Unbiased Analysis of Today's Healthcare Issues

CoR #221

Written By: Jason Shafrin - Nov• 13•14

Claire Wilkinson hosts this week’s collection of post-election risk-related blog posts. Check it out at “Terms + Conditions“.

Does more spending improve quality?

Written By: Jason Shafrin - Nov• 11•14

In most goods and services you buy, the answer is yes.  A Tesla is more expensive than a KIA; a large house is more expensive than a big house; a night at the Ritz Carlton is more expensive than a night at the Motel 6.

Nevertheless, in healthcare, many policy wonks believe that cost and quality may not be tightly related.  One reasons is that many prices (e.g., Medicare reimbursement rates) are set administratively and thus high quality providers often cannot charge higher cost.  In addition, patient are limited in their ability to observe quality of care, both before purchasing the service as well as afterwards.

A paper by Dowd et al. (2014) uses Data Envelopment Analysis (DEA) to create an aggregate measure of value that combines cost and quality.  They find that more cost-effective physician practices–as measured by DEA input efficiency scores–have lower levels avoidable or unncessary utilization of health care services.  However, the authors also find that “rates of preventive screening and monitoring of chronically ill beneficiaries increase with efficiency.”

Does this mean that physician practices should just provide as few services as possible?  Likely no.

This finding could be the result of many factors.  First, low-cost providers may have significant value in signaling to the market that they are high quality. Thus, low-cost quality initiatives–such as cancer screenings–may help improve their market share at little additional cost.  High-quality/high-cost providers may have little value focusing on broad, population-level quality metrics and may instead focus on specialized, high-quality care.  Second, the firms who are low cost may be part of accountable care organizations (ACOs).  ACOs typically receive bonuses for reducing patient cost and improving quality.

In summary, finding that “efficient” providers are low cost does not mean that reducing reimbursement rates or performing fewer services will lead to better patient outcomes.


Trends in Value-based reimbursement

Written By: Jason Shafrin - Nov• 10•14

A McKesson study cites 7 trends in value-based reimbursement:

  • Rapid adoption of VBR. About 90% of payers and 81% of providers are already using
    some mix of value-based reimbursement (VBR) combined with fee-for-service (FFS).
  • Collaborative regions are more aligned with VBR. Collaborative regions, where one or two payers and providers stand out, are more aligned with VBR.  Regions with more fragmentation have less VBR.
  • ACOs drive VBR. Accountable Care Organizations (ACOs) are significantly closer to VBR adoption than non-ACOs.
  • Pay-for-Performance leads the pack. Of the existing value-based models, payers and providers project that the proportion of their total business (inclusive of commercial and
    Medicare) that is aligned with pay-for-performance (P4P) will experience the most growth.
  • IT systems are not there yet. Currently, 15% of payers and 22% of providers characterize P4P as “very difficult” or “extremely difficult” to implement. They also rated Episode of Care/Bundled Payment and others (e.g., Shared Savings) as very or extremely difficult. The key obstacles to implementing these value- based models, payers and providers agree, are a lack of standards, analytical tools, and the need for better business IT infrastructure and systems that support these models—all while taking action to reduce administrative burdens and costs to remain financially sound.
  • Technology is the key to successful VBR. Integrating IT systems and giving payers and providers useful tools is key.
  • Clinical buy-in is vital. The largest proportion of payers and providers pointed to a lack of clinician buy-in and engagement with VBR as the number one challenge to its success (20% of payers and 17% of providers).

Check out the full report for more details.

Obamacare premium increases overstated?

Written By: Jason Shafrin - Nov• 09•14

Health insurance premiums appear will rise modestly or even decline for many Obamacare plans in state Health Insurance Exchanges.  A RWJ brief reports:

Premium increases will be quite low between 2014 and 2015. In the rating areas we examine in the 17 states plus the District of Columbia, six states will have average premium reductions across the carriers’ lowest cost silver plans, 10 will have small premium increases (defined as 5% or less), and two will have increases greater than 5 percent. Across the 39 rating regions studied within those states, 18 will have average percentage premium reductions across their carriers’ lowest cost silver plans, 11 will have small increases, and 10 will have larger increases (greater than 5%).

Although this is mostly good news, the individuals in rural areas may not be as fortunate.

Larger premium increases are more likely to occur in rural areas. For example, the rural counties studied in Tennessee will see a 21.4 percent increase in the average lowest cost silver premiums offered by carriers in 2015. Premiums will increase in the study’s selected rural counties in Michigan by 6.7 percent, in New York by 7.9 percent, and in West Virginia by 9.0 percent.


HWR is up

Written By: Jason Shafrin - Nov• 06•14

Jennifer Salopek has posted an excellent roundup of wonkery in Health Wonk Review: The Election Week Edition at Wing of Zock.

Treating Dual Eligibles

Written By: Jason Shafrin - Nov• 06•14

The PBS Newshour has an interesting story on the treatment of the 9 million dual-eligible beneficiaries in the US.  They discuss integrated care model in California, Cal MediConnect.


Donuts and drugs

Written By: Jason Shafrin - Nov• 03•14

Medicare patients are likely to discontinue their medication in December. Why? Are they busy with the Christmas holidays? Do they have additional expenses for gifts and limited funds for prescription drugs? Perhaps.

Another idea advanced by Kaplan and Zhang (2014) is that Medicare’s benefit structure encourages discontinuation. Why is that? Medicare’s Part D drug plan has an odd design where patients have a deductible for the first few hundred dollars of prescription drug, then Medicare pays 75% of cost for the next few thousand, then the beneficiary again bears 100% of the cost in the so-called donut hole until patients reach catastrophic coverage (over $5,726 in drug cots in 2008) where Medicare pays 95% of the cost.

Thus, if patients are in the donut hole, it makes sense for them to wait until January for their prescription in order to avoid having to pay 100% of the cost.

This is exactly what Kaplan and Zhang find. They use data from CMS’s Chonic Condition Warehouse (CCW) and examine patients with a myocardial infarction who have had an inpatient hospitalization in the previous year.   The compare low-income subsidy beneficiaries (non-LIS) to those beneficiaries who are eligible for a low-income subsidy (LIS). Medicare LIS beneficiaries do not pay any copayment for medications and thus are not subject to the donut hole. Non-LIS patients, however, are subject to these copayment discontinuities.

Using this approach the authors find the following:

Overall, we find that individuals who ordinarily would have reinitiated medications at the end of the year have a tendency to wait until the reset of benefits at the beginning of the year. Despite the cause, this delayed effect on medication resumption might increase the chance of uncontrolled symptoms and hospital readmission.


Who will pay the Cadillac tax?

Written By: Jason Shafrin - Nov• 02•14

Beginning in 2018, many individuals will face the “Cadillac” tax. What is the Cadillac tax?

The Cadillac tax is a tax on high-cost health insurance plans. According to a Truven report, it is calculated as “40 percent of the excess of total per employee per year (PEPY) healthcare costs above statutory threshold limits of $10,200 for individual coverage and $27,500 for family coverage.” Benefits subject to the tax include:

  • Employer and employee contributions to medical and pharmacy benefits
  • Flexible Spending Accounts (FSAs)
  • Employer contributions to Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs)
  • Benefits obtained at worksite clinics

Employers who self-fund their health insurance benefits also are subject to the tax as they must calculate a premium equivalent.

How many people will be subject ot the Cadillac tax? Truven estimates:

“Beginning in 2018, 15 percent of active employee plans for U.S. employers are projected to incur the Cadillac tax; this rate is projected to increase to 19 percent by 2020…we estimate an average annual…tax amount…of $364 [per employee]… this amount represents 2.9 percent of total…costs for plans expected to incur tax.”

The probability of incurring the tax depends significantly on the composition of the employees covered under the plan. The tax will be much higher for plans covering older workers. “81 percent of early retiree plans for U.S. employers are projected to incur the Cadillac tax; this rate is projected to increase to 84 percent by 2020. For early retiree plans projected to incur the tax in 2018, we estimate an average annual PEPY tax amount of $1,069.”

Friday Links

Written By: Jason Shafrin - Oct• 30•14

Halloween CoR

Written By: Jason Shafrin - Oct• 29•14

Head over to Colorado Health Insurance Insider to take a look at the All Treats No Tricks edition of the Cavalcade of Risk.