A Fragmented System with Multiple Frames of Reference

I heard bits and pieces of Maggie Mahar on NPR’s Fresh Air the other night. On the show, she made a point that I think is worth repeating and fleshing out a bit more—along with a Healthcare Intelligence twist. In talking with Terry Gross, Mahar said that the healthcare system was positively Hobbesian. Hmm. How so? Well, remember back in college when you read The Leviathian? Perhaps not. But surely, you remember Hobbes description of life in the absence of society—the intense competition between individuals, the lack of specialization, and the lives that were “solitary, poor, nasty, brutish, and short.”

Welcome to the US healthcare system! As Gross paraphrased it, MDs compete against MDs, who compete against insurance companies, who compete against other insurance companies, who compete against pharmaceutical companies, who compete against other pharmaceutical companies, who compete against regulators, etc. You get the idea. Eew. Mahar’s points were that this competition has made the system less stable, more expensive, and more fraught with poorly coordinated care. And, of course, she’s right.

Our healthcare system—from financing, to service delivery, to data tracking—is inveterately fragmented. And as a result, different healthcare entities (patients, primary care physicians, hospitals, pharmaceuticals, insurance companies, etc) have slightly different frames of reference with regards to healthcare data, healthcare costs, and healthcare quality. They differ in terms of what data they have access to, the combination and constitution of elements related to cost and quality that they pay attention to, and in the leavers they can use to manage costs and improve quality.

Hospitals, for example, are looking not only at quality issues, but how those quality issues intersect with their supply chain, the use of materials for various procedures, etc. Many hospitals have moved towards the use of Diagnosis Related Groups (DRGs). These provide reimbursement to hospitals on the basis of a certain diagnosis, regardless of the services provided and, ultimately, encourage hospitals to become more efficient. At least in theory. You can think of it as managed are for hospitals. But this ultimately places a greater emphasis on the use of materials and supplies, so long as it doesn’t have too much of a detrimental effect of quality.

(When my daughter was born, the nurses looked like they’d gotten into a fight in a sticker factory. For each piece of equipment they pulled out—saline drips, latex gloves, vacuum extractor, etc—there was a convenient barcode sticker. As each nurse took a new something, they’d peel off the barcode, and stick it to her scrubs. At the end, it was like being in the checkout line of a grocery store. They zapped all the barcodes and catalogued all the supplies and equipment they used. All I kept thinking was, “Boy, I’m sure glad I’m not paying for this.”)

If a hospital can reduce the number of certain supplies for a particular procedure, they can reduce their costs. They can also start to look at the cost of storing their supplies, as well as the quantity to purchase at a single time. All of this can affect a hospital’s bottom line. But all of this is likely to have some effect on quality. How much? Well, that’s where healthcare intelligence would come in—to help evaluate the change in terms of quality outcomes, and it would need to control for a variety of factors including the relative sickness of various patients, any seasonality issues, demographics, etc.

I can devote another entry to some of the different kinds of quality certifications that different healthcare agencies must obtain, but suffice to say that Hospital certification—specificallyJCAHO--is a very complicated process that requires hospitals to monitor and report on their performance on a number of different measures. Although it will rarely be a single measure that would prevent a hospital from achieving certification, it is not difficult to imagine that a hospital might devote significant resources to improving marks in a certain area. Or perhaps they might decide that they are prepared to accept a declination in a certain quality area where they are already strong in order to improve their bottom line.

Mind you, this may be the right thing to do—cost and quality are inexorably linked, mostly in inverse proportions. And here again we get to our $1 Trillion question(s): how good is good enough? And how much are we prepared to pay to achieve it?

Obama and Unwarranted Variation

I watched with interest Obama’s press conference from Wednesday night, as I’m sure many people did. I think he handled himself quite well and showed an impressive command of the issues. I think the discussion definitely favors healthcare reform when it is kept high level, which is why it concerns me that the Senate is now delaying a vote on healthcare until after the August recess.

A few high level things that I noted throughout the conference: there were at least two points at which Obama used the term “unwarranted” in his answers. One was when he was talking about tonsillectomies; the other was when he was talking about bonuses for bank executives. Of course, “unwarranted” is the first half of a famous phrase in healthcare: Unwarranted Variation. This is the phenomenon observed in Medicare data that the delivery of healthcare in different regions around the country differs for reasons that have nothing whatsoever to do with illness, medical need, or evidence based medicine.

These observations were made by Dr. Jack Wennberg and colleagues at Dartmouth, and have been documented in an important project called The Dartmouth Atlas. The Dartmouth Atlas, in turn has been referenced by the likes of Peter Orszag, Obama’s Director of the Office of Management and Budget. (Incidentally, Orszag's Special Advisor for Health Policy is Ezekiel Emmanuel--Obama Chief of Staff Rahm Emmanuel's brother.) By some estimates, if unwarranted variation was completely eliminated, it would reduce Medicare costs by as much as 30 percent.

(As an aside, I think it is interesting that he is starting a subtle mantra of unwarranted variation as a bad thing, and the unseemly association of “unwarranted” with bank bonuses. If everyone had the same visceral reaction to unwarranted variation that they have to unwarranted bank exec bonuses, we'd all be much better off.)

In essence there are three categories of Unwarranted Variation:

• Effective care: Care where the evidence is incontrovertible, yet not delivered. For example, if you have had a heart attack, you should be taking beta-blocker (BB) medication. Only about 45% of patients are adherent with a BB in their first year post-heart attack. This under-use of care is unwarranted variation.
• Preference Sensitive Care: Care where the evidence supports different interventions, each with equal clinical validity. NOTE: on the link, there is a box in the lower left hand corner of the front page that talks about…wait for it….tonsillectomies. That’s right, the very example that Obama gave in his press conference concerning preference sensitive conditions is talked about as the classic example of preference sensitive care. Another more recent example (with great cost comparisons of treatments, is David Leonhardt’s discussion of Prostate Cancer in the NYTimes.
• Supply Sensitive Care: Care that tends to be driven the availability of services, not by improvements in quality. It is, in part, related to Roemer’s Law, but has broader implications. Diagnostic imaging, is a great example. When a new MRI machine is available in a community, it gets used, but the quality of the care being delivered does not appreciably improve. But perhaps most scarily, on pg. 3 of the attached brief, there is actually evidence to suggest that more care isn’t just more expensive, it can be deadly. As the brief states, “The study (comparing outcomes for patients with one of three conditions) showed increased mortality rates in regions with greater care intensity.” Yowza.

I think unwarranted variation is a great example if the way in which the healthcare debate is extremely complicated. This suggests that the problems with our healthcare delivery system are not merely about providing more care or less care, but both—as well as care that is just different.

Let me explain: if we are talking about delivering effective care, people need it, so we are talking about MORE CARE. If we are talking about supply sensitive care, we are talking about delivering LESS CARE, because too much of it is a bad thing. And if we are talking about preference sensitive care, we need to deliver DIFFERENT CARE.

And one of the real questions for healthcare reform, is how to use public policy to address unwarranted variation. This is a fairly nuanced point that has trouble making it through the cacophony of vitriol on healthcare reform. However, steps are being made in this direction.

Perhaps most importantly, the ARRA legislation (the “stimulus bill” that was passed in February) included a provision to create the “Federal Coordinating Council for Comparative Effectiveness Research” and funded it with $1.1 Billion. Some of this will get at issues of unwarranted variation; others will address lacunae in research around the delivery of qualityhealthcare.

As I said earlier, I think the major thrust of this round of reform efforts is on coverage. Lets get the 45+ million Americans without coverage covered. Then lets really start tweaking the system so we 1) know what quality is; 2) measure and report on it; and 3) incent providers to provide it—financially or otherwise.

More to come

I have been struck over the last few days by the sheer volume of information on healthcare reform coming out. From the announcement yesterday about the tepid response by governors, to a lengthy discussion I heard this AM on XM Radio, healthcare is all the rage.

Although I will make an effort to discuss some of these items--in particular the items in the House's health reform bill that I find more interesting (such as the expansion of Medicaid (not Medicare) eligibility, and the graduated healthcare credits up to 400% of the Federal Poverty Level), I also want to begin to discuss some of the more complicated aspects of the healthcare system's peverse incentives.

Stay tuned!

-- Sent from my mobile device

A Short Quiz

According to the Congressional Budget Office, what is the net 10-year cost of the House's Healthcare Reform Bill?

• ~$1.8 Trillion
• ~>$1.1 Trillion
• ~$573 Billion
• ~$65 Billion

If you said ~$1.8 Trillion you were wrong. If you said ~$1.1 Trillion you were wrong, too.

The net cost after factoring in efficiencies, cost reductions, etc?

~$65 Billion.

The CBO's analysis of the bill is both short and fairly read-able. And you can read it here.

QALYs and the Rationing of Healthcare

Peter Singer had this outstanding piece in the NY Times Magazine today. It is long, but well worth it. In sum, it says a few things:

1. Those who charge that a nationalized healthcare system will "ration" healthcare, ignore fundamental realities about our current healthcare system;
2. A national healthcare system that makes care available to everyone must make hard choices about what care is worth providing. Furthermore, the best way of doing that is through the use of QALYs--Quality Adjusted Life Years; and
3. If those who have the means are dissatisfied with a nationalized healthare system's use of QALYs to apportion care, they should purchase supplementary insurance.

I'll have a few comments on this later, but I wanted to get this up quickly. Stay tuned....

The Public Plan Option

There has been a big debate of late around the creation of a Public Plan option for healthcare, as currently proposed in the House’s “America’s Affordable Health Choices Act.” The basic outline of a public plan is that the government—in the form of a panel operating under the auspices of the Surgeon General’s office—will define a health benefit and pay for it through premiums charged to individuals. As currently described there are limits on who will be eligible to purchase this public plan insurance.

On the one hand, you have the WSJ and others who think the public plan option is a stalking horse for a single payer system (see here), and on the other, you have the house’s summary of the bill (here) that describes it in far rosier terms about choice and a basic benefit. Nate Silver, from fivethirtyeight.com, had a nice observation on the right’s antipathy to a public option.

In any event, the “public option” is really just a way of saying that the federal government will become an insurer and will charge premiums for the insurance it offers. Now, whether it will in fact administer the insurance, I am not at all sure. In many instances, they may contract with an ASO (Administrative Services Organization) that looks and acts like an insurance company, but has no financial skin in the game.

(This ASO relationship is commonly used in our current system by large employers that opt to “self-insure.” There are a variety of reasons why an employer would elect to do this, which I can cover at another time, if there is interest.)

Crowd-out and SCHIP:

The major concern of the right at this time appears to be “crowd-out”. Crowd-out is what occurs when there is a public plan that is so attractive that people leave private insurance for it. This was a major issue with the SCHIP program, and there have been a number of interesting papers written about it, such as this survey from the Robert Wood Johnson Foundation. In any event, it is not near the hyperbole you see (here) from the Heritage Foundation

(As an anecdote, I also want to note some of the ways in which crowd out occurs: In 2002 we were living in New York City. We were insured through my employer, so when my son was born, we expected to move up to the “family” plan that was available to us. Of course, this turned out to be an increase of I think about $350 per month. Child #2 would have been free, but there was no option available to us to include just one child. New York at the time permitted anyone to sign up for its State Child Health Insurance Program (SCHIP). But the regulations stipulated that if you made too much money (as we did) then you would receive no subsidy for the health insurance. So we signed up for it. Want to know how much we were charged for unsubsidized coverage? $132 per month. Same pediatrician, same coverage limits, almost the exact same everything. The only difference was that we no longer had to pay copayments when we saw the pediatrician. If the “public option” does anything similar, it will be a huge boon to families all over the country.)

A recent analysis of possible healthcare reform proposals by The Lewin Group suggests that given different variables, between 32M and 119M people will switch from private insurance to a public plan. In either scenario, about 27-28M people will go from being uninsured to insured. The two scenarios basically have to do with whether the public option is available only to small employers and the uninsured, or if it is open to anyone—even those employers currently offering private coverage (who choose to dump it in favor of the public option). For what it is worth, the 119M is about 2/3 of the entire private insurance market.

Obama has also talked about this in terms of only allowing small employers, individuals, and the self-employed to purchase the public option, but in all fairness, I think it is only a matter of time before it is open to large employers, too. While it will radically change the economics of the healthcare system, I don’t think this is likely to lead to the “dreaded” single payer system that is the bane of the WSJ. To my view, two things are likely to happen:

1) The insurance industry, much as in France, will morph from an all encompassing insurance system to one that focuses on supplementary insurance. In other words, private insurance will be available for anything above and beyond what is covered by the “public option”; and

2) The profit motive will drive private insurance companies to innovate around the use of different healthcare models to achieve better outcomes with a different mix of providers and provider types. In doing so, they will be able to offer the same coverage, but at a lower cost. Now, while it is true that among the largest drivers of costs is inpatient stays (typically in the form of preventable readmissions), I could easily see a health insurance company providing direct on-site home transition support to prevent subsequent inpatient stays. That’s not “managed care” that denies services to improve the bottom line, that’s “well-managed” care the keeps costs low by providing high quality services.

Preview: The Public Plan Option

I've been asked a question about the recent proposal around a public plan option. Check back tomorrow for a discussion on this interesting proposal.

The Major Challenges of Healthcare Reform

The House came out with its initial Healthcare reform bill yesterday. Kudos for getting it out. By all indications it is an ambitious plan that address some of the core issues in our healthcare system. I haven’t read enough to comment much on it, but I want to use this as a jumping off point to lay some foundations for later discussions.

One of the central challenges to healthcare reform is the magnitude of the failure of our current system. We have three major challenges that need to be addressed at some point: cost, coverage, and quality. If you want to throw in a paean to healthcare consumers like you and me, you can also add “choice.”

Cost:

As I noted in yesterday’s entry, we spend a very high percentage of our GDP on healthcare—according to The Commonwealth Fund, “The U.S. spends 16 percent of gross domestic product (GDP) on health care, compared with 8 to 10 percent in most major industrialized nations.”

Not only do we spend more, but the rate of annual increase of healthcare expenditures is also higher. Thus, we spend more than others, and our spending begets more spending. In an effort to make my posts more manageable, I will address some of the sources of our higher costs later, for now, I think it is clear that “cost” needs to be tackled somehow.

Coverage:

In yesterday’s entry, I also touched on coverage. We have about 1/4 of our country that either lacks coverage, or has inadequate coverage. Taken as a stand alone issue, covering more people, obviously, costs more. More premiums, most services delivered, etc. Big dollars, especially when you consider the number of folks we’re talking about.

Quality:

Measuring quality can be a bit of a sticky wicket, so be wary whenever you hear anybody talking about quality. Chances are folks are not talking about the same thing.

Quality can take a number of forms: There is clinical quality (eg. HEDIS measures), there is quality of life (QALY), a bazillion different quality measures for hospitals and individual MDs (both at the aggregate and specialty level). And, these are just the things that can be measured. Keep in mind that there are a ton of other subjective measures of quality that cannot be captured. As a parent of school-age kids, a “good school” doesn’t mean my kids will have a “good teacher.”

Oh….don’t forget that quality measurement and improvement initiatives, well, they cost money, too. Sometimes lots of it.

Summary:

So looking at these three central pillars of healthcare reform we have countervailing forces: We want to keep costs down, expand coverage, and improve quality. It is nigh on impossible to do one without compromising the others.

And here is the crux of healthcare intelligence: As a zero sum game, action is impossible. Only when we start doing things differently, can we really start to change the economics of the system. This means in an ideal world, we would address multiple domains (cost, coverage, quality) simultaneously. But no matter what, something HAS to get done—the complexity of our system means that everyone wants change, but no one wants to lose their revenue cash cow. Given the long-fuse, big-bang nature of healthcare reform, we’re going to have to decide to do something long before we see any of the results, which means big outlays of cash. But where to start?

Most of the debate that I’ve seen thus far is focused on a public plan or no public plan. This means the real fight at this stage is over coverage. This is a good first step. My $0.02 is that we can’t start reforming the system until everyone is part of it. Once that happens, we can focus on the really interesting stuff.

Number Veracity

Already, I've received some questions about the 45+ million number of uninsured Americans, so I'll address them here. Sally Pipes raises some interesting questions about the veracity of this 45+ M number, so I want to break it down. She argues a few things:

1) This is an estimate that looks at someone who lacked insurance at any point in the year; and

2) The number of "chronically" uninsured is far smaller and much less alarming.

Here is how she breaks it down:

• 17.5M make >$50K/year (many of whom are young and believe they will not get sick)
• 10M are not citizens
• 14M are eligible for other government sponsored coverage like SCHIP, Medicaid, and Medicare
• 8M chronically uninsured

Now, she doesn't say that these are mutually exclusive numbers and they total up to 49.5M. I'm not one to nitpick on numbers that are close like this--there will be plenty of time for nitpicking later--so lets examine some of her assumptions.

Sounds pretty dramatic, doesn't it? I mean, is it really a crisis when you've whittled down the uninsured population form 1/6 of the country to 2.5% of the country? Well, yes. But lets dive in.

Point by point:

#1: 17.5M make >$50K/year (many of whom are young and believe they will not get sick)

The danger in this, of course, is the whole absurdity around pre-existing conditions. Should someone get sick during this time of transition--and I mean really sick with cancer or some other life-altering condition--they run the risk of having an insurance company say at a later date that they won't cover the condition. Case in point: a teacher at one of my kids schools had some kind of reprodutive cancer (I think it was uterine, but I don't remember--in any event, it was not aggressive). At a time immediately post high school she was without insurance for a time. Now working, she made too much to qualify for MaineCare (our Medicaid program). The result? Pre-existing condition. She had to pay out of pocket for her cancer treatments. Regardless of whether someone "should" have healthcare, only in a system where we allow for gaps (and allowable exclusions from coverage) in coverage do we run into these kinds of issues.

#2: 10M are not citizens

Although I would like to see Ms. Pipes' numbers here, let's take it at face value. We can assume some are legal, some are not. Regardless, I think the real concern here is both a public health issue, and one of cost-benefit. I am willing to bet that most uninsured non-citizens are more or less able-bodied, though not the type to vacation in the Hamptons. And although there is a strong correlation between health outcomes and wealth (i.e.: the wealthier you are, the healthier you are) there is also a correlation between age and health. (i.e. the younger you are the healthier you are). I am willing to bet that most of these folks would be relatively cheap to include in some kind of health insurance program, or at least it make it available to them at a significantly reduced cost. Besides, communicable diseases don't distinguish between citizens and non-citizens. Best provide everyone with affordable coverage.

#3: 14M are eligible for other public programs (Medicaid, SCHIP, Medicare)

Again, let's assume this is true, as I don't have any reason to believe it isn't. The real problem with this is that it impugns the motives of the low incomes individuals that might qualify for Medicaid and SCHIP in particular. Furthermore, it assumes that they are monolithic programs, which they are not. In particular, for Medicaid and SCHIP there are 51 different eligibility requirements for each program that all depends on which state you live in (Washington DC is treated as a state for these purposes). Furthermore, you have to prove eligibility differently in each state. And finally, there's Texas.

I bring up the case of Texas because Pipes suggests that signing up for health insurance is as easy as starting a job and choosing a PCP from a book of in-network MDs. Sorry folks. Our state governments make it far more difficult, sometimes deliberately so.

The graph below shows enrollment in Texas’ SCHIP program every June from 2002 to 2007. When Texas launched their SCHIP program, they met with wild success. Very quickly, they had enrolled more than 1/2 a million kids in their program. But what happened in 2004 and beyond? Were there suddenly fewer kids actually eligible for Texas SCHIP program? Hardly.

SCHIP Enrollment in Texas Year Enrollment (in 000) 2002 530 2003 513 2004 360 2005 326 2006 293 2007 327

(Data courtesy of Kaiser State Health Facts)(nb: I had a nice graph for this, but I couldn't figure out how to get it loaded to the blog. Help anyone?)

Now, most states would consider high enrollment a mark of a successful program. Not so with Texas. Very quickly, they saw the SCHIP program, even with the generous federal match, as a huge drag on their state finances. Rather than monkey with eligibility requirements or cap enrollment (both of which would have been politically untenable) the legislature instead mandated the use of more complicated enrollment paperwork. That’s right. Paperwork. The result? Well, I think it speaks for itself. More than 150K kids lost eligibility in the first year. Way to go, Tex.

Bottom Line: If we are truly invested in ensuring that people were covered with health insurance, we would make it far easier to do. Offering coverage but making the enrollment/eligibility verification process too difficult to complete is akin to putting a stumbling block before the blind.

#4: 8M Chronically uninsured

This, of course, is what’s left over when you take everything else away. But I think even she would agree that these folks need to get covered.

In conclusion:

On a final note, Pipes doesn't even touch the subject of underinsured--those Americans who don't have adequate coverage to prevent an illness from wiping them out financially. And I would love to be able to compare these numbers to our OECD colleagues, as this is as close as we are going to get to reasonable comparisons. But here’s the problem: under-insured, periodically uninsured and chronically uninsured are not meaningful distinctions in OECD countries. They cover their citizens. We don’t.

Why Healthcare Intelligence

Over the last few days, I have been encouraged by a few friends and colleagues to start a blog on the healthcare system and healthcare intelligence. Mostly, I think, this has been a response to my persistent complaints about the quality of the healthcare debate. So let's see where it goes.

Among my greatest complaints, of course, is the dearth of cohesive discussions about the healthcare system we have today in the US. Hence the genesis of this blog. On one level, this blog will attempt to describe our healthcare system, its players, and how some of the changes being proposed will play out; on another, it will explore how better healthcare data can reduce cost and improve quality. Now have patience, dear reader, I vow not to bore the socks off you.

At the highest possible level, we have serious problems with our healthcare system that command action: Compared to our OECD colleagues, we pay far more for healthcare in the US, yet we achieve poorer health outcomes than our colleagues. Furthermore, we fail to provide any coverage to about 1/6 of our country (45+ million people) at any given time, and have “inadequate” coverage for another 25 million.

Although these numbers have increased over the last two years due to the economic crisis, the difference is immaterial. The bottom line is that we, as a country, fail to provide adequate insurance coverage to a significant portion of our population, Clearly, we have a structural problem with our healthcare system that needs to be addressed. Almost every other industrialized country has found a way to make healthcare available more widely and at a lower cost, with better outcomes than we do. We don’t need to be the best, but we can certainly do better.

And here’s the problem and the paradox: there is no boogeyman, and the boogeyman is everywhere. What I mean to say, is that our healthcare system is incredibly complicated with so many folks with skin in the game (nb: for you James) that it would be nigh on impossible to say that some one, or some group, or some entity is pulling all the strings to maintain the status quo. In other words, no boogeyman.

But, at the same time, our healthcare predicament is also a product of small decisions made by the federal government, state governments, pharmaceutical companies, insurance companies, hospitals, universities, clinic and physician offices, the HR director at your company, and yes, my friend, even you and me. In other words, everyone is culpable, so the boogeyman is everywhere.

So how do we sort out this mess? Well, we need to use a little intelligence. So welcome to my blog.