Why the Potential CVS Acquisition of Aetna is Brilliant, The Law of Unintended Consequences

By FRED GOLDSTEIN

Many people have been surprised by the announcement that CVS is interested in purchasing Aetna.  Why would a PBM want to own a health plan?  There has been speculation that the move by Amazon to get into the pharmacy space may be a reason.  But there is another more rationale reason and its based upon a flaw in the Affordable Care Act.

The flaw is known as the Medical Loss Ratio requirement and it reads like this from the CMS website

The Affordable Care Act requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the rate review provisions imposing tighter limits on health insurance rate increases. If an issuer fails to meet the applicable MLR standard in any given year, as of 2012, the issuer is required to provide a rebate to its customers.

This requirement was put in place as a way to ensure that health plans did not make money by underutilizing medical care.  But it had the unintended consequence of insuring that costs never went down and here’s why.

Let’s assume that a hypothetical health plan offers a product at a $5,000 premium.  Based on this premium, they must spend 80% or $4,000 on Medical Care and the remaining $1,000 goes to cover administrative expenses and profit. At the same time, it’s fairly common knowledge that 30% and possibly more of healthcare costs are associated with waste, fraud and abuse.  So, let’s use some AHIP data and come up with a scenario.

Perhaps a health plan wants to go after some of this waste, fraud and abuse and targets inpatient hospital costs. Per AHIP this represents 15.8% of a health plan’s spend or $790 in our hypothetical scenario. So now the health plan puts in programs and negotiated pricing that reduces inpatient costs by 10% or $79. Now let’s assume that all other medical costs remain the same. The health plan is now below the 80% MLR requirement and must rebate $79 back to the customers; they can’t keep even a piece of it as a reward for their efforts. Next year under the same scenario, if nothing else changed, they would need to come in with a lower premium (meaning they’ll have a smaller 20% for their admin and profits) or rebate the money again. This is why health plans do not take a meat cleaver to the pork.

BUT… Now let’s introduce a new owner of the health plan, a PBM, which per the same AHIP report represents 22.1% or $1,105 of our hypothetical health plan premium.  The PBM will tell the health plan to sharpen up and use the meat cleaver. Why? Because instead of rebating the savings to the customer, the PBM can increase its cost and or utilization up to $79 to keep the health plan in good graces with the government MLR requirement. In this hypothetical, $79 is equivalent to 7.2% growth for the PBM and is a way, as the owner, to pull more profits out of the health plan which are not allowed to be taken by the health plan under the ACA’s MLR requirement.  Now in the pharmacy case, some of this could be due to better adherence, or higher price or more utilization, some potentially good, some not so good.  In any case, if the PBM is really smart they will take a meat cleaver to every area except pharmacy costs and shoot for the whole hog.

And that potential growth strategy is another unintended consequence of the MLR requirement.

Fred Goldstein is the founder of Accountable Health Inc.

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“Mouths full of gold.” Private practice in Britain’s National Health System

By SAURABH JHA, MD

When Aneurin Bevan was asked how he convinced doctors to come on board the National Health Service (NHS) he allegedly replied, “I stuffed their mouths full of gold.” Bevan recognized that to conscript doctors to the largest socialist experiment in healthcare in the world he had to appeal not so much to their morals, but pockets.

There is much piety about the NHS. It is the envy of the world, though oddly Saudi oil barons still favor Cleveland Clinic and Texas Heart Institute over quaint little hospitals in rural Scotland. The NHS featured in Britain’s 2012 Olympic parade along with Mr. Bean and the human right activist, Shami Chakrabarti – only one of them was there for parody. Brits aren’t ones to posture self-righteously, except when it is about the NHS, when the violins come out full mast, and we’re treated to a spectacular display of sanctimony and disingenuity. The NHS is a religion which keeps its prophets happy.

Bevan, an arch socialist, Labour to the bones, and founder of the NHS, was no social justice warrior. He recognized that berating doctors into doing the right thing wasn’t going to work. Nor was selling them a utopian paradise. Remember, this was post Second World War Britain, when socialism was in fashion, and sympathies towards communist Soviet Union was an intellectual fad. Selling the concept of the NHS should have been a cake walk, most of all to doctors. But Bevan was a pragmatist, not sentimentalist. He knew that he needed more than ethos, logos and pathos.

So, in a stroke of everlasting genius Bevan allowed doctors to see private patients in NHS hospitals, a small quirk with considerable consequences. In essence, Bevan legitimized a two-tier system, in which the rich could jump queues, and doctors could serve the rich and the poor, though the rich a little faster, and with more personal touch. The NHS is living embodiment of George Orwell’s famous quip: everybody is equal, but some are more equal than others.

If the NHS isn’t the envy of the world it should be the intrigue of the world. Its survival wasn’t probabilistic. There are two reasons why the NHS hasn’t imploded – foreign-trained doctors and private medicine. The contribution of the private sector to the longevity of the NHS isn’t immediately apparent. Both tiers support each other. The parallel private track allows doctors in Britain to earn more than their NHS salaries, with only a little extra effort. Private insurance in Britain compensates handsomely.

The fact that doctors could multiply their income, through the private sector, whilst working in the NHS arguably reduced the incentive for doctors to form private conglomerates and desert the NHS. Or to put it more clearly, the private track kept doctors working for the NHS. I know this sounds paradoxical, and I’ll try to explain more.

Further, the private sector allowed the NHS to compensate all doctors the same – e.g. pay the neurosurgeon the same as the psychiatrist. This didn’t bother neurosurgeons because they knew that in the private sector, they’d make up for the egalitarianism. I’m not saying that neurosurgeons deliver more value to society than psychiatrists. But neurosurgery training is more exacting than psychiatry. A system which pays neurosurgeons the same as psychiatrists will have fewer medical students who want to become neurosurgeons than a system which pays neurosurgeons more than psychiatrist. You don’t have to be a health economist to figure this out.

The training in the NHS for hospital doctors, by that I mean those not in general practice, particularly for surgeons, was always long, and unpredictable. It wasn’t uncommon for physicians to spend 15 years after medical school before they became a hospital consultant (attending), some spending the last few years as a locum consultant, a pseudo-consultant who has the responsibilities of a consultant but not their share of the private pie. What kept them going wasn’t just that they had no choice, but that there was light at the end of the tunnel – a pot of silver.

Once the private practice picked up, and it often did, doctors multiplied their NHS salaries, often by several integers, finally bought that four-bedroom detached house in a nice suburb which they’d been eyeing, sent their kids to private (oddly called “public”) schools, and holidayed in Algarve and Goa. Given what doctors went through in their training, they never asked for much – just a slight separation from the masses, in both their indulgences and expression of tastes.

A close friend, an NHS orthopedic surgeon, spent a year in Boston in a fellowship. He was seriously considering staying in the US and was on the verge of signing on the dotted line for a faculty position in venerated Boston when a post in a London teaching hospital opened. Choosing between Boston and London was a no brainer. Raj returned to the UK and now has a private practice so successful that wait times to see him privately are longer than NHS wait times for some elective procedures. Last year his private income exceeded his NHS income by a factor of eight. Yes, he’s minting it, making more than he would ever have made in Boston.

Not only is Raj minting it, he’s minting it knowing that, thanks to the tax payer, the poor and disenfranchised receive his services for their emergencies free at the point of care. Bevan allowed doctors to be a sort of Robin Hood – who took copiously from the rich so that they could serve the poor. Private insurance in Britain, held by less than 15 % of the population, expedites elective care but doesn’t hasten emergency care, which is reasonably rapid in the NHS. This is redistribution with clinical acumen.

I asked Raj what he wanted to do when he grew up. May be run a hospital. Or an insurance company. His reply was curt – “I want to keep drilling.” At a time when many doctors are drawn to administrative and leadership positions, physicians in the NHS with successful private practices aspire to nothing more in their future except medicine, and even more medicine.

Raj loves orthopedics, partly because he’s good at it, partly because he’s autonomous and spared interference from mediocre busy-for-nothing bodies, and partly because he’s minting it. He works incredibly hard, is technically competent and does a good job, and has a gift of the gab. He wants to be rewarded. Piety would have lasted four hours with Raj. Money pushes him to eighty hours per week.

The NHS is important for private practice just as private practice is important for the NHS. His NHS patients tell their GPs, “Raj – what a charming surgeon. He fixed my hips.” Raj’s private referrals come from GPs impressed by his work, his succinct summary letters, and how quickly he sees their patients. It is a perfect symbiosis. Reputations which lead to private work are derived from quality work done in the NHS. Of course, this is not the only source for private referrals, and some referrals come from shared experiences on golf courses, and memories of the fields of Eton and Harrow. The point is that many paths to private riches run through the NHS. This architectural marvel was Bevan’s genius.

Since the inception of the NHS, the government has tried to limit private practice. When I was a junior doctor in surgery, the government’s limitation on private practice was supported by the president of the Royal College of Surgeons, Barry Jackson, who suggested that surgeons not see private patients for the first phase of their careers, and see private patients only after seven years of becoming a consultant. Sir Jackson, who was the Queen’s surgeon, and was knighted, had a booming private practice of his own. Jackson’s motivations were unclear, though many believed he wanted to keep the nugget, the colloquial term for private practice, for the older codgers.

This created an uproar amongst trainee surgeons, one of whom, Tom, a talented chap aspiring to become a plastic surgeon, a lad who modeled himself on Peter Benton, the surgeon from the TV series, ER, left surgery and joined a consulting group. I still remember his pithy words when he resolved to leave. “Fuck this bullshit.”

The path to becoming a plastic surgeon was long, though not uniquely long. Typically, then, in Britain you entered medical school at 18, and after 6 years got the MBBS degree, followed by a year of house jobs, and three years of basic surgical training. Then most people went off and did a stint of research for 2 or 3 years, not because of intellectual curiosity but to pad their CVs. Everyone else was padding their CV with publications, because there was a bottleneck in competitive specialties, and what started off as a way to distinguish yourself from others, became a default requirement for specialties such as cardiology, urology and plastic surgery.

After research you’d apply for higher training – which typically took 6 years, at the end of which you’d become a consultant in a specialty, such as urology or plastic surgery – i.e. at 37 if all went well. Many, such as me, at 29, with 10 years of education and training behind us, were still uncertain what we’d be when we grew up. If Jackson’s rule passed, Tom would be 44 before he was allowed a dip in the nugget. That he’d be on a miserable trainee’s salary till he was 37 was acceptable, because he knew that at 38 his salary would increase considerably. But Jackson’s proposal meant that Tom had to defer that four-bedroom house in the outskirts of London till he was 44. This was the last straw on Tom’s morale.

Several people I knew left surgery at the end of basic surgical training and became GPs, in large part because of the impending moratorium on private practice, though few would admit that was their reason. British GPs don’t earn as much as consultant plastic surgeons, once you factor in the private income of the surgeon, but they’re well settled by 30, making considerably more than junior doctors in hospitals, who still take the brutal hospital call, some well into their forties.

I recall meeting an old medical school friend for a drink. He was a gastroenterology registrar, only three years from becoming a consultant gastroenterologist with access to the endoscopic nugget. He had a particularly brutal night on general medical call, and seemed unusually miserable. To raise his morale, I asked, with unsubtle admiration, what kept him going. He replied, with characteristic self-deprecation, “I’m a mug.” Shortly afterwards, he left gastroenterology and became a GP. He has never stopped being happy since. Not everyone braved it out for the nugget.

Tom is now making more money than he ever would have as a plastic surgeon, but he still misses surgery. Good riddance, you might say. We got rid of a doctor who was motivated by money, not patients. And many hold this hopelessly naïve ideal, that physicians should not be influenced by money, whatsoever, in their professional choices. Some even contend that if physicians are underpaid the profession will be enriched by nobility, by knight-errant physicians.

That money is the only thing which matters for physicians is patently absurd, and a tad offensive. But to believe that money doesn’t matter at all is disingenuous and naïve. The truth is that some minimum matters, and though everyone’s floor is slightly different, it is not wildly different. Tom did not want a seven-figure salary, but could not abide a salary which was barely touching six figures, particularly after all the years he had sacrificed. He did not want to fly first class, but was tired of looking for the cheapest vacation package deal. He worked neither despite the money nor because of it.

Not all hospital specialists have opportunities for private practice, and the ones which don’t, yet which exact long training, predictably, face a shortage of physicians. Intensive care is a notable example. There’s an emerging shortage of intensivists in Britain in general, and London, in particular, and London because the house prices are off the roof. It’s not good for patients if a city prices consultant intensivists out of the housing market. Many intensive care trainees are looking to the antipodes, where the salary is higher, weather better, and there are fewer clipboard-carrying bureaucrats. Aussies have an excellent work ethic, and when they’re not working, many are surfing or diving, leaving little time for whining.

Moses pleaded with the Pharaoh to raise the living conditions of the workers if he wanted more work to be done in the scorching Egyptian heat. The solution to the shortage of intensivists in the NHS is simple and obvious and carries the risk of actually working – which is to double the consultant salaries. This is not an unusual strategy and raising wages, even when supply exceeded demand, was a strategy used by Percival Perry, and later by his employer, Henry Ford, to attract and retain loyal workers. It is well recognized in the private sector that to keep workers happy and productive you need to raise their wages, not threaten them with outsourcing or artificial intelligence – a concept known as “efficiency wages.” Those who believe that flooding the market with doctors, so that the dog-eat-dog competition lowers their wages and raises their quality, a win-win, classic economics teaching, are deluded. Supply side economics doesn’t work in medicine.

The tussle between the government and doctors in the NHS is often about money. The government wants to pay doctors as little as possible, but wants doctors to work as hard as they can. That is government wants from doctors the highest bang for the buck – i.e. efficiency. Efficiency was made health policy by the market-driven Baroness Thatcher who, allegedly, after reading Hayek’s Road to Serfdom, had a bright idea – internal competition, though it was never clear what exactly the doctors were competing for, and why they’d run faster than others on the hamster wheel. Thatcher once said that the South African government needed both carrots and sticks to encourage them to abolish Apartheid. With doctors, Thatcher, and her clones, were all sticks, no carrots. Naturally, the doctors showed her and her clones the middle finger.

A few years ago, the Tories proposed a reduction in pensions, still generous by public sector standards, for doctors. Unsurprisingly, this wasn’t terribly well received by doctors. In the Lancet, several doctors voiced concerns about the reduction in pensions. The specific concern was that the reduced pension was a small step to the privatization of the NHS. You may think that this self-serving logic is stretching irony a bit, even by British standards. But the truth is even more ironic. The government yearns for privatization of the NHS precisely because they believe that only corporations can bring doctors down a notch. The government’s efforts to de-professionalize doctors is fiscal at its root, fiscal in its intent, a means to thrift, with thrift being the end. To put it rather bluntly, it’s about money.

British doctors, even those who don’t double dip in the two-tiered system which gives them a decent wage without the moral turpitudes of the market, know they have it good with the NHS. Money isn’t unimportant for doctors, even in the socialist NHS. This was Bevan’s intuition. This was Bevan’s genius, which Sir Barry Jackson, whose proposed moratorium on private practice was mercifully never enforced, singularly missed.

About the author:

Saurabh Jha is a radiologist and contributing editor to THCB. He can be reached on Twitter @RogueRad

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Population Health and the Missing Specialist

By VIKRAM REDDY, MD

I attended a Population Health conference this summer where a number of representatives from large health systems and physician organizations convened to discuss common challenges. Many of my healthcare colleagues assume that anything that carries the label “Population Health” must relate to health disparities and food deserts. While we do address these topics, the vast majority of sessions and conversations had one underlying theme: lowering the total cost of care. In rebuttal to any charges that our group is far too corporate to be considered a fair example of Population Health advocates, even the Institute for Healthcare Improvement addresses the importance of managing costs with the third part of the Triple Aim stated as “reducing the per capita cost of health care”.

Whether it is from Medicare or commercial ACOs, the Efficiency metric in CMS’s Value-Based Purchasing program, or the continued push from commercial payors for bundled payment programs, health systems and provider groups are beset by demands regarding cost. Unfortunately, at this conference, and in most groups trying to meet the demands of Population Health, one key stakeholder group is often absent: Specialists.

If cardiologists, spine surgeons, and hospitalists cannot become engaged with Population Health principles, moving the cost needle will be very challenging, if not impossible. I believe there are ways, however, to engage specialists in providing efficient care.

Access to Data: Commercial insurance payors have provided Primary Care Physicians with cost data for their attributed patients for years. Moreover, most primary care physicians are enrolled in risk contracts with penalties and potential bonuses with quality and cost-of-care tied in. Specialists, unfortunately (or fortunately, depending on whom you ask), have been immune to the cost of the care they provide. While groups like Propublica have released Medicare payment data, what would be valuable to specialists is how their quality and costs compare to their peer groups who manage the same conditions. For example, what is the average cost between two gastroenterologists for a patient with inflammatory bowel disease. Sharing this data with specialists can lead to some tough questions about best practices, clinical variation, and, appropriateness criteria.

The need to develop appropriateness criteria: When talking to several orthopedic surgeons about a new bundled payment program for joint replacements, one senior surgeon opined, “Well, this is all well and good, but what do we do about the 82-year-old woman with a bad heart and severe arthritis?” His comment has stuck with me because it points to the lack of guidance many practitioners have when it comes to deciding which patients should receive treatment and which patients should not. Defined by Brooks and colleagues at the RAND corporation, a procedure or treatment is considered appropriate if the expected health benefit of the treatment exceeds the expected adverse consequences by a wide enough margin that the intervention is worth doing.

Unlike clinical guidelines, which may recommend a therapy for certain pathology (joint replacement for severe arthritis), appropriateness criteria incorporate patient-specific variables (diabetes, heart disease, obesity, etc.) and the “appropriateness” is defined by an expert panel. Specialty societies and colleges should endeavor to establish appropriateness criteria for their members to help curtail care that may both be wasteful and potentially harmful to their patients.

Teaching the residents: When I was a surgical intern (during the first term of the George W. Bush administration), I recall my first day on the Trauma service. I was given a list of patients by the graduating intern and the order to do the discharges first—especially the one going to the SNF, as it would require the most paperwork. I did as I was told and sent the patient to this magical place called ‘SNF.’ It took me a couple of months to muster up the courage to inquire what the acronym stood for. I have become well acquainted with Skilled Nursing Facilities in my short career in Population Health as I have looked at reducing post-acute care expenditures, but, sadly, the interns whom I speak to now have just as foggy of a notion of why it is important to know where our patients go after they leave the hospital. Most teaching institutions are tertiary- and quaternary-facilities that focus on developing new therapies and techniques in addition to training residents on what constitutes standard of care. It may be easy to forgive academic physicians for not having the time, quite frankly, to educate on Population Health. Unfortunately, if training programs do not start stressing this aspect of medicine, specialists will remain in the dark.

I will be admonished by some for spending an inordinate amount of time on medical costs in an essay about Population Health, and I would be the first to state that quality of care should never be sacrificed when accounting for the cost of care. However, as patients continue to face increasing out-of-pocket costs for the care they receive, it is one more reason to make sure that their dollars are being used judiciously. ​

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Is Obamacare Dead?

By STEVE FINDLAY

“It’s dead. It’s gone. There’s no such thing as Obamacare anymore. It’s no longer – you shouldn’t even mention.”

— President Donald J. Trump  October 17, 2017

Not so fast, President Great-Again. First off, this is an obviously and flatly false statement. But also, don’t look now but Congress and the Trump administration itself are haltingly and chaotically moving to enact bipartisan legislation to stabilize the ACA exchange marketplaces for 2018 and 2019.

Importantly, passage of such a measure would get the ACA through the 2018 mid-term elections, although it’s unlikely that any legislation will tamp down the long-running and fierce debate about the fate and future of the law.

The primary aim of the bipartisan effort is to get funding for cost-sharing reduction (CSR) payments on the budget books. The payments, which go to health insurance companies, lower deductibles and co-pays for millions of low-income people.

They are the subject of a long-running legal dispute, which entered a new phase on Oct. 25 when a federal judge in California rejected an urgent appeal by 18 states to compel the Trump administration to continue making the payments as litigation continues. Trump announced earlier this month he would cease reimbursing insurers for the assistance, which insurers are required to deliver.

The ruling leaves the dispute to be resolved over the next few months in the California court even as a separate case involving the payments continues in a federal court in the District of Columbia.

The payments will total about $8 billion this year and were projected to come in at $10 billion in 2018. The Obama administration drew on general HHS and ACA funds to make the payments for 4 years. The Trump administration continued that practice until Trump’s decision earlier this month.

As expected, Trump’s action triggered insurers to announce they would—to recoup the loss—raise premiums 10% to 20% more than already planned for plans in the ACA exchanges. Such premium increases will hit people who get little or no subsidies the hardest. That includes the 8 million or so people who buy coverage off-exchange because they get no subsidies.

Those who buy on-exchange and get premium subsidies will be largely held harmless from the premium increases since the ACA requires the subsidization of premiums to keep up with premium increases.

Republicans characterize the CSR payments as insurance company bailouts. And Trump this month said several times that the payments have significantly enhanced insurer profits, which he said have soared since Obamacare went into effect in 2013.

All these assertions are incorrect. Again, insurers are mandated by the ACA to provide the assistance. Unfortunately, a technical error in the drafting of the law failed to establish an explicit process to appropriate funds for the payments.   As for profiting from the payments, data filed with HHS and the states overwhelming show insurer losses for their exchange business from 2014 to 2016. Those losses began to abate in 2017.

Despite the daily machinations and statements of doom, there’s still at least a 50/50 chance that some kind of compromise bipartisan measure will become law by year’s end.

Insurer, physician and hospital groups are pushing hard for it. Governors and state regulators—Democrat and Republican—want it. And the public favors bipartisan action; 70 percent now support fixes to the ACA rather than any further attempts at repeal and replace as the Nov. 1 start of open enrollment looms.

The major obstacle now is that the Trump administration and far-right conservatives are trying to leverage negotiations in the Senate—led by Tennessee Republican Lamar Alexander and Washington Democrat Patty Murray—to shoehorn in a batch of ACA changes Republicans failed to get via repeal and replace legislation over the summer and last month (Graham-Cassidy).

Namely, the White House has floated these additions to the Alexander-Murray bill: (a) buying insurance across state lines, (b) association health plans, and (c) state flexibility that permits states to nix some essential health benefits, thus undermining the ban on discriminating against people with pre-existing conditions.

Adding to the mix on October 24, Senate Finance Committee Chairman Orrin Hatch (R-Utah) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) introduced proposed amendments to Alexander-Murray that would kill the individual mandate, expand health savings accounts, and exempt employers from penalties if they didn’t offer coverage.

Said Hatch, who is trying to reclaim his committee’s ownership of health care: “If Congress is going to appropriate funds for CSRs, we must include meaningful structural reforms that provide Americans relief from Obamacare.”

Democrats will not agree to these changes.   Moreover, as well said in a blog at the Georgetown University Center on Health Insurance Reforms website:

“The negatives associated with the end of the CSR payments are not strong enough to require a compromise on other provisions of the ACA in exchange for restoring the CSR payments…..In fact, negotiating away key consumer protections in return for a couple of years of CSR payments would create more harm to consumers. Eliminating the individual mandate would result in 15 million more uninsured by 2026 while increasing the budget deficit by $416 billion. Weakening the guardrails on the 1332 waiver, such as by allowing states to waive some or all of the essential health benefits, would result in higher costs for people with pre-existing conditions.”

At last count, the Alexander-Murray bill had 12 Democrat sponsors and 12 Republican sponsors.   Thus, it is at the 60 votes needed to pass in the Senate.   Leader McConnell has said, however, that he would not bring the bill up for a vote unless Trump signals he’ll sign it.

House Republican conservatives (The Freedom Caucus folks) said on Oct. 24 that Alexander-Murray as configured now is a “non-starter” for them.

On Oct. 25, CBO forecast that Alexander-Murray would lower the federal budget deficit an estimated $3.8 billion during the next decade and not affect the number of people with health insurance.

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The Future Will Be Blogcast

By THCBist

# The Four Things Keeping Hospital CEOs Awake at Night This Year (Hint: Donald Trump Isn’t One of Them)
#Valuing Value-Based Payment
# I Refuse to Tell You What to Eat
# Price Transparency Tools Are Still Struggling. We Offer Advice
# EHR-Driven Medical Error: The Unknown and the Unknowable
# Sorry. Health Care Reform Can’t Wait for Quality Measures to Be Perfect
# Building Better Metrics:  Immunizations and Asking the Right Question(s)

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Super Macranomics

By KIP SULLIVAN

This is the second of a two-part series on MedPAC’s October 4 decision to recommend the repeal of the MIPS program. In Part One , I gave the MedPAC staff credit for urging the commission to support repeal of MIPS, and I criticized their irrational proposal to replace MIPS. I said MedPAC is stuck in a vicious cycle – they recommend “reforms” without evidence, and when the reforms don’t work, they recommend evidence-free tweaks that don’t work either. I referred to this vicious cycle as a “tar pit.”
In this essay I attempt to explain how MedPAC created this intellectual tar pit. I begin by describing the three most important “reforms” in MACRA – pay-for-performance, ACOs, and “patient-centered medical homes.” Then I review the decisions MedPAC made, starting in 2003, that led them to endorse those “reforms.” We will see a pattern: MedPAC adopts “reform” proposals based on opinion, not evidence, and MedPAC never works out the details of their evidence-free proposals but instead foists that responsibility on Congress or CMS.

The three pillars of MACRA

If I were asked to explain MACRA (the Medicare Access and CHIP Reauthorization Act) to someone who wasn’t familiar with it, I would start like this: “MACRA imposes a pay-for-performance (P4P) scheme on all doctors who participate in Medicare’s fee-for-service program. This program is called the MIPS program. Doctors who want to escape the MIPS program must join either an ACO or a ‘patient-centered medical home (PCMH).’”
Those of you who are familiar with MACRA will have noticed that I left out the handful of small-bore “bundled payment” programs that doctors could enroll in to escape MIPS. But those programs apply to relatively small pools of patients with specific diseases, not patient populations in the tens of thousands as ACOs and PCMHs do.

If you accept my summary description of MACRA, then you must also accept this statement: If P4P, ACOs, and “medical homes” don’t work, MACRA can’t work.

P4P must work at the level of the individual doctor if MIPS is to work, and it must work at the group level if ACOs and “homes” are going to work as advertised. [1] And ACOs and PCMHs must work if doctors are going to have some place to run to escape MIPS, and if Medicare is going to save money on the ACOs and PCMHs that doctors are expected to run to. Not one of the three nostrums essential to MACRA’s success – P4P, ACOs, and PCMHs – has worked (they do not lower costs and have mixed effects at best on quality). Yet MedPAC enthusiastically endorsed all of them.

MedPAC endorsed the Three Nostrums in rapid succession between 2003 and 2008: It endorsed P4P for all providers (including individual doctors) in reports issued between 2003 and 2005; it was the first proponent of the ACO (it invented the term in 2006); and in 2008 MedPAC endorsed “medical homes.” MedPAC endorsed each of the Three Nostrums without a shred of evidence that they would work.

Monkey see, monkey do

In the wake of the “HMO backlash” of the late 1990s, chastened managed care proponents looked for less visible, and therefore less annoying, tactics than those pioneered by HMOs. Pay-for-performance was the first of these new tactics to emerge, and MedPAC was among the first to jump on the P4P bandwagon.
MedPAC put Congress on notice in Chapter 7 of their June 2003 Report to Congress http://ift.tt/2zSXXVB and Chapter 4 of their June 2004 report http://ift.tt/2xqdkmG that they intended to endorse P4P on “quality” for all providers – individual physicians as well as institutional providers like hospitals and nursing homes. They formally endorsed P4P for physicians, hospitals and home health agencies in a report http://ift.tt/2zSXZgb issued in March 2005. “We come to this year’s recommendations by determining that quality measures can be used to distinguish among hospitals, home health agencies, and physicians,” said the commission in the 2005 report. “Where necessary, adequate risk adjustment is available. Data needed to take these measurements can be collected without undue burden on providers or the program.” (p. 184)

Twelve years later, at its October 4, 2017 meeting, MedPAC’s staff urged the commissioners to reverse these positions as they applied to individual doctors. It wasn’t true, it turns out, that quality can be measured at the individual level, that “adequate risk adjustment is available,” and that “data …can be collected without undue burden.” The staff did not, however, remind commissioners that 12 years earlier MedPAC had told Congress just the opposite. The commission should have been alerted to that fact, and the commissioners should have investigated how their predecessors made such a serious mistake.
Had the commissioners bothered to do that, they would have discovered that the 2005 decision to recommend P4P for individual physicians and other providers was adopted because General Motors, Leapfrog and other business and insurance industry groups were experimenting with P4P. The decision was simply a case of monkey see, monkey do. MedPAC admitted as much. Here is how MedPAC described their “research” on P4P in their June 2003 report: “Through our interviews we find that many purchasers and plans are experimenting with incentives for improving quality.” (p. 111) And in their March 2005 report they said this: “To determine whether it is feasible for Medicare to pay for performance we consulted with quality experts, providers, researchers, purchasers, CMS, the NQF, and accreditors. It is their hard work and enormous progress in improving quality measurement that provide the foundation for these recommendations.” (p. 184) Note that this “foundation” was not research, but gossip picked up from interviews with “experts” in business and agencies charged with promoting managed care.
Research on (as opposed to gossip about) P4P was almost non-existent in 2005. A 2006 edition of Medical Care Research and Review devoted entirely to the emerging P4P fad stated, “P4P programs are being implemented in a near-scientific vacuum.” [2] In the same edition of that journal, Glenn Hackbarth, a former HMO executive who chaired MedPAC at that time, offered this lame explanation for why MedPAC endorsed P4P in such a vacuum:

Why is MedPAC confident that P4P is the proper thing to do, especially given the limited amount of hard evidence on its impact? Two reasons. First, there is overwhelming research documenting the poor performance of our health care system…. The status quo is unacceptable…. Second, there is abundant evidence that health care providers respond to incentives. For people with substantial experience in health care delivery and policy, like the MedPAC commissioners, it does not seem like much of a leap to conclude that P4P is a step in the right direction. [3]

Hackbarth’s justification for endorsing P4P boiled down to, “Things are so bad, experts like us are justified in recommending pretty much whatever we want.” Even his claim about the evidence on system “performance” (“overwhelming research” demonstrates “poor” quality is rampant) was faith-based. As the Institute of Medicine put it in Crossing the Quality Chasm (the New Testament of the managed care movement) in 2001, “The concern about quality arises more from fear and anecdote than from facts; there is little systematic evidence about quality of care in the United States.” (p. 231)

In the case of the ACO, MedPAC was the first monkey that others copied. The label “accountable care organization” was invented during a conversation between commissioners and Elliott Fisher, the “father of the ACO,” at a MedPAC meeting in 2006 following a presentation by Fisher on an algorithm he invented that lumped doctors and their patients arbitrarily with nearby hospitals. Several commissioners indicated they doubted Fisher’s vaguely defined groups were anything more than artificial constructs. Fisher had no answer for them. And most importantly, he had no evidence that even ACOs with some internal cohesion could cut costs and improve quality. Nevertheless, the commission went on to become a fervent advocate of the amorphous ACO concept.
MedPAC’s endorsement of the equally amorphous PCMH in its June 2008 report to Congress  was another evidence-free decision. The report identified several vague and unproven criteria for “homes,” including use of electronic medical records and email to communicate with patients, and it recommended that P4P be inflicted on PCMH doctors. The report implied that MedPAC’s endorsement was based on interviews with “experts,” but even that was not clear. What is clear is that MedPAC was once again making decisions about abstractly defined “reforms” based on folklore, not evidence.

Thus, by the summer of 2008, MedPAC had notified Congress that lawmakers should impose upon the traditional Medicare program all three of the MACRA pillars – P4P, ACOs, and PCMH’s. Congress took that advice. It passed several bills instructing CMS to begin linking reimbursement to “performance” on both cost and quality (the Physician Group Practice Demonstration, an early test of the ACO, is one example) and in March 2015 Congress enacted MACRA, the managed care proponent’s dream legislation, to replace the failed Sustainable Growth Rate (SGR) formula. MedPAC’s wishes had come true.

Why can’t MedPAC admit its mistakes?

As I stated in my last post on this subject, the October 4 meeting at which MedPAC staff recommended the repeal of MIPS would have been an ideal time for the commission to ask how they made the mistake of endorsing P4P at the individual physician level in their 2003, 2004 and 2005 reports to Congress. The commission’s decision at the October 4 meeting to urge the repeal of MIPS, mainly on the ground that measuring individual physician “merit” accurately is not possible, was a 180-degree reversal of their existing position on that topic. Why not admit their mistake and learn from it? Why not set aside some time to ask, “How did our predecessors endorse such a bad idea and why are we reversing it only now?”

The commission didn’t do that.

I submit the reason the commission refuses to admit error, and refuses to investigate how they commit errors, is that they understand that an honest investigation will force them to terminate two MedPAC traditions that minimize their accountability. The first of these is one I have already discussed – MedPAC’s deeply ingrained habit of endorsing “reforms” based on opinion as opposed to evidence. The second tradition I blame is MedPAC’s habit of articulating its proposed “reforms” as abstractly as possible and leaving to Congress and CMS the unpleasant task of making their evidence-free proposals work in the real world.

Both traditions encourage intellectual laziness and lack of accountability. If you don’t have to think through the details of your abstract proposals because you think your job is merely to throw out grand ideas from 80,000 feet, and if you don’t have to present evidence for your proposal or explain away evidence that contradicts your proposal, it’s easier to persuade yourself that your proposal will work. It’s also easier to say, “It’s not my fault,” when CMS is unable to implement your grand idea down on Earth where doctors and patients live.

Here is an example of both traditions at work. This example (some of which I have already quoted) is from MedPAC’s chapter in their March 2005 report in which they recommended measuring “quality” at the individual physician level:

[A]dequate risk adjustment is available…. Data needed to take these measurements can be collected without undue burden on providers or the program…. Expanded use of IT would also increase the ability to measure and reward good performance. In sum, adequate measurement tools are available to begin paying for performance…. The Congress should instruct the Secretary [of HHS, which in effect means CMS] to design a pay-for-performance program that rewards both improvement and attaining or exceeding certain benchmarks. This approach will encourage all providers to respond…. The program should be budget neutral.… Further, we would expect the Secretary to define the specific parameters of this program, such as the weights assigned to different measures and the mechanism for distributing the funds among providers. (p. 184)

You see how that works? You make statements about risk adjustment, the burden of collecting data, the role that IT could play in P4P and other conditions necessary for P4P to work that aren’t true or are grossly exaggerated and for which there is no evidence. Then, on the basis of this happy talk, you recommend P4P in the abstract, you throw out a few guiding principles (rewards and punishments should be dished out for both improvement from baseline and attaining some absolute thresholds, and the P4P scheme should be a zero-sum game so as not to increase the cost to Medicare). And then you declare that CMS can figure out the rest.

An honest investigation by MedPAC of its erroneous endorsement of the notion that physician “merit” can be measured accurately at the individual physician level would force the commission to confront these two traditions – the habit of valuing opinion over evidence, and the habit of never articulating proposals clearly and concretely and leaving it to someone else to wrestle with the details. That would be more than just embarrassing. It would force MedPAC to terminate those dysfunctional traditions. And that in turn would make it very difficult for MedPAC to continue to promote the faith-based managed care diagnosis (“overuse” due to the fee-for-service system) and the faith-based managed care solution (antidoting the FFS incentive by shifting insurance risk to providers, and micromanaging them just in case shifting insurance risk doesn’t do the trick).

Addiction to the managed care diagnosis and solution is, in the end, MedPAC’s fundamental problem. Until MedPAC’s staff and commissioners are ready to confront that addiction, they will resist recognizing the roles that disdain for evidence and love of abstraction play in maintaining that addiction. And until they explicitly condemn those traditions, they will not extricate themselves from the MACRA tar pit.

[1] Here are a few more details about MACRA. MACRA, enacted in 2015, will force all doctors who treat patients insured by Medicare’s traditional fee-for-service program to choose between two programs: A pay-for-performance scheme called the Merit-based Incentive Payment System (MIPS) that will allegedly measure the value (that is, both the cost and quality) of individual doctors; and a scheme called the “alternative payment model” (APM) program that relies on ACOs, “medical homes” and bundled payments. Doctors who remain in or refuse to join one or several of the APM programs will be given a score of somewhere between zero and 100 for their “total performance” as measured by hundreds of “quality” measures and a cost measure, and depending on their score they could receive up to a 9-percent increase or decrease in their Medicare payments.

[2] Dan Berlowitz et al., “Introduction,” Medical Care Research and Review, 2006; 63 (Supplement) 118S. Over the last decade a large body of research on P4P has emerged and it does not support P4P. As a literature review http://ift.tt/2iXCrJv published in 2017 put it, “consistently positive associations with improved health outcomes have not been demonstrated in any setting.”

[3] Glenn Hackbarth, “Commentary,” Medical Research and Review, 2006; 63 (Supplement) 118S.

[4] The four CMS ACO programs I’m referring to are the Physician Group Practice (PGP) Demonstration (2005 to 2010), the Pioneer program (2012 to 2016), the Medicare Shared Savings Program (a permanent program begun in 2012), and the NextGen program (begun in 2016.) Here is the abysmal track record of these four programs (the figures take only Medicare’s claims costs into account; they do not take into account the costs to ACOs of attempting to reduce Medicare’s claims costs nor the cost to CMS of running these complex programs): The PGP demo raised costs by 1.3 percent; the Pioneer and NextGen programs cut costs by a few tenths of a percent; and the MSSP program, by far the largest of the four, has increased costs by a few tenths of a percent. The latest report http://ift.tt/2vCTMLa from the OIG, its deceptive title notwithstanding, indicates that the MSSP program raised Medicare’s costs by $300 million over the three years 2013 to 2015. CMS’s 2016 data for its NextGen ACOs indicate that they cut Medicare’s costs by seven-tenths of a percent that year (my calculations based on CMS data). For specific savings rates on CMS’s Pioneer and MSSP programs by year, see my comment here http://ift.tt/2jBSOeD. MedPAC staff estimate the cost to ACOs of starting and running ACOs is 1 to 2 percent of their Medicare spending. This estimate seems low to me, but low as it is it swamps the tiny savings achieved by the Pioneer and NextGen programs and substantially raises the cost of the MSSP program.

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My 14 Year Old Cancer Patient May Be Addicted to Opioids. What Do I Do?

By JULIE KIM, MD

I’m a pediatric oncologist, but cancer is not always the most serious problem my young patients face. Currently one of them, a 14-year-old boy, his mother, or both may be opioid addicts. I may be enabling their addiction.

Tragically, their situation is not unique. Adolescent patients are at risk for addiction from opioid pain medications just as adult patients are. But pediatric patients are overlooked in this war against opioid addiction. No policies protect them or those caring for them.

Usually pain is short-term, and only limited opioids are needed. Most providers, including those caring for children, are trained in acute pain management. Patients and providers are also protected by policies limiting the prescribed amount of opioids for acute pain.

Occasionally, complications such as bone, muscle, nerve damage, or scar tissue development result in longer-term, chronic pain. These complications happened to my 14-year-old patient, and happens with enough frequently that cancer patients are often exempt from prescription limits.

A person’s ability to cope with pain varies greatly. Some patients with identical complications manage with minimal narcotics and instead use lidocaine patches, ibuprofen, physical therapy, and mind-body awareness to continue their lives with resilience. Others, like my patient’s mother, insist nothing but opioids work.

Most doctors avoid chronic pain management and worry about the liability of authorizing repeated narcotic refills. I worry, too. In this case of this patient, I worried particularly after an online opioid prescription registry showed that in one month, my patient had filled my oxycodone prescription, as well as other prescriptions, four times what I had prescribed.

I cannot tell who is taking the pills — my patient or his mother. He does not know what medications he takes when they are handed to him. However, he frequently comments that his mother cannot wake up early or drive sometimes because of her pills. Indeed, our office knows she may be incoherent and forgetful if we call in the morning.

Prescribers who suspect an addiction usually refer their patients to a specialist trained to manage chronic pain. By referring the patient to a pain specialist, providers remove themselves from the opioid liability while preserving the relationship to treat other health issues. Unfortunately, my state, New Hampshire, which has the nation’s second highest opioid overdose death rate, has no pediatric pain clinic. None.

Adult chronic pain specialists are not trained to manage pediatric patients even if they are adult-sized. Children cannot sign opioid contracts or be held directly responsible for their care. Chronic pain is as much psychological as physical, and adult pain specialists are not prepared to manage the interdependent psychosocial complexities between children with cancer and their traumatized and anxious parents.

My patient and his mother went for a single visit to the closest pediatric pain clinic three hours away. Physical therapy, non-addictive neuromodulators, counseling, and opioid weaning were recommended. His mother was offended by the counseling suggestion, unhappy opioids were not prescribed, and refuses to return to the pain clinic. I cannot force them. It is too far and the cost is not covered by insurance.

I suggested medical marijuana, which can improve coping with pain. Professionally, marijuana is easy. Physicians do not prescribe marijuana. We only certify a diagnosis. The state is responsible for determining eligibility, investigating abuse risk, and dispensing it. I have no responsibility or liability in my pediatric patient’s marijuana use. But as a pediatric opioid prescriber, I am fully exposed.

Although his stuffed animals talk to him when he uses marijuana, he still has pain and his mother still demands oxycodone. I expect him to have pain, but I have no idea how bad it is, how many opioids he needs, or who really takes the pills.

Some suggested treating only his cancer and not his pain. I would follow that suggestion, if pain management were available elsewhere. But it is not, and I know he has painful complications from the chemotherapy I gave him.

Others suggested entirely refusing to treat him because of his non-compliance. But he is not solely responsible for his non-compliance. And, it is unethical to deny him cancer care when the next closest pediatric oncologist is three hours away and outside his insurance network.

So I do what I can. I cannot provide ideal chronic pain care. Instead I focus on minimizing the damage that could be done to him, his mother, and myself.

I am scared for my patient and his mother and their addiction risk. I am scared for myself and other providers who lack guidance and protection in pediatric chronic pain management and the inadvertent role we may play in addiction. I am scared because writing prescription after prescription feels wrong, but I see no alternative.

So I am curing this boy’s cancer at the cost of his life? How many other pediatric patients are like him, successfully battling a disease and yet falling through cracks of our healthcare system into a deadly pit of addiction?

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ACOs: An Act of Faith, Theory, Hope, or Evidence? What Do the Data Say?

By ROSS KOPPEL and STEVE SOUMERAI

The recent Health Affairs Blog piece by Chernew and Barbey (October 17, 2017) provides a helpful theoretical summary of the various ways ACOs might achieve savings—even if modest or still latent. But their analysis of the empirical literature, including the CMS innovations, gives us little confidence that even these small savings are real or will emerge. It is astonishing there is little or no critique of ACO studies’ limitations that generally bias the findings toward the apparent (but miniscule) savings.

Two Critical Methodological Flaws:

1. ACOs generally volunteer to participate based on their pre-existing capacity to “manage” care. These organizations are then compared to non-volunteer organizations that are less likely to game the system and are destined to perform worse than volunteers.
2. These studies fail to incorporate the costs of forming and maintaining ACOs. These creation and maintenance costs alone would alter the calculations and may sink them.

It is no wonder the majority of Pioneer ACOs have dropped out of the program. It seems clear they were not saving money. In fact, the arrangement put Dartmouth Hitchcock—associated with the developer of the ACO concept—at financial risk.

Other, similar studies (such as the Massachusetts’ Blue Cross/Blue Shield reports on alternative payment models), have similar methodological limitations, including volunteer bias and significant shifts in the participant population over time.

While behavioral economics offers much promise and has already delivered exciting and useful policies, there are, to date, no responsible data that justify our current faith in ACO-like incentives for physicians to practice better medicine. It turns out that paying physicians extra income for things they were already doing (e.g., taking blood pressure), or charging patients with high cholesterol thousands of dollars more for their health insurance premiums does not improve chronic illness.

Of course we should base policy and practice on research. But it must be methodologically sound research. Absent or untrustworthy evidence of treatment and policy benefits plus ignorance (or ignoring) of previous failures is not acceptable.

Some policies encourage cherry picking (selecting only healthy patients) which can generate possibilities of patient harm. In addition to cherry picking, the crude application of economic incentives can backfire in other ways, such as changing diagnostic codes to maximize revenue, or keeping patients for “observation” in the emergency department to avoid penalties for re-admission with certain illnesses within thirty days, or post hoc documenting that patients entered a hospital with pre-existing community-acquired infections to avoid penalties for hospital-acquired infections.

As a nation, we are understandably desperate to reduce our healthcare costs. But we continue to seek workarounds rather than systemic solutions. Other nations spend 40% to 50% less than the US on healthcare and yet have much better health outcomes. We need to confront the patchwork chaos of our insurance system (e.g., insurance companies spend about 15% to 25% on overhead whereas Medicare spends about 2%), subsidies for sugar- and fat-laden food, food borne illnesses enhanced by weak or non-existent inspections, and incompressible medication pricing. The authors give little consideration to other models that have made our cost control efforts appear feeble, such as some of the European multi-payer plans than control costs and cover virtually all their citizens. Even the puny effects of ACOs cited here are illusory.

Ross Koppel, PhD, FACMI, University of Pennsylvania, teaches sociology, is a Senior Fellow at LDI Wharton, and is PI on several projects involving healthcare IT and cybersecurity. He is also professor of biomedical informatics at the University at Buffalo (SUNY).

Stephen Soumerai, ScD, is professor of population medicine and research methods at Harvard Medical School.

 

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I Refuse to Tell You What to Eat

By MICHEL ACCAD, MD

A recent tweet from JAMA, the journal of the American Medical Association, urged me andother doctors to “include nutrition counseling into the flow of [our] daily practice.”

Along with the tweet came a link to an article that outlines “relatively small” dietary changes, based on the latest Dietary Guidelines for Americans, that can “significantly improve health.”

My response to the tweet was swift and knee-jerk.  I will not do it.  I simply will not.  I refuse to follow dietary guidelines or recommend them to my patients.

“What are you saying?!” “Are you the kind of self-interested doctor who only treats disease and cares nothing about prevention?!”  I imagine my outraged critics erupting in a chorus of disapproval.

Is my reaction unwarranted?  After all, the recommendations themselves seem sensible enough:  Eat fast food less often; drink fewer sugary sodas; consume more fruits and vegetables.  What’s not to like?

Unhealthy guidelines

I don’t know.  Perhaps it’s dietary guideline fatigue.

For more than 40 years, the nutrition experts have instructed us with guideline after guideline, food pyramid after food pyramid.  But what have they got to show for?  The obesity epidemic followed the introduction of dietary recommendations, and some doctors even blame those recommendations for causing the epidemic!

The blame may be far-fetched, but there’s something un-natural and perhaps even unhealthy about dietary guidelines.

Take the recommendations in the JAMA article.  Even though the authors claim that only “small steps” need be taken, the whole message occupies 2 pages of fine print.  What’s more, the doctor is supposed to start the process by asking patients to fill out a questionnaire.  Who has the appetite for yet another questionnaire?!

The recommendations themselves come in the usual manner of adding or subtracting “servings:” increase vegetables by one serving per day; decrease sodas by one serving per day; replace one serving of crackers with one handful of nuts, etc…

But why think about meals in terms of discrete servings of food and beverage stuff?  A meal is one thing, one experience.  To break it up into physico-chemical or caloric components makes sense for laboratory animals, and perhaps for patients with serious metabolic disorders.  But does it really work for most human beings in their natural environment?

The article correctly points out that “conflicting and confusing nutrition messages from popular books, blogs, and other media further complicate patient decision making.”  Indeed, some gurus advocate a strict reduction in carbohydrates in favor of proteins and fats, while others promote a strict vegan diet and complete abstinence of animal protein.  Both sides offer what appears to be compelling evidence for the effectiveness of their favored diet.  Yet they can’t be both right.  Something’s seriously amiss here.

However, the academic community that informs nutrition policy has lost much of its authority and finds itself unable to be the voice of reason.  For example, its prior recommendations against saturated fats were overly negative and not based on sound science, and the discredit has limited the ability of mainstream academics to influence eating behaviors.

Missing ingredients

The main problem with nutrition guidelines and diet fads is that they all conceive of people as passive organisms who “are what they eat.”  They hardly take into account the complexity of human behavior and of the individual who is the target of the dietary intervention.

Unlike a beast rummaging for food in the forest by instinct, people choose their meals.  They may also choose to eat or not to eat.  The physical, chemical, financial, psychological, cultural, and spiritual elements that enter into those choices are not so simple.

People’s diets are imbalanced because people’s lives are frequently out of balance.  Not addressing the bigger picture may miss the main cause of the problem and makes following nutritional guidelines and fads another chore, another imposition.  If nutritional counseling is to be effective—and there’s no question that counseling can help—it must go beyond the stomach and address the whole person.

Less is more

For what it’s worth, I frequently do give dietary advice.  My advice invariably involves a four-letter word:  LESS.

From what I see, we are surrounded by food, drinks, and other edible items made available to us for easy consumption.  We find food and drink to be a convenient and, in the short term, effective way to satisfy some inner desires, but those desires are rarely simply nutritional in nature.  Therefore, telling patients to eat less is part of my routine, but not necessarily where my advice ends or where the solution lies.

So, no.  I will not add my voice to the cacophony of generic nutritional advice.  I will not sheepishly follow the recommendations of yet another academic article on the subject.  I refuse to tell you what to eat!

Michel Accad is a cardiologist based in San Francisco

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Price Transparency Tools Are Still Struggling. We Offer Advice

By PETER, BELL & FINDLAY

The potential of price transparency tools to help consumers with high out-of-pocket medical expenses remains largely untapped, according to two recent studies published in Health Affairs and other recent research by Consumer Reports and Public Agenda.

One study found that while more than half of the nearly 3,000 patients surveyed said they would use a website to shop for healthcare if they knew of one, only 13 percent actually looked for information on future healthcare spending and only 3 percent compared prices and costs across providers.

In the second study, patients with access to a price transparency tool focused on “shoppable” services did not experience overall lower spending on those services, and only 12 percent used the tool to begin with. On a positive note, patients who compared prices for imaging tests decreased spending an average 14 percent.

Research by us at Consumer Reports and a survey by Public Agenda (publicagenda.org) signals additional cautious hope for consumer’s use of price transparency tools in the future.   Both projects were sponsored by the New York State Health Foundation (myshealthfoundation.org) and received additional funding from the Robert Wood Johnson Foundation (rwjf.org).

What Public Agenda found

Public Agenda surveyed 2,062 adults nationwide and, in addition, 802 people in New York, 808 in Texas, 819 in Florida, and 826 in New Hampshire. In contrast to the Health Affairs findings, Public Agenda found that about half of those surveyed had tried to find medical price information online before getting care—with a focus on how much they might pay out-of-pocket.

About 20 percent of respondents said they sought the information to compare prices across providers while 28 percent tried to find out a single provider’s price. Of those who compared prices, 59 percent said they chose a less expensive doctor, hospital, medical test, or treatment.

Seventy percent agreed with the statement: “higher prices are not typically a sign of better medical care.”

Knowledge and use of state-sponsored price information websites was low, however. About 20 percent of people in states with such websites, like New Hampshire, said they had heard of the sites and only seven percent had tried to use them.

Consistent with the Health Affairs findings, almost 60 percent of Public Agenda’s respondents who had not tried to find price information online said they would like to do so in the future. And 70 percent agreed it would be a good idea for doctors and their staffs to discuss prices with patients before ordering or doing tests or procedures. Less than a third (28%) said their doctor had ever discussed cost with them.  

That plus low public awareness of medical price variation remain serious stumbling blocks to wider adoption of price transparency tools. A surprising 56 percent of people in the Public Agenda survey were not aware that doctors’ prices vary.

The Consumer Reports findings

CR used a combination of qualitative and quantitative methods to evaluate health plan websites and their cost estimator components. We also assessed stand-alone cost-estimator tools. For both, we used a structured evaluation by trained reviewers and usability testing by consumers.

We developed an overall score (0 to 100) based on 100 criteria grouped into four components: ease of use, functionality, content, and scope and reliability. (For details, see our technical report.)

We found that the quality of the tools varied substantially – from a low of 55 (Kaiser’s tool) to a high of 84 (Cigna’s tool).

Based on the 100-point scale, the insurance plan websites scored as follows:

Cigna – 84
United HealthCare – 82
Aetna – 77
Anthem – 73
Humana – 69
Kaiser Permanente – 55

The biggest failing was in the presentation of “value” to consumers—that is, combined cost and quality data integrated in a way that helps consumers make meaningful choices. Only the Cigna site got top marks for that.

Stand-alone national price transparency websites can provide useful information on prices and quality, especially for consumers who have no access to this information through their health plan. But our analysis found that many of the stand-alone tools lack key features that consumers want. Even the highest-rated tools have limited individual provider-level quality data, for example.

Two of the state websites (CompareMaine and New Hampshire’s HealthCost) and one of the stand-alone national sites (Amino) scored well, however—near the average of the private health plan tools.

The scores:

Amino – 66
CompareMaine – 65
NH HealthCost – 63
Colorado Medical Price Compare – 44
Guroo – 41
MDsave – 40
Healthcare Bluebook – 37
FAIR Health – 28

 

A synopsis of our findings for non-experts can be found here. http://ift.tt/2zKMY0e The full report of our findings can be found here.

The New York State home page for the project is here.

Implications and recommendations

We think price and quality transparency is a basic right for consumers. People need this information to manage their out-of-pocket expenses, avoid expensive surprise bills, and optimize their chances of getting high quality care.   According to 2016 study by the U.S. Federal Reserve, 47 percent of consumers don’t have the financial resources to manage an emergency expense of $400 or greater, without borrowing or selling assets.

The cost/quality tools available now are improving, but there are critical gaps. Some lack essential features, such as accurate, reliable up-to-date data, and out-of pocket spending estimates. And most don’t yet marry price and quality information in a way that is easy for consumers to understand and use.

Given the financial burdens increasingly placed on consumers, creating actionable price and quality transparency content is no longer an option; it simply has to happen.

At a minimum, insurers should be required to provide the information to enrollees. At the time of our study, only 12 New York state health plans offered price and out-of-pocket cost estimator tools to their members. Those 12 plans reached about 50 percent of the fully-insured market. And nine other New York plans—with 3.3 million enrollees—did not offer a plan-specific cost-estimator tool.

There’s no question about the need. About 30 percent of people with insurance through their employer have a high-deductible health plan, and projections from the Kaiser Family Foundation and others indicate that will increase to 40 percent in the next few years.  The unintended consequences of high-deductible plans are causing consumers harm; much of the savings they generate are due to people cutting back on healthcare services. People postpone going to a doctor, don’t fill prescriptions, or cut back on preventive care—and most troubling of all is that the sickest workers also cut back on care. (See “How to Survive a High-Deductible Health Plan” (from the January 2017 issue of Consumer Reports.  

At the same time, it’s becoming much clearer that price and quality transparency alone will not be a magic bullet for bending the health care cost curve. One analysis found that only seven percent of total healthcare spending was amenable to shopping (although that seven percent represents 47 percent of consumers’ out-of-pocket costs.)

Our recommendations:

• For outpatient and elective in-patient services, consumers deserve a pre-visit, personalized estimate of the costs they will face.
• All cost/quality tools should meet high standards for ease-of-use, functionality, content, and reliability, similar to those described in the Consumer Reports ratings rubric. (See links above.)
• Quality information should always be made available alongside price information and vice versa.
• Insurers should address the shortcomings of their price/cost estimator tools now, to prepare for increased use in the future.
• State and federal regulators should consider mandating the availability of cost/quality tools for all health plans, to ensure consumers have timely access to price information specific to their plan.
• Insurers, employers, health providers, government agencies, and health navigators should promote the availability and user benefits of online cost/quality tools, to increase their “findability” and use by consumers.

As we were preparing to submit this post to THCB, we saw this excellent blog at Health Affairs. It discusses and links to Maryland’s new price and quality transparency initiative.

http://ift.tt/2xQpeG5

Doris Peter is Director of the Health Ratings Center, Chuck Bell is Programs Director, and Steven Findlay is a Contributing Editor, all at Consumer Reports.  

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