Health Care Cost Inflation Returns

True, that....

Call it the return to the old normal.

With the slow recovery of the U.S. economy, the advent of some blockbuster drugs and the entry of more than 8 million newly-insured persons, healthcare cost inflation is ticking back up. Writing in Health Affairs, CMS' actuaries are projecting a 5.8% year-over-year rate of inflation that reminds them of the years prior to the Great Recession. This rate is projected to grow faster than the Gross Domestic Product (GDP), which means that by 2024, the U.S. will be devoting 19.6% of its economy to healthcare.

Some eye-catching observations:

1) If it weren't for consumer cost-sharing, the inflation rate would be even higher;

2) Drug treatment for a single disease - Hepatitis C -  is driving prescription drug costs "sharply higher" and adding to the overall 5.8% rate;

3) No mention of the impact of the administration's innovations, like accountable care organizations;

4) Substantial uncertainty.

The Population Health Blog's take:

In a highly competitive global economy, even single point increases in healthcare costs underlying the manufacture of items that make up the GDP, automobiles or washing machines, is bad news.  If the projections are true, business leaders could reconsider the merits of overseas outsourcing or start dropping employer-based health insurance.

Costs in 2015 and 2016 will be lower than the 5.8% rate, which means it won't hurt enough to make healthcare a big factor in the 2016 elections.  While the Affordable Care Act remains a rhetorically rich target environment, the PHB expects politicians on both sides of the partisan divide to find better red meat elsewhere, like building thousand-mile walls or buying hundreds of millions of solar panels.  So, if you're an investor in healthcare stocks, continue to go long.

Any good news in other sectors of the economy could paradoxically make healthcare costs look comparatively worse. As energy and housing costs creep along at a lower rate, consumers are going to see a greater percent of their income going toward healthcare - either in the form of health insurance premiums or out-of-pocket cost-sharing.  If (and that's a big if) the U.S. economy can return to its efficient cost-cutting ways, expect the healthcare debate to heat up and for calls for a government-sponsored option to increase. 

The mean increase of 5.8% is an average.  Some segments of the insured population will see higher costs and others will see lower costs "around" the mathematical mean.  Which voter block "loses" by paying more than the 5.8% could drive the coming debate as it shifts from insurance coverage to affordability and access.  Case in point: the PHB's spouse is registered to vote and she's not happy with the guesswork behind our pricey monthly insurance premium.

While Americans have reasons to be reluctant to travel overseas for cheaper surgery, they'll be far less so for access to a course of just-as-good medications that are under foreign price control.  Call it medication tourism.

And finally.... uncertain abounds.  No one saw that Hepatitis C would have such a near-term impact.  Who knows what else is out there?  A new epidemic?  Another cure?

Stay tuned!

You Get What You Pay For in Cancer Care and Insurers Get What They Save With the Medical Home

The latest issue of Health Affairs is out and the Population Health Blog couldn't stay away. 

Three interesting articles:

The United States healthcare system has been criticized for spending too much of its treasure for too little in the way of outcomes.  Well, it's not that simple.  Stevens and colleagues in this just published Health Affairs study examined global cancer spending and found that increased spending on treatment correlated with drops in cancer mortality. From 1995 to 2007, the U.S. experienced a growth of $18,000 per cancer patient and dropped mortality among amenable cancers from 55 to 45 per 100,000.  Other than Japan and Finland (which benefit from already low levels of cancer plus sociodemographic factors like this and this), no other country has achieved that level of success.

In other words, you get what you pay for.  And when it comes to cancer, residents of the U.S. are not only paying, but getting a lot.

And speaking of payment, the same issue of Health Affairs has an article on multipayer medical home initiatives. The Population Health Blog didn't know this, but 17 of these initiatives have been launched since 2008.  Most were launched by states, not only because they controlled Medicaid's participation, but because they could blunt antitrust concerns. Challenges included agreeing on the criteria for provider participation, standardizing the payment models, and establishing criteria for success. What's more, the political landscape (health reform) and science (risk stratification, for example) has changed over the years. .

In other words, there is still no single approach to the medical home. When you've seen one statewide medical home initiative, you've seen one medical home initiative.

And speaking of initiatives, Geisinger's medical home program was also featured in Health Affairs. This observational study found that its care management nurses were independently associated with lower health care costs for as many as seven years.  That's good news.

But, the PHB knows that the Geisinger Health System is comprised of provider entities (such as its hospitals and the clinic) as well as a managed care insurance plan called Geisinger Health Plan (GHP). According to the article, "GHP hires, trains and manages the embedded case managers, partly because practices often lack resources to support such capabilities."

In other words, since.....

1) reducing health care costs will only benefit the holder of risk (the insurer) and

2) typical primary care settings lack the resources to change their approach to care,

....the real lesson of Geisinger's ProvenCare is that ownership of the medical home by commercial health insurers is an important option in assuring its success.

Is the United States the Only Country Into "Patient Engagement?" (plus a definition)

Patient engagement is there too!

The answer is no.  Check out this paper in Health Affairs that defines patient engagement as ordinary people who manage their own health by shifting the clinical paradigm from determining “what is the matter?” to discovering “what matters to me?” 

The authors point out that patient engagement is a phenomenon in Great Britain, the United Arab Emirates, India and the United States:

England's "Big White Wall" is an online community accessible via handhelds or computers where persons with psychological distress can find support in managing their care.  Participation is anonymous and is covered (£100 for 6 months) by some of the local National Health Service organizations or by employers directly. There are questionnaires, guided support programs, moderated discussion groups and individual 'live" therapy (£75 per session). Supporters point to data that suggests there are fewer physician visits that result in a net savings.

The United Arab Emirates' pattern of tribal consanguinity has led to a high incidence of inherited genetic disease. In response, the UAE recruited and paid student "ambassadors" to lecture about genetic screening among the country's university student population. That plus mandated screening plus coverage of the cost has led to an increased tribal acceptance of screening for thalassemia and sickle cell disease.

In India, a checklist was promoted and given to new mothers to help them spot danger signs in their babies within a week of birth. The checklist was loaded on the mom's cell phones, which was sent prompts about looking for problems, such as breathing difficulty or poor feeding. If there was an "yes" answer to any question on the list, the health system was alerted.

In the U.S., Boston's Deaconess Hospital identified a hundred patient and family "advisors" who sit on ten committees and give input into various quality improvement projects in the institution.  This has facilitated the ability of patients and families to view their test results on line, get prescription refills or trigger an inpatient concern.

Think Bundled Payment is Inevitable? Think Again

Getting bundles of these is easy?

This just published Health Affairs article finds some flies in the bundled payment ointment.  The summary below speaks for itself.

In 2010, California's Integrated Healthcare Association and RAND piloted a bundled payment with gain-sharing arrangement for a set of orthopedic surgery procedures. Six commercial health insurance plans, eight hospitals and one independent practice association (IPA) agreed to participate in a uniform payment program. There were technical consultants, a steering committee, and physician committees that presided over deciding which services would be included in each of the orthopedic bundles.

Problems abounded. There were delays, fewer than anticipated surgeries, doubts about whether the bundles would result in meaningful change, concerns about administrative burdens and problems fitting the bundles into some of the existing capitated contracts.

It all boiled down to:

1) Details: it turns out that an episode of care is complex and intertwined, making it difficult to establish consensus over what should - and should not - be covered in a bundle payment.  Insurers naturally favored inclusion of as much as possible while providers favored preserving separate fees for as many related services as possible.

2) Distrust: each of the participants had different motivations. Insurers wanted the overall volume of orthopedic procedures to drop. Hospitals wanted their implementation costs covered. Insurers wanted to price the bundle using a roll-up of fee-for-service minus a discount, while the hospitals demanded a higher aggregate payment plus higher volumes of referrals from the insurers. Insurers wanted to transfer risk, while the hospitals wanted a stop-less provision.

3) Information technology: the legacy systems of both the hospitals and insurers were unable to process the bundles. Attempts to switch to a manual system only increased inefficiencies.

4) Whither the physicians: Not only was it complex figuring out how to compensate doctors for their services within a bundle, California has a prohibition against the "corporate practice of medicine" by hospitals.  Other regulatory concerns over managed care contracts made things worse.

5) Critical mass: the absolute volume of orthopedic procedures was less than anticipated.  This diminished the financial as well as educational return on investment.

The introduction to the article sums up the Population Health Blog's takeway:

"Evidence is lacking on the effectiveness of bundled payment in terms of improving the quality of care, reducing its costs or both.  Existing evidence about bundled payment programs mostly comes from bundled payment designed with more limited scope that have little generalizability to current programs."

This real world attempt shows that "bundled payments" are not a health reform slam-dunk.

The Majority of Medicare Spending Variation Is Unexplained

From time to time, the Population Health Blog spouse finds that her husband is insufficiently attentive.  During a recent conversation about that very topic, things stopped when the PHB pointed out the window and exclaimed "Look! A squirrel!"

Naturally, the spouse is curious about the PHB's erratic attentiveness.  Is it how its brain is hardwired?  Too much sugar? Substandard parenting?  And of all those possibilities, how much do each contribute?

That introduction should help the PHB and its readers check out this just-published Health Affairs paper on Medicare's erratic spending habits.

As PHB readers know, Medicare's patient costs patient vary from one locale to another by thousands of dollars, with no discernible impact on survivorship or quality. One narrative is that the health system is being consciously or unconsciously manipulated by doctors and hospitals at a regional level.  Another is that poverty is causing patients in some areas of the country to have have more than their fair share of health problems.

Enter Laurence Baker et al, who wanted to know if patients' preferences are playing a role.

The answer is that it does. But, compared to hospitals and patient income, not that much.

The authors obtained Medicare claims data from 2005 and sorted it by Medicare Hospital Referral Region (or "HRRs," which can span several counties). They wanted to know if HRR costs correlated with 1) county and zip code-level median income, 2) self-reported health status, 3) the availability of doctors and hospital beds and 4) a six question survey that ascertained respondents' preferences for care based on scenarios like chest pain or cough.

The results?

The HRRs were grouped and sorted into low to high spending quintiles.  As the quintiles increased, so did the number of hospital beds per thousand (2.2 low to 2.5 high), which suggested that the supply of services increases health care utilization. Doctors were negatively correlated (the more docs, the lower the spending, 214 per 100K low vs. 193 per 100K high). 

Income was not correlated.

Patient preferences were correlated but only by a small amount (just over $100 across the quintiles).

It's one thing, however to have a correlation, it's another to know the strength of the correlation.  Using regression analytics, the authors found that the availability of hospital beds and doctors could independently account for 23% of the low to high variation across the quintiles. Health status and income seemed to drive another 12%. Patient preferences explained another 5%.

While that explains approximately 40% of the low to high variation across the quintiles, that means 60% remains a mystery. 

In other words, if hospital services, patient economic disparities and patient preferences were completely neutralized by very enlightened central planning, wholly just income redistribution and perfect patient education, only 40% of the cost variation across the United States would go away.  Boston would still cost more than Boise.
 
The PHB's take:

1) Squirrels abound: there is still a lot that we don't understand about the national swings in Medicare's costs.  Some areas are cheap, others aren't and the majority of that has little to do with the availability of hospital services, poverty or beneficiary preferences.

2) Any wonk, policymaker, politician, academic or blogger who offers "a solution" to Medicare's variation is kidding themselves.  The majority remains outside the reach of laws, regulations or payment reforms.

3) Compared to Medicare, PHB's variable attention span is a comparatively modest problem.  The spouse should take some comfort in that.

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