A few years ago, I noted that the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) has a dominant role in suggesting payment levels to CMS. It raises hard questions about price-setting in the health care sector, many of which cannot be answered because its processes are opaque. Now we know that judicial relief will not improve things any time soon. As Brian Klepper reports, “On January 7, a federal appeals court rejected six Georgia primary care physicians’ (PCPs) challenge to the Centers for Medicare and Medicaid Services’ (CMS) 20-year, sole-source relationship with the secretive, specialist-dominated federal advisory committee that determines the relative value of medical services.” What was the complaint?
The core of the … physicians’ legal challenge was that the RUC is a “de facto Federal Advisory Committee,” and therefore subject to the stringent accountability requirements of the Federal Advisory Committee Act (FACA). This law ensures that federal bodies have panel compositions that are numerically representative of their constituencies, that their proceedings are open, and that methodologies are scientifically credible. In other words, FACA ensures that advisory practices are aligned with the public interest.
The RUC adheres to none of these and is an object lesson in how special interests can be insinuated into and capture regulatory processes, displacing the public interest. For example, when the legal challenge was first filed, only 3 of 29 RUC panelists (10 percent) represented primary care, even though some 30 percent of US physicians practice primary care. RUC meetings are closed to the public, unless an invitation is extended by the Chair, and admission is tied to the guest signing a nondisclosure agreement. Determination of a procedure’s value has been based on as few as 30 survey responses by physicians who know that their reimbursement will be linked to how they have answered the questions.
This is a sad example of opacity in health pricing. In ordinary markets, publicity would tend to narrow the price differential between similar quality services. In health care, however, there is a triple layer of agency between care and patients whose physicians’ recommendations are often constrained by an insurer that is chosen by the patient’s employer or government. Even if we assume away the agency problems in such an arrangement, it is difficult for buyers and sellers to truly understand “market” dynamics, or even the governmental processes that underlie them.
Originally posted at Health LawProf Blog.
The bad news is that the country’s too broke to be sick. The New York Times reports that health care spending rose just 3.9% in 2010, totaling $2.6 trillion or 17.9% of the Gross Domestic Product. The information was derived from the latest report from the government’s National Health Expenditure Accounts (NHEA), which are, according to the Center for Medicare & Medicaid Services, “the official estimates of total health care spending in the United States. Dating back to 1960, the NHEA measures annual U.S. expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care. The data are presented by type of service, sources of funding, and by type of sponsor.”
The Times notes:
Health spending normally grows much faster than the economy. But in 2010 growth rates were similar, so that health care accounted for the same share of total economic output in 2009 and 2010.
“U.S. health spending grew more slowly in 2009 and 2010″ than at any other time in the 51 years the government has been collecting such data, said Anne B. Martin, an economist in the office of the actuary at the Department of Health and Human Services.
How bad is it? The data is, well, record-breaking.
In 2010, the study said, hospitals reported a decline in admissions and slower growth in emergency room visits and outpatient visits. Likewise, it said, doctor’s office visits declined, and spending for doctors’ services grew just 1.8 percent, to $416 billion in 2010. Total health spending averaged $8,402 a person, up 3.1 percent from 2009, the report said.
Doctors often prescribe drugs during office visits, and the decline in visits helped slow the growth of drug spending, as did the use of lower-cost generic medications. The number of prescriptions filled rose just 1.2 percent in 2010, and total retail spending on prescription drugs also grew 1.2 percent, to $259 billion, the slowest rate of growth in a half-century, the report said.
Those numbers of slowed growth are even more incredible given the context of a slowed generation of aging baby boomers.
But in the inimitable words of R. Hunter and J. Garcia,
Talk about your plenty, talk about your ills
One man gathers what another man spills
The Times notes:
For the first time in seven years, total private health insurance premiums grew faster than insurers’ spending on health care benefits, the administration said. Premiums totaled $849 billion in 2010, while spending on benefits totaled $746 billion. The difference includes administrative costs and profits.
There are a number of other interesting points to be found in the New York Times article, not the least of which is the growth in federal expenditures. It’s well worth a read.
Filed under: Health Care Economics, Health Reform
Kudos to Health Affairs and the RWJF for their continuing efforts to focus on the social determinants of health. A recent issue focused on cooperation between the Federal Reserve Bank and community development institutions to assure healthy neighborhoods and health-enhancing social conditions. As editor Susan Dentzer explains:
The Robert Wood Johnson Foundation became acutely aware of the gap [between the public health and health care sectors and the nation’s community development “industry”] through its sponsorship of the Commission to Build a Healthier America, which the foundation convened in 2008 and of which Williams served as staff director. The Fed’s awareness stems from its congressional mandate to achieve strong, low-inflation economic growth and to help low-income communities become full partners in that process.
So, as the foundation’s Risa Lavizzo-Mourey and Sandra Braunstein of the Fed write, both sectors are now focused on what they might achieve together. Health care providers understand that they can make more headway against chronic disease if residents of a local housing complex have access to safe parks and healthier food. Community developers understand that beyond creating low-income housing, they should also invest in these amenities and even construction or expansion of community health centers.
The program is also podcast as a Health Affairs event.
Filed under: Economic Analysis of Health, Health Care Economics
1) At the beginning of the summer, I noted some problematic drug shortages (bottom half of post). The problem keeps getting worse. There is a steady stream of heartrending stories about care being compromised. Reform measures to assure an adequate supply are moving at a snail’s pace, thanks both to truculent manufacturers and the bipartisan drumbeat to “cut health care costs.” But at least some folks are thriving: as the NY Times notes, ”Unscrupulous wholesalers have made matters worse by scooping up scarce drugs and offering them to hospitals at markups that often reach 20 times the normal price or more.”
What a great business model! So glad the “free market” is working its magic on health delivery. While we’re at it, let’s allow ER docs to force patients to sign over half their bank accounts before treatment. That will certainly increase the supply of emergency rooms, even if the transition is a little bumpy for some people.
By the way, I’m sure some will argue that, if only Medicare weren’t paying for many of these drugs, we’d be fine. (Or at least the “we” capable of paying for the drugs at a “market price,” whatever that is, would be fine.) Query: Would there have been adequate incentive to create the drugs if a major purchaser like Medicare hadn’t paid what it did while the drug was on patent? No, I didn’t think so. Income and wealth in our society is still equally distributed enough (and coordination problems severe enough) that the top 1% won’t sustain a thriving hospital and drug research system all by themselves, even if they are the critical factors in one’s policy calculus. As I noted earlier, it’s hard to imagine individuals, or even wealthy groups, stockpiling all drugs they might need, particularly the sterile injectables or biotech solutions that are critical to advanced medicine. Even the very wealthy must rely on a steady, more general demand for these products. They can’t just order them up for just-in-time delivery, like a Tiffany watch. Public subvention—ranging from research grants to Medicare and Medicaid funding for the products research generates—provides that demand.
2) Pauline Chen reports on an “insurance maze” for US doctors, based on a new Health Affairs study comparing their practices to those of their neighbors to the north:
Physicians in Canada, where health care is administered mainly by the government, did spend a good deal of time and money communicating with their payers. But American doctors in the study spent far more dealing with multiple health plans: more than $80,000 per year per physician, or roughly four times as much as their northern counterparts. And their offices spent as many as 21 hours per week with payers, nearly 10 times as much as the Canadian offices.
Clearly the US has a comparative advantage in generating insurance-based hassles. Maybe we can keep specializing there, and aim to spend five times as much as the Canadians by 2014. The more choice, the better, whatever the cost, right? Think of all the people employed by this gauntlet of private sector checks and balances:
A young patient complaining of extreme fatigue, for example, might benefit from a $40 blood test that could confirm infectious mononucleosis in 10 minutes. But a doctor cannot order the simple test without first checking with the insurance company to see if it is covered and if there are any constraints on where the patient’s blood can be drawn and the test run.
Tracking down answers often means phone calls with long periods on hold, digging up old patient information and even recruiting office workers to act as specimen couriers to other labs and hospitals in order to expedite results or save frail patients or harried family members the hassle of traveling to an “approved site” for a test or procedure. “If someone comes in with a sick infant who needs a test, we often eat the costs and draw the blood ourselves,” Dr. Star said. “We aren’t going to tell them to put that kid in a car seat, drive a mile to an approved lab, park, register, then wait in line.”
If you’re an insurer (or the insurance industry), you’ve “won” to the extent you’ve foisted these costs and inconveniences onto doctors and patients. You certainly don’t want to abide by new Medical Loss Ratio requirements that limit the extent to which you employ these strategies of cost-shifting, delay, and denial of needed care. The “free market” is your friend, as is anyone who insists that health care delivery can be guided by the same economic principles that govern every other commodity.
Filed under: Compliance, Health Care Economics, Treatment
What’s worse than a kidney stone? For those of you who have had one, or read my post the other day describing how it felt–
…broke out in a cold sweat and quickly began writhing around and wailing in pain like a wild animal caught in a bear trap. The pain came in excruciating waves radiating as though I had just been punched below the belt– repeatedly.
that might be difficult to answer. But I’m going to go with two kidney stones– back to back, or more precisely, two kidney stones, and a tiny cyst and a 1.5 cm lesion on and in my kidney, respectively– which is my current diagnosis. An ultrasound was unable to rule out cancer for the lesion.
And so I wait. A CT scan with contrast is next, probably sometime later this week– after a pre-cert from my insurer, Cigna– which has yet to fail me.
As you might imagine, the last week– what with the back to back kidney stones and all — was less than comfortable. But fortunately, the pain comes in waves and as the week wore on and I became more accustomed to the new and seemingly interminable rhythm, I was able to work in between the waves. And doing so brought me no small measure of joy– no longer reduced to a being defined solely by pain, I produced. I contributed. I was not merely subject to.
And so this blog.
The presence of the cyst caught me unawares. Initially diagnosed as one of two stones waiting in the wings back at the E.R., they were presented to me as nothing I’d have to worry about in the near future. Still in the kidney itself, they might have proved candidates for blasting. The follow-up trip to the urologist disabused me of this notion while apprising me that the one “stone” was a cyst which would have to be further examined so as to rule out density– which is a euphemism for cancer.
And in a moment it all changes. I got the sonogram later that day, and later that night I wrote to this blog’s Editor-in-Chief, somewhat incredulous as to how I signed things for that test– legal documents– in a haze of fear, pain and painkillers. Legally trained, I scribbled my name or initials on everything before me with what barely amounted to a perfunctory glance as I received one sentence explanations from the admittance clerk for one page fine print documents– no doubt painstakingly wrought by the pens of my legal brethren to ensure compliance– and payment. But I assure you, the compliance was a one-sided affair. Because, as our Editor-in-Chief Frank Pasquale has said so many times before, the acquisition of healthcare is fundamentally different than buying other commodities. It is not like buying a car; the economy of healthcare is unconventional– far more akin to “how much would you pay for a glass of water in the desert,” than how much of a rebate is available on that new Kia Soul. A hard bargainer, car dealers hate me. In the legal world, I’ve built a reputation as someone with a cold hard eye for a contract. In the hospital, I signed with an almost wild abandon–wondering who would take care of my children as I did.
And today I got the results. One kidney stone gone, one still making its way, and
“Tiny parapelvic cyst right kidney. This does not appear to correspond to the 1.5 cm visualized right renal lesion on CT scan. Therefore, possibility of a solid lesion not visible ultrasonographically cannot be ruled [out].”
His footsteps loud as he walked down the hall, the melodramatic stringed theme from “The Godfather” played in the room as the doctor entered and explained. Even if it is cancerous, I’m told it’s small. Maybe even too small to do anything but wait to see what it does– and test the rest of me to see if it migrated from someplace else.
But whatever this process may be, I think there might be some value in my writing about it– for both of us. No longer mired in the abstractions of healthcare, I am, it seems, walking straight into the belly of the beast. Consider this a postcard of sorts– with the hope that it can work itself into being a guide.