28 October 2016
Dear Interested Readers,
About This Letter
In last week’s letter about IBM’s Watson as a potentially important innovation that could help reduce waste and lower the cost of care I made the statement, “...the greatest threat to the future health of the nation... [is] our continuing inability to reduce the cost of care.”
It was just a few weeks ago that I was complaining about the lack of discussion of healthcare in the election. Now I am terrified that the cost of healthcare could determine the outcome of the election. I am concerned that the meaning of the recently published 25% increase in the average cost of a policy sold on the exchanges could be twisted and distorted enough to become an issue that could make the election much closer than the experts like Nate Silver at 538 have been predicting.
Unfortunately, the sudden return to a focus on healthcare has been the result of the negative “drip drip” effect of a steady progression of unsettling stories and events. Back in August many of us were upset to learn that Aetna, United and Humana were withdrawing from many of the 2017 state healthcare purchasing exchanges. In September many of you were shocked to learn that Dartmouth was withdrawing from all Medicare ACOs for financial reasons. The pain from these disturbing announcements was increased like salt being poured into a wound when Bill Clinton handed the Republican party a big gift earlier this month when he called the ACA “the craziest thing.” I now see that unfortunate sound bite in the negative political ads for Donald Trump as well as for the Senate and House races in New Hampshire.
The major portion of this letter is not a closer examination of what all of this focus on healthcare cost might mean over the next few weeks to the outcome of the election, but rather it is an embracing of the benefit that cost is back on the table as a shared concern. I do worry that the subject will be used for political gain by those who want to repeal the law, but I am more concerned about the lack of real progress that is being made in the effort to lower the total cost of care.
Hillary Clinton and the majority of Democrats believe that the answer to the painful realities of the medical cost question is not to throw out the ACA but to build on it. I hope to make the point that as important as it is to shore up the ACA and correct many of its design flaws, it is even more important to realize that for us to lower the cost of healthcare we must actually change the way we practice and deliver care. The answer to the healthcare cost concerns lies secondarily in how we are paid or how patients are insured and primarily in how we practice. I am not so sure that just fostering more competition will lower the cost of care. I hope that I will be able to convince you that getting the cost down has always depended on you and your colleagues sharing the effort as a common goal.
When I returned to New Hampshire last Thursday night from Chicago I discovered that the beautiful fall had been replaced by grey skies, hard rains and a chilly wind that had substantially changed the picture. Oh, the fleeting reality of superficial beauty and the joy of reassurance in the reliability of the cycle of the seasons. There is more of this rapture about nature later in the letter where you will also find a celebration of the first two games of this World Series. This World Series has the potential of a very memorable outcome like the Red Sox victory in 2004. At a minimum it will help us get through much of the next week and a half until the merciful end of the election and the beginning of whatever is destined to follow.
If you did not have the energy to read through last week’s letter that focused on the potential of IBM’s Watson to contribute to the innovation we need to get the cost of care down while preserving quality, the same information is now available in many fewer words and in a slightly altered form on strategyhealthcare.com. I hope that you will read it and leave a comment. Perhaps you might get a friend or colleague interested in these letters by sending them the link.
Healthcare Costs Too Much
The next sign up for healthcare through the exchanges created by the ACA begins Tuesday November 1. The recent announcement that the average increase in premiums for 2017 will be 25% has brought to a rolling boil the concern about the cost of care that had been a simmering source of anger. Everywhere you look there are articles describing the problem and proposing possible solutions. From where I sit all of the proposed solutions miss the fundamental point that insurance premiums are too high because charges are higher than ever and besides being inflated are often nothing more than the monetary expression of waste.
Earlier this week the Boston Globe attempted to explain the problem in a thoughtful op ed article written by the Columbia Economist Jeffrey Sachs entitled “Disparities and high costs fuel the health care crisis.” The article begins by reminding us that the life expectancy in America now falls behind that of most developed countries. What it also emphasized was the inequity in our system of care. Variation by zip code reveals defects that are attributable to race and class. The citizens in some of our zip codes might have a better outlook in a third world country. The crowning defect that we have all tolerated is that we spend up to twice as much on healthcare as many of the counties that have much better results than ours.
The real name of the “Affordable Care Act”, or Obamacare, is The Patient Protection and Affordable Care Act. Even that expanded term is probably a misnomer because the likelihood of a substantial reduction in the cost of care from the law that was passed in 2010 was low. The law did expand care to twenty million more people. It falls short of universal care by almost 30 million people or ten percent of the population. In many of the states that refused the Medicaid expansion the rates of the uninsured come up to 25%. Care has been made affordable for many patients who qualify for subsidies, but that has not reduced the total cost of care. With the subsidies to low income eligible participants in the exchanges and through Medicare and Medicaid, many patients are largely shielded from the dramatic increases in cost projected for 2017, but the pain will be born in Federal, State and Local budgets. Individuals getting care through the exchanges who do not qualify for subsidies will on average feel the pain of cost increases.
My contention is that the ACA is not the cause of the problems. The root cause problems that largely explain the variances between the experience of care, the public health metrics and the cost differential between our country and other countries with better results can not be fixed by legislation. As an industry and as a profession we theoretically have the ability to lower the cost of care and perhaps even make a dent in some of the social issues that contribute to the inequities of care. We just do not do what we could do. The real questions are why is it that we don’t do what we can do, and what will it take for us to do what no law can do?
In last week’s letter I did not give an absolutely accurate report of Michael Nowicki’s excellent presentation of the economics of healthcare. Professor Nowicki anticipates the burden of healthcare costs forcing substantial changes to life as we know it in the future. The good news is that if we do not want to undermine our ability to invest in other social supports like education, housing, infrastructure and culture, and if we do not want to resort to greater de facto rationing of care than we experience now, there is still time to realize the Triple Aim, if we act promptly. That is the optimistic outlook. If there is not some fundamental change in the way we approach our responsibility over the next twenty to thirty years healthcare costs could easily become the falling domino that knocks down some of the most vulnerable parts of our economy and leads to a continuing cycle of loss.
Before we succumb to those that would have us throw out what the ACA has accomplished let’s review what we have gained by the investments of time and money we have made, despite enormous resistance that includes substantial resistance from healthcare professionals and the industry. You can list the positives as well as I can, but in his article in JAMA last August the President best expressed both the positives and the shortcomings of the law.
The ACA has succeeded in sharply increasing insurance coverage... The number of uninsured individuals in the United States has declined from 49 million in 2010 to 29 million in 2015…
Each of the law’s major coverage provisions—comprehensive reforms in the health insurance market combined with financial assistance for low- and moderate-income individuals to purchase coverage, generous federal support for states that expand their Medicaid programs to cover more low-income adults, and improvements in existing insurance coverage—has contributed to these gains...The law’s provision allowing young adults to stay on a parent’s plan until age 26 years has also played a contributing role, covering an estimated 2.3 million people after it took effect in late 2010.
Early evidence indicates that expanded coverage is improving access to treatment, financial security, and health for the newly insured. Following the expansion through early 2015, nonelderly adults experienced substantial improvements in the share of individuals who have a personal physician (increase of 3.5 percentage points) and easy access to medicine (increase of 2.4 percentage points) and substantial decreases in the share who are unable to afford care (decrease of 5.5 percentage points) and reporting fair or poor health (decrease of 3.4 percentage points) relative to the pre-ACA trend. Similarly, research has found that Medicaid expansion improves the financial security of the newly insured (for example, by reducing the amount of debt sent to a collection agency by an estimated $600-$1000 per person gaining Medicaid coverage). Greater insurance coverage appears to have been achieved without negative effects on the labor market, despite widespread predictions that the law would be a “job killer.” Private-sector employment has increased in every month since the ACA became law, and rigorous comparisons of Medicaid expansion and nonexpansion states show no negative effects on employment in expansion states.
The law has also greatly improved health insurance coverage for people who already had it. Coverage offered on the individual market or to small businesses must now include a core set of health care services, including maternity care and treatment for mental health and substance use disorders, services that were sometimes not covered at all previously. Most private insurance plans must now cover recommended preventive services without cost-sharing, an important step in light of evidence demonstrating that many preventive services were underused. This includes women’s preventive services, which has guaranteed an estimated 55.6 million women coverage of services such as contraceptive coverage and screening and counseling for domestic and interpersonal violence. In addition, families now have far better protection against catastrophic costs related to health care. Lifetime limits on coverage are now illegal and annual limits typically are as well....The law is also phasing out the Medicare Part D coverage gap. Since 2010, more than 10 million Medicare beneficiaries have saved more than $20 billion as a result.
That is a lot of accomplishment. Gains that should be given great consideration before throwing them all out to be replaced by promises. What did he say was wrong with the law, and what does he suggest? I have bolded some of his words for emphasis.
Despite this progress, too many Americans still strain to pay for their physician visits and prescriptions, cover their deductibles, or pay their monthly insurance bills; struggle to navigate a complex, sometimes bewildering system; and remain uninsured. More work to reform the health care system is necessary, with some suggestions offered below.
First, many of the reforms introduced in recent years are still some years from reaching their maximum effect. With respect to the law’s coverage provisions, these early years’ experience demonstrate that the Health Insurance Marketplace is a viable source of coverage for millions of Americans and will be for decades to come. However, both insurers and policy makers are still learning about the dynamics of an insurance market that includes all people regardless of any preexisting conditions, and further adjustments and recalibrations will likely be needed, as can be seen in some insurers’ proposed Marketplace premiums for 2017. In addition, a critical piece of unfinished business is in Medicaid. As of July 1, 2016, 19 states have yet to expand their Medicaid programs. I hope that all 50 states take this option and expand coverage for their citizens in the coming years, as they did in the years following the creation of Medicaid and CHIP.
With respect to delivery system reform, the reorientation of the US health care payment systems toward quality and accountability has made significant strides forward, but it will take continued hard work to achieve my administration’s goal of having at least half of traditional Medicare payments flowing through alternative payment models by the end of 2018. Tools created by the ACA—including CMMI and the law’s ACO program—and the new tools provided by MACRA will play central roles in this important work...
Second, while the ACA has greatly improved the affordability of health insurance coverage, surveys indicate that many of the remaining uninsured individuals want coverage but still report being unable to afford it. Some of these individuals may be unaware of the financial assistance available under current law, whereas others would benefit from congressional action to increase financial assistance to purchase coverage, which would also help middle-class families who have coverage but still struggle with premiums. The steady-state cost of the ACA’s coverage provisions is currently projected to be 28% below CBO’s original projections, due in significant part to lower-than-expected Marketplace premiums, so increased financial assistance could make coverage even more affordable while still keeping federal costs below initial estimates.
Third, more can and should be done to enhance competition in the Marketplaces. For most Americans in most places, the Marketplaces are working. The ACA supports competition and has encouraged the entry of hospital-based plans, Medicaid managed care plans, and other plans into new areas. As a result, the majority of the country has benefited from competition in the Marketplaces, with 88% of enrollees living in counties with at least 3 issuers in 2016, which helps keep costs in these areas low. However, the remaining 12% of enrollees live in areas with only 1 or 2 issuers. Some parts of the country have struggled with limited insurance market competition for many years, which is one reason that, in the original debate over health reform, Congress considered and I supported including a Medicare-like public plan. Public programs like Medicare often deliver care more cost-effectively by curtailing administrative overhead and securing better prices from providers. The public plan did not make it into the final legislation. Now, based on experience with the ACA, I think Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited. Adding a public plan in such areas would strengthen the Marketplace approach, giving consumers more affordable options while also creating savings for the federal government.
Fourth, although the ACA included policies to help address prescription drug costs, like more substantial Medicaid rebates and the creation of a pathway for approval of biosimilar drugs, those costs remain a concern for Americans, employers, and taxpayers alike—particularly in light of the 12% increase in prescription drug spending that occurred in 2014...Congress should act on proposals like those included in my fiscal year 2017 budget to increase transparency around manufacturers’ actual production and development costs, to increase the rebates manufacturers are required to pay for drugs prescribed to certain Medicare and Medicaid beneficiaries, and to give the federal government the authority to negotiate prices for certain high-priced drugs.
There is much more in the President’s paper. You may have noticed that he calls for a “Public Option” as does Secretary Clinton. I agree with that suggestion.These are the things that lawmakers and politician introduce. My contention is that all of these interventions are necessary but they are also insufficient when the industry and its professionals do not take on reducing the total cost of care while improving quality for everyone as job one.
In the past, not so much now, many people looked to Massachusetts for leadership. At the moment I see the story of Massachusetts as a cautionary tale. No one felt more challenged and conflicted than I did when Massachusetts passed Chapter 58 in 2006, Romneycare. I liked the universal coverage. I disagreed with the idea of a mandate. I was concerned about costs. I was actually delighted in 2008 when Chapter 305 was passed with the objective of fixing the cost problem by making “global payment” the finance system of the state’s healthcare by 2013. Well that did not happen. Again I was cautiously optimistic when Chapter 224 was passed in 2012 creating the Health Policy Commission to guide the cost reductions that were needed because of the rising cost of care. My caution was an expression of my concern that the HPC had no powers to enforce its opinions or make real change much beyond the use of transparency and the exercise of influence on public opinion.
Now ten years after the passage of Chapter 58, Massachusetts still has a substantial problem with the total cost of care that does distort the state budget and does continue to undermine the economics of individuals, employers, and taxpayers. Why? The job of lowering the cost of care can not be done without the active engagement of clinicians and their institutions. The transition has been painfully slow for our patients and the community and ultimately our inability to organize for effective change will undermine our long term objectives.
Despite all of our laws, without clinician and institutional engagement health care premiums are once again soaring, and the social determinants of poor health are not being adequately addressed. Obamacare is not enough alone to fix such a flawed system.
Jeffrey Sachs is a numbers guy. Much of his piece in the Globe was data to document our failures, but he does bring some emphasis to the ethical questions that the status of our healthcare performance raises. I have presented these same arguments before, but repetition has its didactic merits.
America’s health outcomes are starkly unequal by class and race. According to the Health Inequality Project, the richest 1 per cent of American men have a life expectancy of 87.3 years, a remarkable 15 years longer than the poorest 1 percent of American men, at 72.7 years. As for race, non-Hispanic white life expectancy in 2014 was 78.8 years, 3.6 years longer than for non-Hispanic blacks, at 75.2 years.
He also is an economist so money is a core concern. Again for the benefit of repetition:
...America’s costs are out of sight, far above those of other countries. America spent a remarkable $8,713 per person on health care in 2013 (the most recent year of comparable OECD data), with the next most expensive country, Switzerland, spending just $6,325. As a share of national income, US health spending came to a whopping 16.4 percent of GDP, compared with 11.1 percent for Switzerland. Since then, US spending has increased to around 18 percent of GDP. The average health spending among all OECD countries was just $3,453, less than half of US health care costs, and constituted an average 8.9 percent of GDP in the OECD countries as of 2013.
I hope that you read the article because in the end, after making both the ethical and the economic arguments, Sachs comes close to pointing his finger in the same uncomfortable direction that I pointed my finger.
The sky-high costs of medicines and health services exacerbate the problem at every turn. ... higher health care outlays in the United States — compared with Europe, Canada, Japan, and Australia — are due to the higher prices of health services, including drugs, hospital stays, outpatient visits, and medical procedures rather than to a greater use or higher quality of those services.
For example, the cost of a bypass operation in 2013 averaged $75,345 in the United States compared with $36,509 in Switzerland, and a CT scan averaged $896 in the United States compared with $432 in Switzerland. Inpatient drug prices (measured in 2010) were also far lower abroad than in the United States — roughly half in the UK, Canada, and Australia.
His explanation:
America’s hospitals, provider groups, and pharmaceutical companies set their prices in a bewildering array of negotiations between the providers and health insurers, governments (federal, state, and city), and individual patients paying out of pocket. Most providers are remunerated by fee-for-service rather than capitation. The prices they charge vary widely by patient, even for the same procedures. There is no single price list. The providers charge what they can, depending on their market power. Some patients are covered by private health plans, and then prices are set between the providers and the health insurers. In other cases, the payer is government, and so the negotiations are with public agencies. In still other cases, the patient is uninsured. Often the health providers charge the most to the uninsured who pay out of pocket.
The health providers have considerable market power, deriving from four sources: patents on medicines and devices; few provider groups in any given geographical market; the unilateral disarmament of Medicare in negotiations; and limits on the supply of health care workers, including doctors and nondoctors.
In his discussion of the economic realities of supply and demand Professor Sachs points to a fact that I have frequently tried to emphasize. Our shortage of physicians is potentially our largest problem.
In 2013, the United States graduated just 7.3 medical students per 100,000 people, compared with an OECD average of 11.5 per 100,000 and a high of 19.7 per 100,000 in Denmark. The United States has only 2.6 doctors per 1,000 people, compared with an OECD average of 3.3 per 1,000…
Professor Sachs has described the extent of our problem. He also makes a statement that I think lends credence to the possibility that poorly discussed issues of healthcare could have a significant impact on the last two weeks of the presidential campaigns.
Recent research by Nobel laureate Angus Deaton and his coauthor, Ann Case, has shown that middle-aged working-class whites are now experiencing an unprecedented rise in mortality rates, not unlike the falling life expectancy that plagued middle-aged men in the Soviet Union in the years before its collapse. Rising death rates in the population signify a deep crisis in the social order, including the health system.
I do not disagree with his recommendations:
- America should adopt policies to reduce income inequalities, end the over-incarceration of the poor, empower workers, clean and green the environment, and raise the social status of working-class families. Over time, such measures would help to reverse the epidemics of drug abuse, mental illness, obesity, and other diseases exacerbated by poverty and low social status.
- America should move toward universal health care coverage through public financing, as in Canada and Europe, with health providers (both private and not-for-profit) supplying coverage on the basis of capitation rather than fee-for-service. Capitation would encourage and enable health providers to offer supportive services (nutrition counseling, social support, health advising) that help to prevent, treat, and manage chronic conditions such as cardiovascular disease and adult-onset diabetes.
- Third, the government should move to a system of price ceilings for medicines under patent through rational guidelines that balance the incentives for R&D with drug affordability and access.
To those three recommendations I would add that our healthcare professional and institutions should move toward what Don Berwick has labeled as the Era 3 of healthcare. In Era 3 we will put our patients’ interests first and that includes their economic interests. In Era 3 we will lead with civility. In Era 3 we will practice waste reduction and continuous improvement as practical ways of lowering the cost of care. In Era 3 we will collectively accept our responsibility to fix this broken system no matter who is President.
Down the Long Slide to Winter
Monday October 17 was a sunny warm and glorious fall day. October 18 I flew to Chicago and enjoyed a fantastic walk in warm fall weather along the shore of Lake Michigan near the Navy Pier. That was the last of the great weather for me. Last Wednesday and Thursday in Chicago were cold, dark and windy days, and the bad weather came east with me when I returned to New Hampshire. The nicest day this week was Wednesday, although it was still cloudy and cold. A friend who was also having trouble giving up on the color of fall suggested that we should climb the longer trail up the North Side of Mount Kearsage. As you can see from the picture in the header this week, there is still a lot of color that you can enjoy from the summit. What the picture does not reveal was that the temperature was below freezing and the puddles were frozen. A brisk wind made it feel colder than it was. The only thing missing was snow and I don’t think it will be long coming. I am hearing predictions that the winter of ‘16-17 will be one that we remember.
Late October is the sports fan’s perfect dream. For a little more than a week all four major professional sports are in action. Baseball is down to the final two. The pro basketball season just started. The hockey season is well under way. It’s almost mid season for pro football.
Every time the World Series comes around I can’t help but think of some of the fabulous World Series games played during my childhood. I did not know what a “perfect game” was (all 27 batters retired with no baserunners) until Don Larsen pitched a perfect game in game 5 in the 1956 series between the Yankees and the Dodgers. At the time it was only the sixth perfect game in history. There has never been another perfect World Series game although there are now 23 perfect games. There have been more than 200,000 professional games played. I was in awe, having seen the last few innings of the game on TV after getting home from school.
This year’s World Series is destined to be one that is long remembered. What is exciting will be to discover what will make it famous. Will it be because the Cubs win for the first time since 1908? Perhaps we will remember it as the first victory for the Indians since 1948! The last time the Cubs played in the World Series was 1945. The team rosters for that series were thin since most of the players were still in the armed services. It was less than two months after VJ Day and I was three months old. We will see. With luck it will last long enough to keep our minds off the election until there is less than a week to go.
I always hope for an encore of warm fall weather after the first frost. The New York Marathon now is run on the first Sunday in November. Some of those weekends have been nice and warm with clear skies. Back in 1979 the race was run on October 21 and the temperature was 80. I know because I ran that day. The forecast for my area for this weekend is for rain and a chilly wind. I hope that wherever you will be this weekend, you might have one of those encore days of summer. |
