary would choose a private insurance plan and the government would give participants in the plan a voucher to help pay for coverage. The voucher would start at $8,000, which would grow only according to the Consumer Price Index, but with some undefined adjustment for people who are older and sicker.

However, actuarial experts predict a near doubling of total Medicare costs within a decade; so Ryan’s proposed vouchers would fall far behind actual costs, and beneficiaries would have an increasing financial burden. The Ryan plan reduces federal outlays for Medicare by shifting costs to patients. It has been passed by the Republican majority in the House, but not by the Senate, and the President strongly opposes it.

Defending Ryan’s plan, Republicans say that under current policies Medicare will soon be bankrupt. They are correct that rising Medicare costs are unsustainable, but the fact remains that the Ryan voucher plan puts an intolerable burden on the elderly and would undoubtedly reduce their access to needed care. We can predict, for example, that patients would make fewer visits to physicians for checkups and reduce their compliance with expensive drug regimens.

As for Ryan’s proposal to reduce Medicaid outlays by making fixed grants to states, the states would have considerable discretion in spending these grants, and their deficits would almost certainly force them to curtail Medicaid services in order to meet other budgetary needs. The grant idea, although favored by some state governors, has provoked wide opposition because it threatens the medical services needed by low-income citizens, and because Medicaid money now also supports nursing home care for the elderly.

4. If neither party is proposing effective solutions to the cost crisis, and political deadlock in Washington is preventing the consideration of new ideas, are we doomed to witness a slowly collapsing health care system that eventually will provide adequate care only to those who can afford to pay? In his latest book on health care,7 the Princeton sociologist Paul Starr, who worked on the ill-fated Clinton Health Security Plan, despairs of any political action that could bring about major reform. However, a new movement in the medical profession might help to start such reform by reconfiguring the way medicine will be practiced.

Traditionally, physicians have practiced either alone or in small partnerships with a single specialty, such as cardiology. Now a big shift to large groups containing many specialties is taking place. These multispecialty practices vary in size, but include physicians in almost all fields. Primary care physicians usually make up almost half the medical staff. They counsel patients and coordinate care by the specialists. Groups usually share common facilities, medical records, scheduling, and billing, and their physicians cooperate in the care of patients.

Many multispecialty groups pay doctors at least in part with base salaries, with the rest of their compensation derived from each physician’s collected fees. Only a few pay entirely by salary, but that may change. Most groups are owned by physicians, but many are now being organized and managed by hospitals. Well-established large groups owned by physicians include the Mayo Clinic, Cleveland Clinic, Permanente Medical Group, Intermountain Healthcare, Scott & White, Marshfield Clinic, Geisinger Health System, Lahey Clinic, and Harvard Vanguard. Many smaller physician-owned groups now exist throughout the country (though there are only a few in the Southeast), and their number is growing rapidly. So are groups owned by hospitals, including academic medical centers as well as large community hospitals. An unknown, but probably substantial, proportion of these groups are not for profit; i.e., they have no investors and use any net income to maintain and improve facilities and services.

The American Medical Group Association (AMGA) is the trade organization that represents most multispecialty physician-owned groups. The American Hospital Association (AHA) is the trade organization for almost all general hospitals. In recent communications with senior officials at the AMGA and the AHA, I learned that membership in the AMGA now stands at about four hundred groups, the highest ever, and is increasing at an unprecedented rate of about 10 percent annually. These four hundred multispecialty groups employ about 117,000 full-time medical doctors, but since many of their physicians work less than full-time, the total number of doctors now employed by such groups is probably close to 140,000, not counting the unknown number in physician-owned groups that are not members of the AMGA.

The AHA says that a 2010 survey of its member hospitals reveals that they employed roughly 120,000 practicing physicians, but the survey did not disclose how many were in multispecialty group practices. Allowing for this incomplete reporting, the total number of physicians now practicing in multispecialty groups could be close to 200,000, or about a quarter of all practicing physicians, and this number is increasing rapidly.

There are many reasons for this change. Young doctors now finish their training with substantial debt, often in the range of $150,000 or more. The prospect of assuming even more debt to start their own practice is daunting. Joining a multispecialty group means less financial risk and provides ready-made facilities and a staff to schedule patients and bill for services. Groups usually offer an income fully competitive with that to be expected in independent private practice. They often pay better fringe benefits than solo practitioners could provide for themselves.

Half of all medical students are now women, and soon they will represent nearly half of all practicing physicians. Women are more likely than men to choose some type of primary care practice, and I and others have found that many of them particularly appreciate the opportunity afforded by group practice to share responsibilities and to limit their working time. Many young male physicians are also glad to be working in a less competitive and more collegial environment, with opportunities to choose limited working hours.

In short, physicians are increasingly looking for arrangements that allow them to focus more on the practice of medicine and less on managing a business. They also want at least a little more time for personal and family life. Practice in multispecialty groups is the obvious answer. Single-specialty groups offer some similar advantages, but are not as attractive. They are smaller, have fewer resources, and will not be able to adapt as well to the new payment methods that government and private payers intend to employ.

Meanwhile, evidence has been accumulating that organized care by multi-specialty groups provides good medical service and has the potential of saving much money.8 This
is because, as most clearly shown by John Wennberg and his colleagues at Dartmouth,9 much of the care prescribed and provided by independent specialists is unnecessary. Physician-owned not-for-profit groups, particularly those that pay their doctors at least partly by salaries, are not as likely to provide unnecessary services or to recommend hospitalization when it is optional. Their physicians have few financial incentives to do so, and the services of their specialists are coordinated with their primary care doctors, who usually recommend the simplest and least expensive choices consistent with good medical care.

However, today’s competitive health care market, with its private health insurance companies and fee-for-service payment system, severely limits the potential cost savings of a delivery system based on not-for-profit group practice. Private insurers contribute to high costs not only because of their profits and overhead, as already noted, but because doctors and hospitals have to pay the considerable costs of billing the insurance companies and collecting money from them. I favor a much less expensive single public payer system supported by a universal, progressive, designated health care tax. Fee-for-service payment gives doctors incentives to provide more services than needed and allows for fraudulent billing. It should be replaced by an advance payment to physicians for comprehensive care on a per capita basis.

To receive such payment, group practices would have to reimburse their physicians largely by salary. Regulations would require open enrollment of patients; to limit the risk of fixed payment for comprehensive care, groups would need public reinsurance or other financial guarantee to protect against the possibility that some patients might need expensive services.

There is much reason to believe that such a reformed system could deliver good care for all at considerably less cost and could also control cost inflation10—although such a system does not have the remotest chance of being legislated by our national government anytime soon. But what if, as seems likely, the rapid trend toward group practice that I have described were to continue, and almost all medical care were ultimately to be provided through multispecialty group practices? Despite the limitations imposed by the existing health care market, the advantages of organized care might become obvious not only to patients but to business employers and even to legislators and policymakers in Washington.

The question would then arise: If restructuring the delivery of medical care is so helpful, why not reform the insurance and payment of care as well? Supported by most of the medical profession and by most voters, major reform might finally be seriously discussed. It might become easier to pass legislation that created a system based on a tax-supported single-payer system, with prepaid comprehensive care for all. Obviously, there is no guarantee this would happen. Indeed, the odds would still be against it. But if most physicians were to be employed in multispecialty groups, the growing number of practitioners now supporting major reform would probably become a strong majority. This could well change the climate of opinion enough to influence legislation.

Dr. Francis J. Crosson, former executive director of the Kaiser-Permanente physicians’ organization and a prominent advocate for physician-managed groups becoming federally certified ACOs, believes that they will be essential for the future control of health costs.11 But unlike the broad reforms I favor, in the system he envisions these group practices would function in a competitive marketplace, in which public and private insurers would offer them financial incentives to improve care, and market forces would be expected to control prices. However, I am convinced that good affordable universal care will require major reform of all parts of the system because market forces and the current system have clearly encouraged excessive medical treatment and diagnostic testing. Insurance coverage will need to be replaced by tax-supported universal access to medical care, which should change from a competitive market to a not-for-profit social service.12

Hospitals, as we have seen, are now hiring more physicians to work in groups. As hospital employees, these physicians inevitably feel pressure to protect their employers’ income by filling beds and using hospital facilities for tests and procedures. They are less likely to control costs than physicians in independent not-for-profit groups. It is not yet clear which type of group will dominate, but those owned by physicians would probably be more supportive of reform.

The greatest resistance to reform would come from the private insurance industry. But with the savings that a reformed health system would generate, it should be possible for whatever agency collects the health care tax to buy out the industry’s investors. Some current employees of insurance companies might be usefully employed in a new single-payer system. Moreover, it seems likely that the jobs lost in health insurance companies would be offset by new jobs created through the expansion of an economy relieved of unsustainable health costs.

I do not underestimate the complexity of the task or the strength of opposition to reform by vested interests, and by conservatives who rail against a “government takeover” of health care. Reform could be delayed for years, or indefinitely. However, the status quo will soon no longer be tenable because of rising costs. New thinking about major reform and private health insurance will be necessary.

Private investor-owned health insurance appeared quite suddenly in the final few decades of the last century, reaping the profits from the health coverage that employers were offering to their employees. But except for a brief and unpopular era of cost control by “managed care” in the 1990s, the private insurance industry has not contributed anything to the health care system nearly comparable in value to the costs it has added.

In some European countries, private insurance companies are an integral part of popular and less expensive health care systems, but they are usually not-for-profit and are closely regulated by government. In Switzerland, for example, the government mandates universal not-for-profit private insurance coverage for most medical services; it also requires uniform benefits and controls costs by regulating insurance premiums and the fees paid to physicians. The government also owns most of the major hospitals. In view of our distinctive political and economic traditions, and cultural diversity, we could not easily adopt this or any other foreign system. We will have to find our own health care solutions.

Health reform might begin in the states. Vermont has recently approved a single-payer system that includes a public board to develop a global health budget and new reimbursement methods to replace fee-for-service payment. The board will help physicians to form multispecialty groups that can accept prior payments for comprehensive care of patients. Many other details remain to be worked out. Federal permission for the state to pool all government health care funds will be needed before the plan can become operative, which is estimated for 2017.13 Similar initiatives may be introduced in other states; if successful, state plans would encourage Congress to enact national reforms.

5. The net effect of the reformed system I have described here on the government’s costs can only be guessed at, but savings would be very large. Any initial increases in expenditures owing to expanded coverage would certainly be more than balanced by savings later on. However, government would hold the ultimate cost-controlling weapon because it would determine the rates at which it reimbursed groups for prepaid, comprehensive care, and would thereby have full control of health care expenditures. If everyone (including politicians and
government officials) were in the system, there would be little chance that the government would underfund it, or allow its services to deteriorate.

Such reforms are the best—perhaps the only—hope of preserving the benefits of Medicare and Medicaid and achieving affordable universal access to care. In today’s political climate these reforms have no chance, but this could change if physicians continue to join groups and transform the organization of medical care. If encouraged by public opinion and by physicians, the members of Congress might see the clear advantages of the group practice model. They might then legislate the broad reforms in insurance and payment that would make this model much more effective. If that were to happen, the medical profession would have made an important, although unplanned, contribution to the rescue of the US health care system.

1 Lisa Potetz and Juliette Cubanski, A Primer on Medicare Financing , Henry Kaiser Family Foundation, July 2009, Exhibit 2.

2 Jonathan Oberlander and Theodore R. Marmor, “The Health Bill Explained at Last,” The New York Review , August 19, 2010.

3 Arnold Relman, “Health Care: The Disquieting Truth,” The New York Review , September 30, 2010.

4 Sean P. Keehan et al., “National Health Spending Projections Through 2020: Economic Recovery and Reform Drive Faster Spending Growth,” HealthAffairs , Vol. 30, No. 8 (August 2011).

5 Department of Health and Human Services, Federal Register , Part II, Vol. 76, No. 67 (April 7, 2011).

6 Ricardo Alonso-Zaldivar, “Medical Group Pans Key Element of Obama Health Plan,” The Boston Globe , May 12, 2011.

7 Remedy and Reaction: The Peculiar American Struggle Over Health Care Reform (Yale University Press, 2011.)

8 Kenneth H. Chuang, Harold S. Luft, and R. Adams Dudley, “The Clinical and Economic Performance of Prepaid Group Practice,” Toward a 21st Century Health System , edited by Alain C. Enthoven and Laura A. Tollen (Jossey-Bass, 2004); and Brent C. James and Lucy A. Savitz, “How Intermountain Trimmed Health Care Costs Through Robust Quality Improvement Efforts,” HealthAffairs , Vol. 30, No. 6 (June 2011).

9 John E. Wennberg, Tracking Medicine: A Researcher’s Quest to Understand Health Care (Oxford University Press, 2010).

10 Arnold Relman, A Second Opinion: Rescuing America’s Health Care (PublicAffairs, 2010).

11 Francis J. Crosson, “The Accountable Care Organization: Whatever Its Growing Pains, the Concept Is Too Vitally Important to Fail,” HealthAffairs , Vol. 30, No. 7 (July 2011).

12 Relman, A Second Opinion .

13 Anya Rader Wallack, “Single Payer Ahead—Cost Control and the Evolving Vermont Model,” The New England Journal of Medicine , Vol. 365 (August 18, 2011).

URGENT: Sign letter of protest over IOM's skimpy health plan prescription

FOR ACTION TODAY

A recent Quote of the Day message expressed alarm at the fact that the Institute of Medicine is recommending a grossly inadequate, skimpy, spartan standard for the package of benefits to be offered by health plans in the state insurance exchanges being established under the Affordable Care Act:

https://pnhp.org/news/2011/october/ioms-disturbing-report-on-essential-health-benefits

Following is a letter asking the Obama administration to reject this recommendation. Though only selected names will be used in publicizing this letter, we encourage everyone who concurs with the views expressed to sign it, using this link:

https://pnhp.org/iom-letter/index.php

President Obama: Reject the Institute of Medicine’s skimpy health plan prescription

We protest the Institute of Medicine’s (IOM) recommendation that cost rather than medical need be the basis for defining the “essential benefits” that insurance policies must cover when the federal health reform law takes effect in 2014. If adopted by the Department of Health and Human Services, this recommendation will sacrifice many lives and cause much suffering. We call on Secretary Sebelius and President Obama to reject them.

The IOM proposal would base the required coverage on the benefits typical of plans currently offered by small businesses – enshrining these skimpy plans as the new standard. These bare-bones policies come with a long list of uncovered services and saddle enrollees with unaffordable co-payments and deductibles.

Already, millions of underinsured Americans forgo essential care: adults with heart attacks delay seeking emergency care; children forgo needed primary and specialty care; patients fail to fill prescriptions for lifesaving medications; and serious illness often leads to financial catastrophe.

The inadequate coverage the IOM recommends would shift costs from corporate and government payers onto families already burdened by illness. Yet this strategy will not lower costs. Delaying care frequently creates even higher costs. Steadily rising co-payments and deductibles over the past two decades have failed to stem skyrocketing medical inflation. And nations that assure comprehensive coverage – with out-of-pocket costs a fraction of those in the United States – have experienced both slower cost growth and greater health gains than our country.

Our patients urgently need what people in these other nations already enjoy: universal and comprehensive coverage in a nonprofit system that prioritizes human need over corporate profit.

The IOM committee was riddled with conflicts of interest, many members having amassed personal wealth and career success through their involvement with health insurers and other for-profit health care firms. Its recommendations were lauded by insurance industry leaders who have sought to undermine real health reform at every turn. As the Lancet noted on its Dec. 5, 2009, cover: “Corporate influence renders the U.S. government incapable of making policy on the basis of evidence and the public interest.”

Sadly, the committee’s damaging recommendations suggest that this corporate bug has also infected the IOM.

https://pnhp.org/iom-letter/index.php

URGENT: Sign letter of protest over IOM’s skimpy health plan prescription

FOR ACTION TODAY

https://pnhp.org/news/2011/october/ioms-disturbing-report-on-essential-health-benefits

https://pnhp.org/iom-letter/index.php

President Obama: Reject the Institute of Medicine’s skimpy health plan prescription

We protest the Institute of Medicine’s (IOM) recommendation that cost rather than medical need be the basis for defining the “essential benefits” that insurance policies must cover when the federal health reform law takes effect in 2014. If adopted by the Department of Health and Human Services, this recommendation will sacrifice many lives and cause much suffering. We call on Secretary Sebelius and President Obama to reject them.

The IOM proposal would base the required coverage on the benefits typical of plans currently offered by small businesses – enshrining these skimpy plans as the new standard. These bare-bones policies come with a long list of uncovered services and saddle enrollees with unaffordable co-payments and deductibles.

Already, millions of underinsured Americans forgo essential care: adults with heart attacks delay seeking emergency care; children forgo needed primary and specialty care; patients fail to fill prescriptions for lifesaving medications; and serious illness often leads to financial catastrophe.

The inadequate coverage the IOM recommends would shift costs from corporate and government payers onto families already burdened by illness. Yet this strategy will not lower costs. Delaying care frequently creates even higher costs. Steadily rising co-payments and deductibles over the past two decades have failed to stem skyrocketing medical inflation. And nations that assure comprehensive coverage – with out-of-pocket costs a fraction of those in the United States – have experienced both slower cost growth and greater health gains than our country.

Our patients urgently need what people in these other nations already enjoy: universal and comprehensive coverage in a nonprofit system that prioritizes human need over corporate profit.

The IOM committee was riddled with conflicts of interest, many members having amassed personal wealth and career success through their involvement with health insurers and other for-profit health care firms. Its recommendations were lauded by insurance industry leaders who have sought to undermine real health reform at every turn. As the Lancet noted on its Dec. 5, 2009, cover: “Corporate influence renders the U.S. government incapable of making policy on the basis of evidence and the public interest.”

Sadly, the committee’s damaging recommendations suggest that this corporate bug has also infected the IOM.

https://pnhp.org/iom-letter/index.php

Health care: a new civil-rights movement?

Nurse Kathleen Bartholomew writes about the importance of making health care about wellness. She suggests health care might be a civil-rights movement of the 21st century.

By Kathleen Bartholomew
The Seattle Times, Friday, Oct. 7, 2011

The patient was stoic and distant as he sat on the edge of the bed waiting for me to give him the bath I had promised an hour earlier. Quickly I gathered my supplies and began by washing the old man’s back. But suddenly, he burst out sobbing.

“Did I hurt you?” I asked concerned.

“No, no!” He ordered gruffly, “Go on now.”

After several minutes of silence, he softly shared.

“I’m sorry. You see, my wife died 22 years ago and no one has touched my back since that day.” In the longest bath I’ve ever given, he told me why she liked the rain and what she always planted in her garden — but it’s nowhere in my charting.

Similarly, a physician I respect sat down and talked for 30 minutes to an elderly woman with high blood pressure. He listened to her story then counseled her to lose weight and take her meds. The current financial structure is so lean that these most fundamental and humanistic interventions are now in peril — because there is no price tag.

What’s the billing code for easing an old man’s grief, or a healing connection? What’s the billing code for holding someone’s hand as they lie dying because they have no relatives or visitors?

Or maybe a better question would be, how much would you pay? What’s it worth to you not to die alone or be heard rather than given a pill? Like pennies on a convenience-store counter there for the taking, these healing acts of care are free.

Maybe it’s time to look at our most fundamental premises in health care by following the money.

The U.S. spends twice as much for half the quality care of other industrialized countries and has poorer outcomes. Hundreds of millions of dollars were squandered lobbying for sacred cows in the 2010 federal health-care-reform law to protect vested interests (our health insurers cost us 20 cents on the dollar versus 3 cents in other countries).

Hospital leaders struggle to cut costs to protect their bottom line, while physicians and nurses try with inadequate time and resources to keep their patients from being one of the 22 who die on average every hour from preventable errors and infections.

Why? Because sick people are only profitable when there are enough of them and someone else pays the bill. “Well” people, on the other hand, generate little, if any, income. From a business perspective, the current structure is a conundrum: we need plenty of sick people to sustain a system supposedly dedicated to health.

It’s time to acknowledge the elephant in the room and make a collective decision for the betterment of all society: Is health care a business, or public service? What should it be?

If it is only a business, then acknowledge the obvious: No business can give away its resources for free. There are no billing codes for easing grief or spending time with a patient so we give them a pill. Within the business model, all the free stuff will have to go away — as much of it has already.

If health care is a business, our best hope is to create a billing code for wellness so that hospital leaders can stop focusing on revenue from disease out of dire necessity and redirect their efforts to safety, quality and prevention.

Or perhaps, embedded in the chaos and polarity, passion is an opportunity. Maybe health care is the civil-rights movement of the 21st century. It certainly has the same emotional charge as pushing blacks to the back of the bus, or refusing the vote to women.

The poor don’t deserve health care! Let them suffer! Though it is labeled as socialism by the “haves” and virtually unreachable by the “have-nots,” we have found our next frontier: improving the wellness of America. And in that quest, maybe the services we give away for free are not worthless after all, but rather the harbingers of a healthier society where every citizen has the inalienable right to be well.

Friday Harbor resident Kathleen Bartholomew is a nurse consultant and an author of books about nursing culture.

http://seattletimes.nwsource.com/html/opinion/2016439515_guest08bartholomew.html

Wall Street Comes to D.C. to Profit from Health Care; 99% Say 'Wall Street Greed Kills Those in Need'

By Margaret Flowers, M.D.
October 2011 Movement, Oct. 12, 2011

Today, the October2011.org Movement confronted Wall Street investors who came to Washington to figure out how they can make more money from health care. The Wall Street Comes to Washington Healthcare Conference underscores why people across the United States are occupying their cities to protest Wall Street greed.

The meeting was sponsored by the Peter G. Peterson Foundation which has spent decades trying to undermine our social insurances: Medicare, Medicaid and Social Security. Panelists included representatives from JP Morgan, Goldman Sachs and Citigroup.

According to Paul Ginsburg, current President of the deceivingly-named Center for Studying Health System Change, who moderated the panel, the purpose of the conference was to discuss market development and Wall Street health policy, to look at trends for an equity analysis of publicly traded health companies.

The panel started with a discussion of why people are currently using less health services. They blamed employers for clamping down on employee costs. They said this ‘trend’ may reflect the ‘new normal’ of people choosing the care that they think is the most important. There was no mention that people are self-rationing, delaying or avoiding necessary care, due to the high cost.

Then they addressed the large increase in health insurance premiums, stating that the Kaiser Family Foundation study which revealed a 9% increase in premiums was false. They stated their goal of having more people with private insurance and more people using health services. Of course, this is not because they want to make sure that people who need care can get it. For Wall Street, health corporations are businesses and they are out to maximize profit, usually by collecting premiums and then denying payment for care.

When the discussion turned to how far they could push their profit gimmicks before the public started to shame them, I stood up and walked to the microphone. I told the Wall Street bankers that they had no place in health care, that because of them people are dying of preventable causes or going bankrupt or homeless trying to pay for needed care. They are criminals masquerading as health policy experts.

For too long investors have put profit ahead of human needs. This is particularly clear in health care where more than 100,000 Americans die each year from preventable causes. The United States spends more per person than any other country, but gets very poor results. Countries that spend less provide health care to all and have better health outcomes. Countries that have universal health systems do not have people losing their homes because of health crisis while in the U.S. two-thirds of foreclosures are due to a health care crisis.

Marriott security officers took me out of the hotel and I sat in front of the entrance where I was joined by 2 more protesters, including Adara who shared the story of her father’s suicide which happened because of a health problem and the inability to afford care. Dozens of October2011.org people were outside the hotel protesting. They were chanting “Wall Street Greed Kills Those in Need,” “No More Wall Street Health Care” and “We Are the 99%.”

The protest lasted for several hours blocking the entrance to Marriott. Police did not make arrests. In fact, DC police have agreed to a 4 year wage freeze in order to maintain health benefits. That’s why we are the 99% and we are standing together to make the country and the world a better place for all of us.

The October2011.org continues to occupy Freedom Plaza in Washington, DC seeking to shift power to the people and end corporate rule.

http://october2011.org/blogs/margaret-flowers/wall-street-comes-dc-profit-health-care-99-say-wall-street-greed-kills-those-

Reinhardt and McCanne on Goodman's claim that free health care causes disparities

Why Are There Disparities In Health Care? Because It’s Free.

By John Goodman
National Center for Policy Analysis, October 12, 2011

(Excerpts)

The latest issue of Health Affairs is devoted to racial and ethnic disparities in the consumption of health care. Naturally, they found some. Why are they there?

Let’s consider another necessity: food. Suppose you get a Double Quarter Pounder with cheese and a large order of fries, my favorite fast food indulgence when I put all considerations about healthy eating aside. Do you think your burger would have less cheese if you were a black customer? Would your fries be less crispy if you were Hispanic? Would the meat be less juicy if you earned a poverty level wage?

The answer to these questions is obvious. Just about anybody in America can have the same fast food dinner anyone else in America is having — usually with very little inconvenience. If there is any disparity in this market, it is due solely to individual preference and choice.

So what makes health care different? I am happy to report that increasingly, it isn’t different. MinuteClinics, RediClinics and other walk-in establishments around the country offer standardized services that are comparable to the market for cheeseburgers and fries. In fact, almost one of every five people who got a flu shot last year got it at a supermarket or a drugstore. At a walk-in clinic, your flu shot costs the same as my flu shot. Your allergy prescription is just as inexpensive and just as accessible as mine. If there is any difference between us it is solely due to differences in needs and preferences. Nothing more.

****

Without looking at any empirical data, economic theory alone predicts that if minimum wage laws and other labor market restrictions create a labor surplus, the black unemployment rate will be greater than the white unemployment rate. If policies that promote first-dollar coverage create a shortage of medical care, economic theory alone would predict that unmet needs will be greater among black patients than among whites.

If the demand for medical care exceeds the supply, for example, providers can discriminate based on racial, ethnic or sexual preferences and not pay a price for doing so.

For the entire article:
http://healthblog.ncpa.org/why-are-there-disparities-in-health-care-because-its-free/

Comments on the Goodman blog:

Don McCanne says:

There are a great number of complex variables that result in disparities in health care, and efforts should be made to reduce the impact of all of them. Perhaps the easiest measure would be to reduce financial barriers that result in disparities by providing first dollar coverage for everyone.

Central planning would also be important to ensure adequate health care facilities in low-income regions – areas that do not tend to be attractive to private providers of health care services.

Perhaps the biggest challenge would be to reverse trickle-up economics so that every household can maintain a decent standard of living, as much as is humanly possible.

And…

Uwe Reinhardt says:

I think John is on to something here.

If white and non-white Americans get the same Big Macs in the free market place, they would get the same CABG’s in a free market place.

I am assuming here that anyone who can afford to pay for a Big Mac can also afford to pay for a CABG out of pocket.

Lest someone on this blog — e.g., Don McCanne — argues that it isn’t so in the real world, let me tell you that I am an economist and thus entitled to make assumptions. Our whole profession depends on it.

Uwe

And…

John Goodman responds to Uwe Reinhardt:

I thought economists were supposed to be able to think abstractly. Do I have to walk through every single medical service and show there is an alternative to nonprice rationing in each case? It appears so.

Okay, let’s take CABGs. One way to allocate them is to make them free and deter access with various forms of nonprice rationing. This is how other countries do it, and it appears to be really bad if you are poor or if you are a racial or ethnic minority.

The other way is to empower patients, make them legitimate consumers and invite providers to compete for their patronage. What I call the casualty model of insurance and what others call reference pricing or value based purchasing gives the patient purchasing power, but leaves the market free to determine prices and realize the benefits of competition.

QED

And…

John Goodman responds to Don McCanne:

First dollar coverage is not the solution. It is the problem. Most people in most countries have first dollar coverage and it does not guarantee access to care. In fact, it impedes access to care.

http://healthblog.ncpa.org/why-are-there-disparities-in-health-care-because-its-free/#comments

Comment:

By Don McCanne, MD

John Goodman promotes himself as being the “Father of Health Savings Accounts.” He has been very influential in spreading the concept that we must “empower patients, make them legitimate consumers and invite providers to compete for their patronage.” This concept has gained traction as we see more health care costs being shifted to patients, especially in the form of higher deductibles for accessing care, and higher premiums so that health consumers will shop for only the insurance that they need.

This exchange on his blog is important because it reveals that this approach is based on ideology under the guise of “economic theory” rather than being based on “empirical data” and health policy science. As Goodman states, “Without looking at any empirical data, economic theory alone predicts…” He then is free to advance his ideology based on his version of economic theory.

Uwe Reinhardt shows that he has Goodman’s number when he states, “… let me tell you that I am an economist and thus entitled to make assumptions. Our whole profession depends on it.”

Although policy wonks might find some humor in this exchange (I did), we are jolted back into reality when we realize the implications of Goodman’s manipulation of economic theory. Disparities in health care produce horrendous health care injustices for the victims. One of the more effective methods of reducing disparities, confirmed by empirical data, is to eliminate financial barriers to care through first dollar coverage. Yet Goodman insists that first dollar coverage “impedes access to care.” The basis for that statement seems to be that it does not fit with his own economic theory of consumer empowerment through bearing the costs of health care.

The tragedy of all of this is that perverse, ideology-based economic theory permeates the Affordable Care Act and has an omnipresence in ongoing political manipulations of our public programs designed to provide health and financial security, especially with the current attack on Medicare, and the continual dismissal of single payer even though it has been proven to be one of the most efficient and effective models of financing health care for everyone.

This is not to say that we don’t have our own ideology. Ours is one of health care justice – providing needed health care for everyone – but we do use empirical health policy science to back up our recommendations.

Reinhardt and McCanne on Goodman’s claim that free health care causes disparities

Why Are There Disparities In Health Care? Because It’s Free.

By John Goodman
National Center for Policy Analysis, October 12, 2011

(Excerpts)

The latest issue of Health Affairs is devoted to racial and ethnic disparities in the consumption of health care. Naturally, they found some. Why are they there?

Let’s consider another necessity: food. Suppose you get a Double Quarter Pounder with cheese and a large order of fries, my favorite fast food indulgence when I put all considerations about healthy eating aside. Do you think your burger would have less cheese if you were a black customer? Would your fries be less crispy if you were Hispanic? Would the meat be less juicy if you earned a poverty level wage?

The answer to these questions is obvious. Just about anybody in America can have the same fast food dinner anyone else in America is having — usually with very little inconvenience. If there is any disparity in this market, it is due solely to individual preference and choice.

So what makes health care different? I am happy to report that increasingly, it isn’t different. MinuteClinics, RediClinics and other walk-in establishments around the country offer standardized services that are comparable to the market for cheeseburgers and fries. In fact, almost one of every five people who got a flu shot last year got it at a supermarket or a drugstore. At a walk-in clinic, your flu shot costs the same as my flu shot. Your allergy prescription is just as inexpensive and just as accessible as mine. If there is any difference between us it is solely due to differences in needs and preferences. Nothing more.

****

Without looking at any empirical data, economic theory alone predicts that if minimum wage laws and other labor market restrictions create a labor surplus, the black unemployment rate will be greater than the white unemployment rate. If policies that promote first-dollar coverage create a shortage of medical care, economic theory alone would predict that unmet needs will be greater among black patients than among whites.

If the demand for medical care exceeds the supply, for example, providers can discriminate based on racial, ethnic or sexual preferences and not pay a price for doing so.

For the entire article:
http://healthblog.ncpa.org/why-are-there-disparities-in-health-care-because-its-free/

Comments on the Goodman blog:

Don McCanne says:

There are a great number of complex variables that result in disparities in health care, and efforts should be made to reduce the impact of all of them. Perhaps the easiest measure would be to reduce financial barriers that result in disparities by providing first dollar coverage for everyone.

Central planning would also be important to ensure adequate health care facilities in low-income regions – areas that do not tend to be attractive to private providers of health care services.

Perhaps the biggest challenge would be to reverse trickle-up economics so that every household can maintain a decent standard of living, as much as is humanly possible.

And…

Uwe Reinhardt says:

I think John is on to something here.

If white and non-white Americans get the same Big Macs in the free market place, they would get the same CABG’s in a free market place.

I am assuming here that anyone who can afford to pay for a Big Mac can also afford to pay for a CABG out of pocket.

Lest someone on this blog — e.g., Don McCanne — argues that it isn’t so in the real world, let me tell you that I am an economist and thus entitled to make assumptions. Our whole profession depends on it.

Uwe

And…

John Goodman responds to Uwe Reinhardt:

I thought economists were supposed to be able to think abstractly. Do I have to walk through every single medical service and show there is an alternative to nonprice rationing in each case? It appears so.

Okay, let’s take CABGs. One way to allocate them is to make them free and deter access with various forms of nonprice rationing. This is how other countries do it, and it appears to be really bad if you are poor or if you are a racial or ethnic minority.

The other way is to empower patients, make them legitimate consumers and invite providers to compete for their patronage. What I call the casualty model of insurance and what others call reference pricing or value based purchasing gives the patient purchasing power, but leaves the market free to determine prices and realize the benefits of competition.

QED

And…

John Goodman responds to Don McCanne:

First dollar coverage is not the solution. It is the problem. Most people in most countries have first dollar coverage and it does not guarantee access to care. In fact, it impedes access to care.

http://healthblog.ncpa.org/why-are-there-disparities-in-health-care-because-its-free/#comments

Uwe Reinhardt shows that he has Goodman’s number when he states, “… let me tell you that I am an economist and thus entitled to make assumptions. Our whole profession depends on it.”

U.K. Agency Rejects Bristol-Myers Skin Cancer Drug

Melanoma (stage III or IV) – ipilimumab: appraisal consultation document

Comment:

UK medical group rejects new skin cancer treatment

U.K. Agency Rejects Bristol-Myers Skin Cancer Drug

Melanoma (stage III or IV) – ipilimumab: appraisal consultation document

Comment:

Essential Health Benefits: Balancing Coverage and Costs (2011)

President Obama: Reject the Institute of Medicine’s skimpy health plan prescription

President Obama: Reject the Institute of Medicine’s skimpy health plan prescription

Comment:

Why Are There Disparities In Health Care? Because It’s Free.

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