PNHP

Harvard professors’ crusade against health care injustice

Harvard professors’ crusade against health care injustice

Harvard’s Health Benefits Unfairness

The Harvard Crimson, November 12, 2014

(Excerpts)

Last week, the Faculty of Arts and Sciences voted unanimously in favor of a motion asking the President and Fellows to suspend changes to the health benefits offered faculty and non-union staff for 2015. In justifying the benefits changes, the University offered four main explanations for its addition of deductibles and co-insurance: (1) the cost of benefits relative to the overall budget; (2) parity with peer institutions; (3) social science on containing health care costs and (4) the future financial health of the University. In advancing these explanations, the University has offered information that is incomplete, incorrect, deeply misleading, and ethically troubling.

The second argument offered in favor of the health benefits changes has been that we need to remain in line with our peers. We contend that the only peer pressure Harvard should heed is that which makes us a better research university. Increasing salaries and benefits might do this if it allowed Harvard to recruit and retain the brightest minds in our fields of research and teaching, as well as the post-doctoral fellows and staff needed to support these research and teaching endeavors.

Perhaps the most distressing argument advanced in favor of the changes, however, has been one that draws on a social science experiment from the 1970s to suggest that a co-insurance system, where the insured must pay a percentage of after-deductible costs, is the best way to contain health-care costs. At the November FAS meeting, Provost Alan M. Garber ’76 and members of the University Benefits Committee asserted that because the RAND Health Insurance Experiment, or HIE, demonstrated a reduction in healthcare utilization without decreasing overall well-being, the new Harvard plan will do likewise.

We assert that, on the contrary, the HIE is irrelevant to the present benefits proposal before us.

The HIE randomized individuals into different insurance plans (some received health insurance free of charge, while others faced a range of co-insurance options). It found that those paying a higher percentage of costs visited primary care physicians less frequently and reduced their health-care expenditures as a result.  But copays for regular physician visits have long been standard and are already part of Harvard’s plan. What Harvard now proposes is further extending cost-sharing to hospitalizations, surgery, and diagnostic testing via co-insurance.

The HIE’s measurement of outcomes is also irrelevant to the matters that concern all of us. The study looked at indicators of general health such as blood pressure, visual acuity, and propensity to smoke. The relevant question for today’s Harvard is not whether going to one’s primary care doctor more often makes one smoke less, but whether a diagnostic test ordered by that doctor could save one’s life, or detect an illness in time to allow for a less invasive, and perhaps in the long run, less expensive treatment.

Co-insurance is not only of questionable utility in the 21st century—at a time when diagnostic testing is much more effective at influencing outcomes than it was in the 1970s—it also unethically transfers risk and expense to the most vulnerable in our community.

We often hear that Harvard is the apex of academic research and teaching institutions, and that part of its success is due to its sense of community. The University ignored that community when it embarked on a secret and non-consultative planning process and disregarded the strong concerns that faculty have about their own health and that of less well-paid members of our community.

The result is a plan that imposes a serious financial burden on those with chronic illness or who face medical emergencies for themselves or their families. This plan is based on a flawed process, on a misguided charge to the University Benefits Committee, on misinformation about our peers, and on outdated research that is not relevant to the current situation. It is unfair to the most vulnerable members of our community, and not worthy of our great university.

Jerry R. Green, John Leverett Professor in the University and David A. Wells Professor of Political Economy
Alison F. Johnson, Professor of History
Marc W. Kirschner, John Franklin Enders University Professor of Systems Biology
Mark Kisin, Professor of Mathematics
Charles H. Langmuir ’72, Professor of Geochemistry
Mary D. Lewis, Professor of History
James J. McCarthy, Alexander Agassiz Professor of Biological Oceanography
Lisa M. McGirr, Professor of History
Richard F. Thomas, George Martin Lane Professor of the Classics
Mary C. Waters, M.E. Zuckerman Professor of Sociology
Christopher Winship, Diker-Tishman Professor of Sociology

http://www.thecrimson.com/article/2014/11/12/harvards-health-benefits-unfairness/

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Harvard Ideas on Health Care Hit Home, Hard

By Robert Pear

The New York Times, January 5, 2015

For years, Harvard’s experts on health economics and policy have advised presidents and Congress on how to provide health benefits to the nation at a reasonable cost. But those remedies will now be applied to the Harvard faculty, and the professors are in an uproar.

Members of the Faculty of Arts and Sciences, the heart of the 378-year-old university, voted overwhelmingly in November to oppose changes that would require them and thousands of other Harvard employees to pay more for health care. The university says the increases are in part a result of the Obama administration’s Affordable Care Act, which many Harvard professors championed.

“Harvard is a microcosm of what’s happening in health care in the country,” said David M. Cutler, a health economist at the university who was an adviser to President Obama’s 2008 campaign. But only up to a point: Professors at Harvard have until now generally avoided the higher expenses that other employers have been passing on to employees. That makes the outrage among the faculty remarkable, Mr. Cutler said, because “Harvard was and remains a very generous employer.”

Richard F. Thomas, a Harvard professor of classics and one of the world’s leading authorities on Virgil, called the changes “deplorable, deeply regressive, a sign of the corporatization of the university.”

Mary D. Lewis, a professor who specializes in the history of modern France and has led opposition to the benefit changes, said they were tantamount to a pay cut. “Moreover,” she said, “this pay cut will be timed to come at precisely the moment when you are sick, stressed or facing the challenges of being a new parent.”

The university is adopting standard features of most employer-sponsored health plans: Employees will now pay deductibles and a share of the costs, known as coinsurance, for hospitalization, surgery and certain advanced diagnostic tests. The plan has an annual deductible of $250 per individual and $750 for a family. For a doctor’s office visit, the charge is $20. For most other services, patients will pay 10 percent of the cost until they reach the out-of-pocket limit of $1,500 for an individual and $4,500 for a family.

Harvard’s new plan is far more generous than plans sold on public insurance exchanges under the Affordable Care Act. Harvard says its plan pays 91 percent of the cost of services for the covered population, while the most popular plans on the exchanges, known as silver plans, pay 70 percent, on average, reflecting their “actuarial value.”

Michael E. Chernew, a health economist and the chairman of the university benefits committee, which recommended the new approach, acknowledged that “with these changes, employees will often pay more for care at the point of service.” In part, he said, “that is intended because patient cost-sharing is proven to reduce overall spending.”

“It seems that Harvard is trying to save money by shifting costs to sick people,” said Mary C. Waters, a professor of sociology. “I don’t understand why a university with Harvard’s incredible resources would do this. What is the crisis?”

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Comment:

By Don McCanne, MD

Peering into Harvard’s academic cocoon, there are two lessons we can take home. One has to do with the insularity of the Harvard academic staff as they consider their own health benefit program, but the more important lesson has to do with the insularity of the health policy academics at Harvard and other institutions regarding the design of optimal systems of health care financing.

When we have a new national standard for health insurance that has an actuarial value of 70 percent (patients pay an average of 30 percent of their health care costs) based on the benchmark silver plans offered in the insurance exchanges established by the Affordable Care Act, it is astonishing to hear the outrage expressed by the Harvard academic community over the reduction of the actuarial value of their plans to the almost unheard of level of 91 percent! They would pay on average only 9 percent of their health care costs.

That said, they are right. They should be able to receive all essential health care services without paying anything out-of-pocket at the time they receive care. Other nations have proven that you can provide first dollar coverage at a per capita cost that averages half of what we spend in the United States. Placing financial barriers in the way of health care access is not only unnecessary, it is frequently harmful.

The first lesson here is that the insularity of these academics did not allow them to think beyond the needs of themselves and the needs of the “less well-paid members of our community” – the Harvard community, that is. It is difficult to watch the expression of their outrage over their comparatively modest reduction in benefits, leaving them with platinum-level plans, when they remain silent on the deficient plans that most of the nation has to deal with. From their academic towers, they have the luxury of being able to sound off about the health care injustices that so many in the nation face. But they didn’t do it. They merely whined about the injustices of their own solid-platinum insurance.

But then there is the academic health policy community. They are still fixated on the misinterpretations and extrapolations of the RAND Health Insurance Experiment (see the Harvard Crimson excerpts above). They continue to insist that when patients have health care needs, they must buy a ticket to enter the health care arena, partially invalidating their prepayment arrangements (i.e., health insurance). That there are better ways to improve value without erecting financial barriers to care seems to be lost not only behind the blinders that these health policy academics are wearing, but also behind the earplugs that they must be wearing as well. They see and hear no evil, but they sure do speak evil!

When are those of us outside of the moat protecting Harvard’s insular compound finally going to take over the policy reins? Soon, I hope.

Vermont never enacted single-payer bill

By Elizabeth R. Rosenthal, M.D.
Times Union (Albany, N.Y.), Letters, Jan. 6, 2014

Yevgeniy Feyman’s argument (“Proposed health plan too costly,” Dec. 29) is not valid because his premise – that Vermont’s bill was really a single-payer plan – is false.

Gov. Peter Shumlin wanted to enact a single-payer system in Vermont, but it soon became clear to him that he could not do it without federal support. The comprehensive federal waivers that would be required, as well as lifting Employee Retirement Income Security Act restrictions, would not be forthcoming from Congress. Therefore the label “single payer” was removed from the legislation and the bill was completely rewritten.

So Vermont never enacted a single-payer bill. The bill that was enacted was not much more than a variation on the Affordable Care Act. Although it did have the unique features of attempting to consolidate private insurers, it failed to provide processes to implement the many other beneficial features that would be required to make it a single-payer system.

Such a flawed model would not have been able to decrease costs the way a true single-payer system can. Therefore, one cannot support the notion that the failure of Vermont’s bill proves that a single-payer system is not viable for Vermont nor for New York. We know, from experience in many other countries, that it is not only viable but successful at providing universal care equitably while lowering costs.

Dr. Elizabeth R. Rosenthal resides in Larchmont, N.Y.

Vt. never enacted single-payer bill

Why did Swiss voters reject single-payer health care?

By Claudia Chaufan, M.D.
Labor Notes, Dec. 31, 2014

Supporters of a single-payer, Medicare-for-all health care system in the U.S. were puzzled September 27 when Swiss voters rejected a reform proposal by 62 percent.

The new law would have replaced the current system, where about 60 insurance companies offer mandatory health coverage, with a single insurer, the government. It would have offered all medically necessary care, paid for by taxes adjusted to each person’s ability to pay.

To Americans who’ve worked for such a system here, nationally and state by state, it was a blow. What’s not to like about single payer?

Swiss and American media, academia, and business sectors rushed to interpret the results. Virtually all crowed that the Swiss people had rejected government-run national health insurance because they preferred private insurers.

But these convenient interpretations rely on false assumptions to justify a model of health insurance that is unraveling—less conspicuously in Switzerland, but dramatically in the U.S.

Let’s look at what’s wrong with these pro-business interpretations, and see what lessons the Swiss referendum has for single-payer advocates here.

Mainstream Answers

Washington Post “policy wonk” Jason Millman wrote that the Swiss rejection shows that single-payer has little chance of gaining popular support in the U.S.

He notes that in 1996, the Swiss voted for an individual mandate that compels everyone to buy a basic package of health services. That law eliminated discrimination for pre-existing conditions, meaning companies have to sell equal plans at equal prices to all customers. The government subsidizes low-income people. In Millman’s view, the resulting Swiss system is very much like Obamacare.

Another policy reporter, Avi Roy from Forbes, asserted that Obamacare (and Romneycare before it) was modeled on the Swiss system: people shopping among competing private plans with little government interference.

Roy says the referendum demonstrates the “political popularity” of universal coverage via private insurance. He concludes that because the Swiss have rejected single payer, there’s good reason to believe Americans will reject it, too.

What’s Wrong with the ‘Official View’?

These interpretations are based more on ideology than on facts. Why?

First, Swiss health care is not a version of Obamacare. The differences are critical to understanding the implications of the Swiss referendum for health care reform here.

Second, Swiss health care, though far superior to ours in terms of access, quality, and equity, has critical problems that threaten the system. Those problems illustrate why, four years after Obama signed the Affordable Care Act into law, health care access, quality, and equity are increasingly threatened here too. The Swiss is a model to reject, not to embrace.

Third, the referendum does not prove that the Swiss don’t want government involvement in health care, nor that they like private insurance companies. Quite the opposite.

Indeed, an analysis of a series of referendums over several years shows that, like the U.S. population, the Swiss are increasingly unhappy with treating health care as a business, rather than a social good.

1) Obamacare is not a version of the Swiss system.

The current National Health Care Law, known as LaMal, requires that everybody living and working in Switzerland carry health insurance—we call this an “individual mandate.” So the Swiss are required to purchase insurance for a uniform, comprehensive package of medical services.

But the national government operates at every level to make everything run smoothly. To more than 50 percent of the population, the government offers full or partial subsidies to purchase insurance. So more than 99 percent of the population is covered.

The government also compels insurers to sell policies to everybody at the same price, irrespective of health status, medical history, gender, age, or location (within each canton, the administrative equivalent of a U.S. state). A 25-year-old and an 80-year-old pay exactly the same premium for the same plan. The only exception: those under 25 pay substantially less.

If your income changes, or job changes, or marital status changes, your doctor need not change.

The government also enforces a “basic” package that is very comprehensive—in the U.S., some call it “Cadillac,” as if only spoilt Americans would dare demand it! Thus basic insurance, Swiss-style, includes outpatient care—essentially whatever a doctor prescribes—hospital care, mental health, all pharmaceuticals on the government’s list, some rehabilitation services, some dental care, some herbal medicine, and acupuncture.

Importantly, the government forbids insurers to make a profit from the sale of the mandatory package, and it compels them to contract with every single health care provider in Switzerland.

The government also imposes a system of risk equalization. It compensates companies that enroll individuals with more expensive medical needs, taking the money from companies that enroll healthier users.

The government also compels mechanisms to deal with prices. Within each canton, prices must be negotiated between associations of providers and insurers, and everybody must abide by them. So providers within a canton are paid equal amounts for equal services, regardless of which plan the patient has.

Finally, the state also enforces limited deductibles (about $300 U.S.) in all plans, and a maximum out-of-pocket cost of about $700.

Users can choose to purchase cheaper policies as a trade-off for higher deductibles (up to 2,500 Swiss francs, or about $2,500 U.S., for adults, and 600 francs, or about $600 U.S., for children). They can also choose policies with restricted provider networks, though few do.

As you can see, this looks nothing like “no government interference.”

Obamacare: A Reality Check

Nor does it look like a version of Obamacare. A few comparative points:

  • Obamacare does not cover 100 percent of the population. In fact, more than 30 million people living in the U.S., the majority of them citizens or legal residents, will remain uninsured by 2024, according to the Congressional Budget Office.
  • Obamacare does not guarantee a homogeneous, generous basic package of services.
  • It does not guarantee equal prices for equal services—hence all these calls for greater transparency of prices so “consumers” can shop more productively! Prices vary according to age—older people pay up to three times as much—geographical location (over 18 different ones only in California!), even gender composition of the workforce insured.
  • Providers under Obamacare are paid differently depending on the patient’s plan—which is unheard of, and would be scandalous, in Switzerland.
  • Obamacare does not guarantee access to every provider in your state—only to providers in your plan, and only as long as your plan does not change.
  • As to maximum out-of-pocket, we’re not even close to the Swiss.
  • As to the celebrated choice of plans, it hardly applies to the 160 million Americans with employer-sponsored coverage (now 60 percent of the non-elderly population; it was close to 70 percent back in 2000), who are stuck with whatever “choices” their employers offer (assuming they offer any).
  • Last and not least, insurers in the U.S. can and do make a profit for selling you insurance for medically necessary care. Which is the only reason they are in the business of selling insurance!

So the belief that Swiss health care and U.S. health care after the ACA are “more or less the same” is quite misguided.

At the center of the ACA is a well-oiled money-making machinery for the medical-industrial complex: insurance companies, Big Pharma, and for-profit (and many non-profit) medical establishments.

2) Over the last decade corporate interests have hijacked the Swiss system, despite the strong government oversight.

This has led to increasing overall and out-of-pocket costs, making the Swiss system the third most expensive in the world.

To control costs, the Swiss government has promoted managed-care options and encouraged users to comparison-shop. So in addition to the classic comprehensive plans, insurers are offering narrower provider networks and higher deductibles and co-pays, and users are prompted to choose plans annually.

However, the Swiss appear not to like all these “new choices” after all, because in a 2012 referendum more than 70 percent voted against a dramatic expansion of managed care, proposed as a key mechanism to “control costs and improve the system.” And only a very small minority chooses to change plans every year.

Last, a growing number find health care unaffordable and are failing to pay their premiums.

Simply put, all the problems the Swiss are grappling with are rooted in the for-profit nature of the companies that participate in the system. As these companies become more financially successful, and hence more powerful, they get harder to tame—and their influence on the politicians who decide health policies grows stronger and stronger.

Clearly, even in the best-case scenario—the highly regulated environment of Swiss private insurers—entrusting them with the provision of health care is assigning a fox to guard the henhouse. The attempt to achieve justice in health care via competing private insurers is a pipe dream.

3) The defeat of the single-payer referendum does not mean the Swiss people reject a government-run system and support private insurance.

The Swiss have rejected almost all referendums since 1891—only 20 out of 191 have succeeded, even when issues were popular.

Critically, one successful referendum was LaMal, the 1996 health insurance law that banned profit from the sale of medically necessary care. It also allowed the government to pass on money from companies spending less on patient care, to those spending more—certainly not an indicator that the Swiss shun “government interference” on behalf of ordinary people, nor that they trust private insurance to do well by them without supervision.

Also worth noting: in 2007 single payer was rejected by 71 percent, but the figure fell to 62 percent in 2014. Maybe the Swiss are beginning to cut through the anti-single-payer propaganda?

Lessons Learned

Why, then, was single payer defeated? What can we learn?

First, we need to grant that the state of Swiss health care may be of concern for the Swiss (they seem to have lower tolerance than we do!), but it is still not as bad as in the U.S. People who experience the greatest barriers to care in Switzerland are the most politically disenfranchised—the young, poor, women, immigrants, much like here—so the problem has yet to affect the so-called middle class enough to pass a referendum.

Second, we can see the extraordinary power of corporate propaganda. The scare tactics deployed by corporate interests in Switzerland were quite extraordinary, both in 2007 and this year. Likewise, their interpretation of the results was designed to discourage supporters of public health care—to make us think we’re more alone than we really are.

The Swiss referendum teaches us that:

  • We need to sharpen our understanding of what the ACA is really about, who our enemies are, and what our alternatives could be.
  • We must increase our outreach to the disenfranchised, to those who don’t think their voices make a difference.
  • And we must work on improving our political education of those we wish to reach—rather than watering it down to sound bites that fit within the boundaries of the “politically feasible.”

Claudia Chaufan, MD, PhD, is an associate professor at the University of California San Francisco and a member of Single Payer Now and of Physicians for a National Health Program.

http://labornotes.org/blogs/2014/12/why-did-swiss-voters-reject-single-payer-health-care#sthash.glvmCeoR.dpuf

Medicare Advantage as a form of managed competition

Can health insurance competition work? Evidence from Medicare Advantage

By Vilsa Curto, Liran Einav, Jonathan Levin, Jay Bhattacharya
National Bureau of Economic Research, December 2014, NBER Working Paper 20818

Abstract

We estimate the economic surplus created by Medicare Advantage under its reformed competitive bidding rules. We use data on the universe of Medicare beneficiaries, and develop a model of plan bidding that accounts for both market power and risk selection. We find that private plans have costs around 12% below fee-for-service costs, and generate around $50 dollars in surplus on average per enrollee-month, after accounting for the disutility due to enrollees having more limited choice of providers. Taxpayers provide a large additional subsidy, and insurers capture most of the private gains. We use the model to evaluate possible program changes.

From the Introduction

Introducing managed competition into healthcare has been an alluring idea to economists and policy-makers. Proponents argue that effectively designed market mechanisms can avoid the inefficiencies of an administrative price system.

The final part of the paper combines our estimates to calculate welfare effects from Medicare Advantage. A useful way to think about this is in terms of the total (dollar) surplus created by a private plan enrollment, and then its division among the plan, the enrollee and taxpayers. As mentioned, MA plans achieved cost savings of 77 dollars in providing the standard FFS insurance benefit. Taxpayers captured none of this. Instead, they provided an additional subsidy of around 94 dollars per month relative to government costs under fee-for-service Medicare. The beneficiaries of these 171 dollars (cost savings of 77 plus subsidy of 94) were insurers and consumers. We estimate that insurers captured 95 dollars per enrollee-month (not accounting for any fixed administrative costs). MA enrollees gained the rest, but also incurred a disutility of 27 dollars from having a limited network of providers, so their net surplus was lower, 50 dollars (per enrollee-month). In short, we estimate fairly substantial efficiency benefits, but an even larger net cost to taxpayers.

http://www.nber.org/papers/w20818

Comment:

By Don McCanne, MD

This technical paper is not worth reading. It was apparently written with the intent of proving that private Medicare Advantage plans show that health insurance competition works. Numerous assumptions were made while largely ignoring the gaming of insurers through favorable risk selection and upcoding for risk adjustment. With all of the authors’ efforts to prove the efficiencies of managed competition through private Medicare Advantage plans, they still showed that this program resulted in “an even larger net cost to taxpayers.”

We need to lay managed competition to rest. Single payer, now.

Hillary Clinton: 1994 statement on single payer

Remarks by the Fist Lady to Lehman Brothers Health Corporation

The White House, Office of the Press Secretary, June 15, 1994
The William J. Clinton Presidential Library, Previously Restricted Documents

Question:  This next question… comes from Scott Engstrom (phonetic) of Franklin Templeton Funds. He asks, it seems clear that everyone on Capitol Hill is in favor of “health care reform” and that if the Administration wanted to compromise, some legislation could be passed very quickly. Is the danger of that approach from your perspective that that you may be giving up a mandate at a specific period in history in which you may be able to effectuate radical change? Is it now or never for massive health care reform?

Mrs. Hillary Clinton:  No, because what I think would happen if there is not health care reform this year, and if, for whatever reason, the Congress doesn’t pass health care reform, I believe, and I may be to totally off base on this, but I believe that by the year 2000 we will have a single payer system. I don’t think it’s — I don’t even think it’s a close call politically.

I think the momentum for a single payer system will sweep the country. And regardless of the referendum outcome in California, it will be such a huge popular issue in the sense of populist issue that even if it’s not successful the first time, it will eventually be. So for those who think that building on the existing public-private system with an employer mandate is radical, I think they are extremely short-sighted, but that is their choice.

There are many ways to compromise health care reform, and I don’t think that the President could have been clearer in every public statement he has made that he has one bottom line. It is universal coverage by a date certain. And he has basically told the Congress, you know, you’ve got different ways of getting there. Come to us, and let’s look at it. There are only three ways to get to universal coverage. You know, a lot of people stand up and applaud universal coverage, and they sit down, and you say, “Well, how are you going to get there?”, and they don’t want to confront that there are only three ways.

You either have a general tax — the single payer approach that replaces existing private investment — or you have an employer mandate, or you have an individual mandate. And there isn’t any other way to get to universal coverage. The market cannot deliver universal coverage in the foreseeable future, and any compromise that people try to suggest that would permit the market  to have a few years to try to deliver universal coverage without a mandate that would take effect to actually finish the job will guarantee a single payer heath care system.

http://www.clintonlibrary.gov/assets/storage/Research-Digital-Library/flotus/muscatine-flotus-press/Box-015/2011-0415-S-flotus-statements-and-speeches-4-26-94-10-21-94-binder-6-15-94-lehman-brothers-health-corp.pdf

More documents (search engine available): http://www.clintonlibrary.gov/previouslyrestricteddocs.html

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Comment:

By Don McCanne, MD

Happy New Year! 

(What else can I say?)

Patient migration between high and low health care utilization regions

Sources of Geographic Variation in Health Care: Evidence from Patient Migration

By Amy Finkelstein, Matthew Gentzkow, and Heidi Williams
NBER Working Paper 20789, National Bureau of Economic Research, December 2014

Abstract

We study the drivers of geographic variation in US health care utilization, using an empirical strategy that exploits migration of Medicare patients to separate the role of demand and supply factors. Our approach allows us to account for demand differences driven by both observable and unobservable patient characteristics. We find that 40-50 percent of geographic variation in utilization is attributable to patient demand, with the remainder due to place-specific supply factors. Demand variation does not appear to result from differences in past experiences, and is explained to a significant degree by differences in patient health.

From the Introduction

Health care utilization varies widely across the United States. Adjusting for regional differences in age, sex, and race, health care spending for the average Medicare enrollee in Miami, FL was $14,423 in 2010, but just $7,819 for the average enrollee in Minneapolis, MN. The average enrollee in McAllen, TX spent $13,648, compared to $8,714 in nearby and demographically similar El Paso, TX.

In this paper, we exploit patient migration to separate variation due to patient characteristics such as health or preferences from variation due to place-specific variables such as doctors’ incentives and beliefs, endowments of physical capital, and hospital market structure. As a shorthand, we refer to the former as “demand” factors and the latter as “supply” factors.

Like past decompositions, ours is not sufficient to draw strong conclusions about the efficiency of observed geographic variation. Though it may be tempting to see supply-driven heterogeneity as evidence of waste, such variation could reflect different allocations of physical or human capital, and so be consistent with efficiency. Conversely, demand-driven heterogeneity could reflect patient misinformation, and so contribute to inefficiency. We view our findings as both a first step toward a more welfare-relevant understanding and a clarification of an influential body of existing evidence.

Conclusion

We find robust evidence that 40 to 50 percent of geographic variation in the log of health care utilization is due to fixed characteristics of patients that they carry with them when they move. Our examination of mechanisms suggests that a large part of this demand-side heterogeneity may be due to patient health. The remaining 50 to 60 percent of variation is due to place-specific factors, possibly including doctor practice patterns and characteristics of health care organizations.

These results suggest that demand-side factors play a larger role in geographic variation than conventional wisdom might suggest. This does not translate immediately into conclusions about efficiency. The correlation of utilization with demand-side factors (and with patient health in particular) may reflect differences in the marginal impact of treatment or the marginal utility from a given impact, and so be consistent with efficiency. But it could also reflect differences in other demand drivers, such as patient information or beliefs. A more careful examination of the efficiency implications of the geographic variation is an important direction for further work.

Our findings have implications beyond our patient-place decomposition. The fact that habit formation seems limited implies that demand-side differences in utilization are unlikely to change quickly in response to policy, at least among the 65 and over population, a population that accounts for about a third of total annual health care spending. The fact that a large part of demand-side geographic variation reflects variation in patient health may also point to limits to the effectiveness of demand-side policies aimed at changing patient beliefs or preferences. At the same time, the sharp adjustment we observe around moves suggests policies that affect the supply-side can have immediate impacts.

While we have taken a first step toward understanding the origins of the patient component we measure, it remains for future work to better understand the mechanisms behind the place component. Particularly interesting questions concern the role of physicians’ training and practice patterns, and the role of health care organizations.

http://www.nber.org/papers/w20789

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Comment:

By Don McCanne, MD

Although this article is technically challenging to read and absorb, and the authors caution that more work is needed to understand better the implications of their initial results, nevertheless, this is a very important article because it improves our understanding of geographic variations in health care utilization as related to “patient characteristics such as health or preferences” (demand-side) and to “place-specific variables such as doctors’ incentives and beliefs, endowments of physical capital, and hospital market structure” (supply-side). Because of concerns over global health care spending, many important demand-side and supply-side policies are being put in place without an adequate regard of the policy science behind those decisions, both known and unknown.

On the demand side, it appears that the health of the patient is far more important in patient decisions on utilization than are patients’ beliefs, preferences and habits. This is as it should be. The health care system should be there to serve the health care needs of the patient. Yet the leading efforts to control demand-side over-utilization include measures that impair access, particularly financial barriers such as high deductibles and tiered layers of coinsurance, and provider barriers established through the use of narrow- and ultra-narrow networks. Policies that prevent patients from getting the care they need should be rejected. The claim that these policies control excess patient demand is based on the fiction that patients are demanding excessive care; they are not.

On the supply side, much has been written about excess capacity that results in excessive utilization, including the alleged excessive supply of high-tech specialized services. The authors of this study state that we need to learn more about the role of physicians’ training and practice patterns, and the role of health care organizations. Yet the leading efforts to control supply-side over-utilization include the use of accountable care organizations, in spite of the lack of evidence of their effectiveness, and the use of dubious pay-for-performance levers to guide physicians’ practice patterns. Many contend that about one-third of care provides marginal benefits that could be done away with, since the the overall negative impact would be small (but not zero). But it is very difficult to prospectively select the care that could be omitted. That is what the accountable care organizations are supposed to be doing, yet, to date, there has been very little reduction in spending under these programs, and often that reduction is erased by the performance rewards.

We already know of very effective policies that could control excesses on the supply side. Our prices are created on the supply side, and they are too high. They could be brought into line through public policies that would ensure adequate funding of services and products while reducing the waste of excessive pricing. The complexity of the supply-side administrative services wastes tremendous resources.  That waste could be dramatically reduced through an administratively simplified single payer financing infrastructure. Excess capacity that invites over-utilization could be reduced through central planning and budgeting of capital improvements – a step that would also address our even greater need to improve capacity in regions wherein services are inadequate.

So let’s get to the basics. Demand side? Remove barriers to care. Supply side? Begin by replacing our dysfunctional health care financing system with a single payer national health program. Once we have those in place, then we can sit around and have intellectual discussions about physicians’ training and practice patterns, and the role of health care organizations. But we can’t waste our time with decades of esoteric policy studies when we have important work to do right now.

Tiered pharmacy benefits can be lethal

Comparative Effectiveness of Generic and Brand-Name Statins on Patient Outcomes: A Cohort Study

By Joshua J. Gagne, PharmD, ScD; Niteesh K. Choudhry, MD, PhD; Aaron S. Kesselheim, MD, JD, MPH; Jennifer M. Polinski, ScD, MPH; David Hutchins, MBA, MHSA; Olga S. Matlin, PhD; Troyen A. Brennan, MD; Jerry Avorn, MD; and William H. Shrank, MD, MSHS
Annals of Internal Medicine, September 16, 2014

Background: Statins are effective in preventing cardiovascular events, but patients do not fully adhere to them.

Objective: To determine whether patients are more adherent to generic statins versus brand-name statins (lovastatin, pravastatin, or simvastatin) and whether greater adherence improves health outcomes.

Design: Observational, propensity score–matched, new-user cohort study.

Setting: Linked electronic data from medical and pharmacy claims.

Participants: Medicare beneficiaries aged 65 years or older with prescription drug coverage between 2006 and 2008.

Intervention: Initiation of a generic or brand-name statin.

Measurements: Adherence to statin therapy (measured as the pro- portion of days covered [PDC] up to 1 year) and a composite outcome comprising hospitalization for an acute coronary syndrome or stroke and all-cause mortality. Hazard ratios (HRs) and absolute rate differences were estimated.

Results: A total of 90 111 patients who initiated a statin during the study was identified; 83 731 (93%) initiated a generic drug, and 6380 (7%) initiated a brand-name drug. The mean age of patients was 75.6 years, and most (61%) were female. The average PDC was 77% for patients in the generic group and 71% for those in the brand-name group (P < 0.001). An 8% reduction in the rate of the clinical outcome was observed among patients in the generic group versus those in the brand-name group (HR, 0.92 [95% CI, 0.86 to 0.99]). The absolute difference was -1.53 events per 100 person-years (CI, -2.69 to -0.19 events per 100 person-years).

Limitation: Results may not be generalizable to other populations with different incomes or drug benefit structures.

Conclusion: Compared with those initiating brand-name statins, patients initiating generic statins were more likely to adhere and had a lower rate of a composite clinical outcome.

Primary Funding Source: Teva Pharmaceuticals.

From the Discussion:

In a head-to-head comparison, we found that patients initiating generic statins were more likely than those initiating brand-name statins to adhere to their prescribed treatment and had an 8% lower rate of a composite end point of cardiovascular events and death. Generic drug use has been widely recognized to reduce patient out-of-pocket costs and payer spending. Most persons in the United States are enrolled in prescription drug insurance programs with tiered benefits that require higher copayments for brand-name prescriptions than bioequivalent generic versions. Among patients in our study, the mean copayment for the index statin prescription was $10 for generic drug recipients and $48 for brand-name drug recipients. Our finding that adherence is greater with generic statins than with brand-name statins is therefore not surprising and is consistent with other studies that have shown a direct relation between higher copayments and lower adherence.

http://annals.org/article.aspx?articleid=1905128

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Comment:

By Philip Verhoef, MD

This study further dispels the notion that more skin in the game leads to better outcomes.

The researchers prospectively examined 90,111 patients who received a new prescription for statin therapy and divided them into receiving generic (83,731 patients) versus name-brand (6380 patients) for the 3 statins that were generic at that time. They used propensity scores to “match” patients since they weren’t able to properly randomize patients to generic versus name-brand. They then measured adherence and outcomes and found the following:

  • 77% adherence in patients receiving generics versus 71% adherence in patients receiving name brand
  • 8% reduction in the rate of pooled clinical outcomes (stroke, acute coronary syndrome or all cause mortality) for patients receiving generics
  • They note that the out of pocket costs to fill the generic was 10 dollars and the branded was 48 dollars

They basically conclude that patients who have to pay more for their medications are less likely to be adherent, and that the difference in clinical outcomes occurred as a direct result of the increased cost, leading to poorer adherence and consequently more strokes/ACS/death.

There’s lots in here:

  • Generics work
  • Generics are cheaper
  • Relatively small differences in adherence can lead to substantial clinical outcomes (ie, perhaps we should focus on improving adherence to prescribed therapies)

But I think that the biggest take-home is that if patients have to pay more for medications, they will not take them and then they will die. Ergo, shifting costs to patients leads to more death.

Philip Verhoef, MD, PhD is Clinical Instructor of Medicine at The University of Chicago Medicine, a member of the PNHP Advisory Board, and co-president for PNHP-Illinois.

Health Insurance workers. We’ve Got Your Back!

By Kay Tillow
Firedoglake, My FDL blog, Dec. 26, 2014

It’s just a matter of time until Humana, Aetna, Anthem, CIGNA, UnitedHealthcare—all the private health insurers—will no longer exist as health insurance companies.

People will organize in vast numbers to demand universal care changing what is politically possible.  Our nation will move forward, like the rest of the industrialized world, to a publicly funded system that no longer allows companies to profit from denying care.  We will find our way to a better system that assures care to all by ending profiteering in health care.

It will be a beautiful day when we all get the care we need.  Our wealthy nation is more than capable of providing it to everyone.

What about the Health Insurance workers who will need jobs?

We’ve thought about that!  There is a solution.  The answer is already written into the legislation.

HR 676, the national single payer legislation, specifies that insurance company workers will be provided for by first choice in retraining and job placement in the new system and by receiving two years of their regular salary so that they will be able to transition to better jobs.  And all the while, they, like all of us, will have all medically necessary care as a right!

Check it out.  It’s Section 303 (e) of HR 676.  Go to www.congress.gov.  In the space that says “examples” write “HR 676” and click the search button.  Then click on highlighted “H.R.676” and then click on “text.”  Scroll to Section 303 (e).

Quoted from HR 676, Expanded and Improved Medicare for All

(e) First Priority in Retraining and Job Placement; 2 Years of Salary Parity Benefits- The Program shall provide that clerical, administrative, and billing personnel in insurance companies, doctors offices, hospitals, nursing facilities, and other facilities whose jobs are eliminated due to reduced administration–

  1. should have first priority in retraining and job placement in the new system; and
  2. shall be eligible to receive two years of Medicare For All employment transition benefits with each year’s benefit equal to salary earned during the last 12 months of employment, but shall not exceed $100,000 per year.

So join with us!  Let’s win national single payer health care for all while protecting the future of those who work in the health insurance industry.

Kay Tillow is a leader of Kentuckians for Single Payer Health Care. She resides in Louisville.

http://my.firedoglake.com/blog/2014/12/26/health-insurance-workers-weve-got-your-back/

As aspiring doctors, we see the racial toll of poor health insurance

By Scott Goldberg
Chicago Sun-Times, December 23, 2014

On December 10, medical students at more than 70 schools across the country held “white coat die-ins” in response to the lack of indictments in the police killings of Michael Brown in Ferguson, Mo., and Eric Garner in New York.

Here in Chicago, I and more than 100 students from Rosalind Franklin University, Northwestern, Rush, the University of Chicago, and University of Illinois at Chicago lay down together in protest on the campus of UIC. It was a moving experience.

Why did we do this? Like many Americans, we are angered by the repression and injustice that affects communities of color. Yet we are not outside observers to these systematic injustices.

Every day, we see the toll inequality has on the lives and health of our African Americans, Latinos, and other nonwhite patients. If we do not speak out on behalf of our patients, then we are not living up to the standards set by our profession.

In an important journal article from 2005, former Surgeon General Dr. David Satcher and co-authors demonstrated that while overall survival for both African American and white populations has improved over the last 40 years, there has been little improvement in the mortality gap between blacks and whites. In fact, this “death gap” worsened for black infants and black men age 35 and older.

What this means is that in 2002, blacks suffered 40.5 percent more deaths — 83,570 excess deaths — than would be expected if they had experienced the mortality rate of whites. This is a shocking statistic for a country with the greatest wealth and resources ever seen in human history.

While there a number of reasons why this racial disparity exists, the lack of universal health insurance coverage is an obvious one. Importantly, it’s a fixable problem.

Every other industrialized country in the world has some form of public health insurance. Many countries, like Canada, have a single-payer system whereby the government funds the private delivery of health care. In Canada, everyone is guaranteed care, medical outcomes are as good if not better than in the U.S., and yet per capita health spending is about two-thirds what we spend.

Our own extremely popular Medicare program, whose 50th anniversary will be observed in the new year, resembles a single-payer system in many ways. For those who qualify, Medicare provides ready and equitable access to care, free choice of doctor and hospital, and a minimum of wasteful paperwork.

As long as private health insurance companies remain in our health care system, there were will be steep financial barriers to people of color and all people with lower to middle incomes getting access to medically necessary, life-saving care. A Medicare-for-All system, without co-pays or deductibles, would eliminate these barriers, save money and improve health.

Regrettably, the Affordable Care Act does not come close to removing these barriers to care. Nearly 31 million people will remain uninsured even after full implementation of the law, and millions more will have skimpy health insurance policies that will leave them vulnerable to financial distress in the event of illness.

As a medical student and future physician, I believe access to high-quality health care is a right of all people and should be provided as a public service rather than bought and sold as a commodity. Until this becomes a reality, the death gap between blacks and whites will continue to afflict us.

This state of affairs is unacceptable. As Dr. Martin Luther King Jr. once remarked, “Of all the forms of inequality, injustice in health is the most shocking and inhuman.” We shouldn’t settle for it. We need an improved Medicare for All.

Scott Goldberg is a third-year medical student at the University of Chicago Pritzker School of Medicine.

http://chicago.suntimes.com/other-views/7/71/229384/aspiring-doctors-see-racial-toll-poor-health-insurance

John McDonough on what follows Vermont

Vermont ends single payer bid: Feds now left to confront the issue

By John E. McDonough
CommonWealth, December 23, 2014

Many American dislike the Affordable Care Act not because it goes too far but because it does not go far enough.  About 24 percent of Americans believe the ACA should be expanded, and by that, many mean a Medicare-for-All single payer financing scheme that takes insurance companies out of the equation.

Since the ACA is nothing like single payer, for four years now, the candle in the window for single payer advocates has stood in the governor’s office in the Vermont State House.  Gov. Peter Shumlin got elected in 2010 promising to bring a single payer health financing scheme to Vermont, and various people in his administration have been hard at work figuring how to make it happen.  Last Wednesday, though, Shumlin snuffed out the candle, admitting that he couldn’t make the numbers work.

So what is single payer’s future?  Like all good Democrats, I harken to the words of my late boss, Sen. Kennedy: “…the work goes on, the cause endures, the hope still lives, and the dream shall never die.”

Today, in the United States, we have three-plus mega-health insurance programs in Medicare, Medicaid, and the new ACA subsidy/exchange structure.  Medicare is actually two programs when you count Medicare Advantage.  Medicaid is nearing 70 million covered lives.  And as employer coverage continues its 25 year plummet, the ACA subsidized exchange world is going to grow in size and importance. 

It may take 5, 10, 15 years, or even longer – but at some point, some Republicans and Democrats will propose federal health insurance consolidation.  The illogic and wastefulness of running these enormous, siloed health insurance behemoths will become clear – that will be the backdoor start and momentum will grow.

The Vermont failure, I believe with regret, signals the end of serious efforts to achieve single payer at the state level.  It’s too big a lift, economically and politically.  Shumlin inadvertently blew out the candle.

At the federal level, I do expect it – but through the backdoor, not the front, and no time soon.

John McDonough is a professor at the Harvard School of Public Health and the author of Inside National Health Reform.

http://www.commonwealthmagazine.org/Voices/Perspective/Online-Perspectives-2014/Fall/028-Vermont-ends-single-payer-bid.aspx

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Comment:

By Don McCanne, MD

John McDonough is one of the nation’s most astute observers of health care reform. We can take solace in his prediction that the entire nation will eventually achieve single payer reform, while regretting that it will be a slow process.

For those who differ, prove him wrong.

WSJ on Vermont’s single payer effort

Vermont’s Single Payer Washout

The Wall Street Journal, December 22, 2014

Last week, in a reversal that deserves more attention, Democratic Governor Peter Shumlin announced that Vermont would no longer create America’s first statewide single-payer health system.

Single payer is the polite term for socialized medicine and the ultimate goal of the political left.

At least the Governor deserves credit for admitting failure. His ideological comrades are rarely dissuaded by the prospect of economic damage, as ObamaCare proves. But Mr. Shumlin has succeeded in making Vermont a national model: By admitting that single payer will make health care both more expensive and less efficient, he has shown other states what not to do.

http://www.wsj.com/articles/vermonts-single-payer-washout-1419293404

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H.202, Bill as Passed by the House and Senate, 2011

“An act relating to a single-payer and unified health system”

changed to

“An act relating to a universal and unified health system”

(H.202 is a 213 page bill. The first 135 pages were deleted and the remaining pages are a rewrite of the entire bill.)

Sec.2(a)(6):

The director, in collaboration with the agency of human services, shall obtain waivers, exemptions, agreements, legislation, or a combination thereof to ensure that, to the extent possible under federal law, all federal payments provided within the state for health services are paid directly to Green Mountain Care. Green Mountain Care shall assume responsibility for the benefits and services previously paid for by the federal programs, including Medicaid, Medicare, and, after implementation, the Vermont health benefit exchange.

http://www.leg.state.vt.us/docs/2012/bills/Passed/H-202.pdf

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Comment:

By Don McCanne, MD

As was fully expected, the conservative and libertarian pundits are inundating the Internet and other media vehicles with celebratory commentaries on the theme that Vermont Gov. Peter Shumlin’s withdrawal of his single payer proposal is proof that single payer is more expensive and less efficient than other health care financing systems. The Wall Street Journal editorial excerpt above is selected as a leading example of these right-wing responses. The problem with these comments is that H.202, the Vermont reform legislation, IS NOT A SINGLE PAYER PROPOSAL.

Even many single payer supporters have it wrong. They claim that Gov. Shumlin gave up for political reasons, and, if he had persevered, he would have been successful in establishing the first state-level single payer system in the U.S. Again, the problem is that H.202, the Vermont reform legislation, IS NOT A SINGLE PAYER PROPOSAL.

Posted above is a link to H.202. During the legislative process, the bill was renamed, deleting “single-payer” from its title. If you check the document at the link, you will see that the original bill was red-lined out, and the bill was entirely rewritten. All references to “single-payer” were removed.

The crucial phrase in the except above regarding waivers and agreements is “to the extent possible under federal law.” It was known at the time the revisions were being made that Sec 1332 ACA waivers, Sec 1115 Medicaid waivers, the narrowly defined Medicare demonstration waivers, and the ERISA limitations on employer-sponsored plans were so limited that it would be impossible to establish a bona fide single payer system through unilateral state action alone, nor through a cooperative effort with the Obama administration. Comprehensive federal legislation would have been required, and that clearly was not forthcoming from this or the next Congress. Legislating a wish list does not equate with clearing all of the hurdles that only Congress can effectuate.

The reason that this message is being reemphasized again today is that there has not been a loud enough voice in unison emphatically rejecting the claim that Vermont’s experience is proof that single payer cannot work. Single payer never had a chance, considering the inertia in Congress. This was not a single payer failure. Do not remain silent when that claim is made. Single payer has been proven to work well in many other nations.

Governor Stops Vermont’s Move Towards Single-Payer

By Pat Bradley
WAMC Northeast Public Radio, Dec. 23, 2014

Last week Vermont Governor Peter Shumlin told Vermonters he would stop his efforts to implement single-payer health care in the state.  The decision has upset supporters, but they say it won’t stop efforts at the state or national level to implement single-payer. 

A long anticipated and delayed health care reform financing report was due to be issued at the end of this month spelling out the costs of Vermont’s transition to a single-payer health care system.  The report, obtained in advance by VTDigger.org, showed that businesses would face a payroll tax of 11.5f percent and individuals would be charged up to 9.5 percent on their state income tax to pay for the system.

Vermont Governor Peter Shumlin stunned Vermonters last week when he retreated from implementation of single-payer, explaining that converting to such a system isn’t affordable.  “Pushing for single-payer health care financing when the time isn’t right and it would likely hurt our economy is not good for Vermont and it would not be good for health care reform.”

Shumlin said he asked his team to find alternatives, but none met service criteria or they were unaffordable.  “This is the greatest disappointment of my political life so far. That we couldn’t advance this ball as quickly as we’d wished.”

Vermonters for Health Care Freedom has advocated for the state to switch from the state run to the federal healthcare exchange and to back off from its single-payer plans.  Founder and President Darcie Johnston embraces the governor’s decision.  “We knew that the financing wasn’t going to work. If you look at the state’s economy, the state is really struggling from an economic point of view and we can see that a $2.6 billion new tax is not going to help jump-start the economy anytime soon.”

Shumlin gained his office, in part, due to his advocacy for universal health care.  Many advocates of the system feel betrayed. The Vermont Workers Center, which coordinates the Health Care is a Human Right campaign, organized a rally the day after the governor’s announcement. 

Executive Director James Haslam believes Shumlin’s decision was political, not economic.  “This is a guy who’s been championing moving forward with universal health care ever since he started running for governor. He’s been trying to use it as a way to advance his political career and a lot of people voted for him for this. So it’s definitely something that has not gone over well. But the way that he was pushing for health care was really essentially, primarily so it’s pro-business. That’s for us not the goal of a health care system.”

Vermont’s efforts to become the first state with a single-payer health care system are being scrutinized nationally.  In the wake of Governor Shumlin’s announcement Physicians for a National Health Program President Dr. Andrew Coates – who practices in the Albany, NY region – and has contributed commentaries on WAMC – disagreed with his decision.  “Single-payer has enormous efficiencies by cutting out profiteering, cutting out layers and layers of middlemen. Cutting out many duplicative efforts to count the money. And without a proposal to cut out all those middlemen, which Governor Shumlin didn’t have, and then to turn around and say that single-payer isn’t feasible in Vermont was disingenuous.”

Coates adds that while this is similar to setbacks in other states, the movement toward single-payer hasn’t stopped.  “We could think about the California Democratic party while they had Governor Schwarzenegger in the statehouse. They passed single-payer and he vetoed it.  Then when they got Governor Brown in the Statehouse they decided that they wouldn’t table the bill. People were very upset. I don’t think it stopped the movement in California. I think it just means a little bit of a reality check about what we’re really up against.”  

Supporters of single-payer are planning a rally  the Vermont statehouse in January as the new legislative session begins.

http://wamc.org/post/governor-stops-vermont-s-move-towards-single-payer