Consilience in Legal Protections for Health IP

Gregg Bloche, a Yale-educated doctor and lawyer, recently published a new article on “The Emergent Logic of Health Law”. He describes health law as an emergent system as follows:

“Competing values and stakeholders, not grand designs, drive health law’s evolution. Reform-minded actors therefore should become opportunists. They should look for potential evolutionary pathways that launch from present-day institutional arrangements and incentives. And they should pursue legal and policy interventions that push our health system along these pathways, powered by stakeholders’ and legal decisionmakers’ interacting responses. The key here is to craft interventions that are “nonlinear” (in emergent systems argot)—interventions that achieve large, long-term impact through minimally disruptive short-term change. http://law.usc.edu/students/orgs/lawreview/documents/BlocheforWebsite.pdf

In other words, the strategic reformer must focus efforts on areas of consilience between the status quo and efforts for change. Bloche’s systems-based explanation provides a compelling rationale, for example, to President Obama’s deference to Congressional leadership. Congressional impramateur makes sense from an emergent systems perspective because Congress is, for better or worse, the best proxy for the many interest groups concerned with health care reform. From an emergent systems perspective, then, deference to Congress lets those interest groups define terms as much as possible while retaining political capital to  intervene at critical junctures.

Bloche also has some micro-level suggestions for reformers who aren't Presidents or members of Congress. In this entry I’ll describe a particularly unique suggestion from Bloche on legal changes that could reform the system from the ground up, and also dish up some criticism where Bloche gets important facts wrong.

One of Bloche’s ideas for holding down costs in a politically savvy way is to find ways to disincent expensive procedures that don’t bring much benefit. Rather than denying end of life care, which despite its utilitarian merits strikes many as unpalatable, he proposes a strategy that will reduce the ongoing proliferation of “half way cures”. He defines “half way cures” as “marvels of engineering, electronics, and materials science, and of modest, often minimal medical benefit”. They are very expensive but minimally useful. To hold the cost down, then, Bloche proposes limiting the intellectual property protections available for these kinds of drugs, devices, and processes. He acknowledges that administrative challenges abound in trying to define “halfway cures”, but he does propose a useful starting point to be a determination of whether the treatment is based on a comprehensive grasp of the biological system. Penicillin, for example, was developed after understanding how to break down bacteria cell walls. His examples of treatments where our understanding of the biological system is less complete includes “drug-coated stents designed to keep atherosclerotic arteries open, high-technology life support, and last-ditch radiation and chemotherapy regimens meant mainly to sustain hope”. He also proposes using Medicare payments to make primary physician consultation and coordination time relatively better compensated than specialty “half way cures”. In time, this would likely result in decreased supply of the high cost minimal benefit technologies.

One emergent area of reform opportunities overlooked by Bloche is high deductible health plans. He states that “[Consumers have been reluctant to] appoint themselves as limit setters by signing up for lower-cost coverage that kicks in only after they and their families spend thousands of dollars on care out-of-pocket.” On the contrary, high deductible health plans have been the largest growth segment in the insurance marketplace. Moreover, the financial institutions that act as custodians to the health savings accounts (HSAs) coupled to high deductible health plans have been among the strongest investors in transparency and quality of care tools. The financial institutions seek to demonstrate value to the consumer by helping the consumer to make smart healthcare decisions. Banks have outperformed insurance companies on measures of trust (at least until recently), security, and availability. Online banking systems (see, e.g., Canopy Financial's suite as implemented by Sovereign Bank) now serve as a point of aggregation for all manner of health decision and quality tools for consumers. The current bills devote significant verbiage (see, e.g., provisions on "navigators") to setting up mechanisms for this kind of distribution of information and support to consumers. The Bacchus bill explicitly references HSA figures to set standards for coverage, perhaps taking a page from Bloche's "emergent systems" strategy suggestions. High deductible health plans coupled with HSAs may yet continue to form a point of consilience between the status quo and efforts for change.

Plasticity in Health Care Payments

For better or worse, most legislative attempts at health reform shift costs. The Medicare Improvement Act of 2003, George W. Bush’s landmark reform, made it more feasible to shift responsibility for payment to individuals through HSAs. The current reform legislation underway will likely swing the pendulum back towards employer and government responsibility for payment. The one certainty is that shifting payment dynamics will lead to opportunity for new payment mechanisms.

With HSAs, banks took off after the opportunity to issue cards that would capture a share of interchange revenue. Webster Financial Corporation, for example, paid $26 million for a small bank in a community of less than 4000 people, because it had a strong HSA line of business. United Healthcare founded a bank just to get in on the action. The card vendors, in return, also began to make health payments a specific focus. American Express announced that it would be the new leader in the market for card-driven health benefits administration, although after several years left the market.

While mobile payment mechanisms garner much attention, paying for healthcare with credit or debit cards is still the mainstream. Visa surveys indicate that up to 90% of patients would prefer to pay with plastic. Where can the card vendors go from here? Providing payment mechanisms designed specifically to solve some of the system’s problems: smoothing payments for patients (much like what is called “insurance” today), simplifying revenue-cycles for providers, and perhaps consolidating data on diagnosis and outcomes.

With increased employer responsibility for healthcare, expect employers to continue to be a point of aggregation for card-related payment services. Today, employers and employees miss out on $2 billion in tax exemptions available through qualified high deductible health plans (HDHPs). For employers, this breaks down to about $140 per employee per year in federal payroll taxes that could be saved. The opportunity for the exemption of income is missed because nearly half of people covered by HDHPs do not open an HSA, and many of the accounts opened are not fully funded. Card vendors could increase HSA utilization by automating account opening, contributions, and distributions -- making tangible the tax advantage.

Disease Management Thrives in Legislative Neglect

A sentiment of lack of change exists, now that legislators are on break. A couple ideas occur to me, examining the disease management industry, that make the legislative slowdown neutral or good in terms of its effect upon the healthcare system.

First, I’ll examine the progress of the disease management industry in the benign neglect of Congress and the Health and Human Services Administration. I’ll then provide an example of how legislation already signed into law this year contradicts core tenets of the Senate and House proposals.

Back in 2000, when HHS was deliberating on how to develop regulations for the HIPAA privacy rule, the agency commented that “[w]e are unable to find generally accepted definitions of the terms ‘disease management’”, and omitted the terms from the final regulation, opting instead for the catch-all category of “health care operations”. Nonetheless, according to BCG (http://www.bcg.com/publications/files/Realizing_the_Promise_of_Disease_Management_Feb06.pdf) disease management organizations (DMOs) grew from $346 million in revenue in 2000 to $1.1 billion in 2005. By 2008, outsourced DMOs alone generated $2.3 billion in revenue. While Medicare did experiment with a disease management pilot, to great initial fanfare, the program’s design failed to monitor a control population, and therefore did little to empirically support disease management's claims.

It may be that slower, more incremental progress is better. Witness, for example, the provisions in the recent American Recovery and Reinvestment Act (better known as the Recovery Bill, or ARRA), which permits individuals to opt out of having their data used for “health care operations”. Specifically, if an individual pays cash, the care provider must offer the individual an opportunity to not have his or her data used for “health care operations” purposes. “Health care operations” includes informatics and disease management, so the ARRA cuts away the empirical data on which those programs run. Individuals paying out of pocket are the minority today, but they represent an important shift towards consumer driven healthcare, and are growing at an increasing rate. In just a few years, omitting these individuals from disease management databases could significantly skew the data. This doesn’t bode so well for the reform bills, for which better disease management is a key cost control strategy. (see, e.g., http://healthcaretransactions.blogspot.com/2009/07/big-changes-even-in-stripped-down-bill.html )

Opportunity Cost: $2 Billion

Employers and individuals miss out on $2 billion per year in HSA tax breaks because they miss an opportunity to predictably match HSA contributions to out-of-pocket health spending from non-HSA accounts. This disconnect between physical and financial health is not being addressed by either healthcare or financial institutions. If there is an opportunity to use health transaction data to help HSA-eligible employees consolidate data on out-of-pocket expenses from non-HSA accounts, it would be a great value to the employee group. The data consolidator need not actually move the money -- the financial institutions can handle that pretty easily based on a file feed, so long as the consolidator has the employees’ imprimatur.

Big Changes Even in a Stripped-Down Bill

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.

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."

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?