The Lewin Group: Cited Often, Owned by UnitedHealth

In a recent Chicago Tribune article, “Health-care reform: Medical insurers poised to reap a healthy ‘bonanza,’”   the following paragraph concerning The Lewin Group caught my eye

One of the Democratic proposals that most concerned insurers was creation of a “public option” government-sponsored insurance plan. The industry launched a campaign on Capitol Hill, distributing arguments opposing the government option that often were grounded in a study published by The Lewin Group, a health policy consulting firm owned by UnitedHealth.

In an effort to stay abreast, I read a fair amount of opposition commentary–and “The Lewin Group” comes off the lips of Republicans and others opposed to the Public Option often enough. Although The Lewin Group connection with UnitedHealth has been made public by a number of sources, I’m not sure that it’s common knowledge. And perhaps, as always, when dealing with information–especially information doing duty as a foundation upon which Medical Insurers stand “poised to reap a healthy bonanza”–considering the source– and considering that the source of that information is owned by one of the nation’s largest insurers– may be worth a moment or two.

This description of The Lewin Group comes from The Lewin Group in their Testimony before the before the Energy and Commerce Committee, U.S. House of Representatives, dated June 25, 2009, and updated July 9, 2009

The Impact of the House Health Reform Legislation on Coverage and Provider Incomes

About The Lewin Group

The Lewin Group is a health care and human services policy research and management consulting firm. We have over 25 years of experience in estimating the impact of major health reform proposals. The Lewin Group is committed to providing independent, objective and nonpartisan analyses of policy options. In keeping with our tradition of objectivity, The Lewin Group is not an advocate for or against any legislation. The Lewin Group is part of Ingenix, Inc.,which is a wholly owned subsidiary of the UnitedHealth Group. To assure the independence of its work, The Lewin Group has editorial control over all of its work products. (emphasis added)

The Lewin Group was purchased by Ingenix (and thus UnitedHealth) in 2007, somewhat presciently in time for the Health Care debate. I do not doubt that The Lewin Group has a stated and formal editorial control over its work products; I do doubt that it looks to bite the hand that feeds it. And I would suggest that as an arm of UnitedHealth, despite Mr. Kellar’s claims above, self decapitation– at least in the corporate world– is less a “mystery” than it is an illusion.

A recent Washington Post article also noted The Lewin Group’s relationship to its immediate parent

Ingenix, a UnitedHealth subsidiary that was accused by the New York attorney general and the American Medical Association, a physician’s group, of helping insurers shift medical expenses to consumers by distributing skewed data. Ingenix supplied its parent company and other insurers with data that allegedly understated the “usual and customary” doctor fees that insurers use to determine how much they will reimburse consumers for out-of-network care.

In January, UnitedHealth agreed to a $50 million settlement with the New York attorney general and a $350 million settlement with the AMA, covering conduct going back as far as 1994.

Ingenix chief executive Andrew Slavitt said the Ingenix data was never biased, but Ingenix nonetheless agreed to exit that particular line of business. “The data didn’t have the appearance of independence that’s necessary for it to be useful,” Slavitt said.

This may give us some idea of where Mr. Slavitt’s bar for data’s  “appearance of independence that’s necessary for it to be useful” is set. But there is of course a possible difference to be had between “useful” and “valid” and “valid as used.”  Distinctions the video below, as well as the Chicago Trib article, may help to clarify.

It should be noted, however, that according to WaPo,

Lewin Group Vice President John Sheils said his firm had nothing to do with the allegedly flawed Ingenix reimbursement data. Lewin has gone through “a terribly difficult adjustment” since it was bought by UnitedHealth in 2007, because the corporate ownership “does create the appearance of a conflict of interest.”

“It hasn’t affected . . . the work we do, and I think people who know me know that I am not a good liar,” Sheils said.

Mr. Sheils also noted to WaPo that those who pay for studies also have the option of “burying” those studies:

But not all of the firm’s reports see the light of day. For example, a study for the Blue Cross Blue Shield Association was never released, Sheils said.

“Let’s just say, sometimes studies come out that don’t show exactly what the client wants to see. And in those instances, they have [the] option to bury the study — to not release it, rather,” Sheils said.

I wonder if UnitedHealth gets the in-house rate.

The Wonk Room v. AHIP on Insurer Profits

Very interesting article by Igor Volsky over at The Wonk Room on Health Insurer profits and the recent campaign by AHIP to “contextualize” those numbers. I highly recommend you take a look, as Volsky puts Insurer profit, medical loss ratios and CEO compensation in a readily digestible (even if sickening) format while taking AHIP’s “Fact Check” to task.

I do, however, have a contention: for CEO compensation, the source relied upon–Modern Health Care– failed to include “Options Granted” during the course of the year. Not merely a matter of accounting,  for someone like Ronald A. Williams of Aetna, that number added $13,537,365 to his Compensation of “10.8 million.” Add in the $101,487 for “personal use of a corporate aircraft and vehicle, as well as financial planning and 401(k) company matches” and we then have Total Compensation in 2008 for Mr. Williams of $24,300,112 — or, as we’ve posted before, $467,309.85 Per Week.

You can read The Wonk Room article here:

Health Insurance Industry Fudges Data To Downplay Its Astronomical Profits

If You Give a Republican a Cookie…

Senator Charles Grassley (R-Ia), who is seeking re-election next year and is said to have wrested key concessions from his Democratic counterparts in the Senate– including, according to AP, “an agreement to back away from a government plan to compete with private insurers” –dipped his beak in the ignominious trough of the demagogue over the weekend. AP reports that Sen. Grassley

told an Iowa crowd he would not support a plan that “determines when you’re going to pull the plug on Grandma.” The remark echoed conservative activists who wrongly claim a House health care bill would require Medicare recipients to discuss their end-of-life plans with doctors.

In addition, with recent (perhaps hasty) speculation regarding the demise of a Public Option in Health Care Reform, The Wall Street Journal reports that “The number two Senate Republican said Tuesday replacing a public health care option with a nonprofit private cooperative wouldn’t win any more Republican support, saying they are essentially the same thing. Sen. Jon Kyl (R., Ariz.), said Republican objections were more fundamental than simply changing the name of a new national entity to compete with private medical insurers.”

Senator Kyle, who as Whip is said to speak for the Republican Party,  favors a more private market based approach to health care reform–utilizing such means as medical malpractice reform, allowing small businesses to join together to give them more negotiating clout with health insurers, and allowing health insurance to be permitted to be sold across state lines like other forms of insurance. In addition, Sen. Kyle is reported to support federal government encouragement of “individuals to save more for potential health care needs through tax-friendly accounts, which would reduce their reliance on costly insurance.”

Notably, in a 2006 report on the affect of the minimum wage on families in Sen. Kyl’s home state,  the Children’s Access Alliance of Arizona stated that “Arizona has the widest income gap in the nation. The average income of the top 5% of Arizona families is 14 times greater than the average income for the bottom 20% of families.” Also worth noting is that Senator Kyl voted against increasing the minimum wage in 1997, 2005 and 2007.

On Health Care Legislation, according to On the Issues.org, Sen. Kyle voted as follows:

• Voted YES on means-testing to determine Medicare Part D premium. (Mar 2008)
• Voted YES on allowing tribal Indians to opt out of federal healthcare. (Feb 2008)
• Voted NO on adding 2 to 4 million children to SCHIP eligibility. (Nov 2007)
• Voted NO on requiring negotiated Rx prices for Medicare part D. (Apr 2007)
• Voted YES on limiting medical liability lawsuits to $250,000. (May 2006)
• Voted NO on expanding enrollment period for Medicare Part D. (Feb 2006)
• Voted NO on increasing Medicaid rebate for producing generics. (Nov 2005)
• Voted NO on negotiating bulk purchases for Medicare prescription drug. (Mar 2005)
• Voted YES on $40 billion per year for limited Medicare prescription drug benefit. (Jun 2003)
• Voted NO on allowing reimportation of Rx drugs from Canada. (Jul 2002)
• Voted NO on allowing patients to sue HMOs & collect punitive damages. (Jun 2001)
• Voted YES on funding GOP version of Medicare prescription drug benefit. (Apr 2001)
• Voted NO on including prescription drugs under Medicare. (Jun 2000)
• Voted YES on limiting self-employment health deduction. (Jul 1999)
• Voted NO on increasing tobacco restrictions. (Jun 1998)
• Voted YES on Medicare means-testing. (Jun 1997)
• Voted NO on blocking medical savings accounts. (Apr 1996)
• Rated 0% by APHA, indicating a anti-public health voting record. (Dec 2003)

More extensive analysis of the votes may be found at On the Issues’ 18 full quotes on Health Care.

In a statement on Senator Kyl’s own website regarding Health Care, he notes that “The shortage of health care professionals is due, in part, to Medicare’s efforts to control costs.”

Senator Kyl has repeatedly opposed what he terms “government intervention” in the health care and health care insurance market, stating that it will invariably lead to bureaucrats standing in between patients and their doctors and what will ultimately amount to the rationing of health care.

Interestingly enough, on his website Sen. Kyl notes that in his home state of Arizona, “The average wait for a consultation with a gastroenterologist in the Phoenix area is now two to three months. Mesa hospital administrators report acute shortages of both orthopedic surgeons and neurologists, resulting in emergency room and inpatient consult delays.”

Senator Kyl does not seem to equate such waits or shortages with any form of market based “rationing” and states that the long waits for care at present are “partly due to exorbitant medical liability premiums and the lack of physicians willing to practice under the threat of lawsuits,” and, presumably,the above mentioned “Medicare’s efforts to control costs.”

Regarding Medical Malpractice as a means of Health Care Reform, Senator Kyl, as we’ve reported before, according to Bloomberg.com might be be best to look elsewhere. Regarding real Health Care Reform, for those who had entertained the notion of Bipartisan dialogue as a means to passing comprehensive legislation, they too might be best to look elsewhere. I would suggest, for now, while there are still cookies to be had, the House–where a substantial number of Democratic Representatives have insisted that they will not vote for any reform measure which does not include a Public Option.

Market Entry by Health Care Cooperatives: Neither Quick Nor Easy

[Ed. Note: Considering recent speculation that the Public Option may be "dropped" in favor of adoption of Health Care Cooperatives, this post, which originally appeared in Health Reform Watch back on June 15th seems particularly worthy of reiteration. For those of you unfamiliar with Professor Greaney's work, he is the Chester A. Myers Professor of Law and the Director, Center for Health Law Studies, St. Louis University School of Law. A frequent contributor to HRW, he is a nationally recognized expert on health care law; Thomas Greaney has spent the last two decades examining the evolution of the health care industry. His bio may be accessed here; his recent testimony to the Senate on "Competition in the Health Care Marketplace" may be found here.]

The idea of establishing regional cooperatives, advanced as an alternative to President Obama’s public plan option, has attracted attention as a means of assuring that health reform legislation contains some means to improve competition among health plans around the nation. But the proposal, which may have superficial appeal as a “middle ground” between a public plan option and an unchecked private market, is ill-equipped to fix the key problems a public plan would address. In addition, recent experience teaches that timely and effective entry by such plans is unlikely.

The first issue is whether a cooperative, organized by consumers or other groups, can effectively deal with the shortcomings of the existing delivery system and insurance market. Thus far, the proposal advanced by Senator Conrad is pretty sketchy, but are grounds for skepticism. A central reason for having government sponsored plans is to allow the efficiencies of Medicare’s well-established administrative structure and innovative payment experiments to carry over to the private sector. Coops provide no such advantage. A second advantage of public plans is that they would likely achieve some bargaining leverage by virtue of their probable role as insurer for people representing higher risks whom private insurers find some methods to avoid. Hospitals and physicians will be hard pressed to bypass such a significant presence in the market and the public plan can thereby exert market-wide pressure to keep provider and pharmaceutical costs down. Whether co-ops will be willing to undertake the role of covering such individuals or able to sponsor innovative delivery systems to treat them is far from certain.

In any event, it is hard to envision numerous regional coops gathering the necessary data, experience and reputation to serve as a benchmark or counterweight to dominant hospitals and provider groups across the country. Further, there is a serious question regarding the independence and mission of coops. It is a mistake to assume that nonprofit entities will necessarily work to the advantage of the public. Unfortunately, our experience with nonprofit hospitals and HMOs suggest that they can easily be persuaded to play along with other providers and may not always vigorously pursue their charitable mission. Keeping cooperatives’ eye on the ball would require close attention to the control and governance of such entities.

The second objection is based on timing and practical considerations. There is ample evidence from our experience with health insurance markets that developing effective coop-sponsored plans will not come easily or quickly. It is clear that new entrants into health insurance markets face a host of obstacles. The prevalence and magnitude of entry barriers is evidenced by the dominance and profitability of existing insurance plans. One or a handful of companies dominate most health insurance markets around the country and these firms have enjoyed consistent and robust profits. Economic theory would suggest that such profit opportunities should have invited entry by rivals eager to capture some of the profits available in those markets.

Additional proof of the obstacles to entry are found in the investigations by insurance commissioners into proposed mergers in their states. In Pennsylvania for example, the proposed merger of Highmark and Independence Blue Cross would have combined the dominant insurers in two large distinct geographic regions of the state. Evidence provided to the State indicated that numerous attempts by regional and national firms such as Aetna and Coventry to enter both markets had proved unsuccessful over the years. Expert studies suggested that a variety of factors including brand loyalty, difficulties in securing physician and hospital network contracts, regulatory and information gathering costs, and obstacles created by the contracting practices of incumbent providers, thwarted entry. Newly formed coops needing to acquire expertise and develop networks will surely face enormous difficulties penetrating markets.

Health Care Reform, Ms. Palin Weighs In

Finally, after all this time mucking around with boring and complex health care experts, a voice from the wilderness has weighed in in terms we can all understand. “Evil.” Ms. Palin actually used the word evil to describe the Health Care system she has fabricated to be the Obama Plan.

Conjuring up pictures of a thumbs-down bloodstained and leering (but decidedly Wonkish) Obama/Caligula “death panel,” Ms. Palin recently informed her Facebook followers with this “Statement on the Current Health Care Debate,”

The Democrats promise that a government health care system will reduce the cost of health care, but as the economist Thomas Sowell has pointed out, government health care will not reduce the cost; it will simply refuse to pay the cost. And who will suffer the most when they ration care? The sick, the elderly, and the disabled, of course.The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s “death panel” so his bureaucrats can decide, based on a subjective judgment of their “level of productivity in society,” whether they are worthy of health care. Such a system is downright evil.

This woman was slated to be a heartbeat from the presidency; she looks to get closer. She has over 700,000 “supporters” on her Facebook page.

The statement starts thus:

As more Americans delve into the disturbing details of the nationalized health care plan that the current administration is rushing through Congress, our collective jaw is dropping, and we’re saying not just no, but hell no!

Without delving deeply into the merits of the argument (others have done so ably–there are none, this is make-believe coupled with demagoguery of the worst sort which also pretends that Private Insurers offer unlimited care at present– but for a very good point by point refutation you can look at any of these compiled over at Kaiser, or this fact-checker from ABC’s Senior White House correspondent Jake Tapper), might I suggest a certain logical inconsistency even within the make-believe of Ms. Palin’s view? In her opposition to a Government or Public Option, she seems left with an option in which a Private Insurance Executive, concerned as he must be with Corporate Profits, would be more likely to extend payment for massive health care expenses to Grandma and Baby Trig than the spendthrift “tax and spend” Democrats she consistently describes as “fiscally irresponsible.” One might imagine a slightly better chance with Howard Dean or Ted Kennedy than with a Health Insurance CEO that made $467,000 PER WEEK last year –and wanted to do so again this year. No?

If you read her post carefully ( I know, but perhaps you could humor me for a moment) what she seems to be saying is that in effect, the fiscal irresponsibility of the spendthrift Democrats in offering health insurance to all will itself lead to, and force, rationing. But the question then, of course, is this: rationing to whom and on what scale? Her premise it seems is necessarily that the absence of health care for some, at present, makes it possible for the unlimited healthcare of  many (i.e., in Ms. Palin’s make believe world, Private Insurers at present offer unlimited non-rationed Health Benefits to those who, at present,  have health insurance, but if the poor and uninsured are given access to healthcare, that will bankrupt the system and require limitations upon those who had formerly held unlimited access to care– or, in short, if the poor and uninsured get some, the presently covered will get less). How is that not rationing?

If rationing is the selective distribution of scarce resources via certain criteria–some form of merit or lack thereof–then rationing is exactly what happens under Ms. Palin’s make-believe model at present: the utilitarian calculus en masse. The distribution criteria, however, in Ms. Palin’s model, is money–which becomes a “death panel” in and of itself. A “communal standard” based on wealth. Simply put, in Ms. Palin’s world, she necessarily allows for that most efficient of instruments, the market, to decide who lives or dies.

Strangely enough, Ms. Palin’s world begins to look a lot like ours.

Bartels’s Unequal Democracy and the Gang of Six

If there’s one thing our elite press corps loves, it’s centrism. They cling to a romantic ideal of bipartisanship–even when they’re discussing necessarily ideological endeavors like health care reform. Thus it comes as no surprise when the NYT’s Herzensohn & Pear can think of no more critical angle on the gang of six “centrist” Senators now at the center of the health reform debate than the fattening snacks that fuel their deliberations.

Those with a more skeptical constitution might note that the Gang of Six represent less than 3% of the US population — a rather slender thread of popular support for whatever solution these striving solons support. Yet they don’t even appear to be acting in their own constituents’ interests. It turns out that a majority of the gang of six–Senators Baucus, Snowe, Conrad, and Grassley–hail from states with extraordinarily concentrated health insurance markets. As Catherine Arnst of Businessweek reports, “such market concentration has become a potent argument for supporters of a public insurer,” which would especially benefit consumers in those states. Yet that’s exactly what the Gang of Six has immediately taken off the table in reform talks:

Already, the group of six has tossed aside the idea of a government-run insurance plan that would compete with private insurers, which the president supports but Republicans said was a deal-breaker. Instead, they are proposing a network of private, nonprofit cooperatives.

Those nonprofit cooperatives are not likely to have much of an effect on spiraling health care costs.

The sudden popularity of this non-solution is one more indication that Larry M. Bartels’s book Unequal Democracy: The Political Economy of the New Gilded Age is essential reading for understanding today’s politics. Bartels predicted a possible “debilitating feedback cycle linking the economic and political realms: increasing economic inequality may produce increasing inequality in political responsiveness, which in turn produces public policies that are increasingly detrimental to the interests of poor citizens, which in turn produces even greater economic inequality, and so on” (286). As the poor uninsured in states like Maine, Montana, and North Dakota see real relief slipping away, they are about as likely to become disaffected and drop out of the political process as they are to hold their senators to account. It’s hard to worry about voting and politics when you’re worried that aches and pains are endangering your job.

Politicized Prognostication at CBO

Back in 2007, wise wonks were already warning that the Congressional Budget Office could torpedo health reform. The CBO dealt Clintoncare a heavy blow by saddling it with huge cost projections — and failing to take into account the savings the program would realize for individual citizens and the private sector. Current CBO director Doug Elmendorf has been riding a wave of notoriety as an objective “referee” in an increasingly bitter reform battle. But as his office’s one-sided estimates enervate reform, it’s beginning to risk its reputation for impartiality. Consider the following observations about CBO’s work:

Bruce Vladeck: “The CBO’s track record in predicting the effects of health legislation is abysmal. Over the last two decades, the CBO has routinely overestimated the costs of expanded government health care benefits and underestimated the savings from program changes designed to reduce expenditures. Most recently, it overestimated the five-year cost of Medicare Part D — the prescription drug benefit — by more than 35%. Even more dramatically, the CBO’s estimates of the Medicare savings from the Balanced Budget Act of 1997 underestimated the impact, on average, by a full 100%. That’s right: In the BBA’s first three years, Medicare spending fell fully twice as fast as the CBO had projected.”

Timothy Stoltzfus Jost: “[A] moment’s reflection would lead one to realize that the CBO’s guess that [a reform proposal] would save [only] $2 billion is about as worthless as an estimate that a loaf of bread will cost $5.65 in 2019, or a gallon of gasoline $4.73. Indeed, the CBO admits as much, stating that it actually believed the proposal would save nothing, but “there is also a chance that substantial savings might be realized.” . . .[T]he media needs to stop reporting CBO reports as though they reflect the real costs of reform.“

Maggie Mahar: “When I read Elmendorf’s testimony suggesting that the [House] bill wouldn’t bend the trajectory of federal health spending, I couldn’t help but wonder: Did he understand how the proposals in the 1,018 page bill dove-tailed with the excellent recommendations that the Medicare Payment Advisory Commission (MedPac) has made in recent years? Has Elmendorf read the lengthy MedPac reports?”

When respected experts like Maggie Mahar are wondering if Elmendorf has understood key literature in the area, something’s gone wrong at CBO. The media’s uncritical acceptance of his figures can only last as long as it fails to report the true complexity and uncertainty involved in both substantive reform and the do-nothing option that CBO’s handiwork is unintentionally advancing.

Read more

The Broken Health Care “Marketplace”

While Mitch McConnell goes on Meet the Press to praise free enterprise in American health care, he ignores the market concentration that gives us vastly more expensive care than comparable countries. As Blue Dogs and other Dems start to tap on the brakes of health reform efforts, they would do well to consider the work of Tim Greaney and David Balto. Both have recently delivered Congressional testimony that indicates just how far health care is from a well-functioning, competitive market.

Balto is hardly a leftist on antitrust matters; for example, he has aggressively defended some Google initiatives now under scrutiny by the DOJ. But even he is alarmed by the extraordinary trends toward concentration in health care:

Few markets are as concentrated, opaque and complex, and subject to rampant anticompetitive and deceptive conduct. As the health care debate progresses, many advocate for limited reform of the health insurance system. Their belief is that it is a fundamentally sound market and with a little dose of additional regulatory oversight, all the ills of the market will be cured. They could not be more mistaken.

As a former antitrust enforcement official, I strongly believe the mission of the Federal Trade Commission and Antitrust Division of the Department of Justice is vital to protecting consumers and competition. However, in the past administration, the priorities of those enforcement agencies were not effectively aligned with the critical priorities in the health care market, with the result that there is substantial anticompetitive and fraudulent activity that raises prices and costs for consumers and the American taxpayer, especially conduct by certain health care intermediaries—Health Insurers, Pharmacy Benefit Managers, or PBMs, and Group Purchasing Organizations, or GPOs.

The full testimony appears here. Balto argues that “the Bush administration did not bring a single case challenging anticompetitive conduct by insurance companies,” while it “spent a hugely disproportionate amount of time, money and effort prosecuting relatively small groups of doctors.” By the end of the testimony, it almost appears that Balto has made his case too well, given the limited resources of current antitrust enforcers. It is hard for me to imagine them investigating even a fraction of the schemes and situations he describes, though perhaps some high profile cases (and partnerships with state attorneys general) would have an in terrorem effect.

Tim Greaney’s testimony before the Senate Commerce Committee paints a similarly grim picture. Greaney notes that, “by 2003, ninety-three percent of the nation’s population lived in concentrated hospital markets.” He quickly identifies the core problem in an increasingly sickly health care antitrust jurisprudence: courts’ short-sighted failure to understand the unconventional economics of medicine:

Legal decisions approving mergers of competing acute care hospitals have been roundly criticized. The judicial missteps can be traced to the courts’ tendency to oversimplify antitrust analysis by adopting plain vanilla, Chicago School assumptions about markets while failing to incorporate the effects of market imperfections in their analyses. Most of these decisions found extraordinarily large geographic markets for basic acute care hospital services as they ignored the heterogeneity of demand for care and the fact that consumers exhibit different preferences for [and ability to] travel.

Other cases refused to recognize supply side heterogeneity, failing to appreciate that mergers of “must have” hospitals may give rise to anticompetitive effects. To right the ship, the FTC has brought two recent hospital merger cases and undertaken retrospective reviews of the outcomes of several hospital mergers. Unfortunately, developing legal precedent takes time and effort and mergers may be attractive to the hospital industry during a period of legal uncertainty and regulatory change. An important priority for the FTC therefore should be to undertake close scrutiny of all horizontal consolidations by hospitals– including joint ventures involving physician-controlled specialty hospitals and outpatient facilities, none of which have been challenged to date.

Greaney also notes substantial failures in antitrust enforcement against physicians, health insurers, and PBM’s.

While Balto and Greaney focus on improving competition policy, I’m left wondering: can this market be saved? Greaney argues that “the nation’s competitive infrastructure — provider and payor markets — is not well designed to produce cost savings if reform proposals simply turn over the job to the private market. . . . [and] this quandary lends strong support to the idea of having a public plan option to nudge private insurers toward more vigorous competition and to serve as a backstop where markets fail.” A highly concentrated health care marketplace has neither the means nor the motive to discipline costs–external competition has to prod it in that direction. Well-designed health insurance exchanges will be key to success here.

Primary Care: Proper Implementation Crucial to Successful Health Reform

In reference to the House Bill, a recent post at The Health Care Blog stated that:

A big reduction in the number of uninsured with no new controls over costs carries its own risk. As Massachusetts–even with only a modest percentage increase in its covered population–discovered, making health care more accessible means a jump in demand, but with no corresponding increase in supply. The predictable results: higher prices and disenchanted consumers unable to obtain care.

This comment raises two interesting points, namely, how will the House bill  affect the demand for, as well as the supply of, health care? The health reform measures in Massachusetts have notably not included a public plan similar to the latest version of the House bill.  Ergo, a comparison of the House bill to the Massachusetts reform measures isn’t exactly comparing apples to apples. In Massachusetts, the private insurers do not have to worry about consumers (who are often simultaneously employers) choosing a public plan. However, in the House bill, this option will, theoretically, increase competition by making the private insurers work to keep their customers from going over to the public plan.  Thus, the addition of  a separate actor–in contradistinction to the MA plan–may lead to decreased cost, a trend I explored in a previous post.  Therefore, Roger Collier’s claim in The Health Care Blog that there will be no cost controls isn’t entirely correct if the public plan fosters competition sufficient to force private insurers to lower the costs of their own plans.

If the price does in fact decrease, demand will then (presumably) increase, and this is when we will encounter the real elephant in the room: supply.  It’s not the relationship between the public plan’s increase in demand that we should worry about, but rather it’s the relationship of it to the present supply. Thus, Collier may be on to something with regard to the inability to obtain care; however, he fails to point out why there may be a supply problem, and the problem is fairly obvious: the massive primary care supply shortage. As the President-elect of the American Association of Family Physicians  noted:

“Primary care has been described as the base of the health care workforce pyramid,” said Heim, who spoke during a hearing on physician workforce shortages. “But the U.S. physician profile is only 31 percent primary care and 69 percent (sub)specialty care.”

The pyramid metaphor has been mentioned by others. It describes a health care system as a pyramid whose base comprises basic health care delivery by primary care, which is the least costly, and which tapers to the more specialized care that is more costly, such as organ transplantation. At this point, our health pyramid is inverted. One need not have taken college level physics to appreciate that  an inverted pyramid’s center of gravity makes it prone to toppling. We also have a second pyramid–a socioeconomic pyramid–with a largely solidified base of lower-income Americans, tapering to the middle class and then rising to the upper income tier at the top– or pinnacle. Imagine these pyramids are side-by-side, yet one is inverted. Congress’s job is to make sure that these metaphorical pyramids co-exist stably. The picture above may be of some help.

The authors of the House bill were not oblivious to the teetering health care pyramid, and added specific provisions that they believed would ameliorate the growing problem. As MedNewsToday pointed out, the bill attempts to combat the shortage by:

• Increased Medicare payments to primary care physicians by 5%
• An additional 5% pay boost for primary care doctors in designated “health shortage” areas
• A restructured formula for calculating Medicare reimbursements each year
• Enlargement of the National Health Service Corps by “an amount sufficient to eliminate 40% of the estimated shortfall in primary care providers”
• New scholarships for medical students who choose primary care as a specialty

Luckily, the House bill has focused to some extent on the most important aspect of the primary care shortage, that of recruiting more students to enter primary care. Enlarging the National Health Service Corps is laudable (notably, Dr. Regina Benjamin, recently named by Obama to the Surgeon General post, is a former participant in the program), and would likely be helpful, but increasing it by an “amount necessary” to reduce a predicted short fall is somewhat amorphous. Also, the National Health Corps and the scholarships associated with them are offered in return for serving in certain areas that have shortages of services but these areas of need will almost certainly expand and alter as coverage is drastically expanded across the nation.

Thus, increasing the number of primary care physicians would in no way be a panacea– a point that is  highlighted by Atul Gawande’s New Yorker article. As the article made clear, health care delivery can be hamstrung after access is provided. I believe this underscores a point that many have noted, that is, that there is a difference between an increase in coverage (i.e. insuring more individuals) and health care reform (making sure that care is delivered effectively and efficiently).

Assuming that medical students are sufficiently enamored by the pay adjustments and scholarships –which is a big assumption–reforming how those new primary care physicians deliver care in response to increased demand is as important as increasing the supply.

AMA President Rohack Responds to Recent Health Reform Watch Blog on Public Plan

On July 4th, we wrote about what seemed an abrupt change in AMA policy regarding the Public Plan as voiced by AMA President, Dr. J. James Rohack in an interview with CNN –and about the organization’s declining membership: “AMA About Face on Public Plan?” President Rohack responded to this blog. In the interest of fairness, and because people sometimes do not read comments from older posts, below is AMA President Rohack’s comment, complete and without edit or comment:

J. James Rohack, M.D., AMA President says:

AMA policy is formed by the AMA’s voting House of Delegates – the nation’s only democratic assembly of physicians and medical students representing all state and specialty medical societies. I shared with CNN the AMA’s new policy – which was created and voted on by our physician delegates at our annual meeting in June - that the AMA supports health system reform alternatives consistent with AMA principles of pluralism, freedom of choice, freedom of practice, and universal access for patients.

This evolution in policy is consistent with the AMA’s strong support for health reform this year that provides high-quality health care coverage for all Americans. Our commitment is clear. Over the last few years we’ve spent $15 million dollars to call attention to the uninsured crisis and lay the groundwork for health reform that gets all Americans covered through our Voice for the Uninsured campaign.

We don’t yet know what form a final bill will take, which is why we will carefully study all options that make the system better for America’s patients and allow physicians to provide high-quality care. The AMA will stay actively engaged to get reform this year that improves the system for patients and physicians.

Schumer v. Grassley, Face the Nation

On Face the Nation, Senator Chuck Grassley reaffirmed his opposition to a public option, stating that “the power of government is an unfair competitor.” He also, however, expressed an openness to health care cooperatives, if they are “in the area of what we have known in cooperatives in America– and there’s even a few insurance cooperatives already operating in America– if they’re within what we have known of cooperatives and the concept of cooperation for the last 150 years, I think we can reach a favorable compromise.”

This may be too much to ask, but Senator Grassley (or at least his staff) follows this blog on Twitter– or at least did before this post. But as regards the failed history of health insurance cooperatives in America, the essentially moribund state of those cooperatives which do still exist, and the difficulty of implementing an effective cooperative plan, he might be well served to read these posts by Professors Timothy S. Jost, “Jost on Cooperatives,” and Tim Greaney, “Market Entry by Health Care Cooperatives: Neither Quick nor Easy. ” Might I also suggest that as we look to reform healthcare in America, the spectre of legislating anew “what we have known” and functioned under is not particularly reassuring. The prospect of “overhauling” health care is appealing simply because “what we have known” doesn’t work.

And I guess the question is, with a filibuster-proof majority in the Senate, a proposal which includes a Public Option making its way out of the Senate’s HELP committee, and a similar proposal emanating from out of the House, ultimately how essential to the issue is what Chuck Grassley thinks ? Yes, he can wrangle and tie up a bill in the Finance Committee– but he and his Republican comrades in private insurance arms can’t tie up all the bills– nor do they have enough votes to quash, or even do more than delay a vote on a bill before the Senate for a mere 30 hours post-cloture. With the advent of the Democrat’s filibuster-proof majority, as long as those Democrats can muster the political will, might I suggest that Senator Grassley’s position has been relegated to being nothing more than a day plus 6 hours of inconvenience? But sure it would be nice to have the benefit of Senator Grassley’s expertise in health care.  Just as it would also be nice to have the entirety of Congress along for the ride instead of kicking an screaming and casting blame and aspersions along the way– but the American Public has seen fit to no longer grant the Republicans more than a “suggesting” seat at the table: their vote no longer essential, their power diminished accordingly– their views relegated to their own merit or lack thereof, void of the political power derived from a substantial bargaining position. Under these circumstances a compromise which leaves us with “reform” void of substantive change in the form of a public option is both unnecessary and, might I say, the result of a failure of will and command.

However, faced with strident opposition to the Public Option from Senator Grassley, the realization of Democratic Party power was evident in Senator Schumer’s response.  Schumer cited the “strong public option” contained within the current proposals from both the House and the Senate’s HELP Committee and stated that in “the Finance Committee, we’re trying to come to some form of compromise. But make no mistake about it, the President’s for this strongly and there will be a public option in the final bill.”

Spoken like a man with all the votes he needs.

Watch CBS Videos Online

AMA About Face on Public Plan?

CNN reports that Dr. J. James Rohack, the “new president of the American Medical Association, which represents the interests of the nation’s doctors, said Wednesday the group is open to a government-funded health insurance option for people without coverage.”

And that

“Dr. J. James Rohack told CNN the AMA supports an ‘American model’ that includes both ‘a private system and a public system, working together.’”

As we posted back on June 11, 2009 the AMA had announced the day prior that it would “lobby against the inclusion of a Public Plan in health care reform legislation.”

At that time, many people made note of the AMA’s long history of opposition to “public” health measures such as Medicare and Medicaid, and as we noted in our post, “AMA to Oppose Public Plan–Again,” “at least one physician, Dr. Chris McCoy, Policy Chair for the National Physicians Alliance…publicly quit the AMA in response.”

But that was way back on June 11^th , a full twenty days ago. Apparently something has changed since then? Although Dr. Rohack became president of the AMA on June 16^th, under the circumstances that alone seems insufficient to account for the purported change.

Insurance & Financial Advisor Webnews describes the situation thus:

The new president of the American Medical Association appears to have confused or complicated the organization’s position on a public health insurance option during a CNN interview.

Dr. J. James Rohack, a physician in Texas who became president of the largest doctors’ group in the nation June 16, said in a live interview Wednesday (July 1) with CNN’s Tony Harris and Medical Correspondent Elizabeth Cohen that the group wants people who lack health insurance to be put into the Federal Employee Health Benefits Plan, the insurance program for federal employees and members of Congress.

“If it’s good enough for Congress, why shouldn’t it be good enough for individuals who don’t have health insurance provided by their employers,” Rohack said in the nine-minute interview.

A call for comment from the AMA was not returned.

One of the more interesting things about this apparent change of heart is that Dr. Rohack’s ascendancy to the post was preordained , so to speak . The AMA chooses it’s “president-elects” a full year in advance (the present AMA president-elect is Dr. Cecil B. Wilson, named on June 15, 2009, will take office in June, 2010 ).

According to this Reuters Press Release from June 17, 2008 announcing Dr. Rohack as the president-elect, Dr. Rohack was certainly no stranger to the inner sanctum of AMA policy decisions prior to becoming president. He did not just jump upon the scene:

“Taking a leadership role with the AMA in 2001 when he was first elected to theAMA Board of Trustees, Dr. Rohack served a one-year term as chair of the AMA Board of Trustees in 2004-2005.  He was reelected to a final four year term in 2005.”

Presumably, as one in “a leadership role” this year as both a Board of Trustees Member and as president-elect, Dr. Rohack was privy to, and part of, the AMA’s announcement (five days before he assumed the presidency) that they would “lobby against the inclusion of a Public Plan in health care reform legislation.” Therefore, his ascendancy seems insufficient to account for the change .

The question then is what could have changed in those twenty days between proclamations besides the ascendancy of Dr. Rohack? New research? A close reading of Profs Cortez, Greaney, Jost, Jacobi and Pasquale? I think not. Although reluctant to criticize for a reasoned and responsive change in direction (to reconsider carefully in the face of conflicting data is a good thing), this sudden (and unexplained) shift of direction smacks of politics and P.R. from an organization which is no stranger to either. I can’t help but find myself thinking of Tess of the d’Urbervilles when faced with her “converted” malefactor Alec:

“Don’t go on with it!” she cried passionately, as she turned away from him to a stile by the wayside, on which she bent herself. “I can’t believe in such sudden things! I feel indignant with you for talking to me like this when you know–when you know what harm you’ve done me!

I’m not sure what harm the AMA has actually done, but their repeated opposition to public options such as Medicare, Medicaid, early forms of HMO’s which sprung up in the Great Depression era, and the present Public Plan have not helped.

Keep your eyes on the spin.

Having said all that, a final note. CNN reported on

“the American Medical Association, which represents the interests of the nation’s doctors…”

Whether or not the AMA can be said to actually “represent the interests of the nation’s doctors,” is, perhaps, subject for debate. A quick google search on the AMA brings up some interesting figures: “the percentage of doctors who belonged to the organization declined from the mid-1960s on. At the height of the group’s campaign against Medicare, the AMA claimed at least 70 percent of American doctors as members. By the mid-1990s, the AMA represented only about 40 percent of American doctors.”

The 40% number of the mid-1990’s is a fond memory for the AMA. The present number for American doctor membership is closer to 22 ½ % — and that’s counting students and interns (who pay reduced yearly dues of only $20 and $45 respectively).

On June 14, 2009, Emily P. Walker, Washington Correspondent, MedPage Today reported on the present status of the AMA:

Although the group boasts close to 240,000 members, 29% are students or residents, who pay sharply discounted dues. Still more of the members are retirees, whose dues are also cut.

The AMA’s Council on Long Range Planning and Development had more specificity. It reported that there are 1,060,333 physicians and medical students in the United States and 238,977 of them AMA members.

Of those members, 20.5% are medical students, 9% are residents, and 36.5% are 56 or older. As one delegate put it, “we have a lot of students and a lot of old docs, but not a lot of practicing physicians.”

Competition in the Health Insurance Marketplace and its Effect on Quality: Intriguing Findings Should Influence Reform Debate

In a previous post I discussed the relationship between the competitiveness of health insurance markets and the cost of insurance. Though the inverse relationship between competitiveness and cost is not unexpected, the studies revealed a complex relationship between the two variables that should be taken into account when reforming our health care system.

In that prior post, I promised to follow up with a discussion of current knowledge concerning the relationship between competitiveness and quality.  Much of the research out there is conflicting. This is somewhat unexpected, as one would assume as a matter of basic market economics that greater competition would force plans to compete on quality. However, as Professor Frank Pasquale has pointed out, there are a variety of activities that insurers engage in to compete, such as “cream skimming” or “cherry picking” their customer base, denying coverage based on preexisting conditions, and remaining largely opaque in their operations. In other words, it appears that a great deal of the competition seems to take the form of mitigating exposure to cost risk.

Instead of competition playing an important role in improving quality, the biggest impact may be the level of HMO penetration. Below I will provide a brief explanation of the “tools of the trade” used in these studies, as well as a brief description of some recent findings.

It is not uncommon to hear that “a public plan is needed because there is no competition in the marketplace” or conversely that “the public plan will destroy the competition that presently exists between private insurers.” Regardless of which of these statements may, or may not, be correct, there is a lingering question that must be answered: how do we know what level of competition exists, and how does competition affect the quality of health care?

Competition

There are three main ways that researchers measure competition in the health insurance market. One way is to simply count the number of insurers in a given market. This method, though instructive in some measure, may give the same weight to an insurer with a few policies as it does to one with a 100,000. Another method is to utilize the Herfindahl-Hirshman Index (HHI).  Simply put, HHI is an index based on the sum of the squares of the market share percentages of the competitors.  If the market share is primarily focused in one competitor, while scattered throughout the rest, then the HHI will tend to be large, since squaring that one large participant’s share greatly increases the resulting sum. Alternatively, squaring the shares of many smaller market participants produces a smaller HHI sum. Thus, a lower HHI corresponds to, at least in theory, a more competitive marketplace.

There are, however, problems with the HHI index. As mentioned in my prior post, health insurers often offer a variety of plans, many of which offer different benefits and heterogeneous provider networks. Therefore, even if a market’s HHI is numerically low, the HHI formula may nevertheless inflate the degree of competitiveness. In other words, we may not be comparing apples to apples.

A third way to look at competition, Read more

Public plans and chronic care

 

The public plan question continues to permeate health reform discussions.   Last week, surprising analysis from the CBO seemed to be leading some Democrats to support stripped-down reform.  On Sunday, polling data was published showing overwhelming support for a public plan that could compete with private plans in a reformed marketplace.  Senator Conrad has proposed a “health cooperative” as a “compromise” between those for and against public plans, suggesting that a plan operated by and for its members could serve many of the functions of a public plan, without presenting the political problems presented by public plans - which he regarded as insurmountable.

Tim Jost and Tim Greaney in previous posts here and here have raised important concerns about cooperatives.  Cooperatives, as they point out, are not new; in the form of mutual insurers, non-profits, and Blues, things very like what Senator Conrad describes existed for decades.  Unfortunately, they have mostly wandered from their community mission to mimic the business practices of for-profit insurers.  Senator Conrad may be agreeing on forms of oversight and organization of a “cooperative” that may lessen the gulf between his original proposal and those of public plan proponents.

What does this have to do with chronic care?  Reform 2009 has focused on access and the uninsured, although cost is certainly another driver.  It is now well-known that health costs are not homogeneously spread; instead, a small number of people need most of the expensive care each year.  Many of these people need expensive care because they are living with multiple chronic illnesses.   Care for chronic conditions is often poorly coordinated, and the costs of care are increasingly shifted to the patient in the form of copayments, coinsurance, and deductibles.

Current draft reform bills gesture to the need to coordinate chronic care.  The House June 19^th House version, at section 1178, would create “fully integrated dual eligible special needs plans” to “optimize” the health and well-being of people eligible for both Medicare and Medicaid, with serious chronic illnesses, and at section 1302, would create a Medicare medical home pilot program for people with chronic illness.  What about those covered in the private marketplace?  Section 1441 would add as a “consideration” in the Secretary’s setting of health priorities “health care provided to patients with prevalent, high-cost chronic diseases.”        The Senate version would directly address the chronically ill in private insurance.  Section 101 would amend the National Health Service Act to require health coverage to contain  ”care coordination and chronic disease management” activities, as well as “medical home” provisions which, as described further in section 212 of the draft bill, would require the plans to provide for medical teams to coordinate chronic  care.

Adding chronic care management provisions to Medicare and Medicaid is a good step.  Nudging private plans to provide appropriate chronic care is also a good thing.  As Robert Kane (University of Minnesota), Edward Wagner (MacColl Institute), Thomas Bodenheimer (UCSF), and others have increasingly demonstrated, patient-centered, clinically-based chronic care coordination has the potential to greatly improve care and patients’ quality of life.  There is increasing evidence that chronic care management can save money, as well.

Private plans - for-profit and non-profit - are aware of advances in chronic care, and to varying degrees have adopted innovative care coordination methods.  But they don’t do enough, for two entirely rational reasons.  First, employers and individuals switch health insurers frequently, for a variety of reasons, leading insurers to regard members as “theirs” for only a few years.  Paying for expensive care (e.g., bariatric surgery for obesity) that pays dividends over a longer time frame, then, pays dividends for their competitors.  Second, insurers who do an excellent job maintaining panels of chronic care specialists, and coordinating care among them, risk becoming “sick people magnets,” attracting exactly those people their actuaries tell them will hurt their bottom line.  Risk adjustment is a partial corrective, but clearly does not level the playing field enough in a market where marginal profits spell success or failure.  Mandating that insurers act against their interests is the right thing to do in this case, but we should not be surprised if they react with less than dizzying zeal.

We all have a chronically ill parent, child, grandparent, or friend whose health has spiraled down because our current delivery and finance systems have failed them.  There are many barriers to reversing the trend away from patient-centered, humane, chronic care.  One barrier that must be addressed is the structural failure of our competitive health insurance market in this regard.  It doesn’t pay to be good at chronic care, and things that don’t pay are, for perfectly understandable reasons, problematic in that marketplace.

President Obama said yesterday that competition from public plans can be “an important tool to discipline insurance companies.”  Others have argued that the public plans can serve as a benchmark, or a compass setting, for private plans.  In chronic care management, here’s what that might get us.  A public plan can be charged with doing an excellent job coordinating chronic care.  Private plans can be similarly charged, but, for the reasons described above, they will have strong market interests to avoid that charge.  The public plan in this area (as in others) can allow us to recognize, by comparison, how well private insurers are doing at the task we most need them to do: provide care for the ill — for those who really need health coverage and care.

Paging Dr. Gawande: Health Reform Matters

Atul Gawande’s article “The Cost Conundrum” offers a distinctively moral perspective on health reform. It has also become a cause celebre in policy circles. The Obama White House is reading it, leading journal Health Affairs has sponsored a roundtable on it, and pundits across the political spectrum are invoking it.

There are good reasons for all the attention in health reform circles. But there’s a paradox here, too, because Gawande doesn’t believe that changes to health care finance and regulation can deter the wasteful and uncoordinated provider behavior which he sees at the root of the present crisis. I respectfully disagree. Law may not be doing a good job at this now—largely because health care regulators over the past 20 years vastly overestimated the degree to which the market would improve quality and access. But we have a rare window of opportunity to correct for those assumptions. Moreover, without real reform, the profit-obsessed providers who are the villains of Gawande’s piece will systematically outcompete the integrated delivery systems he champions. Gresham’s Law applies in health care, too.

First, some background. Gawande compares a high-cost Texas town (McAllen) with a nearby, low-cost one (El Paso). He finds very little in the McAllen extravagance that is actually improving the longevity or quality of life of its residents. The piece describes in some detail how commercial imperatives affected medical practice in McAllen:

[M]any physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the end of each month, they put the money out of their minds.

Others think of the money as a means of improving what they do. They think about how to use the insurance money to maybe install electronic health records with colleagues, or provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients don’t miss their mammograms and pap smears and colonoscopies.

Then there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. . . .

In every community, you’ll find a mixture of these views among physicians, but one or another tends to predominate. McAllen seems simply to be the community at [the high-cost] extreme.

Gawande describes a market gone wild in McAllen, where doctors would demand “four or five thousand [dollars] a month” or even sex in exchange for routing their patients to certain home health agencies.

How does such a culture of commercialization develop? Gawande is not a social scientist, but he can extrapolate from his own experience. He knows how physicians mentor one another and provide models of care. He also mentions the work of Woody Powell, who examines how certain leading institutions can set the tone for much of an economic community. These “anchor tenants” led McAllen’s “medical community . . . to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.”

Gawande contrasts McAllen with several centers of excellence in health care, including the Mayo Clinic and a Grand Junction, Colorado network of physicians. Mayo doctors are salaried, and in Grand Junction “the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick [and lemon-drop] patients.” A local HMO encouraged the Grand Junction doctors to meet and “focus[] on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates.” As a result, quality improved, cost declined, and Grand Junction Medicaid patients enjoyed higher rates of effective access than average.

It would seem that a health reform ought to focus on encouraging these types of interventions. But in an interview with Ezra Klein, Gawande is strangely agnostic on whether law can change much:

My vantage point on the world is the operating room where I see my patients. And trying to think about whether a public option would change anything didn’t connect. I order something like $20,000 or $30,000 of health care in a day. Would a public or private option change that?

People say that the most expensive piece of medical equipment is the doctor’s pen. It’s not that we make all the money. It’s that we order all the money. We’re hoping that Medicare versus Aetna will be more effective at making me do my operations differently? I don’t get that. Neither one has been very effective thus far.

I think there are several misconceptions in that quote. First, the public option is not designed to displace private insurance. It’s supposed to be a benchmark for private plans, to incentivize them to act more constructively. Second, Gawande is here invoking his own perspective, that of “good” physicians, those who push “the money out of their minds” as they decide courses of treatment. Law, as Justice Holmes reminds us, should be written and interpreted with the proverbial “bad man” in mind, who “cares only for the material consequences which [knowledge of law] enables him to predict.”

Many of the rules of health care finance and regulation address exactly the types of problematic behavior discussed in the article. Niche facilities and imaging centers are at the cutting edge of the commercialization Gawande worries about. Lawyers have debated them for years, and the policymaking is still ongoing. HHS set a moratorium on the development of specialty hospitals in 2003, but it expired. This led to a flurry of interest in administrative action designed to address specialty hospitals’ “cherry-picking” of lucrative patients and “lemon dropping” of costly cases onto other hospitals. Something as obscure as “certificate of need” rules (operating at a state level) have proven critical in determining the spread of specialty hospitals. Reports from the GAO and the Medicare Payment Advisory Commission have investigated their impact, while CMS rulemakings have focused on re-assessing payment levels for procedures at ambulatory surgical centers. Antitrust litigation could also play a pivotal role in the struggles between general and specialty hospitals for what Gawande calls the “soul of medicine.”

In the article, Gawande repeatedly talks about “blunting financial incentives” for bad medicine or patient cherrypicking. But that’s exactly the charge of the Medicare Payment Advisory Commission (MedPAC) in its examinations of developments like niche providers. State policymakers can also reflect these concerns in various ways–adjusting nonprofit status, facilities licensure rules, taxation, and many other legal variables.

In other words, law matters. Sure, all these laws can be bent in ways that favor the further commercialization of medicine. Much of any book on health care finance regulation is a tale of frustrated hopes and dashed ambitions. But this body of law at least provides some tangible guide to past and potential realignments of incentives–something that can’t be said for the appeals to cultural change at the core of Gawandean quietism.

Gawande concedes that “In the war over the culture of medicine—the war over whether our country’s anchor model will be Mayo or McAllen—the Mayo model is losing.” Calls for cultural change just aren’t being heeded—and why should they be? If an insurer develops an extremely effective protocol for dealing with the chronically ill, it will be rewarded by the market with. . . . more expensive, chronically ill patients wanting to sign up for it. As things stand now, providing high-quality care for the chronically ill is a great way to go out of business in virtually any market where your competitors can “skim the cream” of the healthiest half of the population, who only demand about 3% of health care spending. Health reform (including real risk adjustment to properly compensate such plans) can help change that.

Gawande’s “Cost Conundrum” could be to health reform what Sinclair’s “The Jungle” was to food safety. It explains current trends in the commercialization of medicine better than virtually any journalistic work out there. Sadly, it appears that its author is now more inclined to “stay above the fray” than to try to articulate and lobby for the regulatory infrastructure necessary for the cultural change he so eloquently advocates.

X-Posted at: Concurring Opinions.

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