By Christopher Ody, Lucy Msall, Leemore S. Dafny, David C. Grabowski, and David M. Cutler
Health Affairs, January 2019

Abstract

Medicare’s Hospital Readmissions Reduction Program (HRRP) has been credited with lowering risk-adjusted readmission rates for targeted conditions at general acute care hospitals. However, these reductions appear to be illusory or overstated. This is because a concurrent change in electronic transaction standards allowed hospitals to document a larger number of diagnoses per claim, which had the effect of reducing risk-adjusted patient readmission rates. Prior studies of the HRRP relied upon control groups’ having lower baseline readmission rates, which could falsely create the appearance that readmission rates are changing more in the treatment than in the control group. Accounting for the revised standards reduced the decline in risk-adjusted readmission rates for targeted conditions by 48 percent. After further adjusting for differences in pre-HRRP readmission rates across samples, we found that declines for targeted conditions at general acute care hospitals were statistically indistinguishable from declines in two control samples. Either the HRRP had no effect on readmissions, or it led to a systemwide reduction in readmissions that was roughly half as large as prior estimates have suggested.

From the Discussion

The Hospital Readmissions Reduction Program has been cited as one of the successes of value-based payment, which fosters the view that targeted financial incentives can lead to large changes in behavior. However, altering two seemingly small details related to data and methodology meaningfully weakens the evidence that the HRRP lowered risk-adjusted readmission rates for targeted conditions and targeted hospitals. By coincidence, the HRRP was implemented just before a change in electronic transaction standards that increased diagnostic coding and therefore created the illusion that risk-adjusted readmission rates had decreased. Furthermore, given the higher rate of readmissions for targeted conditions at targeted hospitals than at nontargeted hospitals and nontargeted conditions, the decreases in readmission rates for targeted conditions and targeted hospitals were not atypically large.

This set of findings can be interpreted in two ways. One is that the HRRP had no effect on readmissions. The second is that the HRRP may have led to a systemwide reduction in readmissions (that is, a reduction not limited to targeted conditions and targeted hospitals) that was roughly half as large as prior estimates have suggested. Distinguishing between these conclusions remains an important topic for research.

We note in closing that if the HRRP has not lowered readmission rates, then the rationale for the program’s existence becomes substantially weaker. To see why, note that pay-for-performance programs have at least two potential downsides. First, participants may engage in undesirable efforts to game the system. In the case of the HRRP, many observers have raised concerns that hospitals may have been less willing to readmit patients after implementation of the program, which could have increased the use of care that was not counted as a readmission (such as emergency department visits or observation stays) or prevented patients from receiving needed care, possibly harming care quality. Second, pay-for-performance schemes expose participants to the risk of unstable funding, in ways that may seem unfair or contrary to other social goals. In the case of the HRRP, the program was found to have initially penalized hospitals that cared predominantly for patients of low socioeconomic status—hospitals that are more likely to be safety-net providers already operating on tight budgets.

In a successful pay-for-performance program, these two potential downsides must be more than made up for by robust improvements in performance. Our study suggests that any salutary effects of the HRRP are smaller than earlier estimates have suggested.

https://www.healthaffairs.org…

---

Comment:

By Don McCanne, M.D.

Medicare’s Hospital Readmissions Reduction Program (HRRP) has been used extensively as an example of how changing incentives (P4P – paying more, or at least not penalizing, based on performance) can lower costs. Yet this study shows that, at a minimum, the benefits of penalizing hospitals for readmitting patients have been tremendously overstated.

An additional concern is that patients are often held on observation status rather than being readmitted, sometimes to avoid the readmission penalties. This can significantly increase out-of-pocket costs for the patient since they are billed as outpatients (Part B), with greater cost-sharing, rather than as inpatients (Part A). More importantly, there is also the risk that the patient may receive less care as an outpatient when the patient’s condition warrants full inpatient services. Thus the readmission reduction program may be causing significant patient harm, both physically and fiscally.

The government bureaucrats and the policy community are fixated on these various programs that they just thought up out of the blue that supposedly would control spending, even though their track record overall is dismal. Yet they keep avoiding a proven solution that would reduce our uniquely outrageous administrative waste that costs hundreds of billions of dollars. That solution is a single payer national health program, an improved Medicare that would cover everyone. We should at least enact that and then we could examine other innovations as long as they are designed to truly benefit patients.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By William Davis
The Daily Caller, January 3, 2019

Soon-to-be Democratic Speaker of the House Nancy Pelosi is willing to test the waters on an important grassroots progressive issue.

The new speaker announced her support for “Medicare for All” hearings through a spokesperson, according to The Hill. The creation of a single-payer healthcare system has been key issue for many on Pelosi’s left flank.

While Pelosi has never endorsed the legislation, she has previously promised that it would be ‘evaluated,’ if Democrats took control of the House.

According to a report from The Washington Post, a group of House Democrats are planning to re-introduce the bill at the start of the 116th Congress. The Rules Committee and the Budget Committee are expected to conduct hearings on “Medicare for All” legislation early in the caucus.

https://dailycaller.com…

---

Health committees finalized in new Congress

By Dan Diamond
POLITICO Pulse, January 17, 2019

Rep. Lloyd Doggett (D-Texas) was announced Wednesday to lead the Ways and Means Health Subcommittee, the last unfilled seat among the Hill’s health leadership positions.

Anna Eshoo walks back vow on Medicare-for-all hearing. The Energy and Commerce Health Subcommittee chair told reporters Wednesday afternoon she’d hold a hearing on Democrats’ Medicare for All proposals — a seeming break with Committee Chairman Frank Pallone (D-N.J.) that would mark a significant victory for the party’s progressive wing.

But by Wednesday evening, the California Democrat was having second thoughts, telling POLITICO’s Adam Cancryn that her subcommittee needed to prioritize shoring up Obamacare and crafting sweeping drug price reforms.

Only after the committee gets done with those issues, Eshoo said, will she see if there’s any “spare time” to tackle Medicare for All — an outcome that she suggested was unlikely.

https://www.politico.com…

---

Comment:

By Don McCanne, M.D.

Through a spokesperson, Speaker Nancy Pelosi announced her support for “Medicare for All” hearings, which pleased the single payer Medicare for All advocacy community.

The two subcommittees of the House of Representatives that introduce major health legislation are those of the Ways and Means Committee and the Energy and Commerce Committee. So who has the leadership appointed to chair these committees, and what are their positions on the issue?

Rep. Lloyd Doggett was appointed Chair of the Ways and Means Health Subcommittee. Though he has been a member of the House since 1995, he has never become a co-sponsor of HR 676 – The Expanded and Improved Medicare for All Act. Also he has not joined the House Medicare for All caucus. Regarding health care, he has stated that he was “committed to individual choices” (Wikipedia), which sounds like an endorsement of our fragmented, multi-payer health care system. Do not look for a Medicare for All hearing before his committee.

Rep. Anna Eshoo has been appointed Chair of the Energy and Commerce Health Subcommittee. We were pleased when she announced yesterday that she would hold a hearing on Medicare for All. But by last evening, barely enough time for the leadership to contact her, she announced that the priorities of shoring up Obamacare would make it unlikely that there would be enough time for a Medicare for All hearing.

Rep. Pramila Jayapal is expected to release very shortly her extensively revised version of HR 676, the Medicare for All Act of 2019. If it receives a hearing at all, it will likely be in the Budget Committee as a token concession to supporters. Don’t hold your breath waiting for the media coverage.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Rachel Bluth
Kaiser Health News, January 16, 2019

Scrolling through the GoFundMe website reveals seemingly an endless number of people who need help or community support. A common theme: the cost of health care.

Of the $5 billion the company says it has raised (in eight years), about a third has been for medical expenses from more than 250,000 medical campaigns conducted annually.

The prominence of the medical category is the symptom of a broken system, according to CEO Rob Solomon. He said he never realized how hard it was for some people to pay their bills: “I needed to understand the gigantic gaps in the system.”

Solomon talked to Kaiser Health News’ Rachel Bluth about his company’s role in financing health care and what it says about the system when so many people rely on the kindness of strangers to get treatment.

Q: KHN and other news outlets have reported that hospitals often advise patients to crowdfund their transplants. It’s become almost institutionalized to use GoFundMe. How do you feel about that?

It saddens me that this is a reality. Every single day on GoFundMe we see the huge challenges people face. Their stories are heartbreaking.

Some progress has been made here and there with the Affordable Care Act, and it’s under fire, but there’s ever-widening gaps in coverage for treatment, for prescriptions, for everything related to health care costs. Even patients who have insurance and supposedly decent insurance [come up short].

I would love nothing more than for “medical” to not be a category on GoFundMe. The reality is, though, that access to health care is connected to the ability to pay for it. If you can’t do that, people die. People suffer. We feel good that our platform is there when people need it.

Q: What have you learned that you didn’t know before?

I guess what I realized [when I came] to this job is that I had no notion of how severe the problem is. You read about the debate about single-payer health care and all the issues, the partisan politics. What I really learned is the health care system in the United States is really broken. Way too many people fall through the cracks.

The government is supposed to be there and sometimes they are. The health care companies are supposed to be there and sometimes they are. But for literally millions of people they’re not. The only thing you can really do is rely on the kindness of friends and family and community. That’s where GoFundMe comes in.

Q: But what does this say about the system?

The system is terrible. It needs to be rethought and retooled. Politicians are failing us. Health care companies are failing us. Those are realities. I don’t want to mince words here. We are facing a huge potential tragedy. We provide relief for a lot of people. But there are people who are not getting relief from us or from the institutions that are supposed to be there. We shouldn’t be the solution to a complex set of systemic problems. They should be solved by the government working properly, and by health care companies working with their constituents. We firmly believe that access to comprehensive health care is a right and things have to be fixed at the local, state and federal levels of government to make this a reality.

https://khn.org…

---

Comment:

By Don McCanne, M.D.

We’ve all heard stories about how individuals were referred to the GoFundMe crowdsourcing website when they were unable to pay for their medical care. What we don’t hear is how much of the unmet need can be filled by GoFundMe. Based on the numbers in this article, they have collected an average of about $200 million a year for health care costs. That is about 00.006 percent of our $3.5 trillion annual health care expenditures – a bit short of the need. Charity just won’t do it; the bill is too big.

Although we certainly admire the efforts of GoFundMe CEO Rob Solomon, he is the first to say, “access to comprehensive health care is a right and things have to be fixed at the local, state and federal levels of government to make this a reality.” It seems like this cries out for Single Payer Medicare for All, federally funded and administered on a regional and local basis. Nothing like good ol’ egalitarian solidarity.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Justin McCarthy
Gallup, January 14, 2019

Seventy percent of Americans describe the current U.S. healthcare system as being “in a state of crisis” or having “major problems.” This is consistent with the 65% to 73% range for this figure in all but one poll since Gallup first asked the question in 1994.

Although the percentage of Americans saying U.S. healthcare has major problems or is in crisis has been fairly flat over the past two decades, Democrats’ and Republicans’ views have changed within that time frame.

From 2001 to 2009, Democrats and Democratic-leaning independents were considerably more likely than Republicans and Republican-leaning independents to say healthcare had major problems or was in crisis. Democrats’ negative assessments then decreased in the rest of President Barack Obama’s first term, after passage of the Affordable Care Act (ACA) in 2010, at the same time that Republicans’ concerns mounted. By 2012, the lines crossed, so that during most of Obama’s second term, Republicans were significantly more likely than Democrats to perceive significant or critical problems in the healthcare system.

Now, with Republican President Donald Trump in office, partisan views have flipped again, with Democrats more likely to be concerned.

The difference between the two major parties on this measure was just five percentage points in 2017, Trump’s first year, when 76% of Democrats and 71% of Republicans said healthcare had major problems or was in crisis. This expanded to a 28-point gap in 2018, when 84% of Democrats and 56% of Republicans expressed these views — the largest partisan gap on this measure in Gallup’s trend since 2001.

The 2018 poll was conducted on the heels of last year’s midterm elections, in which Democratic candidates highlighted key problems with the healthcare system — especially coverage.

https://news.gallup.com…

---

Comment:

By Don McCanne, M.D.

Consistently since 1994 (except 9/11/2001) about seven-tenths of the nation has believed that the U.S. health care system is in a state of crisis or has major problems. That view persists today.

The intensity of this view has varied with the politics. During the administration of George W. Bush, the Democrats thought the system was worse than did the Republicans. Following the passage of the Affordable Care Act under Barack Obama, the Republicans thought the system was worse. At the time of the midterm elections last year, the opinions flipped again when the Democrats had campaigned on the need to fix our system with Medicare for All whereas the Republicans abandoned their attack on Obamacare and called only for guaranteed issue – not excluding people from insurance because of preexisting conditions.

Although political polarization is certainly a reality, we should temper our views on this particular difference. It should be noted that the graph is truncated – the bottom 30 percent is not included. It looks like the two sides switched positions two times, but, in fact, except for 2001, at all times the majority of both parties believed that health care was in a state of crisis or had major problems.

The point is that a majority of all Americans, regardless of party affiliation, believes that we have very serious problems with our health care system. The main difference is that the Republicans have failed to come up with any effective solutions and thus currently consider the crisis less pressing, whereas the Democrats are now more concerned, in spite of Obamacare, and thus many support a proven solution: Single Payer Medicare for All. It would fix the problems, and everyone, regardless of political affiliation, needs to understand that.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Gerard F. Anderson, Peter Hussey, and Varduhi Petrosyan
Health Affairs, January 2019

Abstract

A 2003 article titled “It’s the Prices, Stupid,” and coauthored by the three of us and the recently deceased Uwe Reinhardt found that the sizable differences in health spending between the US and other countries were explained mainly by health care prices. As a tribute to him, we used Organization for Economic Cooperation and Development (OECD) Health Statistics to update these analyses and review critiques of the original article. The conclusion that prices are the primary reason why the US spends more on health care than any other country remains valid, despite health policy reforms and health systems restructuring that have occurred in the US and other industrialized countries since the 2003 article’s publication. On key measures of health care resources per capita (hospital beds, physicians, and nurses), the US still provides significantly fewer resources compared to the OECD median country. Since the US is not consuming greater resources than other countries, the most logical factor is the higher prices paid in the US. Because the differential between what the public and private sectors pay for medical services has grown significantly in the past fifteen years, US policy makers should focus on prices in the private sector.

From the introduction

Much has happened in the US and other OECD countries in health policy and health care delivery in the intervening fifteen years. Since 2003 there has been much greater attention given to the cost of treating people with chronic conditions, a greater emphasis on value-based care, more people entering managed care programs, the passage of the Affordable Care Act, the introduction of electronic medical records, consolidation of hospitals and insurers, and many other changes designed to lower the level of spending in the US. As a result, it is important to assess whether the general conclusion that prices are responsible for most of the difference in health spending remains valid and what, if anything, has changed.

Health spending

US per capita health spending was $9,892 in 2016. The US spending level was 25 percent higher than that of Switzerland ($7,919), the country with the next-highest expenditure per capita; 108 percent higher than that of neighboring Canada ($4,753) and 145 percent higher than the OECD median of $4,033. The US spent 17.2 percent of its GDP on health care in 2016, and the OECD median was 8.9 percent.

Public versus private spending

The US financed 50.9 percent of its health care from private sources in 2016, compared to the OECD median of 25.0 percent. It is noteworthy that the differential between the prices paid by public and private insurers in the US has increased drastically since the 2003 article was written. In 2000 the price differential between what public and private insurers paid was approximately 10 percent. The Medicare Payment Advisory Commission recently estimated that private insurers pay prices that are 50 percent higher than what Medicare pays. Increased attention needs to be paid to the prices paid in the private sector.

Spending on pharmaceuticals

In 2015 per capita spending on pharmaceuticals varied from $171 in Poland to $1,011 in the US, with most of the OECD countries spending $400–$600. Recent studies found that prices for brand-name pharmaceuticals were responsible for most of the difference in pharmaceutical spending, with the US providing a considerable portion of the profits to the pharmaceutical industry.

Supply of physicians

In 2015 the US had 19 percent fewer practicing physicians per 1,000 population than the median OECD country (2.6 versus 3.2). The median OECD country had 12.1 medical school graduates in 2015 per 100,000 population, while the US had only 7.5. The US also had the lowest percentage of generalist physicians among the twenty-eight countries with data available, according to the OECD definition: 11.9 percent. The OECD median was 27.9 percent.

Supply of nurses

The US nurse-to-population ratio declined from 2000 to 2015, when it was 7.9 per 1,000 population—20 percent below the OECD median (9.9 per 1,000).

Hospitals

The US had 26 percent fewer inpatient acute care hospital beds per 1,000 population (2.5) than the median OECD country (3.4) in 2015.

Medical technology

The US was second (after Japan) in MRI units per million population and third (after Japan and Australia) in CT scanners per million population in 2015.

Explanations for differences

There is a growing literature on administrative costs. A Commonwealth Fund comparison of health insurance administrative costs showed that the US spent $737 per capita on administration, compared to $94 per capita in the median OECD country. The next-highest-spending country after the US (Switzerland) had administrative costs of only $280. In 2017 Steffie Woolhandler and David Himmelstein estimated that the US would save about $617 billion (about 20 percent of its total health spending) if it moved to a single-payer system. A study comparing administrative costs of physicians in Canada and the US found that US physicians spend considerably more on administrative services than Canadian physicians do.

Health spending versus health care provision

The 2003 article discussed how the buy and sell sides of the marketplace operate. The subsequent literature has validated the arguments made in the 2003 article. First, many OECD countries continue to use their monopsony power to control prices, while the US continues to have geographic areas with providers able to obtain “rents” from having monopolies in their community. Second, the current literature continues to show that the US buy side continues to be highly fragmented by international standards.

A series of recent articles has examined the relationship between the market power of providers in a community and health outcomes and found association with higher prices but very little correlation with health outcomes. These studies show that insurance companies are strengthening their market power through consolidation, while hospitals and physicians’ practices merge into giant conglomerates, strengthening their sell-side market power and driving up the prices.

In the US the evidence suggests that consolidation of insurers does not necessarily lead to lower premiums, copayments, or deductibles, but it shifts profits from providers to insurers, thereby transferring revenues from providers to insurers and not to society.

It’s still the prices, stupid

In 2000 the US had fewer physicians per 1,000 population, physician visits per capita, and acute care beds per capita, as well as fewer hospital admissions per 1,000 population and acute care days per capita, compared to the median OECD country. The US was still not devoting more real resources to health care than most other OECD countries in 2015 or 2016. At that time, the US had 26 percent fewer hospital beds per capita, 20 percent fewer practicing nurses, and 19 percent fewer practicing physicians per capita, compared to the OECD median country. Because the US is still not devoting more real resources to medical care than the typical OECD country, we believe that the conclusion that “it’s the prices, stupid,” remains valid. What is different between 2003 and 2016 is that the differential between what public and private insurers pay for health care services has become wider. Lowering prices in the US will need to start with private insurers and self-insured corporations.

https://www.healthaffairs.org…

---

Comment:

By Don McCanne, M.D.

The really important finding of this update of the classic study, “It’s the Prices, Stupid,” is that the conclusion has not changed: Health care spending in the United States is the highest largely because our prices are the highest.

There are a couple of quotes in this update that warrant special attention:

“In the US the evidence suggests that consolidation of insurers does not necessarily lead to lower premiums, copayments, or deductibles, but it shifts profits from providers to insurers, thereby transferring revenues from providers to insurers and not to society.”

Got that? The consolidation of the private insurers has not resulted in benefits to health care consumers nor to society at large. It has shifted profits from providers to insurers. It makes you wonder why the American Medical Association and the American Hospital Association continue to support a financing system heavily dependent on private insurers when those insurers are draining the providers of their profits, which then must be compensated for by yet higher prices.

“What is different between 2003 and 2016 is that the differential between what public and private insurers pay for health care services has become wider. Lowering prices in the US will need to start with private insurers and self-insured corporations.”

Got that one too? The private insurers have been more successful in enabling the increase in health care prices than has the public sector. Success here of course means more profit from higher prices, but not success in controlling excess health care spending to benefit society.

The authors conclude that lowering prices will need to start with private insurers and self-insured corporations, but the past three-quarters of a century has provided more than ample evidence that private insurers and self-insured corporations have been incompetent or derelict in their efforts to control prices; both have been far more concerned with tending to maximizing their own profits.

Single payer advocates understand that reducing prices does not mean cutting physician and hospital payments to unacceptably low levels, but rather it means reducing prices by increasing efficiency of the financing system by eliminating profound administrative excesses, negotiating fair rates, eliminating diversion of funds to passive investors, and use of global budgets similar to financing of other publicly-funded facilities like fire departments.

There are two models that have been proven to be effective: a national health service (socialized medicine) or a single payer social insurance program like an improved Medicare that covers everyone (Single Payer Medicare for All). For the United States, the latter would be less disruptive, not to mention that it already has a following within the nation in a large part because of the popularity of our traditional Medicare program.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.