Unbiased Analysis of Today's Healthcare Issues

Cavalcade of Risk #213

Written By: Jason Shafrin - Jul• 23•14

There are many types of risk. There are health risks and financial risks, systematic risk and idiosyncratic risk. And some risks are riskier than others:

In this week’s edition of the Cavalcade of Risk, the best of the blog-o-sphere give their opinions on a handful of risky issues.

The next CoR host is Jaan Sidorov of The Population Health Blog.

CBO presents ominous debt projections

Written By: Jason Shafrin - Jul• 21•14

Like most years, in recent history, the Congressional Budget Office’s 2014 Long-term Budget Outlook is not rosy.

Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing its debt to soar. The total amount of federal debt held by the public is now equivalent to about 74 percent of the economy’s annual output, or gross domestic product (GDP)—a higher percentage than at any point in U.S. history except a brief period around World War II and almost twice the percentage at the end of 2008…Twenty-five years from now, in 2039, federal debt held by the public would exceed 100 percent of GDP

The good news for fiscal hawks is that healthcare spending has slowed in recent years. In fact, CBO stated that it has “substantially reduced its 10-year and long-term projections of spending per person for Medicare, for Medicaid, and for the country as a whole.”

The bad news is that the future of healthcare costs also looks grim for two reasons. First, the rising age of the US population will increase the burden of health care costs. Second, “the expansion of federal support for health insurance under the ACA, which will significantly increase the number of people receiving benefits from Medicaid and make some people eligible for federal subsidies for health insurance purchased through exchanges (or marketplaces).

Further, economic growth in recent years has been fairly anemic and thus health care spending as a share of the economy has inched slowly higher.

In CBO’s extended baseline, net federal spending for those programs (that is, spending net of offsetting receipts for Medicare) grows from an estimated 4.8 percent of GDP in 2014 to 8.0 percent in 2039; in that year, 4.6 percent of GDP would be devoted to net spending on Medicare and 3.4 percent would be spent on Medicaid, CHIP, and the exchange subsidies.

In other words, by 2039 one in 12 dollars generated by the economy would go towards federal government health care payments.


HIV Developments: The Good and the Bad

Written By: Jason Shafrin - Jul• 20•14

The World Health Organization estimates 35 million people and more than 1 million people in the US have AIDS. Further, 18% of Americans with HIV are unaware of their infections.

Nevertheless, over the last decade, the US has made major strides in reducing HIV incidence. The BBC reports that a new JAMA study found that:

the [HIV] diagnosis rate [in the US] fell to 16.1 per 100,000 people in 2011 from 24.1 in 2002

Even this figures may understimate the declining incidnece. Over the past decade, HIV testing has rose, indicating that the true drop in incidence may be even larger than the numbers presented above.

Although there is much uplifting HIV news on the macro in the US, current events have not been as hopeful. A number of AIDS researchers have died on the Malaysia flight MH17. Vox reports:

The HIV/AIDS community is mourning the loss of Joep Lange, a prominent HIV researcher and former president of the International AIDS Society, who died on flight MH17 on his way to an international AIDS conference.

“Joep is one of our giants in terms of AIDS research and AIDS access to treatment and care in poor places around the world,” said Richard Marlink, executive director of the Harvard School of Public Health AIDS Initiative. “He worked in Thailand on vaccines, in Africa on access to care and medical education. On top of all that was just a gem of a person.”

A Dutch citizen, Lange was professor of medicine and head of the department of global health at the University of Amsterdam. He had been involved in HIV treatment and research since 1983, just as the virus was emerging as a global health threat.

Lange was one of the key researchers behind several pivotal antiretroviral therapy trials, including projects involving the prevention of mother-to-child transmission of the virus in both the developing and developed world, according to the Amsterdam Institute of Global Health and Development.

And this is just one of the people killed on MH17. Other AIDS researchers who died in the crash include:

  • Pim de Kuijer, STOP AIDS NOW!
  • Lucie van Mens, Director, AIDS Action Europe
  • Maria Adriana de Schutter, AIDS Action Europe
  • Glenn Thomas, World Health Organisation
  • Jacqueline van Tongeren, Amsterdam Institute for Global Health and Development

A tragedy, but their work lives on.


Healthcare.gov vs. Amazon.com

Written By: Jason Shafrin - Jul• 18•14

Which one is easier to use?  The answer to this is clear: Amazon.  Of course, health insurance is a much more difficult product for people to understand than most good at Amazon.  However, many policymakers may have underestimated the amount of customer service new enrollees in Healthcare.gov need.  The Washington Post reports:

Just 13 percent of assistance programs said they spent, on average, less than an hour with each person they helped. Most spent between 1-2 hours, but some averaged much higher.


President Obama clearly oversold how easy it would be to purchase insurance.

Just before HealthCare.gov’s awful launch in the fall, President Obama said Americans would be able to go online to shop for health insurance the “same way you’d shop for a plane ticket on Kayak or a TV on Amazon.” That, of course, was a sales pitch to get people to look at the enrollment Web site (before we knew how bad it’d be at the start). But today’s polling data and similar polls in recent months show that just isn’t the case — and the law’s implementers need to plan appropriately for that.

HWR is up

Written By: Jason Shafrin - Jul• 17•14

Jennifer Salopek has posted  the July edition Health Wonk Review: Polar Vortex Edition at Wing of Zock.

Defining “comparative advantage”

Written By: Jason Shafrin - Jul• 16•14

Don Boudreaux describes comparative advantage using an interesting example.

HT: Marginal Revolution

How did the ACA affect Employer-Sponsored Insurance?

Written By: Jason Shafrin - Jul• 15•14

Most people think that the Affordable Care Act (ACA) has focused on decreasing uninsurance rates by creating health insurance exchanges, providing subsidies for health insurance premiums for these exchanges, and expanding Medicaid. The ACA also has affected a number of other segments of the health care industry.
Less well known is that the ACA also affected the 156 million Americans insured through an employer-sponsored plan. Drawing largely from a policy brief from the UC Berkeley Labor Center, I summarize the affect of the ACA on employer-sponsored plans.

  • Employer participation in marketplace: Firm Size. Small employers can participate in the Marketplaces. States have the option to define small employers as up to 50 or 100 employees through 2015, and must define small employers as up to 100 employees beginning in 2016.
  • Is marketplace participation mandatory for employers?  No.  Employers of all sizes may also continue to purchase coverage outside of the Marketplaces.
  • Subsidies:
    • For patients. For purposes of determining eligibility for subsidies through the Markplaces, affordable employer-sponsored insurance is defined as requiring an employee contribution of less than 9.5 percent of household income for an employee-only plan that covers at least 60 percent of medical costs on average (“minimum value”). If self-only coverage costs less than 9.5 percent of household income and the employer offers family coverage (at any cost), then both employees and their family members are ineligible for subsidies regardless of whether or not family coverage is affordable.
    • For firms. Tax credits are available for small businesses with 25 full-time equivalent employees or fewer and average wages of no more than $50,000. The credit pays up to 50 percent of employer contributions beginning in 2014. However, the credit is only available for employers that purchase coverage through the exchanges.
  • Penalties for firms failing to cover workers.
    • Firms not offering coverage: Applicable large employers not offering coverage or offering coverage to fewer than 95 percent of its full-time employees pay $2,000 multiplied by the total number of full-time employees minus 30. This penalty only applies if at least one full-time employee receives subsidies in the Marketplaces.
    • Firms offering coverage: Applicable large employers offering coverage to at least 95 percent of its full-time employees pay the lesser of $3,000 multiplied by the number of full-time employees receiving subsidies, and $2,000 multiplied by the total number of full-time employees minus 30. This penalty may occur because employers did not offer coverage to a full-time employee or because the coverage offered was unaffordable or did not provide minimum value.
  • Automatic Enrollment. Employers with more than 200 full-time employees must automatically enroll employees into a plan unless they opt out of coverage.
  • Maximum waiting period.  Group health plans and issuers offering group health insurance must limit waiting periods for coverage to no more than 90 calendar days (including weekends and holidays) effective in 2014.
  • Grandfathering.  ACA establishes new standards for employer-sponsored plans, but plans in existence as of March 2010 are grandfathered with regard to many of the standards for current employees, their family members and new employees
  • Cadillac Tax. Insurers will be taxed at 40 percent of the aggregate value of plans above a high-cost threshold beginning in 2018. In the case of self-insured plans, the tax will be paid by plan administrators.  The cost of this tax will likely be passed on to employers and enrollees through higher premiums.  In 2018, the high-cost thresholds will be $10,200 for individual coverage and $27,500 for family coverage.
  • Flexible spending account: Contributions to a Flexible Spending Arrangement (FSA) for medical expenses are limited to $2,500.
  • Reporting Requirements. Employers must report the value of the benefits on each employee’s annual Form W-2 beginning with the calendar year 2012 forms.
  • Health Plan Standards: See table below

Health Plan Standards


What is China’s NMCS?

Written By: Jason Shafrin - Jul• 14•14

In 2003, China introduced the New Cooperative Medical Scheme(NCMS), a health insurance scheme for the rural population. What is the NCMS?  Hou et al. (2014) describe the NMCS as follows:

As a voluntary and heavily subsidized scheme, it has seen extremely rapid growth of coverage in comparison with most new schemes in developing countries. By the end of 2011, 97.5% of the rural population (832 million people) had been enrolled in NCMS. Generally, the NCMS was primarily oriented at inpatient care and, especially, in the period before the 2009 Health Care Reform, characterized by rather high copayments and coinsurance rates. Outpatient care was typically covered through medical savings accounts (MSAs), which involve no risk pooling. Although the central government has issued broad guidelines for the design of the scheme, the policy details and implementation responsibilities have been decentralized to the county-level local governments. As a result, important scheme features, including the benefit package, the reimbursement level and the payment methods, display considerable variation across counties and over time, which can be used to identify the impact of the scheme.

How did NCMS affect the care patients receive? The authors exploit regional variation in the implementation of NCMS acoss six counties, three counties in Shandong province (Zhangqiu, Changle and Dong’e) and three in Ningxia province (Yongning, Qingtongxia and Zhongning). The authors find that NCMS is effective in increasing access to care but not in increasing financial protection.

We find clear evidence that adoption of a more generous scheme raises the probability of using both inpatient and outpatient care…We also find the variation in NCMS generosity to influence the choice of provider for inpatient care: all else equal, enrollees are more likely to choose providers with more generous reimbursement.

Our results indicate that NCMS has only limited effects on financial protection. No effects are found of NCMS on spending in the full sample, but conditional upon use, NCMS reduces the share of OOP spending for an outpatient visit. More worrisome is that we find higher NCMS cover to raise total spending per hospitalization and to increase the OOP spending per inpatient stay (among the users).

Based on these results, one should consider NMCS a promising first step, but currently only a partial success.

How the FDA evaluates Cancer Drugs

Written By: Jason Shafrin - Jul• 13•14

The Food and Drug Administration (FDA) reviews and approves all drugs. But what criteria does the FDA use to evaluate new drugs? Namely that they are effective (i.e., improve health outcomes) and safe (i.e., have limited adverse health events). In a 2007 guidance document from the FDA’s Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER) branches, the institution states:

The requirement that new drugs show effectiveness is based on a 1962 amendment to the Federal Food, Drug, and Cosmetic Act. This law requires substantial evidence of effectiveness and specifies that this evidence must be derived from adequate and well-controlled clinical investigations. Similarly, the Public Health Service Act requires biological products to be safe, pure, and potent. Clinical benefits that have supported drug approval have included important clinical outcomes (e.g., increased survival, symptomatic improvement) but have also included effects on established surrogate endpoints (e.g., blood pressure, serum cholesterol).

However, what does efficacy mean? What is the burden of proof for drugs that treat life-threatening illnesses. The guidance document states that these drugs can receive accelerated approval using surrogate endpoints to measure efficacy:

…additional endpoints for approval of drugs or biological products that are intended to treat serious or life-threatening diseases and that either demonstrate an improvement over available therapy or provide therapy where none exists. In this setting, the FDA may grant approval based on an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit… A drug is approved under the accelerated approval regulations on condition that the manufacturer conducts clinical studies to verify and describe the actual clinical benefit.

What endpoints does the FDA use to approve cancer drugs?

In the 1970s, the FDA usually approved cancer drugs based on objective response rate (ORR), determined by tumor assessments from radiological tests or physical examinations. In the early 1980s…the FDA determined that cancer drug approval should be based on more direct evidence of clinical benefit, such as improvement in survival, improvement in a patient’s quality of life (QOL), improved physical functioning, or improved tumor-related symptoms. These benefits may not always be predicted by, or correlate with, ORR.

Since then, the FDA now considers endpoints such as:

  • Overall survival (OS): The time from randomization until death from any cause and is measured in the intent-to-treat population
  • Disease free survival (DFS): DFS is defined as the time from randomization until recurrence of tumor or death from any cause. The most frequent use of this endpoint is in the adjuvant setting after definitive surgery or radiotherapy. DFS has been the primary basis of approval for adjuvant breast cancer hormonal therapy, adjuvant colon cancer, and adjuvant cytotoxic breast cancer therapy.
  • Objective response rate (ORR): The proportion of patients with tumor size reduction of a predefined amount and for a minimum time period. Response duration usually is measured from the time of initial response until documented tumor progression. Generally, the FDA has defined ORR as the sum of partial responses plus complete responses.
  • Time to progression (TTP): The time from randomization until objective tumor progression; TTP does not include deaths.
  • Progression-free survival (PFS): The time from randomization until objective tumor progression or death.
  • Time to treatment Failure (TTF): A composite endpoint measuring time from randomization to discontinuation of treatment for any reason, including disease progression, treatment toxicity, and death. TTF is not recommended as a regulatory endpoint for drug approval.

Both TTP and PFS seem similar. Which one is better to use? The FDA guidance doc states:

Compared with TTP, PFS is the preferred regulatory endpoint. PFS includes deaths and thus can be a better correlate to overall survival. In TTP analysis, deaths are censored, either at the time of death or at an earlier visit representing informative censoring (nonrandom pattern of loss from the study). PFS assumes patient deaths are randomly related to tumor progression. However, in situations where the majority of deaths are unrelated to cancer, TTP can be an acceptable endpoint.

So, if you are a scientist working from for a pharmaceutical company, which endpoint should you use? The process is likely to be a negotiation between the research firm and the FDA. In fact, the FDA recommends that “applicants meet with the FDA before submitting protocols intended to support NDA [new drug applications] or BLA [biologics license applications] marketing applications.”

Friday Links

Written By: Jason Shafrin - Jul• 11•14