Unbiased Analysis of Today's Healthcare Issues

HWR: Mud Season Edition

Written By: Jason Shafrin - Mar• 13•14

Brad Wright has posted Health Wonk Review: Mud Season Edition at Wright on Health – you can find the link here.

Are ACOs working?

Written By: Jason Shafrin - Mar• 12•14

Maybe. An press release from CMS is very upbeat on ACOs. What do the numbers say?
Farzad Mostashari and Ross White review the CMS report and find that results were mixed:

Of the 114 ACOs in the program, 54 of the ACOs saved money and 29 saved enough money to receive bonus payments. The 54 ACOs that saved money produced shared net savings of $126 million, while Medicare will see $128 million in total trust fund savings.

There was not a large difference between the success rate of physician-led and hosptial-led ACOs. 29% of the physician-led ACOs achieved savings than expected compared to 20% for hospital-sponsored ACOs. However, this difference was not statistically significant.

Another question is: are these savings a one-time change or can decreases in spending growth continue into the future. Some evidence indicates that the latter is more likely. Mostashari and White claim that “there is some evidence that ACOs in the highest cost states are more likely to be achieve shared savings. The states with the most expensive (risk adjusted and standardized) regions for Medicare are Florida, Louisiana, Mississippi, and Texas.” Thus, the biggest ACO savings could be simply a regression to the mean phenomenon.

Further, little evidence is available on the whether cost savings decreased patient health. Although the ACOs do use a number of quality measures, most of these are process of care measures; the outcome measures used are generally crude.

Are ACOs working? The question has not yet been fully answered.

Extended Cost Effectiveness Analysis

Written By: Jason Shafrin - Mar• 10•14

Most people know what cost-effectiveness analysis (CEA), but what is extended cost effectiveness analysis (ECEA)?  A paper by Verguet, Laxminarayan,and Jamison (2014) describes the ECEA approach as it relates to the benefits of universal public finance (UPF) of specific medical treatments.  CEA measures the effectiveness of a treatment relative to its cost.  ECEA does this as well but also includes that value of UPF based on its value providing provide insurance against financial risks. Since most people are risk averse, insurance is useful in and of itself.  Second, ECEA also accounts the financial implications of crowding out private expenditures; namely, in the case of UPF that funding coverage (e.g., through taxes) creates deadweight loses.  Finally, ECEA can incorporate values society places on more or less equal distributional of resources across wealth strata of a population.

The authors apply the ECEA framework to determine the value of universal public finance (UPF) of tuberculosis (TB) treatment.  Their analysis concluded that “replacement of private finance for TB treatment in India with UPF could lead to both substantial health gains and financial risk protection bets, both concentrated among the poor.”


Does licensing increase prices for dentists?

Written By: Jason Shafrin - Mar• 09•14

Clearly the answer is yes. For many basic tasks, dentists and dental hygenists may perform task of similar quality. However, in some states, dental hygenists are not allowed to perform these tasks. A paper by Wing and Marier find the following:

United States, occupational regulations influence the work tasks that may legally be performed by dentists and dental hygienists. Only a dentist may legally perform most dental procedures; however, a smaller list of basic procedures may be provided by either a dentist or a dental hygienist. Since dentists and hygienists possess different levels of training and skill and receive very different wages, it is plausible that these regulations could distort the optimal allocation of skills to work tasks…Our empirical analysis exploits variation across states and over time in the list of services that may be provided by either type of worker. Our main results suggest that the task-specific occupational regulations increase prices by about 12%…We [also] find that allowing insurers to directly reimburse hygienists for their work increases one year utilization rates by 3–4 percentage points.

Would you be willing to pay 12% more for a dental cleaning from a dentist compared to a dental hygenists? The answer may be no, or may be yes. The individual, rather than the government, however, should be making this decision. Certifying individuals as dentists or dental hygenists provides information to consumers that can impact market prices. However, restricting the scope of services provided increases prices by restricting supply. Further, requiring patients to see a dentist rather than a dental hygenist likely hurts poor individuals who need dental care the most.

Are we running out of antibiotics?

Written By: Jason Shafrin - Mar• 07•14

Nicole Allan of the Atlantic discusses why overuse of antibiotics is making them less effective.  The fact that antibiotics are less effective did not come as a surprise to many experts.  In fact, in 1945, “while accepting a Nobel Prize for discovering penicillin, Alexander Fleming warned of a future in which antibiotics had been used with abandon and bacteria had grown resistant to them.”  More recently, the director of the CDC stated that“If we’re not careful, we will soon be in a post-antibiotic era. In fact, for some patients and some microbes, we are already there.”

Overuse of antibiotics occurs due to:

  • Unnecessary use of antibiotics to combat viral, rather than bacterial, infections
  • Use of antibiotics in food. 80 percent of all antibiotics used in the U.S. each year are given to animals in order to help them gain weight faster or use less food to gain weight.

Disease that were previously entirely treatable with antibiotics have now evolved to make the antibiotics partly or entirely ineffective. Drug-resistant tuberculosis killed 170,000 people in 2012.

Thursday Links

Written By: Jason Shafrin - Mar• 06•14

CoR #203 is Up

Written By: Jason Shafrin - Mar• 05•14

Bob Wilson presents a truly remarkable edition of the Cavalcade of Risk at WorkersCompensation.com.

Too much competition?

Written By: Jason Shafrin - Mar• 05•14

Rarely due consumers think that too much competition is a problem.  According to the Centers for Medicare and Medicaid Services (CMS), however, this is a major issue for consumers when they choose Part D prescription drug health plans.  Avalere reports that:

Proposed revisions to the meaningful differences policy will restrict the market’s top sponsors from offering more than two plan options in a given Part D region, leading to significant consolidation in CY 2016 among the top sponsors. Additionally, the proposed rule will limit the ability of several sponsors to offer low-cost enhanced PDPs that attract cost-conscious enrollees.

In essence, these plans would be limited to one basic and one enhanced plan per region.  Why would CMS limit choice?  One reason is that they worry about risk segmentation. The sickest patients may choose plans with lower cost sharing but higher premiums, which could create an adverse selection death spiral.  To date, however, this has not been a large issue for Medicare and it is unclear what the true benefit would be.  Reducing cognitive strain on consumers may also be a laudable goal since choosing Part D plans is often difficult for the elderly (and non-elderly).  Reducing choice may be an optimal partial equilibrium strategy, it is certainly not a good general equilibrium strategy as it may reduce entry into the market and drive up costs.

Quotation of the Day: Pricing of Biosimilars

Written By: Jason Shafrin - Mar• 04•14

Bilsimilars are biologic medical products whose active drug substance is made by a living organism or derived from a living organism by means of recombinant DNA or controlled gene expression methods. Biologic drugs can be patented, but once the patents expire, biosimilars can enter the market.

Are biosimilars> priced similarly to generics? According to Ana Nicholls, healthcare analyst at The Economist Intelligence Unit, the answer is no:

“Given the lower levels of competition in the biosimilars market, the copies tend to be priced at just 20-30% below the original drugs, compared with around 90% below for traditional generics.”

Increasing Generalizability of RCTs

Written By: Jason Shafrin - Mar• 02•14

Is your randomized controlled trial (RCT) generalizable to the general population?  This question is known as external validity and is a major issue for a number of treatments.  Sometimes, a treatment is very effective in an RCT, but less so in the real world.

One reason why this may be the case is that the sites selected for the RCT may not be representative of the general population who use the treatment.  To address this issue, a paper by Gheorghe et al. (2014) proposes using a generalizability index (GIx) to measure whether the sites selected for an RCT are representative of the general population.  Below I describe how to estimate the GIx.

GIx calculation

  1. Identify site-specific variables that could influence cost effectiveness estimator. Some variables which may cause differences in site-specific clinical efficiency include the site’s capacity, clinical expertise, patient case-mix and specialization.   For instance, there are likely differences in cost-effectiveness based on whether an RCT is implemented in a teaching or non-teaching hospital.
  2. Generate jurisdiction-wide estimates of these variables.  For all sites where the treatment could be implemented, measure the average values of the relevant variables form Step 1.
  3. Summarize the “typical” value for the population of interest.  This could be the mean, median or other statistic representing the typical patient in the general population.
  4. Rank sites in the study by each variable.   The rank will be based on the deviation from the “typical value”
  5. Calculate and rank the (weighted) sum of ranks for each site across the included dimensions.  The authors describe this calculation in more detail: “The centre-level GIx will be given by the rank of its (weighted) sum of dimension ranks. Lower values of the GIx will correspond to the more ‘typical’ centres, whose characteristics are close to the typical values in the population of centres. Higher values of the GIx will correspond to centres that are more extreme in one or more dimensions. Weighting the variables may be desirable to incorporate evidence or belief about the relative influence of the included variables on cost-effectiveness estimates, such as from the variance – covariance matrix of a regression on the incremental net benefit.”

The GIx can serve two purposes.  First, it can identify sites that are most likely to be representative of the general population. To identify these sites, one could simply choose centers with low GIx scores.  Second, one could select sites from all quintiles of the GIx distribution in the case where site heterogeneity creates non-linear effects on cost-effectiveness.


GIx helps to address the issue of the generalizability of site selection but one should not that it does not solve all problems of external validity.  For instance, the RCT itself may not reflect real-world treatment.  For instance, physician visits may be more frequent during and RCT than would occur in the real world.  Additionally, medications are often given to patients for free.  Thus, adherence rates in RCTs are much higher than those in real-world studies.  Nevertheless, GIx is a useful tool to address some part of the external validity problem.