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Did Medicare Part D Affect National Trends in Health Outcomes or Hospitalizations?: A Time-Series Analysis

By Becky A. Briesacher, PhD; Jeanne M. Madden, PhD; Fang Zhang, PhD; Hassan Fouayzi, MS; Dennis Ross-Degnan, ScD; Jerry H. Gurwitz, MD; and Stephen B. Soumerai, ScD
Annals of Internal Medicine, June 16, 2015

Background: Medicare Part D increased economic access to medications, but its effect on population-level health outcomes and use of other medical services remains unclear.

Objective: To examine changes in health outcomes and medical services in the Medicare population after implementation of Part D.

Results: Five years after Part D implementation, no clinically or statistically significant reductions in the prevalence of fair or poor health status or limitations in ADLs or instrumental ADLs, relative to historical trends, were detected. Compared with trends before Part D, no changes in emergency department visits, hospital admissions or days, inpatient costs, or mortality after Part D were seen. Confirmatory analyses were consistent.

Conclusion: Five years after implementation, and contrary to previous reports, no evidence was found of Part D’s effect on a range of population-level health indicators among Medicare enrollees. Further, there was no clear evidence of gains in medical care efficiencies.

http://annals.org/article.aspx?articleid=2322799

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Researchers find prescription drug benefit did not save money for Medicare

By Joe O’Connell
news@Northeastern, June 16, 2015

For years, the Medicare pre­scrip­tion drug ben­efit Part D has been cred­ited with pos­i­tively impacting national trends in health out­comes and med­ical ser­vices. But a recent study led by North­eastern asso­ciate pro­fessor Becky Briesacher chal­lenges that assump­tion.

“We are con­cluding that Medicare Part D did not save the (Medicare) pro­gram any money overall,” said Briesacher, a health ser­vices researcher in the School of Phar­macy with nationally-​​recognized exper­tise in drug policy and med­ica­tion use in older adults. “You have to be real­istic about the fact that giving people access to med­ica­tion is impor­tant, but it’s not going to sub­stan­tially save money in other parts of the health care system or keep a sig­nif­i­cant number of people out of the hospital.”

http://www.northeastern.edu/news/2015/06/researchers-find-prescription-drug-benefit-did-not-save-money-for-medicare/

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Comment:

By Don McCanne, MD

Although it was important to include a drug benefit in the Medicare program there was concern that the conservatives designing the program wanted to allow the market to work its magic. The program was to be administered by private pharmacy benefit managers (PBMs) rather than the government. In fact, the government was even prohibited from negotiating drug prices with the manufacturers. Further, it was thought that the benefits of improving access to drugs would make patients healthier thus reducing future costs for Medicare.

This study shows that the magic did not work in that the drug benefit did not save money for Medicare, and it did not measurably change the health status of Medicare beneficiaries. Specifically there were no changes in emergency room visits, hospitalizations, and inpatient costs, nor was there any change in mortality.

It would not be surprising to see conservatives propose that the Part D program be terminated since it supposedly isn’t doing any good. But there are innumerable studies that have shown that some medications do provide at least a modest benefit, though those benefits were not detected by this study.

At any rate, it is clear that PBMs are not as effective price negotiators as is our government, as demonstrated by the greater value in drug purchasing that we have through the VA and the Medicaid program. Also, the PBMs waste considerable funds in excess administrative activities, not to mention the added middleman profits that they divert to themselves.

Under an improved Medicare for all we would have a more efficient and less costly publicly-administered program that would ensure that the government was paying fair prices for our drugs. It is not that way now.

Randomize evaluations to improve health care delivery

By Amy Finkelstein, Sarah Taubman (MIT)
Science, February 13, 2015

The medical profession has long recognized the importance of randomized evaluations; such designs are commonly used to evaluate the safety and efficacy of medical innovations such as drugs and devices. Unfortunately, innovations in how health care is delivered (e.g., health insurance structures, interventions to encourage the use of appropriate care, and care coordination approaches) are rarely evaluated using randomization. We consider barriers to conducting randomized trials in this setting and suggest ways for overcoming them. Randomized evaluations of fundamental issues in health care policy and delivery should be — and can be — closer to the norm than the exception.

http://www.sciencemag.org/content/347/6223/720.summary

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Health care reform unethical by research standards

Science, June 19, 2015

A. Finkelstein and S. Taubman report on the underuse of randomized controlled trials for U.S. health care reform (“Randomize evaluations to improve health care delivery” Policy Forum, 13 February). This reliance on suboptimal research compromises information needed for policy. However, a second problem about health reform decision-making is more serious, constituting a major ethical breach. 

The principles of research with humans require that deviations from the standard of care are allowable only if there is real uncertainty regarding which intervention is better. This is called the “principle of equipoise”; only when we don’t know which strategy yields the best results is it acceptable to compare them (1).

Yet for health care reform writ large — i.e., the basic payment system — there is no equipoise. Research from dozens of developed countries demonstrates convincingly that single-payer financing reduces costs, assures access, and improves outcomes.

To ignore this compelling evidence risks lives in the United States as we experiment with partial fixes to the multi-payer system. This experimentation would be rejected by any responsible university institutional review board as violating the principle of equipoise and causing unacceptable patient harm.

James G. Kahn (UCSF)
Paul Hofmann (Moraga CA)

1. Freedman B. Equipoise and the Ethics of Clinical Research. N Engl J Med 1987; 317:141-145

http://www.sciencemag.org/content/348/6241/1325.2.full

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Equipoise and the Ethics of Clinical Research

By Benjamin Freedman, Ph.D.
New England Journal of Medicine, July 16, 1987

The ethics of clinical research requires equipoise — a state of genuine uncertainty on the part of the clinical investigator regarding the comparative therapeutic merits of each arm in a trial. Should the investigator discover that one treatment is of superior therapeutic merit, he or she is ethically obliged to offer that treatment. The current understanding of this requirement, which entails that the investigator have no “treatment preference” throughout the course of the trial, presents nearly insuperable obstacles to the ethical commencement or completion of a controlled trial and may also contribute to the termination of trials because of the failure to enroll enough patients.

I suggest an alternative concept of equipoise, which would be based on present or imminent controversy in the clinical community over the preferred treatment. According to this concept of “clinical equipoise,” the requirement is satisfied if there is genuine uncertainty within the expert medical community — not necessarily on the part of the individual investigator — about the preferred treatment.

http://www.nejm.org/doi/full/10.1056/NEJM198707163170304#t=abstract

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Comment:

By Don McCanne, MD

Here’s a shocker. Enactment and implementation of the Affordable Care Act has been and continues to be unethical, under the “principle of equipoise.” How could that be?

Amy Finkelstein and Sarah Taubman, of MIT, call for an increased use of “randomized evaluations of fundamental issues in health care policy,” likening policy research to medical research. On the surface this seems quite reasonable, but James Kahn and Paul Hofmann reveal the potential dire implications of such a proposal when policies are studied that, at best, would fall short of already well established beneficial policy principles. 

Medical research requires the adherence to the principle of equipoise – the principle that it is unethical to expose a patient to an experimental treatment when there exists a better treatment that would always be recommended regardless of the outcome of the study. Only when there is agreement that the more effective and safer treatment is not known is it ethical to proceed with a randomized trial.

How would this apply to health policy research? In randomized trials proposed health policies could be compared with existing or other proposed health policies to determine which policies produce more favorable outcomes. This would require that the existing comprehension of the policies would be clearly inadequate to reliably predict the outcomes. Keep in mind that a health system’s policies can impact individual health as much or even more than the actual health care received. If the outcomes are predictable, it would be unethical to proceed with the study.

The problem with the proposal by Finkelstein and Taubman is that health policy science is quite advanced, and we have a rich body of knowledge of the potential impacts of various health policies. These researchers suggest that randomized evaluations should be closer to the norm when, in fact, it would be quite rare that two or more policy options would be so poorly understood that it would require a randomized trial to determine which would produce better outcomes. 

To understand the enormous impact of this, let’s compare the most basic policies perpetuated and enacted by the Affordable Care Act with fundamental policies inherent in a well designed single payer system – policies that are well understood through our experiences and the experiences of many other nations.

The Affordable Care Act

• Tens of millions will be left uninsured
• Tens of millions will be underinsured
• Financial barriers to care that result from being uninsured or underinsured clearly impair access to beneficial health care services and thus often result in poor health outcomes and even death

Single Payer National Health Program

• Everyone would be insured
• Underinsurance is eliminated by removing financial barriers, especially high deductibles and coinsurance
• Removal of financial barriers improves access to health care with a consequent improvement in health outcomes and with a lower mortality rate

Further, our current system wastes hundreds of billions of dollars on administrative excesses – much of which could be recovered under a single-payer system and be redirected into health care delivery.

We cannot do a randomized trial comparing single payer with the Affordable Care Act since a single payer system cannot exist commingled with a fragmented, multi-payer system, but we would not want to do that study anyway since we already understand the policy science behind these systems. Such a study would clearly violate the principle of equipoise.

To continue with our current grand national experiment in health care reform is clearly unethical because of the financial hardships, physical suffering and premature deaths that are perpetuated and would be prevented if we switched to a single payer national health program.

It would be unethical to repeal the Affordable Care Act and do nothing else since some provisions of the Act are beneficial. But since we can enact and implement a single payer national health program, we are engaging in unethical behavior by failing to do so.

Our national policymakers need to understand how profoundly unethical their behavior is by their continued violation of the principle of equipoise. People are suffering and dying as a result.

Improved Monitoring of Medi-Cal Managed Care Health Plans Is Necessary to Better Ensure Access to Care

California State Auditor, California Department of Health Care Services, Report 2014-134, June 2015

Cover letter of report:

June 16, 2015

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the California Department of Health Care Services’ (Health Care Services) oversight of California Medical Assistance Program (Medi-Cal) managed care health plans (health plans).

This report concludes that Health Care Services did not verify that the provider network data it received from health plans were accurate. Therefore, it cannot ensure that the health plans it contracts with had adequate networks of providers to serve Medi-Cal beneficiaries. Health Care Services’ contracts with health plans to provide medical services to Medi-Cal beneficiaries generally require the plans, among other things, to maintain a network of primary care providers that are located within either 30 minutes or 10 miles from a member’s residence. To determine whether the health plan has an adequate provider network to meet these standards, Health Care Services receives provider network data from each of the health plans. However, for the health plans we reviewed, Health Care Services did not verify the accuracy of these data before certifying the health plans’ network adequacy during the Healthy Families Program transition to Medi-Cal and did not verify data for another health plan at the time the health plan entered the Medi-Cal program. Similarly, it does not verify the accuracy of the data it receives from health plans and that it provides to the California Department of Managed Health Care (Managed Health Care), with which it has an agreement to conduct quarterly network adequacy reviews. Furthermore, it has not ensured that Managed Health Care performed all quarterly reviews of health plans’ provider networks required pursuant to the agreement.

In addition, flaws in Health Care Services’ process for reviewing provider directories have resulted in it approving provider directories with inaccurate information. Specifically, our review of provider directories for three health plans — Anthem Blue Cross, Health Net and Partnership HealthPlan — found many errors in directories, including incorrect telephone numbers and addresses, or information about whether they were accepting new patients. However, Health Care Services’ review of these same directories had not identified these inaccuracies before it approved the directories for publication. Furthermore, we noted that thousands of calls from Medi-Cal beneficiaries seeking assistance through Health Care Services’ Medi-Cal Managed Care Office of the Ombudsman have gone unanswered. Specifically, each month between February 2014 and January 2015 an average of 12,500 calls went unanswered. Finally, Health Care Services has not performed all statutorily required annual medical audits of Medi-Cal managed care health plans to determine whether the health plans meet their beneficiaries’ needs.

Respectfully submitted,

ELAINE M. HOWLE, CPA

State Auditor

Full report: https://www.auditor.ca.gov/pdfs/reports/2014-134.pdf

Summary of report: https://www.auditor.ca.gov/reports/summary/2014-134

Fact sheet: https://www.auditor.ca.gov/pdfs/factsheets/2014-134.pdf

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Comment:

By Don McCanne, MD

Medicaid patients throughout the nation are being transferred into Medicaid managed care plans, allegedly to provide more coordinated care at a lower cost. There has been some justifiable concern that these plans may not be delivering on their promises. This auditor’s report of California’s Medi-Cal managed care plans provides some limited insight into the performance of these plans.

Medi-Cal is California’s Medicaid program for low-income individuals and families. Three-fourths of the 12 million Medi-Cal patients are already enrolled in the Medi-Cal managed care plans (state population 39 million). Astonishingly nearly half of all children in California are enrolled in Medi-Cal managed care, especially since those previously enrolled in CHIP were transferred to Medi-Cal. It is a massive program.

The auditor did not look at the adequacy or the quality of the health care services that are being delivered. Rather she looked at the plans’ reports submitted to the Department of Health Care Services on the adequacy and accessibility of their networks, the accuracy of the provider directories, and the effectiveness of the Medi-Cal Managed Care Office of the Ombudsman – basically just whether or not the infrastructure was adequate to provide the promised services.

The auditor found that the reports from the plans were inadequate and the oversight provided by the California Department of Health Care Services and the Department of Managed Health Care was also inadequate. It was not possible to determine the degree of the failures, but enough information was gathered to know that the system fell far short of the requirements. Some perspective of the extent of this problem is demonstrated by the fact that each month about 12,500 calls to the Office of the Ombudsman went unanswered. The Medi-Cal system wasn’t working for the patients, and the calls for help overwhelmed the telephone system.

Some have suggested that the funding was inadequate. Medicaid has been chronically underfunded, and Medi-Cal is near the bottom of all states in its level of funding. Also governments chronically underfund their own agencies. In a health care system that is infamous for its administrative excesses, under the Affordable Care Act we have expanded the need for yet more administrative services for both the health plans and for the government bureaucracies that provide oversight (not to mention the providers), yet our federal and state legislators do not authorize adequate funds to carry out their requirements.

Although the auditor attributed most of the blame to failures of the California Department of Health Care Services, the real blame lies with those who devised these expensive and inefficient programs and then failed to fund them adequately. The agencies cannot do their job if they are unable to hire the personnel that they need.

Although this report raises serious concerns about the infrastructure, much more important is whether or not the actual health care services are adequate in both quantity and quality. Though this report does not address that, there is reason to be concerned. Are the health plans really delivering more integrated care at a lower cost? Is the funding enough for the dedicated health care professionals to deliver on this promise? Unlikely, based on preliminary information. It is unfortunate that we will have to wait longer until the severity of the deficiencies is exposed.

If nothing else, it does appear that, through Medicaid, we have institutionalized a lower tier of a two-tiered health care system. The Affordable Care Act perpetuates a mediocre system for middle-income individuals and families and a substandard system for those with low incomes. Most other wealthy nations have a single higher health care quality standard for all of their people, delivered at a much lower cost. What is our resistance to learning from them?

Obamacare’s final test: if it survives the Supreme Court, it’s here to stay

By Sarah Kliff
Vox, June 15, 2015

In the next two weeks, the Supreme Court will rule in King v. Burwell, a challenge that threatens to dismantle Obamacare by ending financial subsidies for 6.4 million Americans.

If the challengers win, it would throw the health-care law into chaos. But if the White House prevails, something equally momentous will have occurred: President Obama’s signature legislative accomplishment will actually, really, definitely be here to stay.

“If we win this, I think that’s major, and I’d call it a monumental step,” says Ron Pollack, executive director of the pro-Obamacare advocacy group Families USA. “It means that the ACA is a permanent part of the American health-care system.”

http://www.vox.com/2015/6/15/8779143/obamacare-repeal-dead-supreme-court

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Will Inefficient Financial Healthcare Reform Kill the ACA?

By Jacqueline DiChiara
RevCycleIntelligence, June 15, 2015

Is the Affordable Care Act (ACA) hurling the healthcare industry further into the red? The answer is a definite yes, according to a recent RevCycleIntelligence.com article about key findings from a pair of Harvard Medical School professors’ Health Affairs blog study.

The bureaucracy will gobble up a quarter of federal spending; the ACA will add almost $274 billion in new administrative costs heading into 2022, well beyond what would have been expected had the ACA not been passed, maintain David U. Himmelstein, MD and Steffie Woolhandler, MD.

“Previous work we’ve done suggests that a third of the total healthcare dollar goes to paperwork and bureaucracy,” Himmelstein states. Such numbers are likely mere underestimates that require updating, he confirms.

“Most other nations are much more efficient in the way that they finance and administer healthcare,” Himmelstein confirms. “There is no reason, other than political difficulty, that we can’t shed massive bureaucratic costs.”

Himmelstein predicts the ACA will soon lose dominance within the healthcare industry, moving forward. “Instead of fighting about whether to go back to an old system, repealing the ACA,” he says, “the debate will turn to how we move from here to something different, hopefully better.”

“Costs are likely to resume an upward growth pattern and more and more people are going to find themselves grossly underinsured. All of those problems are going to be part of the debate very soon,” he says. “We are moving to a handful of giant organizations controlling the health delivery system, largely focusing on their own interests and giving lip service to wanting to serve patients, but really acting like corporate masters of the healthcare system and shaping it to do what they want rather than what patients need,” he maintains.

The simple solution is to implement national health insurance, Himmelstein maintains. “Is it appropriate that some private organization have the decision making power over the healthcare of the vast majority in that region?” he asks. “Privatization is much less efficient,” Himmelstein states. “We’ll again be coming to a debate about national health insurance.”

http://revcycleintelligence.com/news/will-inefficient-financial-healthcare-reform-kill-the-aca

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Comment:

By Don McCanne, MD

Everywhere you turn these days there is rampant speculation on what the impact will be of the soon-to-be-released Supreme Court decision on King v. Burwell – the case on whether or not subsidies can be provided to enrollees in federal ACA insurance exchanges. In the long run, the outcome doesn’t matter.

As David Himmelstein (co-founder of PNHP) explains in the RevCycleIntelligence article above, “Costs are likely to resume an upward growth pattern and more and more people are going to find themselves grossly underinsured,” and “Instead of fighting about whether to go back to an old system, repealing the ACA, the debate will turn to how we move from here to something different, hopefully better.” Regardless of the King v. Burwell outcome, “We’ll again be coming to a debate about national health insurance.”

It’s absolutely inevitable.

Health care cost-sharing prompts consumers to make big cuts in medical spending

By Ben Handel
The Conversation, June 15, 2015

Is that surgery really worth it? Do I really value that cancer screening? Is that extra imaging service necessary?

These are the kinds of questions consumers ask themselves when their insurance plans require higher cost-sharing for medical services. This is a new reality in the US health care system as large employers offering coverage have moved aggressively toward less generous, high-deductible insurance offerings.

This shift was accelerated by the “Cadillac Tax” provision contained in the Affordable Care Act (ACA), which, starting in 2018, places an excise tax on employers offering insurance plans that cover very high levels of medical spending. Further, many of the consumers enrolling in the public state exchanges created under the ACA have enrolled in lower- coverage financial plans that cover an average of 60% (bronze) or 70% (silver) of medical expenditures, similar to typical high-deductible coverage.

Though these policies are in part motivated by the government’s need to reduce its share of total health care spending, they are also driven by the expectation that they will lead consumers to use higher-value, lower-cost medical services.

In my recent research with Zarek Brot-Goldberg, Amitabh Chandra, and Jon Kolstad, we dug into the mechanisms for how and why consumers reduce medical spending when faced with higher cost-sharing.

To do this, we studied the medical claims and medical spending of more than 150,000 employees and dependents from one large firm that moved everyone from an insurance plan that provided completely free health care to a high-deductible plan covering 78% of medical spending on average.

During the switch, the in-network providers that consumers could access and the services covered remained the same. As a result, this switch presented an excellent opportunity to assess in detail how consumers respond to markedly increased cost-sharing.

Primarily, we wanted to know whether employees would reduce their medical spending as a result of the change and, if so, by how much. Further, we hoped to learn where specifically they’d cut back. Would they spend less on nonessential services or reduce spending across the board? Would they try to find cheaper sources of health care? Do some employees cut more than others? Do employees correctly perceive the true marginal price of care in a complex insurance contract?

Health care spending plunges

We first established that increased cost-sharing does reduce medical spending at the firm. Age- and inflation-adjusted medical spending dropped by 19% – from a base of approximately US$750 million in spending – when employees switched to high-deductible coverage.

Strikingly, many of the spending reductions come from the sickest employees. The sickest 25% (based on prior diagnoses each year) reduced spending by one-quarter after shifting coverage. This is especially notable, and somewhat surprising, since these employees earn relatively high incomes and their maximum out-of-pocket payment in high-deductible coverage for the calendar year was approximately $6,500 for a family.

How did consumers reduce spending? A detailed data analysis reveals that medical prices did not go down. Further, we show that consumers did not price-shop after the switch – that is, they did not move toward cheaper providers, for example, when they were going to undergo a specific procedure.

It turns out that all spending reductions were directly linked to quantity reductions: consumers just consumed less medical care.

Cuts across the board

Importantly, it didn’t seem like consumers were particularly choosy about what kind of health care they cut: consumers appeared to reduce consumption across a range of medical services, from low to high value.

For example, quantity reductions led to a 22% drop in spending on imaging services (such as MRIs or CT Scans), some of which are likely unnecessary. However, consumers also reduced how many preventive health services they used – which policymakers typically believe are underutilized – by 16%.

The cuts were across the board. Spending on mental health care fell 8%, inpatient and outpatient hospital services declined 14% and 17%, respectively, drug purchases dropped 20%, and emergency room services plunged 27%. Of the top 30 medical procedures (by revenue) that we investigated, we found that consumers reduced spending for 23 of them.

Simply put, consumers did not look for cheaper services but consumed less medical care, and did so across almost the entire range of medical services.

Insurance price misperceptions

One possible reason for why these sick, relatively high-income consumers reduced potentially valuable medical spending is that they perceived the marginal price of their medical care to be higher than it actually is.

Take the example of a consumer who knows he/she is quite sick entering the year and expects to spend a lot on health care. That consumer should not worry about the deductible and cost-sharing when making medical decisions early in the year because he/she knows that by the following January, all medical care used after passing the plan’s out-of-pocket limit will be free. Thus, the true marginal price of health care for this predictably sick consumer is close to $0, no matter how high the deductible is, so care consumed early in the year is essentially free as well.

But we found that these consumers substantially reduced spending early in the year when under the deductible, but once they passed it spent more. In other words, many consumers whose true marginal price for care throughout the year is essentially zero because of their impending high spending don’t treat incremental care as free when under the deductible. Instead, they respond as if the price of care under the deductible is the relevant price, despite the fact that they will spend that money during the year regardless.

This suggests that they misperceive their own health risks, misperceive how much medical care costs or don’t understand how the high-deductible insurance contract actually works. Similar consumer price misperceptions are also documented in Medicare Part D, electricity markets and broadband markets.

What this means for reform efforts

Giving consumers direct incentives to think about their health care spending is a cornerstone of health reform in the US and plays a large role in several national health systems around the world, such as in France.

An important prerequisite for these reforms to be successful is that consumers, who may or may not be making medical decisions in conjunction with physicians, understand the costs and benefits of different health care services. Our evidence suggests that consumers don’t seem to be responding to increased cost-sharing with nuanced expertise and instead reduce consumption across the range of medical services, some valuable and some likely wasteful.

Additionally, they reduce care heavily when sick and under the deductible, even when their true marginal price of care is very low.

Thus, while increased consumer cost-sharing can be an effective instrument for reducing health care spending, it may be a blunt instrument for encouraging higher value medical spending, especially relative to supply-side interventions that target physician incentives or interventions that reduce the use of high-cost low-value medical technologies.

As health reform pushes forward, policymakers will need to recognize the limits of consumer cost-sharing policies and focus more on how to appropriately incentivize providers to deliver high-value, low-cost care.

This article: https://theconversation.com/health-care-cost-sharing-prompts-consumers-to-make-big-cuts-in-medical-spending-41657

“What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics” by Zarek Brot-Goldberg, Amitabh Chandra, Benjamin Handel and Jonathan Kolstad (43 slides): http://eml.berkeley.edu/~bhandel/wp/BCHK.pdf

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Comment:

By Don McCanne, MD

A cursory glance at this article suggests that it is simply one more study that confirms that high deductible plans decrease health care spending, and since you already know that you might be tempted to pass on reading today’s message. But don’t skip this one if you wish to better understand just what impact high deductibles really do have.

What is unique about this study is that it evaluated the patterns of the change in health care spending when a large firm switched about 85 percent of its employees from a PPO plan that provided first dollar coverage (no deductibles, no coinsurance, and $0 out-of-pocket maximum) to a HDHP (high deductible health plan with $3,750 deductible, 10% coinsurance, and $6,250 out-of-pocket maximum). The health care providers were the same both before and after the change was made. This is about as pure of a study as you could devise on this topic – the same employees, the same health care providers, but with a change to a high deductible with coinsurance and a new patient responsibility for up to $6,250 in cost-sharing.

As expected, spending abruptly declined – by about 19%. So was this a result of better price shopping, as the advocates of these consumer-directed HDHPs tout? No. Medical prices did not go down after the switch was made. These health care consumers did not shop prices.

What went down was the quantity of health care provided. In fact, the sickest employees reduced their use of health care services even more – by about 25%. The reductions in utilization were across the board – inpatient services, outpatient services, emergency room services, mental health care, drug purchases, imaging, and preventive health services. Most of these are beneficial services.

Another interesting finding is that those individuals with significant disorders who knew that they would reach their maximum out-of-pocket spending nevertheless reduced their utilization of health care services while they were still under the deductible. They did not need to reduce their use of these services since after the out-of-pocket maximum is reached, their marginal cost of additional health care is essentially zero. Their net costs are the same regardless of their utilization. It is likely that these sick individuals were needlessly forgoing beneficial health care services.

The author states, “consumers appeared to reduce consumption across a range of medical services, from low to high value.” Clearly policies that reduce the consumption of high value care are undesirable, and, for this reason alone, deductibles and coinsurance should be eliminated. But what about low value care? What is low value care? Is that the MRI that, in retrospect, turned out to be normal? Wasn’t there some benefit in excluding potential pathology? Attempting to ferret out low value care can be detrimental if it consequentially results in the blunt elimination of high value care as well.

Besides, how much spending reduction would we really see with the reduction in beneficial health care services that results from deductibles? Remember that the 20 percent of individuals with greater health care needs consume 80 percent of our health care services. Most of this spending is well above the maximum out-of-pocket costs and thus cost-sharing has very little impact on this spending. The deductibles might influence utilization for the other 80 percent of us, but that would reduce spending by only a fraction of the 20 percent of health care that we use. Anyway, is the amount of health care used by us low-utilizers really an egregiously excessive amount of care? We usually have a legitimate reason for going to the doctor.

In this article, Ben Handel states, “while increased consumer cost-sharing can be an effective instrument for reducing health care spending, it may be a blunt instrument for encouraging higher value medical spending, especially relative to supply-side interventions that target physician incentives or interventions that reduce the use of high-cost low-value medical technologies.”

Instead of using detrimental demand-side patient cost-sharing instruments to reduce spending, just think of what could be accomplished on the supply-side using a well designed single-payer monopsony for financing health care: global budgeting of institutions such as hospitals, dramatic reduction of administrative waste, negotiation of rates for services and products, bulk purchasing of pharmaceuticals, avoiding excess capacity through planning and separate budgeting of capital improvements, and establishing a global budget for the entire health care delivery system.

There is no need to assess financial penalties (deductibles and coinsurance) merely for accessing beneficial health care services. With a single payer system, patients simply obtain the health care that they need, when they need it. That’s the way it should be.

Medicare Advantage Members’ Expected Out-Of-Pocket Spending For Inpatient And Skilled Nursing Facility Services

By Laura M. Keohane, Regina C. Grebla, Vincent Mor and Amal N. Trivedi
Health Affairs, June 2015

Abstract

Inpatient and skilled nursing facility (SNF) cost sharing in Medicare Advantage (MA) plans may reduce unnecessary use of these services. However, large out-of-pocket expenses potentially limit access to care and encourage beneficiaries at high risk of needing inpatient and postacute care to avoid or leave MA plans. In 2011 new federal regulations restricted inpatient and skilled nursing facility cost sharing and mandated limits on out-of-pocket spending in MA plans. After these regulations, MA members in plans with low premiums averaged $1,758 in expected out-of-pocket spending for an episode of seven hospital days and twenty skilled nursing facility days. Among members with the same low-premium plan in 2010 and 2011, 36 percent of members belonged to plans that added an out-of-pocket spending limit in 2011. However, these members also had a $293 increase in average cost sharing for an inpatient and skilled nursing facility episode, possibly to offset plans’ expenses in financing out-of-pocket limits. Some MA beneficiaries may still have difficulty affording acute and postacute care despite greater regulation of cost sharing.

From the Discussion

MA beneficiaries still pay a great deal for inpatient and SNF services even after new regulations have gone into effect. We found that these expenses often exceed what traditional Medicare beneficiaries without supplemental coverage would pay under the Part A deductible, which covers hospitalizations and SNF services. The majority of MA beneficiaries are enrolled in zero-premium plans with higher cost-sharing expectations. This pattern could reflect other studies’ findings that Medicare beneficiaries are strongly influenced by premium levels and have trouble selecting plans that will minimize their out-of-pocket exposure.

http://content.healthaffairs.org/content/34/6/1019.abstract

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Comment:

By Don McCanne, MD

The growth in enrollment in private Medicare Advantage (MA) plans has been largely due to the attraction of not having to pay a premium for the plans. The trade-off is that the patient is exposed to higher out-of-pocket expenses.

Many studies have shown that selection of health plans is most heavily influenced by the premium, since plan purchasers are averse to higher premiums. For insurers to be able to offer plans with low premiums they must reduce the coverage, primarily by requiring higher deductibles and other cost sharing. This study shows that the cost sharing for inpatient and SNF services may be unaffordable and thereby impair access for those enrolled in zero-premium MA plans – the plans that the majority select.

In a single payer system, there is no premium. Equitable taxes, based on ability to pay, fund the universal risk pool. Individuals are not faced with the temptation of being allowed to keep more money in exchange for accepting less than adequate coverage. With single payer, everyone would have adequate coverage, while progressive taxes would would make it affordable for all of us.

The Trans-Pacific Partnership — Is It Bad for Your Health?

By Amy Kapczynski, J.D.
The New England Journal of Medicine, June 10, 2015

International trade deals once focused primarily on tariffs. As a result, they had little direct effect on health, and health experts could reasonably leave their details to trade professionals. Not so today. Modern trade pacts have implications for a wide range of health policy issues, from medicine prices to tobacco regulation, not only in the developing world but also in the United States.

The Trans-Pacific Partnership Agreement (TPP) is a case in point. A massive trade deal now reportedly on the verge of completion, the TPP has nearly 30 chapters. A draft chapter on intellectual property (IP) alone runs 77 single-spaced pages.

The full health implications of the TPP are hard to judge, not only because its provisions are complex but also because the draft text is a closely held secret. Even members of the U.S. Congress can see it only if they agree not to talk publicly about it and if they leave their pens and phones (and, until recently, their expert staffers) at the door. But several key chapters have recently been leaked and reveal that the TPP could have a substantial impact on health.

Groups including Médecins sans Frontières and Oxfam warn, for example, that the agreement could threaten the lives of millions of people in developing countries. Their concerns stem primarily from the leaked IP chapter and the effect that patents have on the prices of medicines. In the context of human immunodeficiency virus, for example, patents increase the annual cost of antiretroviral therapy from around $100 per person to $10,000 per person.

The TPP could impose obligations on developing countries that go far beyond any existing trade agreement. Indeed, some proposals in the leaked IP chapter seem directly targeted against innovative measures that developing countries have used to maximize the use of low-cost generic medicines.

For example, India allows patents on new drugs but not on new uses of old drugs or new forms of known drugs that do not increase therapeutic efficacy. These provisions have paved the way for generic versions of lifesaving drugs such as the cancer treatment imatinib mesylate (Gleevec) in that country. But such limits on patent eligibility could be outlawed by the TPP. Reports suggest that there may be some kind of phase-in period for developing-country members, but only for some parts of the agreement. And at best, a phase-in period would merely postpone some of the TPP’s effects for a few years.

India is not a party to the TPP negotiations, which have been conducted by 12 Pacific Rim countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Why, then, would India’s laws — sometimes word for word — be targeted in the TPP negotiations? For one thing, other developing countries have started to follow India’s lead. For another, the TPP is a platform agreement designed for other countries to join, and it will establish a new baseline for future international negotiations. The risk regarding access to medicines in developing countries is real.

Though it is less widely recognized, the TPP could also have a direct effect on health in developed countries. For example, the leaked IP chapter contemplates major extensions of “data exclusivity” provisions. These laws prevent drug regulatory agencies like the Food and Drug Administration from registering a generic version of a drug for a certain number of years — and as a result can substantially affect the prices of medicines.

In recognition of this fact, President Barack Obama’s fiscal year 2016 budget proposes rolling back the data-exclusivity period for biologic drugs in the United States to 7 years from 12 years, yielding a projected savings of more than $4 billion over the next decade. In the TPP negotiations, however, the United States is proposing a 12-year term of exclusivity. Such a requirement would lock the United States into a policy that many observers, including, apparently, the President himself, believe inflates the cost of medicines unjustifiably. Even if the number of years required by the TPP is negotiated downward, the lock-in effect remains a concern, because trade agreements can be extremely difficult to amend.

The cost of medicines is no small concern in the United States today: spending on prescription drugs in the United States jumped 13% in 2014 alone. The recent experience with new hepatitis C treatments shows that even lifesaving cures may be rationed in the United States — whether implicitly or explicitly — if we fail to contain drug costs and promote more efficient innovation. The TPP, however, could make moves toward more rational drug pricing in the United States difficult and even imperil existing provisions that help to contain costs for government programs.

A 2011 “annex” to the TPP, apparently proposed by the United States, would have mandated that all countries use “competitive market-derived prices” or benchmarks that “appropriately recognize the value” of the drug in question when establishing drug prices. A just-leaked December 2014 draft omits these provisions but still contemplates substantial procedural obligations for governments and makes clear that these rules apply to the Centers for Medicare and Medicaid Services (CMS). The text is difficult to decipher and still in flux. But consumer groups argue that the annex could create opportunities for interference in the decisions of CMS and render health programs in all TPP countries more vulnerable to drug-company influence and more difficult to reform.

In March 2015, a third bombshell dropped: a draft chapter on “investor-state dispute settlement” (ISDS). It would empower foreign companies to sue member countries for hundreds of millions of dollars in damages in a wide range of cases in which they argue that their expected future profits have been undermined. These challenges would be heard by “arbiters” — typically private lawyers, many of whom cycle in and out of industry — with no prospect of independent review by a national court. Such provisions have been included in trade agreements before. But the scale of the TPP would substantially increase the number of companies that could bring such challenges. Firms have already used provisions like these to challenge an astonishing range of laws, from minimum-wage laws in Egypt, to tobacco regulations in Uruguay and Australia, to core aspects of patent law as they apply to medicines in Canada. The ISDS provisions alone could interfere with domestic health policy for decades to come. Under their auspices, policies covering a wide range of issues, from food and tobacco labeling, to patent law, to drug-pricing rules, to environmental protection could be challenged in participating countries — including, of course, the United States.

The course that the TPP takes is not yet set in stone. Negotiations continue, and the Obama administration could work toward an agreement that excludes provisions such as ISDS and the health care “annex” or that incorporates robust safeguards to protect health. Congress has an important role, too. As of early June, it was in the midst of a fierce legislative battle over whether the TPP and deals like it should be “fast-tracked.” If Congress takes this route, its ability to influence the treaty will be much diminished: fast tracking allows passage of a trade treaty with only a simple majority vote in Congress and also denies Congress any opportunity to make changes to the agreement’s text.

Much hangs in the balance in the coming weeks and months. If the TPP includes robust ISDS provisions and the expansive provisions proposed in the IP chapter and the health care annex, the United States could be signing away its authority to regulate critical aspects of health policy for years to come.

http://www.nejm.org/doi/full/10.1056/NEJMp1506158

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GOP, Obama on cusp of fast-track trade victory

By Scott Wong and Peter Schroeder
The Hill, June 10, 2015

House Republicans have set the stage for a high-stakes vote Friday to grant President Obama fast-track trade authority.

While objections from some Democrats on a last-minute deal related to the trade package raised some doubts about the outcome, Obama and the GOP appear poised to earn a significant victory.

“We’re moving because we feel comfortable moving,” said Ways and Means Committee Chairman Paul Ryan (R-Wis.), who has led efforts to secure GOP votes for the measure.

If the vote on Friday is successful, the trade bill would head to Obama’s desk, weeks before many thought possible. Fast-track powers would greatly enhance the president’s ability to conclude negotiations on a sweeping trade deal with Pacific Rim nations that is a key part of his economic and foreign policy agenda. They would prevent Congress from amending the trade deal, and stop the Senate from filibustering it.

http://thehill.com/policy/finance/244619-gop-obama-on-cusp-of-fast-track-trade-victory

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Comment:

By Don McCanne, MD

Every member of the House of Representatives needs to read this NEJM article before the crucial vote tomorrow on fast-track authority. If Congress grants the President fast-track authority and eventually provides nonnegotiable blanket approval of TPP, “the United States could be signing away its authority to regulate critical aspects of health policy for years to come.”

We cannot let that happen. Contact members of the House of Representatives immediately.