Unbiased Analysis of Today's Healthcare Issues

Medicare spending surges again

Written By: Jason Shafrin - Aug• 31•15

The August update to the Congressional Budget Office’s 10-year economic outlook is fairly rosy.  The deficit will ‘only’ be $426 billion, which is $59 billion less than the deficit last year and would represent 2.4% of GDP, the smallest deficit as a share of GDP since 2007.  Nevertheless, CBO still products overall US debt to rise as a share of GDP by 2025.

In health care, the news is more worrisome, even in the short-run.

In 2015, spending for Medicare (net of premiums and other offsetting receipts) will rise by $35 billion, or about 7 percent, CBO expects—the fastest rate of growth recorded for the program since 2009 (after adjustments are made for shifts in the timing of certain payments). Part of that increase reflects the fact that certain provisions of the ACA that reduced the rate of growth in Medicare spending have been implemented already. Those provisions will continue to constrain Medicare spending, but to roughly the same extent each year, so they are no longer reducing its growth rate. In addition, the increase in 2015 reflects growth in the number or cost of services furnished to Medicare beneficiaries, although data are not yet available to show how much of that growth is attributable to changes in hospital admissions, physician visits, prescriptions of expensive new drugs, or other health care services.

The Medicare Access and CHIP Reauthorization Act of 2015 (P.L. 114-10) raised the rates Medicare pays to physicians and led the CBO to increase its projections of outlays by $159 billion for the 2016–2025 period.  However, this change is mostly just accounting tricks.  PL 114-10 ended the annual need for a “doc fix”; CBO’s alternative fiscal scenario already had assumed that the “doc fix” was a political reality.

In the long run, things aren’t much better with respect to Medicare spending due to an aging population:

Outlays for Medicare (adjusted for shifts in the timing of certain payments) remain near 3.0 percent of GDP through 2018 and then increase each year through 2025, when they total 3.7 percent.


The Cons of Restrictive Prior Authorization Policies

Written By: Jason Shafrin - Aug• 30•15

Dr Dana Goldman, a USC professor and partner at my employer–Precision Health Economics–explains how restrictive prior authorization policies can adversely affect the care patients with schizophrenia receive

What is Comprehensive Care for Joint Replacement?

Written By: Jason Shafrin - Aug• 27•15

Bundled Payments for Care Improvement (BPCI)A helpful post from Steven A. Farmer, Meaghan George and Mark B. McClellan explains.  Comprehensive Care for Joint Replacement (CCJR) is a bundled payment structure for hip and knee replacements.  CMS notes that:

2013, there were more than 400,000 inpatient primary procedures in Medicare, costing more than $7 billion for hospitalization alone.

The CCJR program creates lower extremity joint replacements (LEJR) episodes for hospital admissions for joint replacements (MS-DRG 469 and 470) that includes all payments during the 90 days following surgery.  All Part A and B services the patient receives in that 90 day period are included in the bundle.

The CCJR program is similar to CMS’s other bundled payment programs such as aptly named Bundled Payments for Care Improvement (BPCI).  However, the authors note a number of key differences between CCJR and BPCI.

  • Mandatory participation. All hospitals (with limited exceptions) in selected geographic areas are required to participate. This design enables evaluation of the program in a much broader range of hospitals than agreed to participate in the BPCI and avoids selection bias. No alternative payment model has yet been applied to an entire class of providers, and CMS intends to pursue a robust evaluation of the program.
  • Initiation occurs at hospitalization.  Whereas CCJR must begin with an inpatient admission, BPCI episodes could be inpatient, outpatient or post-acute care.
  • Providers have fewer choices with the CCJR episodes. The CCJR includes all Medicare Part A and B services, while some of BPCI models do not. BPCI offers participations a choice of episode durations (30-, 60-, or 90- day), while CCJR can only be 90 days.

One key issue with all bundled payments is innovation.  Under bundled payment–either CCJR or BPCI–provider have an incentive to adopt new technologies that lower cost and improve or do not change quality as well as technologies that do not affect cost, but improve quality.  Innovations that improve patient care but increase cost, however, will become increasingly difficult for providers to adopt if rates for CCJR episodes are fixed.  Further services that are not currently captured in billing–such as telemedicine or digital medicine technologies–would not be included in the estimated payment bundle until years in the future.

Bundled payments will incentivize providers to improve efficiency and can save Medicare money, but it risks stifling innovation and potentially harming patient care.



What is the cancer incidence rate in your state?

Written By: Jason Shafrin - Aug• 26•15

Find out at the CDC’s website. They have incidence information by cancer type and gender for all states between 1999 and 2012. Below is a sample chart you can produce with these data.

Mid-week links

Written By: Jason Shafrin - Aug• 25•15

A universal flu vaccine

Written By: Jason Shafrin - Aug• 24•15

Wired reports:

Today, independent teams reported inScience and Nature Medicine how they’ve tinkered with a piece of viral protein so it can teach immune systems—in this case, in mice, ferrets, and monkeys—to fight whole groups of viruses rather than just a single strain. “It’s a great first step in the road for generating a universal flu vaccine,” says Gary Nabel, who oversaw one of the studies as former head of the National Institutes of Health’s Vaccine Research Center.

How much better is this than the current flu vaccine? The current flu vaccine was only 23% effective last year and it only protects against three different flu virus strains.

Even if the vaccine is highly effective in humans, the efficacy will only last until the influenza virus mutates once again to overcome the vaccine. Nevertheless, many years with few or limited influenza outbreaks would be a welcome respite for world health.

Narrow Networks in your state

Written By: Jason Shafrin - Aug• 24•15

The Affordable Care Act aimed to increase patient access to care.  Although it has certainly improved the share of patients who are insured, it is not clear whether it has actually improved “access.”  Many health insurance exchange plans are able to offer low premiums by limiting the number or type of doctors you are able to use.

Describing the prevalence of these “narrow networks” across states is a recent RWJ issue brief by Polsky and Weiner (2015).  Below are the states whose health insurance exchange plans are most likely to have narrow network.


ACO Characteristics

Written By: Jason Shafrin - Aug• 23•15

In recent years, payers have moved towards shifting more financial risk to providers.  One of the most significant ways financial risk is passed to providers is through the creation of Accountable Care Organizations (ACOs).  The biggest ACO program is Medicare’s Shared Savings Program (MSSP).  Are ACO’s improving quality and reducing cost?  A paper by Schulz, DeCamp and Berkowitz (2015) finds:

Of MSSP ACOs that initiated operations in 2012 or 2013, 118 (54%) lowered expenditures compared with benchmark projections. In total, these ACOs generated $383 million in net savings for Medicare during their first performance year, with 52 ACOs earning shared savings payments of more than $315 million.

What do ACO’s look like?

Of these ACOs, 131 (42%) have more than 20 participating entities, while 42 (13%) are composed of only 1 (Table). More specifically, 140 (45%) included PCPs, specialists, and hospitals, 124 (40%) had PCPs and specialists, while 49 (16%) were composed entirely of primary care physicians.

The authors also found that large ACOs–those with at least 20 participating entities–were the most likely to generate savings.



HWR is up

Written By: Jason Shafrin - Aug• 21•15

Peggy Salvatore of Health System Ed posts this week’s edition of the Health Wonk Review. She has the clever theme of “The More Things Change, The More They Cost.”

Check it out!

How useful are health rankings?

Written By: Jason Shafrin - Aug• 20•15

According to an HSR editorial by Stephan Arndt, the answer is not very.  Generally, county level health rankings are too variable to be of much use.  Further, while some metropolitan regions may have large sample sizes, the sample sizes in less densely populated rural counties will be far lower leading to less precise estimates of any quality measure of interest.

As an exercise to demonstrate the lack of reliability, the author did the following:

I calculated the gross overall mortality rate in Iowa as thetotal number of deaths (Bureau of Vital Statistics, Iowa Department of Public Health 2009) divided by Iowa’s 2010 U.S. Census population total. Using this constant mortality rate, I then generated a random Poisson value for each county in Iowa based on the expected number of deaths given the constant state rate and the county population totals. Then, I calculated the counties’ observed mortality rate. Note that the rate parameter was constant across all counties, so no county had any more or less “problem” than another.Nonetheless, there was a large difference among the observed rates, randomly affecting county rank. The lowest mortality rate (rank = 1) was in Monroe County with 66.5 deaths per 10,000, and the highest mortality rate (rank = 99) was in Adams County with 114.2 deaths per 10,000. Adams County had over 1.7 times the mortality rate as that of Monroe County. Of course, that is nonsense since these are random variations around a constant rate.

In summary, even when the true baseline mortality risk is identical across counties, we still observe significant variation in actual mortality across regions due to random noise.  This is not to say that all studies looking at regional variation in quality are not worthwhile, but rather that there should be some caution when interpreting these results, particularly when there are small sample sizes in certain areas.