Unbiased Analysis of Today's Healthcare Issues

HWR: World Cup Edition

Written By: Jason Shafrin - Jun• 19•14

Julie Ferguson has posted a fresh Health Wonk Review: The “Undeterred by World Cup Fever” Issue at Workers’ Comp Insider.  Check it out!

Is Health Care Exceptional?

Written By: Jason Shafrin - Jun• 18•14

Many health care wonks claim that health care is a market unlike any other. Unique features make it unsuited to be governed by a market economy. However, research research by Amitabh Chandra, et al. (2013) claims that healthcare providers act like firms in most any other industry.

The conventional wisdom in health economics is that large differences in average productivity across hospitals are the result of idiosyncratic, institutional features of the healthcare sector which dull the role of market forces. Strikingly, however, we find that productivity dispersion in heart attack treatment across hospitals is, if anything, smaller than in narrowly defined manufacturing industries such as ready-mixed concrete. While this fact admits multiple interpretations, we also find evidence against the conventional wisdom that the healthcare sector does not operate like an industry subject to standard market forces. In particular, we find that hospitals that are more productive at treating heart attacks have higher market shares at a point in time and are more likely to expand over time. For example, a 10 percent increase in hospital productivity today is associated with about 4 percent more patients in 5 years. Taken together, these facts suggest that the healthcare sector may have more in common with “traditional” sectors than is often assumed.


Hospitals moving to the ‘burbs

Written By: Jason Shafrin - Jun• 17•14

The ACA offers States the option to expand Medicaid eligibility to millions of Americans.  The goal of the expansion was to increase poor and middle class Americans’s access to affordable health care.  However, access to acute care may be getting more difficult for poor individuals.

A recent article looking at Milwaukee’s hospital market describes how hospitals are leaving the city and moving to the suburbs, where the share of individuals with private insurance is much higher.  For example,

The Aurora [hospital chain's] expansion is part of a national push by nonprofit health systems to increase their market share in affluent and lucrative suburban markets. In all, nearly two-thirds of the roughly 230 hospitals opened across the country since 2000 are in wealthier areas, a Pittsburgh Post-Gazette/Milwaukee Journal Sentinel analysis found.

…All told,the health systems in the Milwaukee area have spent more than $750 million in the past seven years to build hospitals and clinics in the city’s suburbs. At the same time, they have invested only a fraction of that amount in Milwaukee’s poorest neighborhoods, where there is the greatest need for additional access to health care.

How big a difference is there between Medicaid and private insurance payment rates? The difference is especially large for lucrative surgical procedures.

For a coronary angioplasty that requires a two- to three-day hospital stay, for example, Medicaid pays $9,280 while commercial insurers typically pay $29,500 to $33,000.

The disparity between urban and suburban areas is especially in Wisconsin since Governor Scott Walker decided not to accept federal funds to expand Medicaid.

US Ranks Last

Written By: Jason Shafrin - Jun• 17•14

According to a Commonwealth Fund report examining the health care system of 11 countries, Americans receive the worst health care.  The report summarizes the findings as follows:

The United States health care system is the most expensive in the world, but comparative analyses consistently show the U.S. underperforms relative to other countries on most dimensions of performance. Among the 11 nations studied in this report—Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States—the U.S. ranks last, as it did in prior editions of Mirror, Mirror. The United Kingdom ranks first, followed closely by Switzerland.


The authors summarized the results in tabular form as well.

Why does the US fair so poorly? Cost and access to care are two clear areas where the US falls behind. The US spends over $8,500 per person on health care; the next closes countries are Switzerland and Norway, both of which spend $5,600 per person. Another reason is that a large share of Americans are uninsured and those who are insured often have high out-of-pocket costs. The US also did poorly on aggregate measures of health. The U.S. ranked last or second to last in infant mortality, mortality amendable to health care, and life expectancy at age 60.

But what about disease-specific measures of health care? Is the US good at treating complex diseases? The answer is likely yes, but those types of metrics are not included in the study. Instead, the study looks at broad categories of effective care, safe care, coordinated care, and patient centered care.

Effective care includes measures such as “Doctor or other clinical staff talked about exercise or physical activity,” “Doctor or other clinical staff talked with patient about a healthy diet and healthy eating” and “Physicians reporting it is easy to print out a list of patients who are due or overdue for tests or preventive care.” These are certainly important dimensions of care, but patients with cancer need more advanced treatment than just preventive care or reminders to exercise or watch one’s diet. Similarly, management of chronic diseases includes such broad measures as “Patients with hypertension who have had cholesterol checked in past year” and “Primary care practices that routinely provide written instructions to patients with chronic diseases.” Again, these are important measures of quality but likely far from the most important for most patients. Nevertheless, the US did fairly well on this dimension, ranking #3/11.

Safe Care. The US ranked #7/11 on these measures which included “Patient believed a medical mistake was made,” patient given the wrong medication, and hospital reporting of hospital-based infections.

Coordinated Care. The US ranked #6/11 on these measures which included whether the patient had a regular doctor, efficiency of specialist referrals, communicating information after a hospital stay to post-acute care providers.

Patient-centered care. The US ranked #4/11 on this dimension. The US was best in the world at giving clear instructions about symptoms to watch for, and physicians encouraging patients to ask questions, but did poorly in terms of continuity of care (i.e., having the same doctor for more than 5 years). However, the US is a fairly mobile (about 15% of the country moves each year) and thus it should not be surprising that few patients have the same doctor for 5 years.

Overall, on most health care quality measures, the US performs about average. Where the US falls short is that the system is expensive, many patients are uninsured, and those who are insured often have high out-of-pocket payments. Although the US healthcare system clearly has areas where it can improve, the headline that the US has the “worst” healthcare system in the developed world is highly misleading.


Health Reform in Minnesota

Written By: Jason Shafrin - Jun• 15•14

Was health reform successful in Minnesota?  If the metric of interest is reducing the number of uninsured, the answer is certainly yes.  A State Health Access Data Assistance Center (SHADAC) report finds:

The number of uninsured in Minnesota fell from 445,000 (8.2 percent of the population) to about 264,500 (4.9 percent of the population).

How was this figure achieved?  Were people buying into the health insurance exchanges?  Not entirely.

Coverage in the private health insurance market also increased. Te total number of Minnesotans with private group coverage (primarily employer-sponsored coverage) was relatively stable with a decline of about 6,000 (a 0.2 percent change); growth in self-insured plans was balanced by a decline in fully-insured coverage. The nongroup market grew by almost 36,000 and included gainsboth inside and outside of MNsure

So how did the previously uninsured gain access to health insurance in Minnesota. The answer is, the government.

Tis increase in health insurance coverage was primarily driven by an increase in the number of Minnesotans enrolled in state health insurance programs, Medical Assistance (Minnesota’s Medicaid program) and MinnesotaCare. Enrollment increased by over 155,000 for these two programs combined


Friday Links

Written By: Jason Shafrin - Jun• 13•14

Are market leaders raising health insurance premiums?

Written By: Jason Shafrin - Jun• 12•14

That is the headline from an Avalere report. The top 5 Exchange plans in the state of Washington increased premiums between 6 and 12%. The Exchange plans with market share ranks of 6 or 7, on the other hand, had increases between 0-2% and the 8th place plans even cut rates by almost 7%. Is this a case of the big guys gouging patients?

Actually, the answer is no. Although market leaders did increase rates as a percentage, the premium rates for the top 5 exchange plans in Washington State are actually below plans 6-8. For instance, Blue Cross (the market leader) raised rates by 8.1%, but their 2015 rates ($273.81/month) are still the lowest of all Washington plans. On the other hand Kaiser raised rates by only about 1%, but its 2015 rates ($335.21/month ) are among the highest in Washington.

What can explain this phenomenon. First, this could be a case of regression to the mean where the lowest price plans raise their rates. Second, it could be the case that market leaders intentionally underpriced the plans to gain market share with the intention of later raising rates. Changing health insurance has transcaction cost. For instance, you need to find a new doctor. Additionally, if you pick a new plan, you need to research which plan is best for you and your family which can be time intesive. Thus, underpricing health insurance in the first year of the Exchange may have been an optimal strategy. Third, this could be the case of increase competition. Health plans with lower market share may want to gain market share. One way to do this is to lower their prices (or in this case, increase prices more slowly than the big guys).

Cavalcade des risques #210

Written By: Jason Shafrin - Jun• 11•14

Monsieur Jeff Root of RootFin hosts this week’s round-up of risky posts from the home of Brie, Merlot and Deneuve. It’s a great one, too, with an interesting selection of posts covering everything from Paget’s Disease to the World Cup

Burden of Autism: $236 billion

Written By: Jason Shafrin - Jun• 10•14

Autism (and autism spectrum disorder (ASD)) and autism are disorders are characterized, in varying degrees, by difficulties in social interaction, verbal and nonverbal communication and repetitive behaviors.  CDC identified about 1 in 68 American children as on the autism spectrum.

One question is, how much does it cost to take care of an austistic child?  A recent study finds that:

…the lifetime cost of being diagnosed with autism in the United States is somewhere between $1.43 million and $2.44 million.

The figure at the low end of the range is for people on the autism spectrum who don’t have intellectual disabilities. The higher tally is for people who do, according to a study published Monday by the journal JAMA Pediatrics.

These costs include not only special education for the children, but also parents’ lost productivity at work to care for the child. For adults, the largest costs include additionally living expenses for housing staffed with medical personnel, medical expenses and the lost productivity on the job.

What is the total cost of autism in the US? Nearly a quarter of a trillion dollars.

The study authors relied on estimates from the Centers for Disease Control and Prevention to estimate that there are 3,540,909 Americans with some form of autism. Assuming that 40% of them have an intellectual disability, the total cost of autism in the U.S. is on the order of $236 billion per year.


The Efficiency Frontier in Health Economics

Written By: Jason Shafrin - Jun• 09•14

Which treatments are better than others? Ideally, medicines that provide large health benefits and cost little will be preferred to those that offer little health benefits and/or cost a lot.

In health economics, one way to systematically evaluate different treatments is the efficiency frontier. The efficiency frontier methodology is an extension of the standard approach of incremental cost-effectiveness ratios. The Instituts für Qualität und Wirtschaftlichkeit im Gesundheitswesen (IQWiG,Institute for Quality and Efficiency in Healthcare) is Germany’s agency responsible for assessing the quality and efficiency of medical treatments (e.g., pharmaceuticals, diagnostic and screening methods). The provide an overview of the efficiency frontier concept which I summarize below.