Archive for the ‘Newsletters’ Category
Tiered Healthcare System?
In my Quality Controls class, a number of students have been debating the merits and detraction of a tiered healthcare system, where the wealthy have the option of buying high-end services and the poor get the quality of services their wallets and government support can afford. Here is my take on the question.
A New Blog is Born
Over the last several weeks, I’ve been hard at work with the start of the new school year and semester at UNC. For the first time, I am teaching Healthcare Policy for the Bachelors of Science in Public Health program, in addition to the Quality Improvement class for the Executive Masters students (Masters in Healthcare Administration, plus the occasional Masters of Public Health student). After a summer focused on consulting projects, it is great to again have a chalk board at my back and brilliant students to my front.
Newsletter — February 7, 2008
Medical error deaths in Pennsylvania. We are all customers with something of a common experience. On a Saturday morning, if you head off to Wal-Mart and purchase a new toaster oven, you fully expect that the oven will work. If it does not, you take it back for a refund. For the customer, there is certainly a cost (typically measured in gas mileage, but including the time invested in the purchase and return, as well). For the retailer, costs are significantly higher. This, of course, would include reduced reputation, the logistical costs associated with returning the defective product to the manufacturer, and the cost of warehousing, both, the defective product and the necessary replacement – plus ancillary costs associated with marketing, in order to churn replacement customers into the system as dissatisfied customers head off to the competition.
In healthcare, there has been a tacit expectation that, when medical errors occur, we will be paid for our services. Under this system it has never been precisely explained why the almighty smiles with such benevolence on us uniquely. It may be argued that tort liability represents an expected healthcare cost, but tort liability applies to other industries (recall the Firestone tire cases and, more recently, the lead-paint-Mattel issues). Perhaps it is the advanced degrees, the lab coats, the stethoscopes, and the other accouterments of healthcare that make us special, but, increasingly, such deference is in short supply among payers – including the big kahuna, CMS (the Centers for Medicare and Medicaid Services). The states, especially, are increasingly opposed to paying for medical-error with Medicaid patients. Today, we have the latest such report, coming to us from the Philadelphia Inquirer, extrapolating the medical error rates from a small number of prominent counties in Pennsylvania to the state at large.
Interestingly, there is a comment in the article indicating that one member of the medical community believes it unlikely that such an extrapolation is accurate. Surely, we are not killing so many patients as these projections suggest, the respondent asserts. These figures, however, strike me as being perfectly reasonable (even an understatement of the reality). Over the last several years, I’ve had close connections with some senior members of the Pennsylvania government and gave testimony in support of legislation designed to reduce the medical error rate. From those sources, I understand that nosocomial infections kill 19,000 Pennsylvania patients per year. Consequently, the figure of 1,500 deaths due to medical error in other categories strikes me as being in the ballpark.
California –Emergency-Room Problems Threaten, Both, Patients and Emergency Rooms. Overcrowded conditions, patients stacked in the hallways awaiting available rooms, a patient writhing and dying in the waiting room, an un-attended patient leaving in disgust and dying on the sidewalk across the street are all recent stories from California hospitals facing loss of CMS accreditation, according to this Los Angeles Times story. California, however, is not like Pennsylvania, and, to our credit, no practitioner is quoted claiming the problem is not as significant as this description indicates. Instead, the problem is blamed on lost capacity. Like the previous story, however, there is a quality improvement aspect and opportunity, in the face of financial constraints. While quality improvement is largely viewed as a means by which to increase customer satisfaction, the process improvement component of CQI is designed to increase cost savings through improved operational efficiency. The problem with CQI, however, is a required and sustained level of commitment that borders on religious fanaticism. Quality Improvement is not, therefore, the hallmark of the merely average provider.
Is Iowa the Solution? A recent an unprecedented surge of patients during the month of January in Iowa provided local hospitals and emergency rooms with a real-world opportunity to test their emergency plans. While this wasn’t the long anticipated bird flu or terrorism-related surge, in many ways it was a more challenging experience – with patients arriving with nearly every conceivable diagnosis. Better approaches to triage, closer monitoring of room and bed status, use of conference rooms as patient-treatment wards, cots lined-up in the hallways, private rooms converted to semi-private, and coordination of patient volumes across multiple hospitals described the severity of the challenge. As indicated in this Des Moines Register article, the established emergency plans were helpful (indicating their utility), but those plans needed to be abundantly flexible, taking into account an assortment of changing scenarios. Today, most hospitals across the nation have emergency plans, but, as the Iowa experience indicates, the simple presence of such plans is not sufficient.
Just as Edwards Deming is considered a founder of CQI, Genechi Taguchi holds the same status for Six Sigma. While Taguchi is best known for his engineering approaches, the core of his method is to create systems that are so robust they will work flawlessly in the worst possible circumstances (as opposed to normal, the average, or the expected). This, of course, would apply to emergency and mass casualty events. As any military planner will assert, the time for such planning is not in the heat of battle, while suffering from the fog of war.
After the bombing in Oklahoma City and the execution of staff alerts in New York City on 9/11, hospital administrators gave press conferences congratulated themselves on the fast response undertaken by their facilities. At the time, I wondered how much of that response was a consequence of executing an established emergency plan and how much of it was accomplished by adrenaline and the application of good judgment in a moment of crisis. Since then, I have learned that both occurred. The emergency plan was initiated and modified on-the-fly. The plans were good but they were not sufficiently robust (as designed) to accommodate what was, arguably, something less than the worst-case scenario (bird flu, dirty bomb, etc.).
Pediatrician Training At Specialty Hospitals Confront Threat Of Federal Government Funding Cuts – Ohio. The Dayton Business Journal reports that a current budget proposal in Congress would cut funding for pediatrician training at specialty hospitals. As indicated in previous postings and newsletters, the federal government is increasingly desperate to halt the impact of health care inflation on government programs — which now accounts for 17 percent of expenditures. This is especially true of Medicaid, as evidenced by federal funding cuts in recent years.
Children, of course, are disproportionately represented among America’s indigent population – the poor tend to have larger families. There is, of course, a significant cost to be borne (literally and figuratively) if failing to provide adequate health care to America’s children, regardless of their financial status. Poor health care diverts student attention during the K-12 years, undermines learning, predicts lifelong poverty and lower incomes (with accompanying cost to government), is a predictor of crime (violent and otherwise), and, perhaps most egregious of all, deprives the totality of the population of this demographics’ future contributions (an especially important consideration in a globally competitive economic system). All these negatives are a consequence of unsustainable health-care inflation … and the boomer generation has not yet begun to retire.
Iowa Proposal Takes a Different Approach to Children Health. This Chicago Tribune article describes an Iowa plan to provide health care coverage to all children in that state – taking an entirely different position on the subject. This, of course, is just a proposal, but I cannot help wondering whether, if successful, the Iowa Legislature will experience “buyer’s remorse,” once the full price of such a change confronts payment by government. This is precisely the situation taking place in Massachusetts, following their new healthcare structure enacted a couple of years back — under then-governor Mitt Romney.
The Big Dig in Massachusetts. Some Massachusetts lawmakers are shocked to discover cost overruns that are projected at $600 million over 10 years for the new state health care plan. That plan was designed to reduce long-term health care costs for the state. The state, however, appears to have identified a solution – increase tobacco taxes.
Several years ago, the state attorneys general secured windfall payments from the tobacco industry, designed to compensate the states for smoker health-care costs. The states gladly accepted the payments and promptly spent the money to build roads, bridges, parks, and on other, non-healthcare initiatives. Very little money was spent to reduce smoking. Doing so would run contrary to the State’s interest – given the sin tax revenues collected on each pack of cigarettes.
In a related story from earlier this week, this blog reported on two stories indicating that obesity and smoking are not responsible for health care cost inflation. In fact, the opposite is the case, with both groups costing the healthcare system less (because both groups die sooner) than healthy patients. While the proposed Massachusetts tax raises the issue of equity, by asking smokers to finance a disproportionate amount of health care costs, such a proposal seems doomed to failure on two fronts.
If the proposed tax increase prompts a reduction in smoking, tax revenues from tobacco would decline. Presumably, this would prompt government to increase tobacco taxes, which would further prompt a reduction in smoking and a new decline in tax revenues. In the insurance industry, this death spiral is known as “adverse selection.”
The second problem with such a proposal is that it does nothing to address the drivers of health-care inflation, which would remain unmolested and free to promote increasing health care costs.
One Response To The Proposed 10% Cut In Medicare Compensation. Earlier this week, the Bush administration submitted its budget proposal for 2009 (following the State of the Union address). That proposal includes significant cuts in funding to Medicare (previously reported here). As the previous newsletter item indicates, we are witnessing systemic hiccupping in advance of Boomer generation retirements, as the federal government seeks the means by which to meet its health-care commitments, in an environment where medical inflation exceeds wage growth by more than double each year on average. If Medicare compensation were low, we would expect to see a practitioner rebellion in Florida – the bellwether state for retiree health care. Indeed, this Tampa Bay Online article indicates that two thirds of Sarasota practitioners plan to cease accepting new Medicare patients unless compensation improves.
That, however, is not the important part of the story. Recall that Medicare + CHOICE was the precursor of Medicare Advantage. Medicare + CHOICE confronted a similar problem of inadequate compensation and received the same response from Florida practitioners. More importantly, institutional payers (insurance) under the Medicare + CHOICE were exiting in droves, stranding as many as 400,000 enrolled seniors per year. This prompted the demise of the Medicare + CHOICE system, a one-time Clinton-era kickback to institutional payers, the undermining of faith and confidence in HCFA (leading to the name change to CMS), and the creation of the Medicare Advantage system (with its higher reimbursement rates).
There was, in fact, significant objection by Senator Charles Grassley and others when the kickback to institutional payers was promptly handed over to hospitals and physicians by the insurance industry. This objection was based on government’s hope that the insurance industry could be bribed or seduced into Medicare Advantage participation, but the insurance industry rightly noted that a growing number of physicians and hospitals were on the verge of bankruptcy. A Healthcare Advisory Board analysis at the time indicated that over one third of hospitals in the United States were in the red.
At the time, my students and I concluded that government’s “solution” would do nothing to halt healthcare’s hyperinflation. Hyperinflation is defined as yearly inflationary rates in excess of 30%. Healthcare has been averaging growth in excess of wage inflation by more than 200% since 1980. Accounts receivable charges by hospitals and physicians, however, are not a source of health care inflation, according to a recent Congressional Budget Office report (see earlier report). We, therefore, came to the conclusion that any solution not directly addressing the sources of health care inflation stood little chance of reversing it. Less than a decade later, we appear to have been right.
Minnesota Sees Things Differently. Two special task forces designed to seek answers to the rising cost of health care in Minnesota are reporting their results. The first is a task force established by the governor, who thanked the committee members for their service and indicated that he plans to largely ignore their recommendations.
This may, however, be a positive, since those recommendations largely mirror the Massachusetts approach (described earlier). The recommendations, of course, would include an increase in tobacco taxes (which were increased by $.75 per pack recently) and a state law mandating purchase of health insurance. It appears, the governor has been talking with the good people in Massachusetts.
The portion of the special committee’s proposals that the governor does like includes improving school lunches to undermine childhood obesity and legislatively preventing hospitals from charging indigent patients higher rates than provided to insurance. As mentioned previously, obesity is not a significant driver of health-care costs inflation, and it seems unlikely that mandating parity in compensation between the indigent and insurance will provide significant savings. The indigent, after all, are, by definition, poor.
Nevertheless, the state believes that these two proposals and a coordinated effort between government, insurance, practitioners, and patients will cut health care costs by $12.3 billion between now and 2015. All of this is described in a Minneapolis-St. Paul Star Tribune article.
The Pennsylvania Plan. The governor’s office, which initially sought to pay for increasing health care costs with a tax on employers not providing employer-based insurance, is now advocating a 10% increase in the tobacco tax, according to this Pittsburgh Gazette article. Beyond the realization that, at this rate, smokers will eventually pay for 90% of healthcare, the governor’s plan seems to ignore the reality that the Speaker of the House of Representatives is a smoker.
The governor has wisely decided against an obesity tax. As every male in the US understands, there is but one safe response to the question “Honey, does this dress make me look fat.” Government, in short, does not want to get into the business of answering that question.
US Health Care System Unsustainable, According to New AHA President. William Petasnick, the chief executive of Froedtert & Community Health, is the chairman this year of the American Hospital Association. He recently gave an interview, with the Milwaukee Journal Sentinel, in which he describes the US healthcare system as “unsustainable.”
First and foremost, we want to use the coming election as an opportunity to begin the debate about our health care system. And it ought to be a debate about ideas for improvement. What we are hoping to do is get the candidates really talking about how do we provide coverage for all? How do we focus in on wellness? How do we create a better health system that is more affordable and more efficient? How do we create a health system in which quality is measurable? And how do we get a better information flow through interoperability? We want to be certain that the next president and congressional leaders are committed to working for change. We don’t believe the current system is sustainable in the long term.
Why isn’t this man a Governor?
Eat ‘em if You Got ‘em — Smoke ‘em, too — Why The Fat Chick and the Marlborough Man Are Saving Healthcare Dollars
In the earlier “Luddites” piece, I argue that the problem of healthcare inflation is not attributable to the poor health practices of the patient or the American people but, rather, the cost of technology. This is based on the recent testimony of the director of the Congressional Budget Office and their research.
Today, we have research findings from the Netherlands National Institutes for Public Health in indicating that the obese and smokers actually incur lower healthcare costs over their lives than those who are healthy. It seems that obesity and smoking, on average, prompt death seven years sooner than for the healthy and, with the bulk of health costs arriving later in life, the increased longevity of the healthy drive up healthcare costs / spending. Here is the supporting research:
http://medicine.plosjournals.org/perlserv/?request=get-document&doi=10.1371/journal.pmed.0050029
And accompanying materials:
http://news.yahoo.com/s/ap/20080205/ap_on_he_me/obesity_cost
http://www.niph.go.jp/English/index.html
http://medicine.plosjournals.org/perlserv/?request=get-document&doi=10.1371/journal.pmed.0050037
Is Healthcare a Free Market? Lessons From Seattle.
In 2000, the state of Washington deregulated the healthcare insurance industry. Individual patients were finding it difficult to secure coverage in an environment of “overregulation.” In 2007, following deregulation and the robust return of the industry to Washington State, a proposed bill designed to return regulatory oversight to the state was defeated when the industry declared that no significant rate hikes were anticipated. The Legislature adjourned, and increases of between 20% and 40% were imposed by many in the industry — using a loophole that increased rates as those covered moved from one age bracket to the next.
Yesterday, the Washington State Senate responded, passing a bill that would return regulatory oversight to the insurance commission. The House of Representatives is expected to easily pass similar legislation, prior to approval by the Governor.
The insurance industry, in response, claims that health care expenses are rising significantly, as the added burden of treating Boomer-generation patients increases industry costs, and in the absence of any effort to address the underlying sources of health care inflation. http://seattlepi.nwsource.com/local/349344_insurance31.html .
All this underscores a question that I raised at a televised debate sometime back. What, precisely, is health care in the United States? Worldwide, as best I can tell, healthcare falls into one of three models.
In the United States, for the majority of our history, health care has been perceived as a free-market economy. Currently, the United States is more of a socialized medicine country (by a small fraction) if simply comparing private-pay and health care insurance, combined, to that proportion of patient treatments paid through government. We are more prominently a free-market health-care system once the pharmaceutical industry, the medical device manufacturing industry, the medical supplies industry, and the other sporting industries are taken into account, within this $1.7+ trillion amalgam of providers, payers, and adjacent industries.
There is, as well, in the United States an established recognition of public health as a government obligation. No private sector equivalent exists for the management of natural disasters and acts of terrorism – such as Katrina and the unrequited but prayed-for deluge of patients from the 9/11 attacks on the Twin Towers. Government coordination of a response to pandemic bird flu, just as the public health response to tuberculosis and polio in previous generations, would fall under this government role of public health, as well. Today, in fact, government is largely responsible for the public education initiatives related to the increasing number of Americans diagnosed with diabetes each year, and it was the states attorneys general that sued the tobacco industry for the cost and harm attributable to smoking and nicotine addiction (to say nothing of the original surgeon general’s declaration in the 1960s).
It may be argued that this is not a legitimate role for government – that, if compensated, the private sector might profitably undertake the exercise and do so with greater efficiency. The counterargument to such a model references the “domestic tranquility” clause in the Constitution as making this a compelling requirement of government. Philosophically, this goes back to Thomas Hobbes, who maintained that each individual enjoyed absolute freedom when no laws exist (including the freedom to steal, assault, and murder), and that we willingly give up a portion of those freedoms to avoid the resulting state of anarchy and pursue what Maslow later described as “personal actualization.”
Domestic tranquility and its promotion, therefore, is a basis on which government credibility is derived. The declared willingness of South Africa and Brazil, several years ago, to ignore international copyright laws and produce AIDS cocktails off patent (rather than suffer the debilitating expense and public health consequences of that epidemic), serve to support the legitimacy of this claim. The governments of neither Brazil nor South Africa could retain internal credibility if ignoring HIV AIDS or supporting patent protection for treatment medications over the public health of the population.
The third model is health care as a human right, which is, either, explicitly or tacitly declared by socialized medicine countries. In France, this declaration is explicit, while, in England, it is tacit. In the United States, it is tacit with respect to the impoverished and the elderly under Medicaid and Medicare, and it is extended to other selective classes of patients through smaller and targeted programs, such as healthcare provision for children, those suffering from black lung, et cetera.
It may be argued that this hybrid model in the US has served us well for at least 40 years, since the enactment of Medicare and Medicaid in 1965. The question going forward, however, is whether it can continue to do so and, in fact, whether it does so today.
Those arguing for the overhaul or reform of the healthcare system note that the cost of goods produced in the United States are less competitive in comparison to the rest of the world. A recent study indicated that $1600 in the cost of every car produced out of Detroit is attributable to healthcare, for example. An increasing number of employers are, in fact, no longer providing coverage (in whole or in part). When coupled with the high cost of care and the rate of healthcare inflation, the number of uninsured Americans has increased by roughly 15 percent to 47 million in roughly the last five years. This serves to further expand the cost of care as preventative services are avoided and inappropriate sources of care (such as the emergency room) substitute for family practice.
Beyond the competitive posture of the country, there is a long-standing realization that the Boomer generation will enter retirement starting in less than two years. This represents a significant burden on the US system and its finances, since greater than 70% of health-care costs are borne in the last five years of life. The Boomer generation is estimated to increase the senior population (those older than 65) by nearly double between now and the year 2030 – growing from 45 million, currently, to over 80 million. Couple this with the realization that Medicare is slated to go bankrupt, by its own estimate, in 2020, and the subject of intergenerational “warfare” seems a real possibility, if warfare is defined as a policy fight over limited resources. The Boomer generation, however, is clearly not to blame, since it contributed to the financing of Medicare costs for the previous generation AND largely funded the now-depleted Medicare Trust Fund – which was designed to cover the healthcare cost of Boomers in retirement.
It is certainly the case that the current model will require significant reform if the implosion of the US system is to be avoided. Recognizing the three current models in existence among first world countries may assist in identifying potential alternatives, but these three models should not be viewed as the only options available. Some different, uniquely creative and, as yet, unrecognized, alternative may exist, but this issue is far too important to represent a topic of interest and voter consternation only during presidential election cycles – simply to be forgotten in the intervening years.
In fact, I am nearly convinced that the problem has been ignored for so long that no viable solution exists. It was a moderate issue when Jimmy Carter ran for president, when Ronald Reagan defeated him, and when the first George Bush followed Reagan. Paul Erdmann lists it as a looming threat in his writings of that time, and Ross Perot made it a center piece of his first campaign for the presidency.
It was the leading issue for President-Elect Bill Clinton at his Little Rock Economic Conference the month before his inauguration, and a campaign focus when the current President Bush was elected his first term in office. It was such a significant issue in advance of Mr. Bush’s reelection that the new pharmaceutical benefit for seniors was enacted. We have, however, largely ignored the looming crisis of healthcare during the three-years-in-four when presidential politics are not at stake.
Given this, some reading the Seattle article may believe this to be the most important sentence, “Jeff Roe, president of Lifewise Health Plan of Washington, said increased rates are driven by the increased costs of providing health care for an aging population that relies on more and better medical technology.” (Emphasis added.)
For me, however, the more telling and important sentence is this one:
“Roe contends the bill would artificially suppress rates through a subjective rate authority but do nothing to address the underlying cause of rate increases.” (Emphasis added.)
Why?
No undertaking by government or industry has directly sought to address the “underlying cause(s)” of our health-care inflation problem. We have, instead, acted as though this were the rightful providence and role of the free market and its “invisible hand.” Health care, however, has not been an unmolested free market for more than 40 years.
Pharma’s Cold Reception in Minnesota
The Minneapolis-St. Paul Star Tribune reports that SMDC Health System has banned all items containing any firm’s logo on the premises. (http://www.startribune.com/lifestyle/health/13881951.html) This applies primarily to pharmaceutical companies and the abundant number of trinkets, such as notepad, pens, pencils, and the rest. Several years ago, Minnesota was one of a small number of states that encouraged state employees to purchase their medications through online pharmacies and distribution houses located in Canada (i.e., drug reimportation). At the time, this was interesting because it represented something of a sanctioned black market, where the federal government was (and continues) to be opposed to reimportation, while a number of states and localities supported the practice due to cost savings. SMDC Health System believes such gratis advertising influences prescribing patterns by their physicians, and the system projects a cost savings in excess of $100,000 through the elimination of inappropriate prescribing.
The Supreme Court, however, has ruled that advertising constitutes free speech and, in the case of health care, the distribution of information. Industry representatives have labeled this new policy as “unfortunate,” but they have not indicated an interest in pursuing the issue in court — as yet. In this case, the industry can hardly bite the hand that feeds them if not being fed. If the practice becomes commonplace, however, it will be interesting to note the positions taken by both sides.
More interesting, is the question of whether there are any unintended consequences with such a practice. It is fully understood by the hospital system that this is likely to incur a reduction in industry support, especially since the new rule reduces access by pharmaceutical sales reps seeking to meet with system practitioners. The health system maintains that there are more appropriate sources of information available to practitioners (such as journal articles and attendance at continuing medical education events) and argues that the information typically provided by sales representatives is skewed to favor the products sold by the represented company.
Potential Unintended Consequences:
A couple of years ago, study results indicating that if a physician were to read one germane journal article per day, that practitioner would be behind by five years before the end of the first year. To the extent that physicians rely on sales representatives for some portion of their professional information, the unintended consequence may be less well-informed practitioners. If the no-logo practice expands, the industry may be less inclined to sponsor continuing medical education conferences, which currently constitute one significant source of medical information for practitioners. Taken to its natural extreme, the inability of the industry to effectively market their products would have the effect of undermining research and development investment. A partial or incremental step in that direction would include a reduction in R&D spending for treatment of low frequency diagnoses and those likely to generate lower profitability – such as medications for treatable conditions, where the goal is to reduce the side effects of drugs currently on the market.
None of this is guaranteed to take place, and, at this early point in the practice of banning logos and other marketing materials, there is no indication that a trend exists along these lines. Moreover, it is certainly not my intent to support the pharmaceutical industry or to oppose what may be an effective approach to reducing the rising cost of health care. Instead, this represents an opportunity to anticipate the unintended consequences – as Edward Tenner recommends in “Why Things Bite Back: Technology and the Revenge of Unintended Consequences.”
