Policy Statement: High-Deductible Health Plans

American Academy of Pediatrics
PEDIATRICS, April 28, 2014

Abstract

High-deductible health plans (HDHPs) are insurance policies with higher deductibles than conventional plans. The Medicare Prescription Drug Improvement and Modernization Act of 2003 linked many HDHPs with tax-advantaged spending accounts. The 2010 Patient Protection and Affordable Care Act continues to provide for HDHPs in its lower-level plans on the health insurance marketplace and provides for them in employer-offered plans. HDHPs decrease the premium cost of insurance policies for purchasers and shift the risk of further payments to the individual subscriber. HDHPs reduce utilization and total medical costs, at least in the short term. Because HDHPs require out-of-pocket payment in the initial stages of care, primary care and other outpatient services as well as elective procedures are the services most affected, whereas higher-cost services in the health care system, incurred after the deductible is met, are unaffected. HDHPs promote adverse selection because healthier and wealthier patients tend to opt out of conventional plans in favor of HDHPs. Because the ill pay more than the healthy under HDHPs, families with children with special health care needs bear an increased cost burden in this model. HDHPs discourage use of nonpreventive primary care and thus are at odds with most recommendations for improving the organization of health care, which focus on strengthening primary care.

This policy statement provides background information on HDHPs, discusses the implications for families and pediatric care providers, and suggests courses of action.

http://pediatrics.aappublications.org/content/early/2014/04/22/peds.2014…

Although this policy statement from the American Academy of Pediatrics is on High-Deductible Health Plans, its reach is well beyond that. It describes some of the consequences of the way that we pay for health care today, not only for children but for everyone.

The abstract above touches on some of these fundamental flaws, but the full statement should be read in its entirety. The last two pages of the text provide a list of recommendations that greatly increase administrative complexity while falling far short of what needs to be done to correct these injustices in health care financing. Single payer advocates will immediately recognize that the financing system needs to be replaced with a single payer system that provides first dollar coverage.

This important policy statement should be downloaded to share with others as we continue with our efforts to provide health care justice for all.

Fox News Poll, April 13-15, 2014

14. I’m going to read a list of potential candidates for the 2016 Democratic nomination. Please tell me which one you would like to see as the Democratic presidential nominee.

69%  Hillary Clinton

14%  Joe Biden

 6%  Elizabeth Warren

 2%  Andrew Cuomo

 1%  Martin O’Malley

 –   (Other)

 4%  (None of the above)

 3%  (Don’t know)

15. I’m going to read a list of potential candidates for the 2016 Republican nomination. Please tell me which one you would like to see as the Republican presidential nominee.

15%  Chris Christie

14%  Jeb Bush

14%  Rand Paul

 9%  Paul Ryan

 8%  Marco Rubio

 7%  Ted Cruz

 5%  Scott Walker

 5%  Rick Santorum

 5%  Rick Perry

 2%  Bobby Jindal

 1%  (Other)

 6%  (None of the above)

 9%  (Don’t know)

http://www.foxnews.com/politics/interactive/2014/04/21/fox-news-poll-independents-more-likely-to-back-anti-obamacare-candidates/

****

Clinton urges move away from fee-for-service payment model; says current system is not serving physicians, or patients, well

California Medical Association, April 21, 2014

Former Secretary of State Hillary Rodham Clinton addressed 700 physicians, practice managers, medical students and others at the Western Health Care Leadership Academy in San Diego. Delivering the keynote address live via satellite, Secretary Clinton urged the California Medical Association to work with other like-minded organizations to help advance meaningful health care delivery and payment reform, instead of continuing to “rejigger” a broken system.

“At some point, we have to move away from fee for service payment for medical care,” said Secretary Clinton. “It is not serving physicians well, or any other health care providers, and I don’t believe it’s serving patients well.”

Secretary Clinton told attendees that she shares physicians’ frustration with Congress’s inability to make any progress on fixing the current broken payment system. She said she would like to see more systemic reform so that physicians are fully reimbursed for everything that goes into the care of patients. “It is deeply bothersome to me that it is still not accepted that a lot of what constitutes wellness—things that a physician can be promoting with his or her patients—should be reimbursed by Medicare,” Clinton said. “When a physician sits down with a patient and says ‘I’m going to give you a nutrition regimen. I’m going to have my nurse or my PA check in on you to make sure that you’re walking every day.’ These are all things that would keep that patient out of the operating room for a bypass or a stent or some other expensive intervention.”

“We’re never going to resolve the injustice, the unpredictability, the unfairness that unfortunately permeates the current system,” she said. “We need to move away from this very narrow approach to reimbursing physicians.”

“At some point, I hope we’re going to be able to take a look at the broad base of funding streams, both public and private, that go into funding health care–particularly physicians’ pay—and look more at who the patient is and what the doctor is providing that patient, instead of what the program is and how we can keep trying to put square pegs in a round hole.”

Secretary Clinton also held up California’s implementation of the Affordable Care Act as a model for the nation. “We’re going to be watching closely what happens in California. Seeing what works, and what doesn’t. States like California, intent on covering more citizens and fostering bold experimentation to improve outcomes and reduce costs, will not only lead the way, but help everyone else find the way.”

Secretary Clinton also urged all stakeholders to work together to keep pushing for improvements to the health care system. “The transparency called for under the Affordable Care act is going to reveal a lot of information. Some of it may be surprising. And some of it may even be quite troubling,” said Clinton. “But for the first time, we’re going to see information. And everyone will be able to look at the same information. We can then try and figure out ‘Is there a problem that needs to be fixed?’”

The data collected under the Affordable Care act will, according to Clinton, will allow us to ask questions that will give us much better insight into how we can move towards a more efficient, quality driven health care system.

“I think this is a great opportunity, if we do it with that kind of open attitude of ‘let’s learn what works, let’s make this better.’ Let’s hear from physicians and nurses and pharmacists, you name it. Everyone come to the table. What do you think needs to be changed?” 

http://www.cmanet.org/cma-alert/archives/april-21-2014/#11

****

Position Statement on the Affordable Care Act (ACA)

PNHP California, April 9, 2014

Excerpt:

Recognizing that we share core principles with those who worked hard to implement the ACA, including the desire for a healthcare system that is truly universal, affordable and provides comprehensive benefits with one standard of high quality care, we resolve to:

• Build bridges to ACA supporters to forge strong alliances for continued reform.

• Work with our partners towards the successful implementation of ACA and to find solutions for the 3-4 million Californians who are still left out of the system, including the undocumented.

• Support efforts to provide healthcare as a basic human right rather than a commodity available only to those who can afford it.

http://pnhpcalifornia.org/2014/04/news-article-pnhp-california-aca-position-paper/

Comment:

By Don McCanne, MD

Considering the difficulty that President Obama has experienced in passing and then implementing the Affordable Care Act (ACA), it is clear that he is in no position to advocate for single payer reform before he leaves office. Thus it seems reasonable to consider the prospects of enacting single payer reform during the term of our next president. What are the prospects?

As people gain more experience with the ACA reforms, it is likely that many will be disappointed. The marketplace (exchange) plans that most people are selecting have relatively low actuarial values with high deductibles, thus many will experience financial hardship should they have significant health care needs. Also many will be disappointed with the narrow provider networks which will often prevent patients from having their choice of physicians and hospitals. Since employers are now adopting some of these same insurance innovations, many who previously were satisfied with their employer-sponsored coverage may also become much less content with their coverage.

It is thought that, by 2017, enough people will have become dissatisfied with our high-cost, administratively inefficient, dysfunctional system that many of them will be ready for an improved Medicare for all. That happens to be the year that our next president will take office. Will we have a president who is willing to support a vastly superior alternative – a single payer national health program?

Obviously we cannot predict the results of a presidential election this far in advance, but we can take a look at the political climate – a climate which is unlikely to change dramatically in the next few years.

Looking at the Fox poll and other recent polls, the clear front runner is Hillary Clinton. Although it is possible that the Republican Party could rally around a candidate that would be a serious challenge to Clinton, currently she outpolls each of the Republicans under consideration.

Suppose Hillary Clinton were elected president, what could single payer advocates expect? The report on her speech to physicians in California is reproduced above in its entirety, mainly to show what was left out of her message. There is certainly no mention of single payer nor expanding Medicare. She does mention moving away from fee-for-service payments, and expanding payments for “wellness-things,” while holding up California’s implementation of ACA as a “model for the nation.” She also touted information transparency. In her last run for the presidential nomination she had displaced her previous failed proposal with the current ACA model. Based on her comments, it is highly likely that her efforts at reform would be limited refinement of the ACA model, if she can get past the crippling partisan divide in Congress.

Should a Republican be elected, it is likely that efforts would be directed to replacing some elements of ACA with policies supporting less regulation of insurance products, limitation of mandates, and ability of individuals to purchase insurance products in less regulated states. No serious potential Republican candidate supports single payer.

So, no single payer will be coming from the top. Then what can we do? We should intensify our efforts to educate the public at large – so they understand why ACA does not seem to be working well for them, while showing them how single payer is precisely the model we need. We need to create a critical threshold of support coming from the general public. If the demand is intense enough, the politicians will follow.

But a caveat. The single payer message must be loud and clear. People must understand that the ACA model is fundamentally flawed and must be superseded by a single payer system. Many single payer supporters abandoned the cause and chose to support the “progressive” alternative – Obamacare. They continue to be involved in the implementation of this highly flawed model (better than nothing but still highly flawed). Fortunately, there are still organizations, such as PNHP, that are not willing to compromise and dilute the single payer message. Doing so would merely continue us down the incremental path of reform, when there are no incremental steps that bridge the gap between a fragmented system of private and public payers and a single payer system.

PNHP California has adopted a position statement calling for “work(ing) with our partners towards the successful implementation of ACA.” Most of the progressive community is already engaged in supporting ACA, and they really do not need more help. Muddling the message of the single payer purists that remain can only perpetuate inertia in the single payer movement. Some sincerely believe that helping the ACA supporters will result in reciprocal support for our efforts on single payer. Really? They are going to help us disassemble a system that they worked so hard on to build?

Let’s not adulterate our single payer message.

Fox News Poll, April 13-15, 2014
14. I’m going to read a list of potential candidates for the 2016 Democratic nomination. Please tell me which one you would like to see as the Democratic presidential nominee.

69%  Hillary Clinton

14%  Joe Biden

6%  Elizabeth Warren

2%  Andrew Cuomo

1%  Martin O’Malley

–   (Other)

4%  (None of the above)

3%  (Don’t know)

15. I’m going to read a list of potential candidates for the 2016 Republican nomination. Please tell me which one you would like to see as the Republican presidential nominee.

15%  Chris Christie

14%  Jeb Bush

14%  Rand Paul

9%  Paul Ryan

8%  Marco Rubio

7%  Ted Cruz

5%  Scott Walker

5%  Rick Santorum

5%  Rick Perry

2%  Bobby Jindal

1%  (Other)

6%  (None of the above)

9%  (Don’t know)

http://www.foxnews.com/politics/interactive/2014/04/21/fox-news-poll-ind…

****

Clinton urges move away from fee-for-service payment model; says current system is not serving physicians, or patients, well

California Medical Association, April 21, 2014

Former Secretary of State Hillary Rodham Clinton addressed 700 physicians, practice managers, medical students and others at the Western Health Care Leadership Academy in San Diego. Delivering the keynote address live via satellite, Secretary Clinton urged the California Medical Association to work with other like-minded organizations to help advance meaningful health care delivery and payment reform, instead of continuing to “rejigger” a broken system.

“At some point, we have to move away from fee for service payment for medical care,” said Secretary Clinton. “It is not serving physicians well, or any other health care providers, and I don’t believe it’s serving patients well.”

Secretary Clinton told attendees that she shares physicians’ frustration with Congress’s inability to make any progress on fixing the current broken payment system. She said she would like to see more systemic reform so that physicians are fully reimbursed for everything that goes into the care of patients. “It is deeply bothersome to me that it is still not accepted that a lot of what constitutes wellness—things that a physician can be promoting with his or her patients—should be reimbursed by Medicare,” Clinton said. “When a physician sits down with a patient and says ‘I’m going to give you a nutrition regimen. I’m going to have my nurse or my PA check in on you to make sure that you’re walking every day.’ These are all things that would keep that patient out of the operating room for a bypass or a stent or some other expensive intervention.”

“We’re never going to resolve the injustice, the unpredictability, the unfairness that unfortunately permeates the current system,” she said. “We need to move away from this very narrow approach to reimbursing physicians.”

“At some point, I hope we’re going to be able to take a look at the broad base of funding streams, both public and private, that go into funding health care–particularly physicians’ pay—and look more at who the patient is and what the doctor is providing that patient, instead of what the program is and how we can keep trying to put square pegs in a round hole.”

Secretary Clinton also held up California’s implementation of the Affordable Care Act as a model for the nation. “We’re going to be watching closely what happens in California. Seeing what works, and what doesn’t. States like California, intent on covering more citizens and fostering bold experimentation to improve outcomes and reduce costs, will not only lead the way, but help everyone else find the way.”

Secretary Clinton also urged all stakeholders to work together to keep pushing for improvements to the health care system. “The transparency called for under the Affordable Care act is going to reveal a lot of information. Some of it may be surprising. And some of it may even be quite troubling,” said Clinton. “But for the first time, we’re going to see information. And everyone will be able to look at the same information. We can then try and figure out ‘Is there a problem that needs to be fixed?’”

The data collected under the Affordable Care act will, according to Clinton, will allow us to ask questions that will give us much better insight into how we can move towards a more efficient, quality driven health care system.

“I think this is a great opportunity, if we do it with that kind of open attitude of ‘let’s learn what works, let’s make this better.’ Let’s hear from physicians and nurses and pharmacists, you name it. Everyone come to the table. What do you think needs to be changed?”

http://www.cmanet.org/cma-alert/archives/april-21-2014/#11

****

Position Statement on the Affordable Care Act (ACA)

PNHP California, April 9, 2014

Excerpt:

Recognizing that we share core principles with those who worked hard to implement the ACA, including the desire for a healthcare system that is truly universal, affordable and provides comprehensive benefits with one standard of high quality care, we resolve to:

• Build bridges to ACA supporters to forge strong alliances for continued reform.

• Work with our partners towards the successful implementation of ACA and to find solutions for the 3-4 million Californians who are still left out of the system, including the undocumented.

• Support efforts to provide healthcare as a basic human right rather than a commodity available only to those who can afford it.

http://pnhpcalifornia.org/2014/04/news-article-pnhp-california-aca-posit…

Considering the difficulty that President Obama has experienced in passing and then implementing the Affordable Care Act (ACA), it is clear that he is in no position to advocate for single payer reform before he leaves office. Thus it seems reasonable to consider the prospects of enacting single payer reform during the term of our next president. What are the prospects?

As people gain more experience with the ACA reforms, it is likely that many will be disappointed. The marketplace (exchange) plans that most people are selecting have relatively low actuarial values with high deductibles, thus many will experience financial hardship should they have significant health care needs. Also many will be disappointed with the narrow provider networks which will often prevent patients from having their choice of physicians and hospitals. Since employers are now adopting some of these same insurance innovations, many who previously were satisfied with their employer-sponsored coverage may also become much less content with their coverage.

It is thought that, by 2017, enough people will have become dissatisfied with our high-cost, administratively inefficient, dysfunctional system that many of them will be ready for an improved Medicare for all. That happens to be the year that our next president will take office. Will we have a president who is willing to support a vastly superior alternative – a single payer national health program?

Obviously we cannot predict the results of a presidential election this far in advance, but we can take a look at the political climate – a climate which is unlikely to change dramatically in the next few years.

Looking at the Fox poll and other recent polls, the clear front runner is Hillary Clinton. Although it is possible that the Republican Party could rally around a candidate that would be a serious challenge to Clinton, currently she outpolls each of the Republicans under consideration.

Suppose Hillary Clinton were elected president, what could single payer advocates expect? The report on her speech to physicians in California is reproduced above in its entirety, mainly to show what was left out of her message. There is certainly no mention of single payer nor expanding Medicare. She does mention moving away from fee-for-service payments, and expanding payments for “wellness-things,” while holding up California’s implementation of ACA as a “model for the nation.” She also touted information transparency. In her last run for the presidential nomination she had displaced her previous failed proposal with the current ACA model. Based on her comments, it is highly likely that her efforts at reform would be limited refinement of the ACA model, if she can get past the crippling partisan divide in Congress.

Should a Republican be elected, it is likely that efforts would be directed to replacing some elements of ACA with policies supporting less regulation of insurance products, limitation of mandates, and ability of individuals to purchase insurance products in less regulated states. No serious potential Republican candidate supports single payer.

So, no single payer will be coming from the top. Then what can we do? We should intensify our efforts to educate the public at large – so they understand why ACA does not seem to be working well for them, while showing them how single payer is precisely the model we need. We need to create a critical threshold of support coming from the general public. If the demand is intense enough, the politicians will follow.

But a caveat. The single payer message must be loud and clear. People must understand that the ACA model is fundamentally flawed and must be superseded by a single payer system. Many single payer supporters abandoned the cause and chose to support the “progressive” alternative – Obamacare. They continue to be involved in the implementation of this highly flawed model (better than nothing but still highly flawed). Fortunately, there are still organizations, such as PNHP, that are not willing to compromise and dilute the single payer message. Doing so would merely continue us down the incremental path of reform, when there are no incremental steps that bridge the gap between a fragmented system of private and public payers and a single payer system.

PNHP California has adopted a position statement calling for “work(ing) with our partners towards the successful implementation of ACA.” Most of the progressive community is already engaged in supporting ACA, and they really do not need more help. Muddling the message of the single payer purists that remain can only perpetuate inertia in the single payer movement. Some sincerely believe that helping the ACA supporters will result in reciprocal support for our efforts on single payer. Really? They are going to help us disassemble a system that they worked so hard on to build?

Let’s not adulterate our single payer message.

Gilead Profit Triples, Hepatitis C Drug Revenue Reaches $2.3B

Fox Business, April 22, 2013

Gilead Sciences Inc (GILD), which ignited a fierce debate over prescription drug prices, said its new $1,000 hepatitis C pill generated quarterly sales of $2.27 billion, helping the company’s quarterly net profit nearly triple.

http://www.foxbusiness.com/industries/2014/04/22/gilead-profit-triples-hepatitis-c-drug-revenue-reaches-23b/

****

MIA In The War On Cancer: Where Are The Low-Cost Treatments?

By Jake Bernstein
ProPublica, April 23, 2014

Increasingly, Big Pharma is betting on new blockbuster cancer drugs that cost billions to develop and can be sold for thousands of dollars a dose. In 2010, each of the top 10 cancer drugs topped more than $1 billion in sales, according to Campbell Alliance, a health-care consulting firm. A decade earlier, only two of them did. Left behind are low-cost alternatives, including generics, that have shown some merit but don’t have enough profit potential for drug companies to invest in researching them.

The predominant focus of cancer drug development today is on “targeted therapies” that are both innovative and lucrative. These drugs block the growth and spread of cancer by interfering with specific molecules involved in tumor growth. Fashioning these targeted therapies involves costly molecular and genetic experimentation, but once patented the investment can translate into enormous drug company profits.

http://www.propublica.org/article/where-are-the-low-cost-cancer-treatments

****

Healing Medical Product Innovation

By Steven Garber, Susan M. Gates, Emmett B. Keeler, Mary E. Vaiana, Andrew W. Mulcahy, Christopher Lau, Arthur L. Kellermann
RAND Corporation, April 22, 2014

Previous studies aimed at reining in spending on technology have focused on changing how existing medical technologies are used. But what about also encouraging the creation of technologies that could improve health and reduce spending, or that provide large-enough health benefits to warrant any extra spending? A recent RAND study focused on policies that could help change which medical products—drugs, devices, and health information technologies—get invented in the first place.

To spur inventors to create medical products that lower health care spending and promote health, policymakers need to address the perverse financial incentives that lead inventors and investors in the opposite direction. Currently, large profits are most often available from creating increasingly expensive products that boost spending, whether or not they also substantially improve health. In contrast, inventors face relatively weak incentives to create products that would help decrease spending.

The RAND research team developed ten high-priority policy options that could change the costs, rewards, and risks that inventors and investors face. We synthesized information from scientific, trade, and popular literature; conducted interviews with more than 50 national experts from a variety of fields; sought input from a panel of accomplished technical advisors; and developed illustrative case studies of eight medical products.

Ten Policy Options for Healing Medical Product Innovation

1.  Enable More Creativity in Funding Basic Science

2.  Offer Prizes for Inventions

3.  Buy Out Patents

4.  Establish a Public-Interest Investment Fund

5.  Expedite FDA Reviews and Approvals for Technologies That Decrease Spending

6.  Reform Medicare Payment Policies

7.  Reform Medicare Coverage Policies

8.  Coordinate FDA and CMS Processes

9.  Increase Demand for Technologies That Decrease Spending

10. Produce More and More Timely Technology Assessments

Because the stakes in reining in health care spending are so high, and the need to get more health benefits from the money we spend is so great, we believe all of these options should be considered—the sooner the better.

RAND Research Brief: http://www.rand.org/pubs/research_briefs/RB9767.html

****

Comment:

By Don McCanne, MD

New technology and drug development is being driven by profits in the private sector – massive profits. Even those of us fortunate enough to not have to use the new technology are still paying for it through taxes to support government health programs and through higher premiums for private insurance plans.

As the nation with the highest health care spending it has become an imperative that we do something about this. The drive to obtain lower prices in health care will not come from the private sector since its first priority is massive profits. Change will have to come from our government.

RAND has published a Research Brief listing ten policy options for “healing medical product innovation.” The list includes some reasonable concepts and some ideas that perhaps are not so hot. What is important is that policy wonks are thinking about the problem and pushing us to do something about it. Especially important is the concept that innovation should be targeted to reducing costs when possible, not to deliberately designing products to be more expensive.

RAND’s suggestions do include a major role for the private sector, but give them too much control, in my opinion. More control should lie with government entities such as the NIH. The private sector wants better products at higher prices whereas the government should incentivize better products at lower prices. As long as the private sector would be willing to provide us with greater value, they should receive legitimate costs plus fair margins.

The benefits of medical product innovation should accrue primarily to the people, both as improvements in health technology, and as reductions in costs. It is the consumers who ultimately pay for the development costs who should be reaping most of the benefits – not Wall Street, Madison Avenue, passive investors, nor the superabundance of administrators that permeate our health care system. 

The point is that we can do something about this misdirection of our funds. We need to place a priority on the ethics of health care spending – the same type of priority that would also lead to a single payer financing system – thereby creating much greater value in health care for all of us.

Gilead Profit Triples, Hepatitis C Drug Revenue Reaches $2.3B

Fox Business, April 22, 2013

Gilead Sciences Inc (GILD), which ignited a fierce debate over prescription drug prices, said its new $1,000 hepatitis C pill generated quarterly sales of $2.27 billion, helping the company’s quarterly net profit nearly triple.

http://www.foxbusiness.com/industries/2014/04/22/gilead-profit-triples-h…

****

MIA In The War On Cancer: Where Are The Low-Cost Treatments?

By Jake Bernstein
ProPublica, April 23, 2014

Increasingly, Big Pharma is betting on new blockbuster cancer drugs that cost billions to develop and can be sold for thousands of dollars a dose. In 2010, each of the top 10 cancer drugs topped more than $1 billion in sales, according to Campbell Alliance, a health-care consulting firm. A decade earlier, only two of them did. Left behind are low-cost alternatives, including generics, that have shown some merit but don’t have enough profit potential for drug companies to invest in researching them.

The predominant focus of cancer drug development today is on “targeted therapies” that are both innovative and lucrative. These drugs block the growth and spread of cancer by interfering with specific molecules involved in tumor growth. Fashioning these targeted therapies involves costly molecular and genetic experimentation, but once patented the investment can translate into enormous drug company profits.

http://www.propublica.org/article/where-are-the-low-cost-cancer-treatments

****

Healing Medical Product Innovation

By Steven Garber, Susan M. Gates, Emmett B. Keeler, Mary E. Vaiana, Andrew W. Mulcahy, Christopher Lau, Arthur L. Kellermann
RAND Corporation, April 22, 2014

Previous studies aimed at reining in spending on technology have focused on changing how existing medical technologies are used. But what about also encouraging the creation of technologies that could improve health and reduce spending, or that provide large-enough health benefits to warrant any extra spending? A recent RAND study focused on policies that could help change which medical products—drugs, devices, and health information technologies—get invented in the first place.

To spur inventors to create medical products that lower health care spending and promote health, policymakers need to address the perverse financial incentives that lead inventors and investors in the opposite direction. Currently, large profits are most often available from creating increasingly expensive products that boost spending, whether or not they also substantially improve health. In contrast, inventors face relatively weak incentives to create products that would help decrease spending.

The RAND research team developed ten high-priority policy options that could change the costs, rewards, and risks that inventors and investors face. We synthesized information from scientific, trade, and popular literature; conducted interviews with more than 50 national experts from a variety of fields; sought input from a panel of accomplished technical advisors; and developed illustrative case studies of eight medical products.

Ten Policy Options for Healing Medical Product Innovation

1.  Enable More Creativity in Funding Basic Science

2.  Offer Prizes for Inventions

3.  Buy Out Patents

4.  Establish a Public-Interest Investment Fund

5.  Expedite FDA Reviews and Approvals for Technologies That Decrease Spending

6.  Reform Medicare Payment Policies

7.  Reform Medicare Coverage Policies

8.  Coordinate FDA and CMS Processes

9.  Increase Demand for Technologies That Decrease Spending

10. Produce More and More Timely Technology Assessments

Because the stakes in reining in health care spending are so high, and the need to get more health benefits from the money we spend is so great, we believe all of these options should be considered—the sooner the better.

RAND Research Brief: http://www.rand.org/pubs/research_briefs/RB9767.html

New technology and drug development is being driven by profits in the private sector – massive profits. Even those of us fortunate enough to not have to use the new technology are still paying for it through taxes to support government health programs and through higher premiums for private insurance plans.

As the nation with the highest health care spending it has become an imperative that we do something about this. The drive to obtain lower prices in health care will not come from the private sector since its first priority is massive profits. Change will have to come from our government.

RAND has published a Research Brief listing ten policy options for “healing medical product innovation.” The list includes some reasonable concepts and some ideas that perhaps are not so hot. What is important is that policy wonks are thinking about the problem and pushing us to do something about it. Especially important is the concept that innovation should be targeted to reducing costs when possible, not to deliberately designing products to be more expensive.

RAND’s suggestions do include a major role for the private sector, but give them too much control, in my opinion. More control should lie with government entities such as the NIH. The private sector wants better products at higher prices whereas the government should incentivize better products at lower prices. As long as the private sector would be willing to provide us with greater value, they should receive legitimate costs plus fair margins.

The benefits of medical product innovation should accrue primarily to the people, both as improvements in health technology, and as reductions in costs. It is the consumers who ultimately pay for the development costs who should be reaping most of the benefits – not Wall Street, Madison Avenue, passive investors, nor the superabundance of administrators that permeate our health care system.

The point is that we can do something about this misdirection of our funds. We need to place a priority on the ethics of health care spending – the same type of priority that would also lead to a single payer financing system – thereby creating much greater value in health care for all of us.

Acceleration Is Forecast for Spending on Health

By Eduardo Porter
The New York Times, April 22, 2014

The Affordable Care Act may well be on track to meeting its primary goal of providing coverage for most uninsured Americans and protecting everyone against the risk of losing their insurance. But for all its innovative proposals to flush waste out of the system, reining in health care spending still appears well beyond the grasp of Obamacare.

“We have been consistently bending the cost curve over the last 20 years, but the kinds of things that we do don’t tend to be permanent,” said Charles Roehrig, who runs the Center for Sustainable Health Spending at the Altarum Institute, a nonprofit based in Washington. “It will take a lot of work just to stay on the same curve we have been on for a while.”

The evolution of the American medical-industrial complex has been driven by two critical dynamics. The first is the development of new technologies. The second is our willingness to pay for them.

Most health care economists agree that the Affordable Care Act, along with other forces, will help reduce waste, pushing the industry to drop the “fee for service” model that encourages doctors and hospitals to spend more whether it is useful or not.

Last November, President Obama’s Council of Economic Advisers issued a hopeful analysis, which posited that structural changes flowing from the act were helping push the growth in health care spending to its slowest on record.

David Cutler of Harvard points to studies that suggest that straightforward changes, such as improving the dismal management of American hospitals, could cut health care costs by 25 to 50 percent. “Getting better is not rocket science,” he said.

But that optimism might be premature. Mr. Roehrig argues that the decade-long slowdown in spending growth reflects a response to the two recessions that provided the economic bookends to the first decade of the new century; not a fundamental shift in the way the system operates.

During that period, employers pushed workers to take insurance with higher out-of-pocket payments, which discouraged use. Medicaid in financially troubled states has cut provider fees and limited access to high-cost services. And, of course, many unemployed workers who lost their company health insurance cut back on visits to the doctor.

These effects, Mr. Roehrig noted, have by now mostly petered out. As the economy recovers, spending growth will resume its climb, reinforced even more by the understandable demands from the eight million newly insured Americans under the health law for services they couldn’t afford previously. He forecasts that health spending will grow substantially faster than G.D.P. in the near future, but expects the gap to shrink gradually to below one percentage point over time. In the long run, he projects that health care spending could consume 30 percent of G.D.P.

Mark McClellan, a former administrator for the Centers on Medicare and Medicaid Services under George W. Bush, and Alice Rivlin, a former vice chairwoman of the Federal Reserve, point out that innovations that improve health or reduce the cost of medical services may also increase demand.

“It would be a mistake to assume that slow growth in health care spending will continue,” they wrote, “or that spending reflects high-value care and therefore, health care delivery reform is no longer an urgent priority.”

Over the last 40 years or so, health care spending has been growing 2.4 percentage points faster than the economy, on average.

But that slowdown still isn’t good enough. By 2032, health care will consume almost a quarter of the nation’s economic production, taking an even bigger bite from workers’ wages and either forcing taxes up to pay the government’s share, adding more to the national debt, or squeezing other important public services.

So, if Americans really want to win the health care spending war, it may take more than reform. It may still take a revolution.

****

Comment:

By Don McCanne, MD

There has been much speculation about the causes of the recent slowdown in health care spending, but, more importantly, about whether the more recent uptick indicates a return to greater health care inflation and, even more importantly, whether new innovations – especially those in the Affordable Care Act (ACA) will be capable of slowing the increases in spending.

Nobody can reliably predict the future. But the policy community can take a careful look at the facts we do have on hand and make decisions that would improve the odds of achieving a goal of more efficient spending in health care.

Almost every article supportive of the cost containment measures in ACA mentions vague concepts such as no longer paying for volume in health care services but paying for quality instead. If they make an attempt to explain how we might do that, they often invoke accountable care organizations, which, at best, seem to be more loosely designed managed care organizations that so far have failed the tests of greater efficiency and higher quality, other than a few reports of positive but negligible impacts that could never “bend the cost curve” nor truly improve quality.

What we do know is that our administrative waste is profound and that the excesses are readily recoverable – a crucial point that was omitted from this and most other current articles on the causes of our high health care costs. A single payer system would have a major impact on reducing waste in health care spending. We also know that health care prices in the United States are outrageous, and public administration through a single payer system would bring prices down to a level that pays legitimate costs plus fair margins.

We do know that there are excesses in high tech medicine. Again, a single payer system could use objective data, such as comparative effectiveness studies, to make decisions on eliminating payment for useless or harmful services. Also, capital planning can reduce excess capacity which would ameliorate its supply side-driven overutilization. The savings may be offset by improving access to beneficial services for underserved populations, but that spending would increase the overall quality of care provided by the health care delivery system – quality meaning getting the right care to the right people at the right time.

So, as far as predicting health care cost containment in the future we know that a single payer system would have a dramatic effect. But we can also predict quite reliably that dinking around with the meager wish-list policies of ACA will only distract us from moving forward with single payer policies that would really work.

Eduardo Porter writes that it may take a revolution to win the health care spending war. The battle would be between the American people and the economic elite that drive policy (Gilens and Page) and concentrate wealth (Piketty). Obviously non-violent civil action through the democratic process would be vastly preferable to a violent coup, but people are going to have to get off their duffs and initiate citizen action.

Acceleration Is Forecast for Spending on Health

By Eduardo Porter
The New York Times, April 22, 2014

The Affordable Care Act may well be on track to meeting its primary goal of providing coverage for most uninsured Americans and protecting everyone against the risk of losing their insurance. But for all its innovative proposals to flush waste out of the system, reining in health care spending still appears well beyond the grasp of Obamacare.

“We have been consistently bending the cost curve over the last 20 years, but the kinds of things that we do don’t tend to be permanent,” said Charles Roehrig, who runs the Center for Sustainable Health Spending at the Altarum Institute, a nonprofit based in Washington. “It will take a lot of work just to stay on the same curve we have been on for a while.”

The evolution of the American medical-industrial complex has been driven by two critical dynamics. The first is the development of new technologies. The second is our willingness to pay for them.

Most health care economists agree that the Affordable Care Act, along with other forces, will help reduce waste, pushing the industry to drop the “fee for service” model that encourages doctors and hospitals to spend more whether it is useful or not.

Last November, President Obama’s Council of Economic Advisers issued a hopeful analysis, which posited that structural changes flowing from the act were helping push the growth in health care spending to its slowest on record.

David Cutler of Harvard points to studies that suggest that straightforward changes, such as improving the dismal management of American hospitals, could cut health care costs by 25 to 50 percent. “Getting better is not rocket science,” he said.

But that optimism might be premature. Mr. Roehrig argues that the decade-long slowdown in spending growth reflects a response to the two recessions that provided the economic bookends to the first decade of the new century; not a fundamental shift in the way the system operates.

During that period, employers pushed workers to take insurance with higher out-of-pocket payments, which discouraged use. Medicaid in financially troubled states has cut provider fees and limited access to high-cost services. And, of course, many unemployed workers who lost their company health insurance cut back on visits to the doctor.

These effects, Mr. Roehrig noted, have by now mostly petered out. As the economy recovers, spending growth will resume its climb, reinforced even more by the understandable demands from the eight million newly insured Americans under the health law for services they couldn’t afford previously. He forecasts that health spending will grow substantially faster than G.D.P. in the near future, but expects the gap to shrink gradually to below one percentage point over time. In the long run, he projects that health care spending could consume 30 percent of G.D.P.

Mark McClellan, a former administrator for the Centers on Medicare and Medicaid Services under George W. Bush, and Alice Rivlin, a former vice chairwoman of the Federal Reserve, point out that innovations that improve health or reduce the cost of medical services may also increase demand.

“It would be a mistake to assume that slow growth in health care spending will continue,” they wrote, “or that spending reflects high-value care and therefore, health care delivery reform is no longer an urgent priority.”

Over the last 40 years or so, health care spending has been growing 2.4 percentage points faster than the economy, on average.

But that slowdown still isn’t good enough. By 2032, health care will consume almost a quarter of the nation’s economic production, taking an even bigger bite from workers’ wages and either forcing taxes up to pay the government’s share, adding more to the national debt, or squeezing other important public services.

So, if Americans really want to win the health care spending war, it may take more than reform. It may still take a revolution.

http://www.nytimes.com/2014/04/23/business/economy/forecasting-the-scale…

There has been much speculation about the causes of the recent slowdown in health care spending, but, more importantly, about whether the more recent uptick indicates a return to greater health care inflation and, even more importantly, whether new innovations – especially those in the Affordable Care Act (ACA) will be capable of slowing the increases in spending.

Nobody can reliably predict the future. But the policy community can take a careful look at the facts we do have on hand and make decisions that would improve the odds of achieving a goal of more efficient spending in health care.

Almost every article supportive of the cost containment measures in ACA mentions vague concepts such as no longer paying for volume in health care services but paying for quality instead. If they make an attempt to explain how we might do that, they often invoke accountable care organizations, which, at best, seem to be more loosely designed managed care organizations that so far have failed the tests of greater efficiency and higher quality, other than a few reports of positive but negligible impacts that could never “bend the cost curve” nor truly improve quality.

What we do know is that our administrative waste is profound and that the excesses are readily recoverable – a crucial point that was omitted from this and most other current articles on the causes of our high health care costs. A single payer system would have a major impact on reducing waste in health care spending. We also know that health care prices in the United States are outrageous, and public administration through a single payer system would bring prices down to a level that pays legitimate costs plus fair margins.

We do know that there are excesses in high tech medicine. Again, a single payer system could use objective data, such as comparative effectiveness studies, to make decisions on eliminating payment for useless or harmful services. Also, capital planning can reduce excess capacity which would ameliorate its supply side-driven overutilization. The savings may be offset by improving access to beneficial services for underserved populations, but that spending would increase the overall quality of care provided by the health care delivery system – quality meaning getting the right care to the right people at the right time.

So, as far as predicting health care cost containment in the future we know that a single payer system would have a dramatic effect. But we can also predict quite reliably that dinking around with the meager wish-list policies of ACA will only distract us from moving forward with single payer policies that would really work.

Eduardo Porter writes that it may take a revolution to win the health care spending war. The battle would be between the American people and the economic elite that drive policy (Gilens and Page) and concentrate wealth (Piketty). Obviously non-violent civil action through the democratic process would be vastly preferable to a violent coup, but people are going to have to get off their duffs and initiate citizen action.

Outpatient Care Patterns and Organizational Accountability in Medicare

By J. Michael McWilliams, MD, PhD; Michael E. Chernew, PhD; Jesse B. Dalton, MA; Bruce E. Landon, MD, MBA, MSS
JAMA Internal Medicine, April 21, 2014

In this study of 145 organizations participating in the Medicare ACO programs, over one-third of beneficiaries attributed to an ACO in 2010 or 2011 was not assigned to the same ACO in both years. Thus, in any given year, a substantial share of patients for whom an ACO is held accountable may be newly or transiently assigned. Although healthy beneficiaries using little primary care contributed to this instability, unstably assigned beneficiaries were more likely than stably assigned beneficiaries to be in several high-cost groups that may be targeted for care management, including the top decile of total spending.

Much of the outpatient specialty care for patients assigned to ACOs, particularly higher-cost patients with more office visits and chronic conditions, was provided by specialists outside of patients’ assigned organizations, even among more specialty-oriented ACOs. In contrast, leakage of office visits with PCPs for ACO-assigned patients was minimal. In addition, less than 40% of outpatient Medicare spending billed by ACO physicians was for care provided to beneficiaries assigned to the billing ACO. This percentage was much lower for specialty-oriented than for primary care–oriented organizations, suggesting that ACOs currently provide substantial amounts of specialty care to patients receiving primary care elsewhere. Thus, at least initially, incentives in traditional Medicare for organizations participating in ACO programs may continue to be largely fee-for-service in nature, particularly for outpatient specialty care.

https://archinte.jamanetwork.com/article.aspx?articleid=1861039

****

Comment:

By Don McCanne, MD

In this study of Medicare Accountable Care Organizations (ACO), 66.7% of office visits with specialists were provided outside of the assigned ACO, especially for higher-cost patients with more office visits and chronic conditions. That hardly represents a model designed to control costs.

Some suggest that tighter relationships need to be established between Medicare patients and ACOs, but that already exists in the Medicare Advantage plans – a model proven to increase costs. It is clear that the nebulous ACO concept has only been a wish on the part of policymakers that physicians and hospitals could somehow organize themselves to provide better, cheaper care. But we now have enough evidence to state that ACOs also are a failure.

The vested interests have indicated that they are going to continue to try to improve the model when it really needs to be replaced. The direction that they are headed is towards more managed care. What we need instead is a financing model that is already proven to reduce waste and improve quality – a single payer national health program. The ACO advocates need a strong dose of disruption, or they will continue leading us down the wrong path.

Outpatient Care Patterns and Organizational Accountability in Medicare

By J. Michael McWilliams, MD, PhD; Michael E. Chernew, PhD; Jesse B. Dalton, MA; Bruce E. Landon, MD, MBA, MSS
JAMA Internal Medicine, April 21, 2014

In this study of 145 organizations participating in the Medicare ACO programs, over one-third of beneficiaries attributed to an ACO in 2010 or 2011 was not assigned to the same ACO in both years. Thus, in any given year, a substantial share of patients for whom an ACO is held accountable may be newly or transiently assigned. Although healthy beneficiaries using little primary care contributed to this instability, unstably assigned beneficiaries were more likely than stably assigned beneficiaries to be in several high-cost groups that may be targeted for care management, including the top decile of total spending.

Much of the outpatient specialty care for patients assigned to ACOs, particularly higher-cost patients with more office visits and chronic conditions, was provided by specialists outside of patients’ assigned organizations, even among more specialty-oriented ACOs. In contrast, leakage of office visits with PCPs for ACO-assigned patients was minimal. In addition, less than 40% of outpatient Medicare spending billed by ACO physicians was for care provided to beneficiaries assigned to the billing ACO. This percentage was much lower for specialty-oriented than for primary care–oriented organizations, suggesting that ACOs currently provide substantial amounts of specialty care to patients receiving primary care elsewhere. Thus, at least initially, incentives in traditional Medicare for organizations participating in ACO programs may continue to be largely fee-for-service in nature, particularly for outpatient specialty care.

https://archinte.jamanetwork.com/article.aspx?articleid=1861039

In this study of Medicare Accountable Care Organizations (ACO), 66.7% of office visits with specialists were provided outside of the assigned ACO, especially for higher-cost patients with more office visits and chronic conditions. That hardly represents a model designed to control costs.

Some suggest that tighter relationships need to be established between Medicare patients and ACOs, but that already exists in the Medicare Advantage plans – a model proven to increase costs. It is clear that the nebulous ACO concept has only been a wish on the part of policymakers that physicians and hospitals could somehow organize themselves to provide better, cheaper care. But we now have enough evidence to state that ACOs also are a failure.

The vested interests have indicated that they are going to continue to try to improve the model when it really needs to be replaced. The direction that they are headed is towards more managed care. What we need instead is a financing model that is already proven to reduce waste and improve quality – a single payer national health program. The ACO advocates need a strong dose of disruption, or they will continue leading us down the wrong path.

Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens

By Martin Gilens and Benjamin I. Page
Perspectives on Politics, April 9, 2014, forthcoming Fall 2014

Abstract

Each of four theoretical traditions in the study of American politics – which can be characterized as theories of Majoritarian Electoral Democracy, Economic Elite Domination, and two types of interest group pluralism, Majoritarian Pluralism and Biased Pluralism – offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented.

A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. This paper reports on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.

Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.

American Democracy?

Each of our four theoretical traditions (Majoritarian Electoral Democracy, Economic Elite Domination, Majoritarian Interest Group Pluralism, and Biased Pluralism) emphasizes different sets of actors as critical in determining U.S. policy outcomes, and each tradition has engendered a large empirical literature that seems to show a particular set of actors to be highly influential. Yet nearly all the empirical evidence has been essentially bivariate. Until very recently it has not been possible to test these theories against each other in a systematic, quantitative fashion.

By directly pitting the predictions of ideal-type theories against each other within a single statistical model (using a unique data set that includes imperfect but useful measures of the key independent variables for nearly two thousand policy issues), we have been able to produce some striking findings. One is the nearly total failure of “median voter” and other Majoritarian Electoral Democracy theories. When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.

Interest groups do have substantial independent impacts on policy, and a few groups (particularly labor unions) represent average citizens’ views reasonably well. But the interest group system as a whole does not. Over-all, net interest group alignments are not significantly related to the preferences of average citizens. The net alignments of the most influential, business oriented groups are negatively related to the average citizen’s wishes. So existing interest groups do not serve effectively as transmission belts for the wishes of the populace as a whole.

Furthermore, the preferences of economic elites (as measured by our proxy, the preferences of “affluent” citizens) have far more independent impact upon policy change than the preferences of average citizens do. To be sure, this does not mean that ordinary citizens always lose out; they fairly often get the policies they favor, but only because those policies happen also to be preferred by the economically elite citizens who wield the actual influence.

What do our findings say about democracy in America? They certainly constitute troubling news for advocates of “populistic” democracy, who want governments to respond primarily or exclusively to the policy preferences of their citizens. In the United States, our findings indicate, the majority does not rule — at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S. political system, even when fairly large majorities of Americans favor policy change, they generally do not get it.

A possible objection to populistic democracy is that average citizens are inattentive to politics and ignorant about public policy; why should we worry if their poorly informed preferences do not influence policy making? Perhaps economic elites and interest group leaders enjoy greater policy expertise than the average citizen does. Perhaps they know better which policies will benefit everyone, and perhaps they seek the common good, rather than selfish ends, when deciding which policies to support.

But we tend to doubt it. We believe instead that – collectively – ordinary citizens generally know their own values and interests pretty well, and that their expressed policy preferences are worthy of respect. Moreover, we are not so sure about the informational advantages of elites. Yes, detailed policy knowledge tends to rise with income and status. Surely wealthy Americans and corporate executives tend to know a lot about tax and regulatory policies that directly affect them. But how much do they know about the human impact of Social Security, Medicare, Food Stamps, or unemployment insurance, none of which is likely to be crucial to their own well-being? Most important, we see no reason to think that informational expertise is always accompanied by an inclination to transcend one’s own interests or a determination to work for the common good.

Despite the seemingly strong empirical support in previous studies for theories of majoritarian democracy, our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts. Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise. But we believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.

http://www.princeton.edu/~mgilens/Gilens%20homepage%20materials/Gilens%20and%20Page/Gilens%20and%20Page%202014-Testing%20Theories%203-7-14.pdf

****

Comment:

By Don McCanne, MD

Martin Gilens and Benjamin Page present historical data that show that average Americans, even when represented by majoritarian interest groups, have negligible influence in shaping public policy. In sharp contrast, the economic elites and their business-oriented interest groups wield tremendous influence in public policy.

Thomas Piketty and Emmanuel Saez have shown that the flow of income to the top has resulted in a concentration of wealth that is not only self-sustaining but likely to perpetuate the transfer of more wealth to the wealthiest, at a cost to everyone else.

This combination – a concentration of wealth at the top with the domination of policymaking by the economic elite, does not bode well for new policies that would be established for the common good.

In health care reform, the common good would have been served by improving coverage through the removal of financial barriers to care and by expanding coverage to everyone. Instead, the interests of the economic elite were served by increasing the market for private insurance products that, for the majority, increased financial barriers to care and reduced choice of providers, while leaving tens of millions of the most vulnerable without any coverage. More wealth moves to the passive investors at the top, while the deterioration in coverage requires average Americans to spend more out-of-pocket through higher deductibles.

We desperately need a well-designed single payer system if we want everyone to have the health care that they should have. At this point it appears that the economic elites are not going to allow single payer, and we will have no say.

Even though our Constitution laid the plans for a democracy, by fiat we now have a plutarchy (plutocratic oligarchy). Although Gilens and Page have shown that our Majoritarian Electoral Democracy has “only a minuscule, near-zero, statistically non-significant impact upon public policy,” perhaps the people can still change that. Although recent history demonstrates citizen inertia, that does not necessarily lock in the future. Think of Social Security, Medicare, and the Civil Rights Act.

A decade ago, in a book review for the NEJM on “Universal Coverage: The Elusive Quest for National Health Insurance” by Rick Mayes, I wrote the following: “Mayes does give us hope. Although he acknowledges that critical junctures are rare, he notes that they do occur, especially in response to unmet social needs. Perhaps the deterioration in insurance coverage that has taken place may have brought us much closer to our next critical juncture than most of us realize.” (https://www.pnhp.org/news/2005/july/rick-mayes-on-the-elusive-quest-for-national-health-insurance)

So what can we do to reverse the process under which “policymaking is dominated by powerful business organizations and a small number of affluent Americans”? Will citizen action through education, coalitions and grassroots efforts be adequate? In spite of such ongoing efforts, we have certainly fallen short so far.

History has taken us to a point wherein the economic elite rules. Can the people revitalize democracy, or is the wealthy ruling class too powerful? If the elite are not responsive to our needs, will our nation be ripe for civil unrest? At the moment, citizen inertia continues to empower the economic elite.