November 2009

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Medicare Doc Paycut Reversed

November 30, 2009 in Current Events, Medicaid/Medicare, Physician Compensation | 1 comment

In 1998, Medicare enacted the sustainable growth rate (SGR) which would slowly bring down Medicare physician compensation.  However, each year, it gets reversed by Congress. Now, instead of a gradual decline, the implementation of SGR would  result in a 21.2% pay cut for Medicare docs.

Before the Thanksgiving holiday, however, Congress once again reversed the SGR.  Megan McArdle gives some solid reasons of why the reform of the SGR should be included in any health reform bill.


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How has episode-based P4P worked in California?

November 30, 2009 in Health Insurance, Managed Care, P4P, Quality | No comments

Episodes of care are defined as the bundle of medical treatments used to treat an illness over  a specified time period.  Because all treatments are bundled together, these episodes have been thought to provide a superior unit of analysis in pay-for-performance (P4P) systems.  In fact, Oxford Health Plan pioneered episode payment in the 1990s.  [Later, the health plan abandoned episode payment due to data and computer system difficulties]

How has episode-based pay-for-performance worked in California?  A paper by Robinson, Williams and Yanagihara (2009) looks at Integrated Healthcare Association (IHA) initiative.  This association of health plans, hospital systems, and medical groups manages California’s P4P program.  The P4P program gives large physician groups a P4P score based on all of its commercial HMO patients. Using the Thomson Reuters Medical Episode Grouper (MEG), $264 million was spent on the California P4P between 2003 and 2007.  Although this is the largest P4P program in the nation, it amounts to less than 2% of California physician’s income.

Using medical groups rather than individual physicians has a number of advantages.  First, a larger number of patients are attributed at the medical group level compared to the individual provider.  Also, having multiple physicians within a single group treating a patient does not complicate the analysis.  Despite the use of medical groups rather than physicians, Robinson and co-authors found a number of problems with episode-based P4P:

  • Small Sample Size: The IHA technical committee stated that a physician organization must have a minimum of 30 episodes to be evaluated.  However, most physician organizations did not have enough episodes to be scored.  The main problem is that most enrollees are healthy during the year and thus do not generate as many episodes.  However, this may be less of a problem if P4P was to be applied to Medicare beneficiaries.
  • Data Completeness: “Prior to P4P, there was little incentive for the medical group to fully code what is done to the patient (procedures) and why it is done (diagnoses) on encounter forms.”  If P4P were applied to the Medicare population, procedure codes would likely be coded more accurately (because physicians are mostly paid by the procedure), but the diagnoses fields would likely suffer from similar problems.

Today in 2009, IHA has mostly abandoned episode-based P4P.  The metrics to be used going forward include: the percentage of prescriptions filled which are generic, the percentage of ambulatory surgery procedures that take place in freestanding centers compared to hospitals, ER visits per 1000 enrollees, non-maternity hospital visits per 1000 enrollees.

The authors note that episodes of care still may be appropriate for high-volume, high cost procedures in orthopedics and interventional cardiology, but California’s enthusiasms for episode-based P4P seems to be waning.

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The Ecological Fallacy

November 27, 2009 in Econometrics | No comments

Are foreign-born individuals more likely to be literate (in English) than native born Americans?  One would think not, but consider the following information:

Robinson (1950) computed the following two pieces of information: the percent of the population who are foreign-born, and the percent who are literate.  Robinson observes that states with a high percentage of foreign-born individuals have higher literarcy rates.  There is a 0.56 correlation between a state’s proportion of foreign born individuals and a state’s proportion of individuals who are literate. Does this mean that being foreign-born causes an increase in literacy?

Actually no. This correlation is an ‘ecological’ correlation,  because the unit of analysis is not an individual person but a group of people—the residents of a state. In reality, the association is negative: the correlation computed at the individual level is -0.11.

These figures can be explained as follows.  Let us assume that high income states have high levels of literacy.  Also assume that foreign born individuals have low levels of literacy.  Because immigrants are drawn to states with high income and the potential for economic growth, one could see a a positive correlation between literacy and foreign born individuals on a state level.  High income states have high literacy among natives, but many foreign born individuals.  Low income states have low literacy levels among natives, but also few immigrants.  Thus, one could see a positive correlation between proportion of foreign born individuals and literacy on an aggregate level, but a negative correlation on an individual level.  

This is the problem of ecological inference.  As David Freeman explains, ecological inference occurs when inferences about individual behavior drawn from data about aggregates.  Stereotypes are another example of ecological inference.  In this case, one assumes that individual members of a group have the average characteristics of the group at large.

Happy Thanksgiving

November 26, 2009 in Miscellaneous | No comments

Two important stories for you to read.  Two things to be thankful for:

The Four-Party System

November 25, 2009 in Regulation | No comments

Who does health care reform affect?  Charles Kroncke and Ronald White organize individuals into the following four major stakeholder groups:

  • First-party patients.  The patients who seek care.
  • Second-party providers.  These include hospitals,  physicians, nurses, physical therapists, dentists, and pharmaceutical companies.
  • Third-party payers.  The payers are generally either private insurance companies or government programs such as  Medicaid and Medicare.
  • Fourth-party employers.  Employers purchase health insurance for their employees and thereby obtain a deductible expense in calculating their federal income-tax liability. 
  • Other parties.  These include health care researchers, scientists, financial institutions that provide funding for medical school, malpractice insurers, and of course bloggers.

Third party payers must decide on either community or experience rating.  Kroncke and White use examples from both health care and other forms of insurance.

  • Community Rating.  Community rating charges all members of a specific group the sam premium.  However, adverse selection can destabilize community rating schemes when healthy individuals opt out.  This drives up insurance premiums for the sicker patients remaining in the insurance pool.  ”Although community-rated insurance systems proved to be unsustainable in free markets, egalitarian-minded legislators were especially fond of them. The most obvious way for legislators to increase these systems’ viability was to prevent low-risk buyers from exiting the risk pools. Compulsory (or mandatory) insurance laws now dominate homeowner, automotive, unemployment, and disability insurance markets….Over the long run, however, without third-party control over second-party reimbursement rates, compulsory insurance produced windfall profits for providers and fueled spiraling costs.”  
  • Experience Rating.  Experience rating may seem to be a solution to the problems of community rating.  Experience rating, however suffers from the problem of information asymmetry and insurance fraud.  Patients may have hidden information concerning the probability they get sick (e.g., family history) or may hide pre-existing conditions from insurers.  Seller’s side information asymmetry involves  deliberately withholding or disguising information insurance buyers need in order to  decide rationally between competing policies or companies.  The language of health insurance contract is extremely opaque and makes comparison shopping between health plans nearly impossible.  Further, there may be fraud in experience-rated systems.  The GAO has long identified large-scale public programs, such as  Medicare and Medicaid, as notoriously rife with provider-based fraud.  In an example outside the health care realm, homeowner’s insurance suffered from a lack of transparency after Hurricane Katrina, when insurers relied on an indiscernible distinction between wind and water damage to deny claims.

Key Pieces of Legislation:

  • Flexner Report (1910): Lead to a reform of medical education; reduced the number of medical school graduates by one half and the number of medical schools from 160 to 85.
  • Stabilization Act (1942): allowed large corporations to offer fringe benefits without violating the freeze on wages. This act stimulated the rise of employer-provided health benefits.
  • Hill Burton Act (1946): Provides federal subsides for the construction of nonprofit community hospitals.
  • IRS tax code (1954): Makes employer contributions to employee health insurance tax deductible for employees.
  • Employee Retirement Income Security Act (1974): exempted health care benefits from many state taxes and regulations. Since then, this act has become a magnet for health care-related enabling legislation.

Source:

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Turkey Links

November 24, 2009 in Current Events | No comments

Some links to tide your over to Turkey Day.

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Why it is difficult to evaluate physicians quality: No medical home

November 24, 2009 in Medicaid/Medicare, P4P | No comments

One laudable goal is to improve medical quality while reducing cost. One way members of Congress have proposed to accomplish this is to use episode groupers in order to provide feedback to doctors regarding their resource use. None other than Max Baucus has advocated this (see p. 45 of this white paper).

However, matching patient costs to individual physicians is difficult. A paper by Pham et al. (NEJM 2007) shows that Medicare beneficiaries see many physicians in the course of a year or even during the course of the treatment for one disease.  “Beneficiaries saw a median of two primary care physicians and five specialists working in four different practices.”

The authors explore 4 methods to attribute patient episodes to individual physicians:

  • Plurality provider algorithm.  Assigns a beneficiary to the physician (or practice) who billed for the greatest number of that beneficiary’s evaluation and management visits
  • Plurality primary care physician algorithm.  This method excludes specialist visits and assigns the beneficiary to the primary care physician billing for the most evaluation and management visits.
  • Majority provider algorithm. Assigns the beneficiary to the provider who billed for the plurality of evaluation and management visits, with the added criterion that the plurality must be at least 50% of those visits.
  • Multiple provider algorithm.  Assigns the beneficiary to all providers who billed for at least 25% of the beneficiary’s evaluation and management visits, thereby allowing the beneficiary’s care to be assigned to more than one provider.

Using these methodologies, Pham and co-authors found that “Between 2000 and 2001, and again between 2001 and 2002, an average of 33% of beneficiaries had a change in their assigned physician, with that assignment changing to a different practice for the vast majority (97%).”

Further, because a physician must account for the majority of the patient’s episode-level visits, many of the physician’s patient visits will be excluded from their score.  In the CTS data from the Pham study, only “39% of a primary care physician’s Medicare patients, and 6% of a medical specialist’s Medicare patients, were assigned to them.”  Patient with chronic illnesses are more likely to have multiple physicians and are less likely to have their care episodes assigned to a primary care physician.

This persistent instability “may decrease the motivation of physicians to invest in long-term improvements in care for patients with chronic conditions (e.g., hiring patient educators), or the ability to target interventions to specific patients, if they perceive that the benefits to patients will take years to accrue and that many of their patients are unlikely to remain assigned to them. Care dispersion may thus limit the motivation of physicians and their ability to improve the quality of care in multiple ways.”

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House Reform Bill’s Impact on the Number of Uninsured

November 23, 2009 in Uncategorized | 2 comments

The CMS’ Office of the Actuary estimates the impact of the House health care reform bill on insurance coverage 10 years in the future:

OACT House reform estimates

One can see that the number of uninsured drops dramatically, but there will still be over 20 million Americans without insurance. The most interesting and difficult part of the analysis is the impact on employer-provided insurance.  According to OACT:

“By 2019, an estimated 15 million workers and family members would become newly covered as a result of additional employers offering health coverage and a greater proportion of workers enrolling in employer plans. However, a number of workers who currently have employer coverage would likely become enrolled in the expanded Medicaid program or receive subsidized coverage through the Exchange. For example, some smaller employers would be inclined to terminate their existing coverage, and companies with low average salaries might find it to their—and their employees’—advantage to end their plans, thereby allowing their workers to qualify for heavily subsidized coverage through the Exchange. Somewhat similarly, many part-time workers could obtain coverage more inexpensively through the Exchange or by enrolling in the expanded Medicaid program.“

Links: California Edition

November 20, 2009 in Current Events | No comments

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Quotation of the Day: The curious task of economics

November 20, 2009 in Economics - General | No comments

“The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.”

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