U.S. Companies and Employees Continue to Struggle With Double-Digit Rate Increases
Hewitt Associates – Press Release
October 11, 2004

On average, Hewitt forecasts that companies will experience 2005 cost increases of 11.5 percent for health maintenance organization plans (HMOs), 10.5 percent for traditional indemnity plans, 11 percent for preferred provider organizations (PPOs) and 11.5 percent for point-of-service (POS) plans, with projected employee contribution increases of 15 percent across all plan types.

That means from 2004 to 2005, the average cost per person for major companies will increase from $6,519 to $7,269 for HMOs; $6,823 to $7,573 for PPOs; $7,192 to $8,019 for POS plans; and $6,793 to $7,506 for indemnity plans, according to Hewitt’s database of more than 2,000 health plans in 139 U.S. markets, including 300 major employers and more than 18 million health plan participants.

“While there are many different variables that factor into regional health care cost increases, one of the most powerful drivers is the level of consolidation in the market,” added (Hewitt’s national health care practice leader Jack) Bruner. “Plans and providers continue to merge in many cities, reducing the purchasing power and number of options available to employers.”

http://was4.hewitt.com/hewitt/resource/newsroom/pressrel/2004/10-11-04.htm

And…

Health costs to rise 11.3%, group says
By Kim Morris
Detroit Free Press
October 12, 2004

…costs are expected to increase between 8 and 12 percent in each of the next five years, said Jeff Nielson, senior benefits consultant in Hewitt Associates’ Detroit office.

http://www.freep.com/money/business/ebenes12e_20041012.htm

Comment:
According to Hewitt, market consolidation has reduced the impact of competitive pricing resulting in higher health plan premiums, and there is no relief in sight. Private marketplace plans continue to prove that they are not capable of controlling health care costs.

It’s time to replace our highly flawed, fragmented system of funding care with our own monopsonistic, single payer purchaser. That’s the only way that we are going to get the level of health care spending right, both for patients and for health care providers.

National Committee for Quality Assurance (NCQA)
The State of Health Care Quality – 2004

From the Introduction:
NCQA is pleased to present its 2004 State of Health Care Quality report. This is the eighth such report NCQA has produced, and the fifth report in a row to find that performance on key measures of clinical quality has improved over the past year. For the 69 million people enrolled in the health plans that provided their performance data to help NCQA prepare this report, this trend is very good news; they can expect better care and better health outcomes.

But what of the rest of the health care system?

What of those with little or no access to care such as the 45 million people without health insurance? What of those who receive care through health plans that do not publicly report their performance? Using conservative estimates, this report finds that the performance of the rest of the system leaves much to be desired. Huge “quality gaps” exist, costing tens of thousands of lives, millions of illnesses and billions of dollars annually.

From the Summary:
Despite evidence of promising gains in certain sectors of the health care system, once again this year NCQA documented evidence of widespread, unexplained variation in quality that results in thousands of unnecessary deaths, tens of thousands of avoidable hospitalizations and illnesses and billions of dollars in lost productivity-hobbling an economy already encumbered by the ever-growing costs of health insurance.

Even as adherence to evidence-based care has improved in many health plans, there is cause for great concern that these gains could be erased in the years ahead. The trend toward PPOs and CDHPs, while holding great promise in terms of consumer engagement and harnessing of the Internet’s power, also relies more on patient decision making and less on aggressive care coordination.

http://www.ncqa.org/Communications/SOMC/SOHC2004.pdf

Comment: The abysmal quality of health care for the uninsured has been well documented. And it is no surprise that quality can be improved for those individuals who have comprehensive health care coverage. Clearly we need to enact changes that would ensure that everyone has comprehensive health care coverage.

What should alarm us about this report is the current trend in health care coverage. Because there is more flexibility in the design of PPOs (preferred provider organizations), premiums can be made more affordable by shifting costs to the beneficiary-patient. Also, the CDHPs (consumer-directed health plans) are designed to make patients more responsible health care shoppers by exposing them to higher out-of-pocket expenses. But as the NCQA report indicates, this trend places a greater emphasis on patient decision making at the cost of deemphasizing aggressive care coordination.

The great news about the NCQA report is that aggressive care coordination does improve quality outcomes. The NCQA report describes approaches to improve the identification of better outcomes through improved care coordination. A carefully designed system can be used to reward higher quality care. But PPOs and CDHPs, by shifting the direct spending decisions to the patient-consumer, also shift the responsibility for identifying quality to the patient. But our current fragmented system does not have the capability of providing readily accessible, easily understood data on quality variation. And limiting choice to health plans reduces the patient’s ability to have the more important choice of actual health care providers.

A single, universal system with truly comprehensive benefits would provide an infrastructure that would enable the promotion of inducements that would encourage aggressive care coordination. We have enough data already to know what would happen with a greater shift to CHDPs and PPOs. We do not need another decade of health policy experimentation ending with the inevitable impaired outcomes.

We also have enough data to know what a universal, comprehensive system would bring. Even the special interests opposing reform understand the vast superiority of the single payer model. So why do we continue to listen to and follow their rhetoric designed to protect their own interests? As we continue to postpone the inevitable, we are perpetuating suffering and death. The blood is on the hands of those who fail to act.

National Committee for Quality Assurance (NCQA)
The State of Health Care Quality – 2004

From the Introduction:
NCQA is pleased to present its 2004 State of Health Care Quality report. This is the eighth such report NCQA has produced, and the fifth report in a row to find that performance on key measures of clinical quality has improved over the past year. For the 69 million people enrolled in the health plans that provided their performance data to help NCQA prepare this report, this trend is very good news; they can expect better care and better health outcomes.

But what of the rest of the health care system?

What of those with little or no access to care such as the 45 million people without health insurance? What of those who receive care through health plans that do not publicly report their performance? Using conservative estimates, this report finds that the performance of the rest of the system leaves much to be desired. Huge “quality gaps” exist, costing tens of thousands of lives, millions of illnesses and billions of dollars annually.

From the Summary:
Despite evidence of promising gains in certain sectors of the health care system, once again this year NCQA documented evidence of widespread, unexplained variation in quality that results in thousands of unnecessary deaths, tens of thousands of avoidable hospitalizations and illnesses and billions of dollars in lost productivity-hobbling an economy already encumbered by the ever-growing costs of health insurance.

Even as adherence to evidence-based care has improved in many health plans, there is cause for great concern that these gains could be erased in the years ahead. The trend toward PPOs and CDHPs, while holding great promise in terms of consumer engagement and harnessing of the Internet’s power, also relies more on patient decision making and less on aggressive care coordination.

http://www.ncqa.org/Communications/SOMC/SOHC2004.pdf

Comment: The abysmal quality of health care for the uninsured has been well documented. And it is no surprise that quality can be improved for those individuals who have comprehensive health care coverage. Clearly we need to enact changes that would ensure that everyone has comprehensive health care coverage.

What should alarm us about this report is the current trend in health care coverage. Because there is more flexibility in the design of PPOs (preferred provider organizations), premiums can be made more affordable by shifting costs to the beneficiary-patient. Also, the CDHPs (consumer-directed health plans) are designed to make patients more responsible health care shoppers by exposing them to higher out-of-pocket expenses. But as the NCQA report indicates, this trend places a greater emphasis on patient decision making at the cost of deemphasizing aggressive care coordination.

The great news about the NCQA report is that aggressive care coordination does improve quality outcomes. The NCQA report describes approaches to improve the identification of better outcomes through improved care coordination. A carefully designed system can be used to reward higher quality care. But PPOs and CDHPs, by shifting the direct spending decisions to the patient-consumer, also shift the responsibility for identifying quality to the patient. But our current fragmented system does not have the capability of providing readily accessible, easily understood data on quality variation. And limiting choice to health plans reduces the patient’s ability to have the more important choice of actual health care providers.

A single, universal system with truly comprehensive benefits would provide an infrastructure that would enable the promotion of inducements that would encourage aggressive care coordination. We have enough data already to know what would happen with a greater shift to CHDPs and PPOs. We do not need another decade of health policy experimentation ending with the inevitable impaired outcomes.

We also have enough data to know what a universal, comprehensive system would bring. Even the special interests opposing reform understand the vast superiority of the single payer model. So why do we continue to listen to and follow their rhetoric designed to protect their own interests? As we continue to postpone the inevitable, we are perpetuating suffering and death. The blood is on the hands of those who fail to act.

Marty Calon, RPh, of Baltimore, Maryland, responds to the critique of Wisconsin’s program to reduce drug costs for state employees:
I usually couldn’t agree more with your comments, but I have to disagree with some of what you say here. I am a pharmacist with long experience in the Department of Veterans Affairs with these prescription practices.

As long as drug companies persist in pricing by dose, whereby a 5mg tablet and a 10mg tablet cost the same, splitting tablets is a viable option, as long as it is not done without controls. The drugs which are suitable for splitting must be specified and selected, on the basis of (in order of priority) suitability for splitting (physically and clinically), cost, and amount of usage (no point in requiring splitting of drugs which are rarely prescribed).

Specifically, there has to be good clinical judgment or clinical evidence that the particular medication and dosage form is suitable for splitting, and there has to be a liberal exception mechanism for patients who cannot or do not wish to deal with the splitting. The splitting program also should be monitored to ensure that the drug therapy with the split tablets is producing the desired results, although this monitoring should be happening regardless of tablet splitting.

For example, SSRIs and sildenafil (Viagra) are ideally suited to splitting. It doesn’t even matter if the dose is not precisely divided, because the exact dose is simply not very important, which is true for many drugs. In the case of SSRIs, which have a long-term effect, it’s just about irrelevant whether the patient gets his precise dose every day; cumulatively, he’ll get the right dose unless the tablet is falling apart. Warfarin is a drug that probably should not be split if possible. Pharmacists have a good understanding of the physical composition of the tablets (coatings, sustained-release mechanism, etc) and their pharmacokinetic parameters to determine their suitability for splitting.

Many physicians don’t have the knowledge, cost information, or motivation to prescribe generically. The majority of medications that are available generically do just fine if the pharmacist selects reputable generic vendors. The handful of notable exceptions (warfarin, theophylline SR, phenytoin, etc) are the only ones that need be limited to brand-specific prescribing. Pharmacists are well-qualified to make these judgments and advise physicians and patients on generic substitution, especially as they have the cost and legal equivalence information that is often not disclosed to physicians.

One more point: Rational selection of the most cost-effective medication, and controlled and monitored therapeutic substitution, again with appropriate exception mechanisms, are even more effective ways to save money. Think of all the people who are taking expensive antibiotics for trivial infections (if they need them at all), and the patients who take expensive “non-sedating” antihistamines and unnecessary COX-2 inhibitors, because they are so heavily promoted. And let’s not even start with all the patients taking medications that they don’t need at all.

I agree that these are not long-term or ideal solutions, and I make no apologies for the so-called “Pharmacy Benefit Managers”, but–properly implemented–they are appropriate responses to the current realities of medication prescribing and its costs.

Don’s response:
I emphatically agree with Marty Calon’s comments. They are certainly applicable to the real world of today, although we would hope might be modified eventually to apply to the ideal world which we envision.

One point that I failed to make was to acknowledge the crucial role that the pharmacist plays as part of the medical team. And I want to emphasize that the role to which I refer is as a health care professional who assists the patient and his or her practitioner in matters regarding drug therapy. This is in sharp contrast to a pharmacy benefit manager (PBM) that is primarily a middleman working the system to maximize profits for the PBM organization. Pharmacists must always be an integral part of the professional medical team.

The other point that I want to reemphasize is that we need fundamental structural changes that will improve access and affordability of prescription drugs. The pharmacist’s role should be to assist with the selection of the most appropriate drugs that also offer the best value. As the paper by Dean Baker demonstrates (a “quote” last week), we need to revise the drug patent system to provide incentives for better value in drugs. But also, we need to use negotiated purchasing that would also eliminate gimmickry designed to enhance profits. And we need to place the pharmacist in a position of being rewarded for applying his or her professional skills, rather than being placed in a subservient role of enhancing the success of a PBM business entity.

Perspective: By John E. Wennberg
Health Affairs
October 7, 2004

Several papers in this Health Affairs collection show once again that unwarranted variation-variation not explained by illness, patient preference, or the dictates of evidence-based medicine-is a ubiquitous feature of U.S. health care. As shown in several of these papers, health care systems fail to provide in full measure such simple life-saving, morbidity-sparing interventions as immunizations, diabetic glucose monitoring, and the use of drugs for those with heart attacks. Every region and every state exhibits underuse of effective care, some more so than others. James Weinstein and his colleagues provide further evidence that the incidence of discretionary surgery, the use of which should depend on patient preference, is unduly influenced by local physician opinion, which has resulted in striking long-term variation in the risk of surgery among local regions-the “surgical signature” phenomenon. Elliott Fisher and his colleagues show that among the chronically ill, the frequency of physician visits, diagnostic testing, and hospitalization and the chances of being admitted to an intensive care unit (ICU) depend largely on where patients live and the health care system they routinely use, independent of the illness they have or its severity. Katherine Baicker and her colleagues show that variation affects minority groups as it does white Americans, which clouds the interpretation of racial and ethnic disparities based on national average rates.

While noting that the U.S. supply of physicians grew remarkably over the past twenty years, David Goodman shows that growth in aggregate supply does not “cure” variations: In 1999 the per capita supply of generalist physicians varied more than twofold and that of medical specialists more than fivefold among regions. I and my colleagues document that Medicare spending varies more than twofold among regions, but more spending is not associated with better quality, as measured by reduced underuse of effective care, or, surprisingly, with more major surgery. Greater per capita spending buys more intensive intervention among patients with chronic illness: Those who live in high-cost regions experience more visits to medical specialists, tests, hospitalizations, and ICU stays than their counterparts living in low-cost regions. And because of the way Medicare is financed, regions with low costs end up subsidizing a sizable proportion of the care for those living in high-cost regions.

The irony, as Fisher and his colleagues show, is that patients with similar chronic illnesses who live in high-cost regions, including those who receive most of their care from prominent academic medical centers (AMCs), do not have better health care outcomes than patients living in low-cost regions. In other words, the patterns of practice in managing chronic illness in low-cost regions do not appear to result in the withholding of valuable care (health care rationing); rather, systems of care serving high-cost regions are inefficient because they are wasting resources.

Three needed reforms:

First, the quality agenda must be extended beyond effective care; the agenda should also address unwarranted variation in preference-sensitive treatments such as discretionary surgery and the overuse of physician and acute care hospital services in managing chronic illness.

Second, reform of the payment system must be undertaken to enable providers to deal with the complicated and interrelated financial, organizational, and behavioral issues that need to be resolved if the quality of patient decision making is to be improved and inefficiencies and waste in the treatment of chronic illness remedied.

Third, AMCs and the National Institutes of Health (NIH) must respond to the glaring weaknesses in the scientific basis for clinical decision making by undertaking the systematic evaluation of the everyday practices of medicine.

http://content.healthaffairs.org/cgi/content/full/hlthaff.var.140/DC2

Editor’s Note
John K. Iglehart

Thirty-one years ago, researchers Jack Wennberg and Alan Gittelsohn began what has become a long odyssey to better understand the distinctive variations in clinical practice patterns that characterize medical care in the United States. By publishing their landmark paper in Science (14 December 1973), they launched a new chapter of health services research in relation to clinical care. In 1984 the editors of Health Affairs, struck by how resistant providers and patients were to addressing unwarranted practice variation, devoted a thematic issue to the subject (Summer 1984). Fast forward to today, and one can only marvel at how little variations that are unexplained by, as Wennberg notes, “illness, patient preference, or the dictates of evidence-based medicine” have been reduced.

With the publication of these papers, Health Affairs is once again lending its voice to the dialogue on variations. But for several reasons, this time the opportunities for real change seem more promising. First, Wennberg and his colleagues at Dartmouth Medical School have developed methods to link the practice variations with specific hospitals and physicians, and they plan to make provider-specific information available as part of the Dartmouth Atlas of Health Care project. As they note, provider-specific information can be used to identify efficient providers within a given region and should prove useful in configuring provider networks. Second, the opportunity to use this information to guide improvement is reinforced by the work of Elliott Fisher and colleagues, which shows that the problem of variation in intensity of treatment for chronic illness is primarily a problem of overuse and waste, not underuse and health care rationing. Third, as discussed in several papers, the puzzling problem of geographic variation in elective surgery is better understood and the value of shared physician-patient decision making, more firmly established. And fourth, the critical importance of creating economic incentives to reward providers who reduce unwarranted variation and the need for Medicare to assume greater leadership is increasingly recognized by payers and Congress alike. In the November/December 2003 issue of Health Affairs, fifteen prominent health policy figures, including Wennberg, signed an open letter to the Centers for Medicare and Medicaid Services (CMS) urging Medicare to assume more aggressive leadership in the “pay for performance” effort.

http://content.healthaffairs.org/cgi/content/full/hlthaff.var.3/DC2

For the index to the twenty articles on variations in clinical practice patterns (web exclusive for 7 October 2004): http://content.healthaffairs.org/webexclusives/index.dtl?year=2004

Comment:
In many of the papers, suggestions are made as to how Medicare reform might facilitate many of the improvements needed in resource allocation that would correct the waste and inadequacies demonstrated by the variations in clinical practice patterns. But improving Medicare alone would not be adequate to correct systemic problems such as capacity variations of academic medical centers or variations in the physician work force.

If Medicare were the only source of funding health care in the United States, then it could use its monopsonistic power to reduce perverse variations in clinical practice patterns. That would provide us all with better value for our health care investment. But it is unlikely that we’ll see that value until we do take control of health care funding through a single payer, national health program.