2012 State of the Union: Healthcare Edition

January 24, 2012 in Current Events, Public Policy | No comments

The full text of the State of the Union is here.  Lots of blogs are analyzing at the State of the Union address, but the Healthcare Economist will examine the President’s health-related remarks.

Healthcare-Related Comments

Medical R&D:“We’ll invest in biomedical research, information technology, and especially clean energy technology -– (applause) — an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.”

Health Reform: “And it’s why we passed reform that finally prevents the health insurance industry from exploiting patients. (Applause.)

Now, I have heard rumors that a few of you still have concerns about our new health care law. (Laughter.) So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses. (Applause.)

What I’m not willing to do — what I’m not willing to do is go back to the days when insurance companies could deny someone coverage because of a preexisting condition. (Applause.)

I’m not willing to tell James Howard, a brain cancer patient from Texas, that his treatment might not be covered. I’m not willing to tell Jim Houser, a small business man from Oregon, that he has to go back to paying $5,000 more to cover his employees. As we speak, this law is making prescription drugs cheaper for seniors and giving uninsured students a chance to stay on their patients’ — parents’ coverage. (Applause.)

So I say to this chamber tonight, instead of re-fighting the battles of the last two years, let’s fix what needs fixing and let’s move forward. (Applause.)”

Cuts to Medicare and Medicaid: “And their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it –- in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes. (Applause.)

This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit.  The health insurance law we passed last year will slow these rising costs, which is part of the reason that nonpartisan economists have said that repealing the health care law would add a quarter of a trillion dollars to our deficit.  Still, I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year — medical malpractice reform to rein in frivolous lawsuits. ”

Health IT:“Veterans can now download their electronic medical records with a click of the mouse.”

The Healthcare Economist’s Take

Your response to these comments are likely, ‘that’s it?!?!’  If you look at the State of the Union address from 2010, you’ll notice that health care reform played a large role in the President’s State of the Union address.  In this address, the President largely avoided the topic. This is not a huge surprise since the President’s Health Reform package (the ACA) is proving unpopular.

Tellingly, the phase “health reform” is never once mentioned in the speech.

He did mention reducing paperwork for small businesses and maintaining the provision to forbid insurers to adjust health insurance premiums based on the patients’ pre-existing conditions. A policy that prohibits rating policyholders based on pre-existing conditions is only tenable with an individual mandate; otherwise healthy people will have no incentive to buy insurance until they are sick. Obama does not mention the individual mandate at all in his speech, however.

The President also says that we need to cut spending for Medicare and Medicaid. He does not, however, offer specifics. In 2010, the President established the bipartisan Fiscal Commission to reduce the cost of Medicare, Medicaid and Social Security. Those efforts largely failed. With so little effort directed towards these cuts in his speech, there is little chance that these cuts materialize or if they do they will be large in magnitude.

In short, on the health care front there is no new news…this would of course change significantly if a Republican takes office in 2013.

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How to Ask for Help via Email

January 24, 2012 in Quotation | No comments

“A problem clearly stated is a problem half solved.”

  • Dorothea Brande

For more tips on getting answers to the questions you need, see this Lifehacker article.

 

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Employer Health Benefits in California in 2011

January 24, 2012 in HC Statistics, Health Insurance, Managed Care | No comments

Each year, the California Health Care Foundation (CHCF) examines trends in employer health benefits in the state of California.  Last year, I reported on the 2010 CHCF report and now I will examine the 2011 report.

Between 2010 and 2011, some things have remained the same.  Healthcare premiums are far outpacing inflation over the medium run and California premiums remain higher than average. Workers at small California firms have to cover a large share of premiums and receive less generous insurance coverage (i.e., deductibles more than $1000).

High-wage firms (66% vs. 42%), firms with few part-time workers (70% vs. 41%) and firms with at least some unionized staff (84% vs. 61%) are more likely to offer health insurance to their workers.

Growth in California health insurance premiums (9.1%) in 2011 fell below the growth rate of the U.S. overall (9.5%). In 2010, the opposite was true. California health insurance premiums rose by 7.5%, but overall U.S. premium growth rose by only 3.0%.

The stereotype that California is the land of managed care holds true. Whereas the national proportion of covered workers enrolled in an HMO declined from 20% to 17% between 2009 and 2011, in California the proportion of covered workers enrolled in an HMO held steady at 54%. Also, although the U.S. overall has seen significant growth in high-deductible health plans (HDHPs) so that 17% of covered workers are enrolled in these plans, in California, only 6% of workers have enrolled in this plan type.

Is the ACA working? The answer is probably no. “Just 32% of small California firms not currently offering health benefits were aware of the small firm tax credit that is part of the Affordable Care Act.”

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Medicare Payments for Hospitals in Under-served Areas

January 23, 2012 in Hospitals, Medicare | No comments

One of the goals of Medicare is to provide its beneficiaries access to quality care regardless of where they live.  Thus, the Medicare program provides financial incentives to providers located in these remote areas.

Whereas most Medicare pays most hospitals through the inpatient prospective payment system (IPPS), it pays certain rural hospitals based on their reported costs.  Medicare pays Critical Access Hospitals (CAH), for instance, 101 percent of its report cost for inpatient, outpatient, laboratory, and therapy services.  It also pays this providers 101 percent of their cost for post-acute care for CAH beds are “swing beds” (which are beds that can be used for either acute or post-acute care).

However, how should Medicare define ‘critical’? The simplest definition is just whether a hospital is in a rural (i.e., non-metropolitan) area. However, there are various gradations of ‘rural’. A rural hospital on the outskirts of a big city would be far less ‘critical’ then one very far from distant areas. One could define ‘critical’ based on facility volume. If the low volume is due to poor quality, however, defining these hospitals as critical could just reward poor hospitals. Third, could define a hospital as isolated based on its distance from other facilities who could provide comparable care. Alternatively, one could identify critical hospitals based on demographic factors such as population density in the surrounding areas.

Below, I provide more information on other types of types of rural hospital designations in Medicare.
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Friday Links

January 20, 2012 in Current Events | No comments

Some informative reading to take you into the weekend.

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Futuristic Health Wonk Review

January 19, 2012 in Carnivals | No comments

Julie Ferguson’s Workers’ Comp Insider hosts a Health Wonk Review edition that examines the key health policy issues for the upcoming year.

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How Health Reform will affect Hospital’s Business Strategy

January 19, 2012 in Health Reform, Hospitals, P4P | No comments

For many years, fee for service payment was the status quo. FFS model encourages hospitals to adopt the following strategies to maximize market share and profits:

  • Centered on short-term acute care
  • Focused on specialist alignment
  • Driven by a volume-based service-line strategy
  • Using expensive medical equipment purchases to encourage physician referrals
  • Attracting patients with new construction in support of market share growth
  • Short-term acute hospitals focus on profitable service lines such as oncology, cardiology, neurology, and orthopedics.

Specific examples of this growth are abundant.  In Indianapolis, all four of their hospital systems built coronary surgery centers at a combined cost of $210 million.  A community hospital 15 miles north of the city opened a smaller, open-heart surgery program.  In Cincinnati, nine hospitals performed open heart surgery. Eight Boston Hospitals Have da Vinci System, which may indicate that robotic surgery may be used for marketing purposes.

However,  health reform has started to change these trends.  Medicare is instituting more bundled payment (e.g., dialysis payments)  rather than pure fee-for-service.  Further, Medicare’s Shared Savings Program (MSSP)  aims to use Accountable Care Organizations (ACOs) to coordinate patient care improve quality and reduce the rate of growth in health care spending.

How will hospitals respond to the changing market landscape?  One way hospitals can improve their margins is to only treat healthier patients to improve their performance in the case where risk adjustment methods are imprecise.  Also, provider mergers may be a trend. Access larger populations will lessen risk providers must bear under new payment models.  Larger size also means that hospitals can negotiate better rates with suppliers.  Hospitals will likely sell redundant or non-core assets.

Hospitals will also adopt new technology to better manage care. For instance, Henry Ford Health System in Detroit uses an embedded specialized software called RadPort in its electronic physician order entry system that prompts physicians to enter specific information when ordering radiology tests.  The pilot, funded with a CMS grant, will see whether these prompts will reduce utilization levels.

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Patient Centered Medical Home: Is your doctor ready?

January 17, 2012 in Medical Home, Quality, Supply of Medical Services | No comments

The answer is probably not.  The NCQA defines 149 factors which would make a practice a successful medical home.  These include physician access during and after office hours, electronic access to patients information, availability of clinical data and use of that data for population management, identification of high risk patients, ability to refer patients to available community resources, care coordinate, and quality measure tracking.

As recent Health Economics articles finds that almost half of physician practices fail to meet the NCQA’s medical home standards.  Specifically,

“Forty-six percent…of all practices lack sufficient medical home infrastructure. While 72.3 percent…of multi-specialty groups would achieve recognition, only 49.8 percent…of solo/partnership practices meet NCQA standards. Although better prepared than specialists, 40 percent of primary care practices would not qualify as a medical home under present criteria.”

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Medicare reducing reimbursement for low-quality docs

January 16, 2012 in Medicare, P4P, Physician Compensation | 4 comments

In 2015, Medicare will begin implementing a value-based purchasing (VPB) program for physicians.  Initially the program will target only certain physicians and groups of physicians, but by 2017 all physicians is participate in this program.

The VBP program will evaluate physicians along two broad dimensions: quality and cost.  In the final rule:

Section 1848(p) of the Act requires the Secretary to ‘‘establish a payment modifier that provides for differential payment to a physician or a group of physicians’’ under the physician fee schedule ‘‘based upon the quality of care furnished compared to cost *** during a performance period.’’ The provision requires that ‘‘such payment modifier be separate from the geographic adjustment factors’’ established for the physician fee schedule. In addition, section 1848(p)(4)(C) of the Act requires that the value modifier be implemented in a budget-neutral manner.

 

Quality

The current quality measures to be used include:

  1. The measures in the core set of the Physician Quality Reporting System (PQRS);
  2. All measures in the Group Practice Reporting Option (GPRO) of the Physician Quality Reporting System; and
  3. the core measures, alternate core, and 38 additional measures in the Electronic Health Records (EHR) Incentive Program measures.

Cost

The current measures of cost CMS is using are total per capita cost measures and per capita cost measures for beneficiaries with four chronic conditions (COPD; heart failure; coronary artery disease; and diabetes).

By January 2012, however, CMS will choose an episode grouper which can evaluate physicians based on episodes of care. Specifically:

Section 1848(n)(9)(A) of the Act requires us to develop by January 1, 2012, an episode grouper that combines separate, but clinically related items and services into an episode of care for an
individual, as appropriate.

Other Issues

One of the main problems of the physician VBP is attribution of patients to doctors. In managed care organizations, patients are assigned a primary care doctor or gatekeeper who are responsible for the patient’s overall care. In Medicare, the patient can see any willing provider; because the primary care doctor cannot restrict the patient’s choice of care, it is more difficult to hold them responsible for the care. Specifically, Medicare beneficiaries never have to choose a primary care doctor, so identifying the doctor to be ultimately responsible for each patient’s overall care is difficult.

Physicians require additional information to understand why the received the VBP scores they did. For this purpose, CMS will create Physician Feedback Reports, confidential reports providing more detailed information of the underlying factors which produce these scores.

For the VBP modifier in 2015, CMS will use 2013 as the initial performance period 2013. This means that payment adjustments in 2015 will be on care provided 2 years ago. Although evaluating physician performance, allowing for appeals and adjusting payments takes time; two years is a long lead time.

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Malpractice Insurance Caps

January 13, 2012 in Malpractice | 3 comments

Many people support malpractice insurance caps.  They believe that malpractice insurance award caps will reduce medical costs in two ways: i) by decreasing malpractice premiums and ii) by decreasing the amount of defensive medicine physicians practice to avoid lawsuits.  An article by Shirley Svorny, however, argues that malpractice awards are bad medicine.  Physicians who are more careless will have higher malpractice premiums; instituting malpractice caps dulls the incentive to practice safe medicine.

Physicians make a number of arguments of why this logic doesn’t fly. The first is that malpractice awards are haphazard and that few victims of actual negligence sue.  Svorny cites some research (see below) which finds a correlations between the presence of negligence and the amount of the award; demonstrating that there is some relationship between physician performance and court awards.  Other critics claim that the malpractice system has high administrative costs.  This is true.  Svorny accurately points out, however, that most of the administrative costs occur in the limited number of cases that go to court.  Further, there is open debate of whether malpractice lawsuits keep doctors from reporting errors.  Although the article cites some research that states that lawsuits start discussions about improving care quality, I believe that self-reporting of errors will decrease in a non-linear fashion as malpractice awards increase.

Svorny’s research also identifies that conventional wisdom that physician malpractice premiums are not experience rated is not entirely correct.  Additional information is below.

Malpractice Insurance Market, Premiums and Risk

Physicians who are higher risk do end up paying higher malpractice premiums. This occurs through a number of mechanisms.

  • Underwriting: When applying for malpractice insurance, physicians describe their practice profile, whether they perform surgery, number of patients treated, educational background, whether their license has been suspended, whether they are board-certified and other information.
  • Experience Rating.  Although base premiums often do not very within a specialty by state, carriers often “impose premium surcharges on physicianswhose claims histories do not meet the company’s standards, or offer discounts to physicians with clean histories.”  Some carriers also give physician longevity credits to physicians with good claims experience.
  • Experience Rating across carriers.  “…most experience rating takes place across carriers. Insurance carriers specialize in serving physicians with similar risk profiles. Physicians who do not meet one carrier’s risk profile must seek insurance elsewhere. This allows insurance carriers to specialize in underwriting certain risks.”  Specifically, surplus-line carriers offer malpractice coverage to physicians who cannot secure coverage through more standard market.  As expected, premiums are much higher in this market.

Other Malpractice Insurer’s Risk Management Tools

  • Practice Constraints.  Some insurers limit the scope of the physicians practice which they will cover.  “For example, California rate filings include forms to exclude performing surgery, administering anesthesia, treating pregnancy, and practicing over the Internet…Underwriters verify that physicians adhere to the restrictions in their policies when the policies are renewed each year and by looking at the doctor’s website or advertisements aimed at consumers.”
  • State Medical Board Sanctions.  Although State Medical Board sanctions of physicians is somewhat rare, those who are sanctioned generally must gain malpractice coverage in the more expensive surplus lines.
  • New Treatments. Malpractice insurers often do not cover more novel and riskier procedures.
  • Direct Risk Management Practices. “A 1989 Institute of Medicine survey of 20 commercial and physician-owned carriers found four types of risk-management strategies to be prevalent: (1) data gathering and analysis,(2) development of clinical standards and protocols, (3) educational programs, and (4)premium discounts for risk-management activities.

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