This evening there is much talk about the House bill (HR 3200) before the Energy and Commerce Committee being subject to compromise. While removing the public plan option and decreasing subsidies would remove key features of the bill, it is an overstatement to say that the revised bill no longer has the capacity to make healthcare more efficient.
For example, there are 4 mentions of “disease management” in HR 3200. Disease management is one of a handful of concepts that could make a significant difference in the efficiency of the system. See, e.g., BCG's predictions. Compare the prevalence of the term in HR3200 with the original HIPAA privacy rulemaking back in the year 2000, where HHS published comments for 65 FR 82462 that “we are unable to find generally accepted definitions of the terms ‘disease management’ and ‘disability management’”, and therefore omitted the terms. See the excerpt that follows:
Comment: Several commenters asked that disease management and disability management activities be explicitly included in the definition of health care operations. Many health plans asserted that they would not be able to provide disease management, wellness, and health promotion activities if the activity were solely captured in the rule's definition of “treatment.” They also expressed concern that “treatment” usually applies to an individual, not to a population, as is the practice for disease management.
Response: We were unable to find generally accepted definitions of the terms 'disease management' and 'disability management.' Rather than rely on this label, we include many of the functions often included in discussions of disease management in this definition or in the definition of treatment, and modify both definitions to address the commenters' concerns. For example, we have revised the definition of health care operations to include population-based activities related to improving health or reducing health care costs. This topic is discussed further in the comment responses regarding the definition of 'treatment,' below.
There is also a piece in the legislative history of 65 FR 82462 where "Commenters representing health plans were concerned that the “static” nature of the definition would stifle innovation and could not reflect the new functions that health plans may develop in the future that benefit consumers, improve quality, and reduce costs." Now, almost 10 years later, Congress is trying to legislate the innovation that was promised but never delivered.
Thursday, July 30, 2009
Tuesday, July 28, 2009
Are tax increases and gov't control always Orwellian?
Just a quick bump to MediaVortex's comment last week on impact of the new health legislation to ERISA:
"A big battle right now in the Senate Finance Committee centers around the idea of "actuarial equivalence." My conversations with a couple of actuaries leaves me with the conclusion that "actuarial equivalence" will be the weasel words that enable the "health choices commissioner" (don't you love the Orwellian irony of that title?) to not only effectively kill consumer-directed care, but provide Congress with the loophole to add special interest benefits to the plan to garner votes. Over time, this will drive up the cost of a public plan rather than reduce it. This will of course be followed by tax increases and the eventual government control of 1/5 of our nation's economy."
A way to protect the public plan from interest group politics would be to create an semi-autonomous entity like the Fed to run the program. Of course the Fed is catching a lot of heat right now, with new demands for accountability.
Assuming we do get increased taxes and government control of 1/5 of the economy, is that such a bad thing? First, in the higher income brackets, does tax policy really need to avoid creating a disincentive for hard work? It may be that it would be better for families and society if people making more than $250,000 did have a disincentive to put in that 81st billable hour -- more progressive taxation could accomplish that.
Second, some economists show that government spending has a multiplier effect on GDP greater than private spending. On what else might those funds be spent? "Gas and toys from china? Once that money is spent it is out of our economy and no longer grows GDP. That decrease our GDP by a factor of 7 to 20 depending on what they are buying. Besides healthcare and housing what other expenditures keep more money in the US? Is a Chinese made big screen really a better purchase? That is where our discretionary spending is being spent, people are choosing to purchase excessive healthcare. If we eliminate that then they will purchase excessive electronics or eating out or other non essential items. Our HC spending is not resulting in people starving in the streets."
"A big battle right now in the Senate Finance Committee centers around the idea of "actuarial equivalence." My conversations with a couple of actuaries leaves me with the conclusion that "actuarial equivalence" will be the weasel words that enable the "health choices commissioner" (don't you love the Orwellian irony of that title?) to not only effectively kill consumer-directed care, but provide Congress with the loophole to add special interest benefits to the plan to garner votes. Over time, this will drive up the cost of a public plan rather than reduce it. This will of course be followed by tax increases and the eventual government control of 1/5 of our nation's economy."
A way to protect the public plan from interest group politics would be to create an semi-autonomous entity like the Fed to run the program. Of course the Fed is catching a lot of heat right now, with new demands for accountability.
Assuming we do get increased taxes and government control of 1/5 of the economy, is that such a bad thing? First, in the higher income brackets, does tax policy really need to avoid creating a disincentive for hard work? It may be that it would be better for families and society if people making more than $250,000 did have a disincentive to put in that 81st billable hour -- more progressive taxation could accomplish that.
Second, some economists show that government spending has a multiplier effect on GDP greater than private spending. On what else might those funds be spent? "Gas and toys from china? Once that money is spent it is out of our economy and no longer grows GDP. That decrease our GDP by a factor of 7 to 20 depending on what they are buying. Besides healthcare and housing what other expenditures keep more money in the US? Is a Chinese made big screen really a better purchase? That is where our discretionary spending is being spent, people are choosing to purchase excessive healthcare. If we eliminate that then they will purchase excessive electronics or eating out or other non essential items. Our HC spending is not resulting in people starving in the streets."
Monday, July 27, 2009
Mobile Devices and Context Sensitivity
Qualcomm recently pulled the plug on development of its leading mobile health device, but the sector seems poised to grow using a non-MVNO model. What better way to deploy context-sensitive information?
Context-sensitivity makes all the difference in the world when dealing with technical terms. “Cervical”, for example, means something much different coming from an OB/GYN than from a chiropractor. If a GPS-enabled mobile device knows where the individual lives, whether he takes the elevator or stairs, and what restaurants he visits, it can provide much more helpful information to the individual. When my iPhone asks me if it is okay to “use current location” to narrow searches, it is already a step in this direction. Moreover, additional medical device technology, such as LEDs that produce a spectrum that takes a radar-like reading of blood glucose, could be bolted on for multiple levels of context sensitivity.
Privacy questions abound. For starters, take the fact that 1 in 3 Americans is obese in some populations, and that obesity is an even greater health risk than smoking. For obese persons, then, the government could impose a higher sales tax on fatty foods. This is likely an unacceptable form of discrimination, but it is technologically possible, using the same methods that insurance carriers use for realtime repricing of medical services today. Carriers tie it to the health ID card, or a health spending debit card; but it could also be tied to a transaction-enabled mobile device as well. Call it "realtime repricing of health incentives". Clearly there would have to be some overall financial incentive, such as funds parked in a health savings account, to incent an individual to agree to such a program. Can existing cafeteria plan (IRC Sec 125) regulations be modified or interpreted to permit this?
Context-sensitivity makes all the difference in the world when dealing with technical terms. “Cervical”, for example, means something much different coming from an OB/GYN than from a chiropractor. If a GPS-enabled mobile device knows where the individual lives, whether he takes the elevator or stairs, and what restaurants he visits, it can provide much more helpful information to the individual. When my iPhone asks me if it is okay to “use current location” to narrow searches, it is already a step in this direction. Moreover, additional medical device technology, such as LEDs that produce a spectrum that takes a radar-like reading of blood glucose, could be bolted on for multiple levels of context sensitivity.
Privacy questions abound. For starters, take the fact that 1 in 3 Americans is obese in some populations, and that obesity is an even greater health risk than smoking. For obese persons, then, the government could impose a higher sales tax on fatty foods. This is likely an unacceptable form of discrimination, but it is technologically possible, using the same methods that insurance carriers use for realtime repricing of medical services today. Carriers tie it to the health ID card, or a health spending debit card; but it could also be tied to a transaction-enabled mobile device as well. Call it "realtime repricing of health incentives". Clearly there would have to be some overall financial incentive, such as funds parked in a health savings account, to incent an individual to agree to such a program. Can existing cafeteria plan (IRC Sec 125) regulations be modified or interpreted to permit this?
Friday, July 24, 2009
New Technologies and Pay for Performance
One of the key beliefs of President Obama and his advisors is that health technologies can make a significant difference to the quality and cost of care. In a recent speech at the Heritage Foundation, Professor Richard Epstein of the University of Chicago challenged this notion, maintaining that adoption of technology by government seldom goes well. It was not clear if he would also maintain that the government seldom gives effective impetus to adoption of new technologies in the private sector. Lots of counterexamples exist there: the Interstate Highways system leading to big box retailing and Walmart; ARPANET leading to Google.
In any case, Epstein maintains that if a technology’s value exceeds its price, it will be adopted by the private sector without any help from the government. That may hold true in a perfect market, but the healthcare system is far from perfect.
Is there a concise way of understanding the features of the healthcare system that have made private-sector innovation unable to stem the tide of cost? Epstein would likely cite government interference, particularly the unique tax treatment of employer-provided healthcare.
In Super Crunchers, Ian Ayres makes the case the increasingly powerful databases and processing power can significantly change how industries operate, including the medical field. Experience, however, seems to validate Epstein’s position. So far, large deployments of evidence-based medicine and pay-for-performance systems appear far and few between. A few notable examples do exist: Medicare bundles payments to hospitals based on diagnosis, forcing hospitals to internalize some incentives for efficiencies; California has the Pay for Performance Program; The Leapfrog Group of Fortune 500 employers has pursued making data on medical cost and outcomes more widely available. While these groups may have laid the foundation, it appears that the economics of healthcare payments has not changed much. The California Pay for Performance coalition, founded in 2001 set the modest goal in 2006 of 10% of physician compensation being outcome-based by 2010.
Blame it on doctor resistance? In that case, it may be a first mover problem and therefore a perfect example of a place for government to get involved.
Hal Luft has said that carriers just don’t have the incentives. Large employers are self-insured, which minimizes the carrier’s skin in the game. Moreover, helping the doctors keep costs down and deliver good outcomes helps the other insurance companies, since most doctors participate in multiple carrier networks.
Is an Accountable Care Organization a better model? Kaiser says no true ACOs exist today, but organizations like Claremont Partners do perform the kinds of longitudinal analysis and intervention that we would expect to see from an ACO.
This blog entry and the questions raised will be refined and answered in the coming days.
In any case, Epstein maintains that if a technology’s value exceeds its price, it will be adopted by the private sector without any help from the government. That may hold true in a perfect market, but the healthcare system is far from perfect.
Is there a concise way of understanding the features of the healthcare system that have made private-sector innovation unable to stem the tide of cost? Epstein would likely cite government interference, particularly the unique tax treatment of employer-provided healthcare.
In Super Crunchers, Ian Ayres makes the case the increasingly powerful databases and processing power can significantly change how industries operate, including the medical field. Experience, however, seems to validate Epstein’s position. So far, large deployments of evidence-based medicine and pay-for-performance systems appear far and few between. A few notable examples do exist: Medicare bundles payments to hospitals based on diagnosis, forcing hospitals to internalize some incentives for efficiencies; California has the Pay for Performance Program; The Leapfrog Group of Fortune 500 employers has pursued making data on medical cost and outcomes more widely available. While these groups may have laid the foundation, it appears that the economics of healthcare payments has not changed much. The California Pay for Performance coalition, founded in 2001 set the modest goal in 2006 of 10% of physician compensation being outcome-based by 2010.
Blame it on doctor resistance? In that case, it may be a first mover problem and therefore a perfect example of a place for government to get involved.
Hal Luft has said that carriers just don’t have the incentives. Large employers are self-insured, which minimizes the carrier’s skin in the game. Moreover, helping the doctors keep costs down and deliver good outcomes helps the other insurance companies, since most doctors participate in multiple carrier networks.
Is an Accountable Care Organization a better model? Kaiser says no true ACOs exist today, but organizations like Claremont Partners do perform the kinds of longitudinal analysis and intervention that we would expect to see from an ACO.
This blog entry and the questions raised will be refined and answered in the coming days.
Thursday, July 23, 2009
Reform Bill to Slow Consumer Driven Care
The financial institutions and advisors that administer health savings accounts (HSAs) have relied upon an exemption from ERISA to streamline deployment of HSA-based consumer driven plans. Ironically, it may be the demise of ERISA itself that causes the greatest regulatory burdens to these firms. ERISA lets employers with self-funded health plans avoid costly federal and state regulations on covered treatments, pricing, rate setting and so on. According to a recent article in the WSJ, roughly 75% of employer-based coverage is governed by ERISA’s “freedom of purchase” rules.
The House health bill would override ERISA’s exemption of self-funded plans. The “health choices commissioner” created by the bill has authority to determine what constitutes a plan that satisfies the individual/employer mandate for coverage. The current Administration’s ambition for regulatory agencies to play an expansive role suggests that unless expressly barred by law, the Commissioner will elect include HSA features in the scope of any such examination. From my experience trying to explain HSAs to federal regulatory agencies (IRS, OCC, NCUA), no leaf of the HSA program will be exempt from the examination. So long, streamlined deployment of HSA-based plans.
The House health bill would override ERISA’s exemption of self-funded plans. The “health choices commissioner” created by the bill has authority to determine what constitutes a plan that satisfies the individual/employer mandate for coverage. The current Administration’s ambition for regulatory agencies to play an expansive role suggests that unless expressly barred by law, the Commissioner will elect include HSA features in the scope of any such examination. From my experience trying to explain HSAs to federal regulatory agencies (IRS, OCC, NCUA), no leaf of the HSA program will be exempt from the examination. So long, streamlined deployment of HSA-based plans.
Wednesday, July 22, 2009
Reporting requirements for health insurance carriers
One small item in the Senate bill that may be foundational to longer-term improvements in the healthcare system is the requirement for reporting of cost data by carriers. This stands in contrast to the paucity of information that is available today.
I was preparing for a call to WellPoint dba Anthem / Blue Cross of California and wanted to pull down California-specific statistics. I found the Insurance Commissioners website easily enough, and the Company Profile section. Finding useful information as a consumer or employer is more difficult. The Company Information page for WellPoint states that their two lines of business are Disability and Life. "Life Insurance" is a defined term in the glossary, and but is not defined to include Health. Not exactly confidence-boulstering for the non-expert who knows just enough to know that WellPoint is in fact a health carrier. Financial reports are available, from which certain premium revenues and administrative expenses can be derived, but it is not for the faint of heart.
Section 2704 of the new legislation provides for reporting on:
‘‘(1) on reimbursement for clinical services provided to enrollees under such plan or coverage;
(2) for activities that improve health care quality; and
(3) on all other non-claims costs, including an explanation of the nature of such costs."
Having these three pieces of information would make comparison shopping much easier for consumers and employers. If there is simply a "first mover" problem with the carriers providing this information, then maybe having the federal government mandate that all the carriers use the same standard will bring value to the carriers as well. In banking we had quarterly call reports and even the credit unions have an equivalent quarterly public report. It was a great way to compare league tables, both inside the financial institution and for potential business partners of the financial institutions.
I was preparing for a call to WellPoint dba Anthem / Blue Cross of California and wanted to pull down California-specific statistics. I found the Insurance Commissioners website easily enough, and the Company Profile section. Finding useful information as a consumer or employer is more difficult. The Company Information page for WellPoint states that their two lines of business are Disability and Life. "Life Insurance" is a defined term in the glossary, and but is not defined to include Health. Not exactly confidence-boulstering for the non-expert who knows just enough to know that WellPoint is in fact a health carrier. Financial reports are available, from which certain premium revenues and administrative expenses can be derived, but it is not for the faint of heart.
Section 2704 of the new legislation provides for reporting on:
‘‘(1) on reimbursement for clinical services provided to enrollees under such plan or coverage;
(2) for activities that improve health care quality; and
(3) on all other non-claims costs, including an explanation of the nature of such costs."
Having these three pieces of information would make comparison shopping much easier for consumers and employers. If there is simply a "first mover" problem with the carriers providing this information, then maybe having the federal government mandate that all the carriers use the same standard will bring value to the carriers as well. In banking we had quarterly call reports and even the credit unions have an equivalent quarterly public report. It was a great way to compare league tables, both inside the financial institution and for potential business partners of the financial institutions.
Tuesday, July 21, 2009
Process Interoperability in House and Senate Bills
Yesterday I was poking fun at the two dozen mandates for “cultural and linguistic appropriateness” in the House and Senate bills. Vince Kuraitis’ recent posting on interoperability made me want to delve more into this bit of legislative doublespeak. To better understand the legislators' intent and ability to transfer from policy to private sector initiatives, take a look at Vince’s summary of “process interoperability”:
"Process interoperability is an emerging concept that has been identified as a requirement for successful system implementation into actual work settings. It was identified during the project by its inclusion in academic papers, mainly from Europe, and by its being highlighted by an Institute of Medicine (IOM) report issued in July 2005 which identified this social or workflow engineering as key to improving safety and quality in health care settings, and for improving benefits realization. It deals primarily with methods for the optimal integration of computer systems into actual work settings and includes the following:
Explicit user role specification
Useful, friendly, and efficient human-machine interface
Data presentation/flow supports work setting
Engineered work design
Explicit user role specification
Proven effectiveness in actual use"
Perhaps “cultural and linguistically appropriateness” was our legislators’ best attempt at mandating “process interoperability”. If they minded their own mandate (i.e., wanted people to understand and act upon it) they might just say: we need to make the healthcare system like an iPod. The iPod's linguistic appropriateness is that very little verbiage is required when listening to music. Perhaps we can design a healthcare system with similar elegance.
The iPod metaphor is a cliché, but clichés exist for a reason. This one regresses laterally towards absurdity when we think that Steve Jobs was looking at Porsches during his BFO, so let me get into the analysis to bridge the gap to healthcare:
1. It is possible to look at the healthcare system as a series of payment transactions (intellectual debt owed to Hal Luft and Metavante)
2. Payment systems require scale
3. Scale requires technology
4. Therefore we can see the healthcare system as a technology system.
While less scary than cancer (except maybe for politicians), designing the intermediate steps of accessing, organizing, sharing, and distributing payment for healthcare is not trivial. Successfully piloting innovative payment strategies for physicians and care providers that foster disease prevention and care coordination will require active participation from many players in the private sector. The threat, and the call to action, is that they won’t use it if they don’t like it. That is the “process interoperability” requirement in a nutshell.
In line with Vince’s comment, processing power and cheap telecommunications make it easy for technology implementers to provide lots of data and lots of configurability; winners focus on culling the most useful information from data and making configuration choices on the consumer’s behalf. Likewise, important tradeoffs are to be made between interoperability and security.
Given that the private sector runs much of the healthcare payments infrastructure regardless of who foots the bill, I wish that legislation was more “process interoperable” with the mindset of those who run the back office pipes. It does give me hope when I see process interoperability as the mission statement of the micro-data crunchers at firms like Acumen LLC. They philosophize with a sledgehammer: “To us, the most important aspect of such systems is not the database, but rather the interfaces we design that make data meaningful to our clients.”
"Process interoperability is an emerging concept that has been identified as a requirement for successful system implementation into actual work settings. It was identified during the project by its inclusion in academic papers, mainly from Europe, and by its being highlighted by an Institute of Medicine (IOM) report issued in July 2005 which identified this social or workflow engineering as key to improving safety and quality in health care settings, and for improving benefits realization. It deals primarily with methods for the optimal integration of computer systems into actual work settings and includes the following:
Explicit user role specification
Useful, friendly, and efficient human-machine interface
Data presentation/flow supports work setting
Engineered work design
Explicit user role specification
Proven effectiveness in actual use"
Perhaps “cultural and linguistically appropriateness” was our legislators’ best attempt at mandating “process interoperability”. If they minded their own mandate (i.e., wanted people to understand and act upon it) they might just say: we need to make the healthcare system like an iPod. The iPod's linguistic appropriateness is that very little verbiage is required when listening to music. Perhaps we can design a healthcare system with similar elegance.
The iPod metaphor is a cliché, but clichés exist for a reason. This one regresses laterally towards absurdity when we think that Steve Jobs was looking at Porsches during his BFO, so let me get into the analysis to bridge the gap to healthcare:
1. It is possible to look at the healthcare system as a series of payment transactions (intellectual debt owed to Hal Luft and Metavante)
2. Payment systems require scale
3. Scale requires technology
4. Therefore we can see the healthcare system as a technology system.
While less scary than cancer (except maybe for politicians), designing the intermediate steps of accessing, organizing, sharing, and distributing payment for healthcare is not trivial. Successfully piloting innovative payment strategies for physicians and care providers that foster disease prevention and care coordination will require active participation from many players in the private sector. The threat, and the call to action, is that they won’t use it if they don’t like it. That is the “process interoperability” requirement in a nutshell.
In line with Vince’s comment, processing power and cheap telecommunications make it easy for technology implementers to provide lots of data and lots of configurability; winners focus on culling the most useful information from data and making configuration choices on the consumer’s behalf. Likewise, important tradeoffs are to be made between interoperability and security.
Given that the private sector runs much of the healthcare payments infrastructure regardless of who foots the bill, I wish that legislation was more “process interoperable” with the mindset of those who run the back office pipes. It does give me hope when I see process interoperability as the mission statement of the micro-data crunchers at firms like Acumen LLC. They philosophize with a sledgehammer: “To us, the most important aspect of such systems is not the database, but rather the interfaces we design that make data meaningful to our clients.”
Monday, July 20, 2009
Gateways, Exchanges, and Navigators
Looking at last week’s House and Senate bills, I saw a couple things that might be interesting to the wide class of firms that provides online health benefits procurement (e.g., BenefitFocus, eHealth, etc.,.) The bills start to describe what the Gateway/Exchange contemplated by Congress (and WellPoint) looks like.
In both the House (“Exchange”) and Senate (“Gateway”) versions, the entity is set up by the government. It is supposed to play a non-exclusive role, but I think the question haunting the whole insurance industry and vendor community is the longer-term viability of other distribution channels, especially if a public option is at play.
The Senate bill is a little more descriptive than the House bill, and provides that: “The Gateway will establish tools to enable consumers to obtain coverage, establish open enrollment periods, and assist consumers in the purchase of long term services and supports”. These are clearly some of the things that need doing, but ultimately the Gateway concept is a quasi-government entity so probably will not attract much private capital.
The Senate bill also describes the role of a “Navigator”, which is in the pleasant position of receiving government contracts but ostensibly could be a private firm:
"(a) The Secretary shall award grants to establishing States to enable the Gateway or Gateways in such States to enter into agreements with private and public entities under which such entities will serve as navigators in accordance with this section.
(b) ELIGIBILITY.—(1) IN GENERAL.—To be eligible to enter into an agreement under subsection (a), an entity shall demonstrate that the entity has existing relationships with, or could readily establish relationships with, employers and employees, and self-employed individuals, likely to be eligible to participate in the program under this title. …
(c) DUTIES.—An entity that serves as a navigator under an agreement under subsection (a) shall— (1) conduct public education activities to raise awareness of the program under this title (2) distribute fair and impartial information concerning enrollment in an[d] the availability of credits for qualified health plans; (3) assist with enrollment in a qualified health plan; and (4) provide information in a manner determined by the Secretary to be culturally and linguistically appropriate to the needs of the population served by the Gateway.”
I am still a bit more interested in a model that gets into the flow of cost and quality data than one that is "linguistically appropriate"… I’ll keep you posted.
In both the House (“Exchange”) and Senate (“Gateway”) versions, the entity is set up by the government. It is supposed to play a non-exclusive role, but I think the question haunting the whole insurance industry and vendor community is the longer-term viability of other distribution channels, especially if a public option is at play.
The Senate bill is a little more descriptive than the House bill, and provides that: “The Gateway will establish tools to enable consumers to obtain coverage, establish open enrollment periods, and assist consumers in the purchase of long term services and supports”. These are clearly some of the things that need doing, but ultimately the Gateway concept is a quasi-government entity so probably will not attract much private capital.
The Senate bill also describes the role of a “Navigator”, which is in the pleasant position of receiving government contracts but ostensibly could be a private firm:
"(a) The Secretary shall award grants to establishing States to enable the Gateway or Gateways in such States to enter into agreements with private and public entities under which such entities will serve as navigators in accordance with this section.
(b) ELIGIBILITY.—(1) IN GENERAL.—To be eligible to enter into an agreement under subsection (a), an entity shall demonstrate that the entity has existing relationships with, or could readily establish relationships with, employers and employees, and self-employed individuals, likely to be eligible to participate in the program under this title. …
(c) DUTIES.—An entity that serves as a navigator under an agreement under subsection (a) shall— (1) conduct public education activities to raise awareness of the program under this title (2) distribute fair and impartial information concerning enrollment in an[d] the availability of credits for qualified health plans; (3) assist with enrollment in a qualified health plan; and (4) provide information in a manner determined by the Secretary to be culturally and linguistically appropriate to the needs of the population served by the Gateway.”
I am still a bit more interested in a model that gets into the flow of cost and quality data than one that is "linguistically appropriate"… I’ll keep you posted.
Friday, July 17, 2009
New Business Models for Google in McAllen, TX
Earlier this week I travelled to meet with Hal Luft, PhD, a Harvard-educated health economist and Director of the Palo Alto Medical Foundation Research Institute.
Hal’s recent book, Total Cure, reads to technology implementers like workflow documentation from the future, so I brought a variety of questions about what new business models might exist in the post-reform world. My favorite idea that he came up with was Google as a health transaction processor.
Hal pointed out that Google has done well by providing consumers with applications they want and then charging businesses for information generated by those applications. With all those servers guaranteeing the classic high availability Google search function, Google looks for ways to use spare processing power in down times. One possibility would be free insurance claims processing. Google could then anonymize and crunch the claims data, connecting diagnosis codes, treatment codes, and subsequent diagnosis codes in order to determine low cost and high quality outcomes. If I were an insurance company with covered lives in McAllen, Texas, which recently gained some notoriety as a region with unusually high medical costs, I would want to know which doctors were the most efficient, and I would pay for the information. The gain to society would be that information about the practices of the efficient doctors would be more widely disseminated. Fits well with Google’s model of “organize the world's information and make it universally accessible and useful”.
Hal’s recent book, Total Cure, reads to technology implementers like workflow documentation from the future, so I brought a variety of questions about what new business models might exist in the post-reform world. My favorite idea that he came up with was Google as a health transaction processor.
Hal pointed out that Google has done well by providing consumers with applications they want and then charging businesses for information generated by those applications. With all those servers guaranteeing the classic high availability Google search function, Google looks for ways to use spare processing power in down times. One possibility would be free insurance claims processing. Google could then anonymize and crunch the claims data, connecting diagnosis codes, treatment codes, and subsequent diagnosis codes in order to determine low cost and high quality outcomes. If I were an insurance company with covered lives in McAllen, Texas, which recently gained some notoriety as a region with unusually high medical costs, I would want to know which doctors were the most efficient, and I would pay for the information. The gain to society would be that information about the practices of the efficient doctors would be more widely disseminated. Fits well with Google’s model of “organize the world's information and make it universally accessible and useful”.
Monday, July 13, 2009
WSJ Article by Epstein on Malpractice Reform
On a recent episode of NPR’s Forum, an expert guest commented that medical malpractice reform tends to be a red herring espoused by those who don’t want to change the broader dynamics of the healthcare system. http://www.kqed.org/epArchive/R906120900.
Nonetheless, it does deserve some attention. I’ll take this opportunity to take on Richard Epstein’s view of medical malpractice reform in his recent WSJ editorial (also on the University of Chicago Law School blog). http://online.wsj.com/article/SB124631652544770707.html#articleTabs%3Darticle
Epstein’s view and those of the responses commented on the WSJ and U of C site seem to take diametrically opposed views. Epstein favors allowing providers to contract out of civil jury trials; the commentators find this inequitable to the injured patient population. I take the view that a Pareto-efficient compromise position exists.
Administrative costs of the malpractice system (not including defensive practice of medicine) exceed total compensation to victims. (T.A. Brennan and M.M. Mello, "Patient Safety and Medical Malpractice: A Case Study," Annals of Internal Medicine 139 (2003): 267; D.M. Studdert et al., "Claims, Errors, and Compensation Payments in Medical Malpractice Litigation," New England Journal of Medicine 354 (2006): 2024.)
Abbreviating the trial process to focus on the question of whether an avoidable compensable event had occurred would be fairer to patients and physicians. An avoidable compensable event (ACE) is an injury that 1) is caused by treatment (or omission of treatment) and 2) should rarely occur when care is provided according to best practice. (H. Luft (2008) Total Cure, Cambridge: Harvard University Press). This standard would be fairer to the population of injured patients as a whole, which is much larger than those filing lawsuits under today's system. (Id). While compensation to patients as an aggregate class could be increased using the savings from administrative costs forgone, the injured patients would forgo damages for pain and suffering.
As detailed by Luft (2008), ceasing to award legal damages for pain and suffering, in addition to making a finding of negligence unnecessary, would make care providers less likely to practice defensive medicine. At the same time, punitive damages should be applied to care providers who demonstrate a pattern of failing to meet the applicable standard of care. (Id). This would require, however, removing the doctrine whereby hospitals and other care delivery teams can claim that they have no control over medical staffs. (Luft, 2008; http://www.abanet.org/publiced/practical/health/corporate_negligence_liability.html)
Nonetheless, it does deserve some attention. I’ll take this opportunity to take on Richard Epstein’s view of medical malpractice reform in his recent WSJ editorial (also on the University of Chicago Law School blog). http://online.wsj.com/article/SB124631652544770707.html#articleTabs%3Darticle
Epstein’s view and those of the responses commented on the WSJ and U of C site seem to take diametrically opposed views. Epstein favors allowing providers to contract out of civil jury trials; the commentators find this inequitable to the injured patient population. I take the view that a Pareto-efficient compromise position exists.
Administrative costs of the malpractice system (not including defensive practice of medicine) exceed total compensation to victims. (T.A. Brennan and M.M. Mello, "Patient Safety and Medical Malpractice: A Case Study," Annals of Internal Medicine 139 (2003): 267; D.M. Studdert et al., "Claims, Errors, and Compensation Payments in Medical Malpractice Litigation," New England Journal of Medicine 354 (2006): 2024.)
Abbreviating the trial process to focus on the question of whether an avoidable compensable event had occurred would be fairer to patients and physicians. An avoidable compensable event (ACE) is an injury that 1) is caused by treatment (or omission of treatment) and 2) should rarely occur when care is provided according to best practice. (H. Luft (2008) Total Cure, Cambridge: Harvard University Press). This standard would be fairer to the population of injured patients as a whole, which is much larger than those filing lawsuits under today's system. (Id). While compensation to patients as an aggregate class could be increased using the savings from administrative costs forgone, the injured patients would forgo damages for pain and suffering.
As detailed by Luft (2008), ceasing to award legal damages for pain and suffering, in addition to making a finding of negligence unnecessary, would make care providers less likely to practice defensive medicine. At the same time, punitive damages should be applied to care providers who demonstrate a pattern of failing to meet the applicable standard of care. (Id). This would require, however, removing the doctrine whereby hospitals and other care delivery teams can claim that they have no control over medical staffs. (Luft, 2008; http://www.abanet.org/publiced/practical/health/corporate_negligence_liability.html)
Friday, July 10, 2009
Doing brain surgery with boxing gloves on
Yesterday we had a comment on the site that “unless the consumers incurring the cost have some direct stake in paying the bill, any cost controls on the health care system via government, much like the insurance companies, are the equivalent of doing brain surgery with boxing gloves on”
Could it be that there is a way to organize the payment system so that doctors also have a stake in keeping down costs? In some situations consumers (e.g., rural/uneducated/scared) are not well-equipped to individually bargain down fees for services.
A key element of the Baucus plan is bundling Medicare payments based on a medical condition rather than for specific services (Transforming the Health Care Delivery System, Senate Finance Committee, 4/29/09, at 14). The Senate Finance Committee review found that in treatment of medical episodes paid for by Medicaid, there was “a lack of accountability of providers for all care provided during the episode”, and proposed bundling to align financial incentives for care providers.
While Medicare (or a public plan) bears the risk that a particular medical condition occurs, the care provider could be made to bear the “production risk” of the medical services creating a good outcome. To isolate the quality of a providers’ care, however, variance must be controlled. Only so much can be controlled through diagnosis codes, even with variable severity built in. Recouping the cost for care for an extraordinarily sick patient within a category could take years of treating more average patients within the category. Today Medicare has an outlier reimbursement program, but the private sector entity would likely have better incentives to monitor payments under the program.
To the other point in yesterday’s comment, yes government bureaucracies often perform badly. At one point, Medicare was making “outlier reimbursement” payments to Tenet hospitals amounting to 17% of Tenet’s Medicare payments, whereas the national average was 5%. (http://www.businessweek.com/magazine/content/02_47/b3809059.htm ). Are there institutions in the private sector other than insurance companies that might do a better job?
Could it be that there is a way to organize the payment system so that doctors also have a stake in keeping down costs? In some situations consumers (e.g., rural/uneducated/scared) are not well-equipped to individually bargain down fees for services.
A key element of the Baucus plan is bundling Medicare payments based on a medical condition rather than for specific services (Transforming the Health Care Delivery System, Senate Finance Committee, 4/29/09, at 14). The Senate Finance Committee review found that in treatment of medical episodes paid for by Medicaid, there was “a lack of accountability of providers for all care provided during the episode”, and proposed bundling to align financial incentives for care providers.
While Medicare (or a public plan) bears the risk that a particular medical condition occurs, the care provider could be made to bear the “production risk” of the medical services creating a good outcome. To isolate the quality of a providers’ care, however, variance must be controlled. Only so much can be controlled through diagnosis codes, even with variable severity built in. Recouping the cost for care for an extraordinarily sick patient within a category could take years of treating more average patients within the category. Today Medicare has an outlier reimbursement program, but the private sector entity would likely have better incentives to monitor payments under the program.
To the other point in yesterday’s comment, yes government bureaucracies often perform badly. At one point, Medicare was making “outlier reimbursement” payments to Tenet hospitals amounting to 17% of Tenet’s Medicare payments, whereas the national average was 5%. (http://www.businessweek.com/magazine/content/02_47/b3809059.htm ). Are there institutions in the private sector other than insurance companies that might do a better job?
Thursday, July 9, 2009
CDH and HSA Founder Endorses Universal Coverage
As a new entry, this blog looks back and looks forward. We quickly (by Congressional standards) approach the eve of the most important healthcare legislation since the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The 2003 legislation hatched a cottage industry centered on health savings accounts (HSAs). To what extent will reform in 2009 cause a reallocation of capital and skills from the consumer driven healthcare industry?
Regina Herzlinger, who is widely credited with the creation of HSAs and consumer driven healthcare, recently opined in the National Review that universal care is imminent. According to the article, the key task for CDH firms is to ensure that a strong degree of choice remains for consumers.
For Herzlinger, HSAs form just one plank in CDH. Professor Herzlinger’s take on HSAs and CDH was summarized in December by Business Week:
“Herzlinger does not want a regulation-free market. Nor does she think health savings accounts, favored by many Republicans, are the best solution. These plans, which combine high deductibles with tax exemptions for health-care dollars, have been adopted by only about 6% of Americans, and she figures that's about right. ‘Consumers should have hundreds of coverage options.’”
If HSAs are appropriate for 6% of the population, what health financing options will provide meaningful choices to the other 94%?
Regina Herzlinger, who is widely credited with the creation of HSAs and consumer driven healthcare, recently opined in the National Review that universal care is imminent. According to the article, the key task for CDH firms is to ensure that a strong degree of choice remains for consumers.
For Herzlinger, HSAs form just one plank in CDH. Professor Herzlinger’s take on HSAs and CDH was summarized in December by Business Week:
“Herzlinger does not want a regulation-free market. Nor does she think health savings accounts, favored by many Republicans, are the best solution. These plans, which combine high deductibles with tax exemptions for health-care dollars, have been adopted by only about 6% of Americans, and she figures that's about right. ‘Consumers should have hundreds of coverage options.’”
If HSAs are appropriate for 6% of the population, what health financing options will provide meaningful choices to the other 94%?
Subscribe to:
Posts (Atom)
