Recommended Reading: Russell Korobkin’s “Bounded Rationality, Moral Hazard, and the Case for Relative Value Health Insurance”

Earlier this week at The Incidental Economist, Austin Frakt asked the following question:

“Is it still the case that US and state laws make it impossible for insurers and hospitals to control the use of health technologies? If so, this is a substantial problem for translation of comparative effectiveness research (CER) into practice. It seems that physicians, as well as hospitals and insurers, would need some legal safe harbor to put CER to use. Who is thinking or talking about this? Anyone?”

In an interesting new article, Bounded Rationality, Moral Hazard, and the Case for Relative Value Health Insurance (posted last month to SSRN), Russell Korobkin identifies a way to incorporate learnings from comparative effectiveness research into insurance contracts without running afoul of the laws to which Dr. Frakt refers.  If a dispute arises over coverage of a medical treatment that is not clearly excluded under the terms of a health insurance policy, the law favors the insured individual over the insurance company. But, as Professor Korobkin explains, “there is no impediment, in theory, to insurers excluding from coverage treatments that fail to satisfy a cost-benefit analysis, as long as the exclusions can be adequately specified at the time of contracting.”

Professor Korobkin contends that an adequate level of specificity could be achieved if insurers sold policies that varied in just one way: the cost effectiveness of the treatments they cover.  “Under this framework,” he explains, “the function of government-sponsored CER would be to evaluate different treatments for medical conditions and rate them on a scale of 1 (low) to 10 (high) in terms of cost effectiveness.”  Insurers could then offer less expensive plans that cover only relatively cost effective interventions (e.g. those rated 7 or above) and more expensive plans that also cover less cost effective interventions (e.g. those rated 3 or above).

In choosing an insurance plan, consumers would be asked to “trad[e] off price against a general level of medical care coverage[.]“  Professor Korobkin argues that this is “a better approach to rationalizing the amount of resources allocated to medical care” than either (1) “consumer directed health care” — which is founded on the unrealistic assumption that consumers are able to make “complex cost-benefit tradeoffs at the point of treatment” — or (2) “proposals to pay physicians based on the efficient use of resources that rely on them to compromise their fiduciary duties and undermine professional norms[.]“  The (relative) simplicity of the 1 to 10 scale would enable consumers to make sound — and legally-binding — decisions about how much of their money to spend on health care and how much to allocate to other priorities.

Professor Korobkin acknowledges that there are impediments to putting his “relative value health insurance” proposal into practice — including the dearth of information on the effectiveness, never mind the comparative effectiveness, of many, if not most, medical interventions, the difficulty of making the value judgments inherent in “measuring the benefits side of the equation,” and the risk that the ratings process would be captured by industry — but suggests that they are not insurmountable.  He also reviews and responds to some of the issues that might arise in a “ratings-based market,”  including the effect of relative value health insurance on the Patient Protection and Affordable Care Act’s health insurance exchanges and premium subsidies.

I highly recommend Professor Korobkin’s thought-provoking article to everyone with an interest in our notorious health care cost curve and how to bend it.

Reform Rodeo

1. The NYT reports on how Florida is retooling their Medicaid system by, among other things, channeling some Medicaid patients into for-profit HMOs.

2. ihealthbeat.org reports on the role of patient-driven PatientsLikeMe.com in creating the first clinical trial from social network data.

3. Health Data Management reports on J&J’s acquisition of device maker Synthes for $21.3 billion.

4. Health Affairs has a piece on how comparative effectiveness research can change the practice of medicine.

5. Becker’s Hospital Review has a piece on the 6 technology building blocks of ACOs.

Recommended Reading: Recent Legal Scholarship on Health Reform

In recent months, the first law review articles on the Patient Protection and Affordable Care Act (PPACA) have begun to appear. I highlight here two very recent contributions to the legal literature that are well-worth reading.

In Setting National Standards for Health Plans Under Healthcare Reform (published in the October 2010 issue of the UCLA Law Review) Jessica Mantel argues persuasively that the notice-and-comment rulemaking procedure set forth in PPACA for defining “essential health benefits” will result in politically-driven decisions that do not serve the broad public interest, using as one case study the controversy over the U.S. Preventive Services Task Force’s recommendations regarding routine screening mammograms.  Professor Mantel proposes that the power to define essential health benefits be vested not in the Secretary of Health & Human Services, as PPACA provides, but instead in an independent commission — modeled on the Base Realignment and Closure Commission — that “could give more careful consideration to the relevant empirical evidence on clinical efficacy and cost-effectiveness, showing sensitivity to the concerns of all individuals impacted by its decisions, correct for fallacies or biases in public opinion, and exercise moral powers of persuasion in evaluating the various policy options.”  The commission’s proposed package of essential health benefits would be subject to an up-or-down vote in Congress and any subsequent changes Congress wished to make would be subject to an “actuarial offset requirement,” i.e., if Congress wanted to expand coverage in one area it would have to contract it in another.  Professor Mantel considers the possibility that the resultant benefits package would tilt in favor of well-organized, wealthy special interest groups but ultimately discounts it, in part because “groups defending the status quo have important advantages over those seeking new mandated benefits legislation.”  Even if Professor Mantel’s proposed reform to healthcare reform is not adopted, her article’s thoughtful analysis of the potential for politics to interfere with the establishment of fair and reasonable national coverage standards is a very valuable contribution.

Richard Saver’s Health Care Reform’s Wild Card: The Uncertain Effectiveness of Comparative Effectiveness (forthcoming in the University of Pennsylvania Law Review) similarly addresses a weakness in PPACA — in this case, its “fail[ure] to bet smart and play the [comparative effectiveness research (CER)] wild card effectively.”  Professor Saver highlights a number of what he calls “translation barriers” that “jeopardize making productive use of governmentally funded CER.”  Included among these is vagueness in the statutory definition of comparative effectiveness that leaves unclear the extent to which cost effectiveness can or should be evaluated and creates the potential for “misson-creep.”  Other barriers include the fact that comparative effectiveness studies are (1) costly, (2) pose design and execution challenges, (3) may raise more questions than they answer, (4) fail to account adequately for patient and provider differences, and (5) fail to keep pace with innovation.  Surpassing all these in importance, Professor Saver argues, is the simple fact that physicians lack “strong incentives . . .  to adapt to CER.”  He concludes his article by laying out a number of concrete steps to address these translation barriers, including rewarding physicians who follow evidence-based practice recommendations with enhanced reimbursement and liability safe harbors, deploying academic detailers to persuade physicians to conform their practices to CER, and systematically studying what implementation methods work and what do not.   I recommend this article for its comprehensive and insightful analysis of the comparative effectiveness research component of health reform and also for its fascinating discussion of the reasons (some legitimate and some less so) underlying practicing physicians’ resistance to CER.

Orszag Proposes Evidence-Based Standards for Malpractice Reform

On October 20, the New York Times published an op-ed piece Peter Orszag, the director of the White House Office of Management and Budget from 2009 to 2010.  According to Orszag, the threat of medical malpractice liability leads to the practice of defensive medicine and a departure from the use of evidence-based guidelines.  To correct this pattern, Orszag proposes that medical liability laws be reformed to create a safe harbor for physicians who follow evidence-based guidelines.  Let’s break it down.

Defensive Medicine

Orszag posits that “too many doctors order unnecessary tests and treatments only because they believe it will protect them from a lawsuit.”  But what impact to defensive spending have on the bottom line?  Researchers and economists question the financial impact of medical malpractice litigation and defensive medicine.  As the HealthReformBlog published, Bloomberg reported the following:

[A] March 2003 study by the U.S. Department of Health and Human Services that estimated the direct cost of medical malpractice was 2 percent of the nation’s health-care spending… A 2004 report by the Congressional Budget Office also pegged medical malpractice costs at 2 percent of U.S. health spending and “even significant reductions” would do little to reduce the growth of health-care expenses.

Malpractice is “a big issue for doctors but whether it’s a big issue for the American health-care system is another question,” [Robert Laszewski, an Alexandria, Virginia, consultant to health insurers and other companies], said in a telephone interview. “There are studies that indicate that medical malpractice reform would not have a huge impact on costs, but that is not what doctors think.”…

However, Orszag focuses not on the waste created from litigation, but the waste created from perceived threat of litigation.  He states, “[t]he academic literature tends to play down the role of medical liability laws in driving up health care costs. Doctors themselves, however, almost universally state that malpractice statutes lead to extraneous testing and treatment.”

Could physician fear be a larger problem than the perceived threat?  According to the same March 2003 study (as reported by Bloomberg), “defensive medical practices accounted for 5 percent to 9 percent of the overall expense.”  However, more recent research (nod to Jordan Cohen’s Reform Rodeo) reports that “annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending.”

Therefore, reductions in defensive medical practices may, but will likely not, make a significant impact on health care spending.

Evidence-Based Safe Harbor

Orszag then argues, “[w]hat’s needed is a much more aggressive national effort to protect doctors who follow evidence-based guidelines. That’s the only way that malpractice reform could broadly promote the adoption of best practices.”  He explains the current problem with the law, and proposes a solution:

It is also conceivable that because [medical liability] laws usually focus on “customary practice” — that is, a doctor who has treated a patient the way most other doctors in the area would is considered safe from accusations of malpractice — they create a strong contagion effect among doctors. The laws, no matter how weak or stringent, may therefore explain why doctors in some parts of the country generally adopt much more intensive approaches than those in other areas do.

The traditional way to reform medical malpractice law has been to impose caps on liability — for example, by limiting punitive damages to something like $500,000. A far better strategy would be to provide safe harbor for doctors who follow evidence-based guidelines. Anyone who could demonstrate that he has followed the recommended course for treating a specific illness or condition could not be held liable.

This proposal raises many questions and issues with regard to implementation.

Issues of Implementation

What happens when the recommended course of treatment is inappropriate? No two patients are alike.  Feinstein & Horowitz raise the issue that “the results show comparative efficacy of treatment for an ‘average’ randomized patient, not for pertinent subgroups formed by such cogent clinical features as severity of symptoms, illness, co-morbidity, and other clinical nuances.”  In addition to the variation between patients and their unique combination of health problems, guidelines neglect to take into account patient preferences.  Also, many guidelines presuppose accurate diagnosis.

Timmermans & Mauck describe the problems associated with “cookbook” medicine put forth by critics of evidence-based medicine:

“Ironically, EBM may also result in a lower standard of safety by deskilling practitioners. Instead of using clinical judgment, practitioners will be encouraged to follow protocols that treat all patients as essentially interchangeable. Providers will therefore be poorly equipped to contend with the variations between patients they will encounter in actual clinical circumstances.”

What if the recommended course of treatment is wrong? Orszag explains the selection of evidence-based guidelines very simply.  “Organizations like the American Medical Association and the Institute of Medicine could also be called upon to issue the needed evidence-based standards for malpractice immunity.”  However, the consensus that surrounds guidelines is more complicated than that.

For instance, what if the American Medical Association and Institute of Medicine disagree over the recommended course of action?   According to David Atkins, et al., “[a]n evidence-based approach to health care policy decisions will neither eliminate controversy nor relieve policymakers of the difficult task of making decisions in the absence of clear scientific consensus… Differing values and resource constraints can produce conflict even when there is good evidence and the policy outcomes are clear.”

Additionally, Mendelson & Carino report that evidence based medicine “cannot be meaningfully practiced in the absence of good clinical studies. Lack of evidence is a major limitation of applying such principles–especially for technologies and medical practices that are not new and might not have been thoroughly tested.”

However, Orszag argues that PPACA will tackle other problems raised by critics.  For instance, Mendelson & Carino point out that “A second barrier to achieving evidence-based clinical practice is the lack of automation in the practice setting. It is unrealistic to expect doctors to be able to easily reference a clinical guideline in a busy practice setting.”  However these authors concede that the “[a]doption of computerized decision-support systems paired with EMRs have been shown to improve compliance with clinical guidelines for patients with diabetes and depression.”  Orszag believes “[s]ubsidies in the stimulus act help doctors pay for this kind of technology.”

In Conclusion…

Orszag’s proposal is intriguing, despite the questions raised regarding the effects of defensive medicine and the proposal’s implementation.  If defensive medicine is a race to the top — to see which physician can do the most to mitigate liability — any strategy to reduce waste is laudable.  Although the introduction of evidence-based guidelines as a legal standard for physicians may appear logical, there are still several hurdles to be overcome.

Reform Rodeo

Medical Loss Ratio: Kaiser Health News reports on tomorrow’s vote by the National Association of Insurance Commissioners on ACA’s contentious rules dictating minimum medical loss ratios.

Cleaning the DSHs: Health Affairs cogently explains the difficulties that the ACA will face when reforming the Disproportionate Share Hospital (DSH) framework that reimburses uncompensated care under Medicaid.

ACO Antitrust: At the Health Care Blog, David Dranove discusses what he believes is a looming antitrust crisis surrounding  accountable care organizations (ACOs)

On QALYs: One of the fathers of the Quality Adjusted Life Year  (QALY) — the metric often used to measure comparative effectiveness — laments its near rejection in the ACA.

Economics: In the first of a series, Maggie Mahar provides a remarkably detailed  analysis of the economic impact of the ACA.

Reform Rodeo: PPACA Provisions Go Live; Victor Fuchs; Physicals; Google Health

1. PPACA News: Kaiser Health News reports on the health care overhaul changes that are occurring this week, including eliminating copays for preventive services and allowing children to stay on their parents’ health plans until 26 years of age.

2. Quality not Quantity: Famed health care economist Victor Fuchs discusses the importance that health care must place on increasing the quality of life as opposed to increasing longevity.

2b. On the Health Care Blog, Matthew Holt interviews Fuchs. Maggie Mahar provides extended commentary.

3. Examining the Exam: NPR has a piece on technology’s role in the fading art of the physical examination.

4. Google Health’s Health: On the Health Care Blog, John Moore of Chilimark Research discusses a recent meeting he had with Google about the future of their once promising but recently stagnant cloud-based EHR system.

5. Mark Your Calendars: Health Affairs announces an October 5th event they will be hosting in Washington D.C. which look at comparative effectiveness research.

Reform Rodeo

1. Duff Wilson of the New York Times discusses the lack of transparency with respect to industry’s payments to doctors.

2. John Halamka gives a nice overview of the various PPACA initiatives–including pilot programs–that involve HIT.

3. A group of lawyers discuss the impact that the recent Supreme Court decision in Citizens United could have on health care.

4. Matthew Holt at The Health Care Blog describes a new poll conducted about PHRs, and some of the results are surprising.

5. Health Affairs has a nice summary of a round table discussion on reforming CMS in the era of Don Berwick.

6. Jason Shafrin of the Health Care Economist gives an overview of a new paper by Basu and Philipson that question some of the common assumptions of the economics of comparative effectiveness research.

Health Reform, “Death Panels,” & Section 1182–What the Text Really Says

This post is a follow-up to my prior post on the Patient-Centered Outcomes Research Institute, a nonprofit corporation created by the Patient Protection and Affordable Care Act (the Health Reform Law), which will oversee comparative clinical effectiveness research–or, in Palin-ese, “the Death Panel.” The pertinent text of the law under which the Institute will operate appears below along with explanation in the plainest English available.

LIMITATIONS ON CERTAIN USES OF COMPARATIVE CLINICAL EFFECTIVENESS RESEARCH

Sec. 1182. (a) The Secretary may only use evidence and findings from research conducted under section 1181 to make a determination regarding coverage under title XVIII if such use is through an iterative and transparent process which includes public comment and considers the effect on subpopulations.

• TRANSLATION: Must be open and transparent and must consider effect on particular groups, but can use research to make determinations regarding coverage

‘(b) Nothing in section 1181 shall be construed as–

‘(1) superceding or modifying the coverage of items or services under title XVIII that the Secretary determines are reasonable and necessary under section 1862(l)(1); or

‘(2) authorizing the Secretary to deny coverage of items or services under such title solely on the basis of comparative clinical effectiveness research.

• TRANSLATION: Coverage cannot be based solely on CER

‘(c)(1) The Secretary shall not use evidence or findings from comparative clinical effectiveness research conducted under section 1181 in determining coverage, reimbursement, or incentive programs under title XVIII in a manner that treats extending the life of an elderly, disabled, or terminally ill individual as of lower value than extending the life of an individual who is younger, nondisabled, or not terminally ill.

• TRANSLATION: CER cannot be used to assign a  lesser value to extending the life of the elderly, disabled or terminally ill (as compared to the younger and healthier) in regard to treatment. Health care dollars cannot be allocated first (or exclusively) to young and relatively healthy individuals under the rationale that extending the lives of the younger and healthier is, by definition, more valuable. The issue is further explored in 1182(e), discussed below. 1182(e) further limits the use of such valuations with regard to the Quality Adjusted Life Year.

‘(c)(2) Paragraph (1) shall not be construed as preventing the Secretary from using evidence or findings from such comparative clinical effectiveness research in determining coverage, reimbursement, or incentive programs under title XVIII based upon a comparison of  the difference in the effectiveness of alternative treatments in extending an individual’s life due to the individual’s age, disability, or terminal illness.

• TRANSLATION: When evaluating treatments to extend an individual’s life, CER can be used to determine whether Medicare will cover one  treatment rather than an alternative. Specifically, an individual’s age, disability, or terminal illness can be a factor in deciding which treatment will be covered, reimbursed and/or incentivized.  For example an elderly person with severe coronary artery disease may have two treatment options: surgery (e.g. revascularization) or drug therapy. Both of these treatments would theoretically extend the life of the patient by reducing the odds of a heart attack or stroke. However (hypothetically) CER data may demonstrate that an individual of advanced age lives longer on average if they opt for drug therapy. In such a circumstance, this section provides that CER data may take into account the individual’s age, disability and terminal illness when comparing two alternative treatments. It may also be the case that CER data shows that individuals with certain disabilities are less likely to respond to surgery or to different treatment, possibly due to immobility, or even impending death. Again, these facts can be taken into account in the CER calculus.

‘(d)(1) The Secretary shall not use evidence or findings from comparative clinical effectiveness research conducted under section 1181 in determining coverage, reimbursement, or incentive programs under title XVIII in a manner that precludes, or with the intent to discourage, an individual from choosing a health care treatment based on how the individual values the tradeoff between extending the length of their life and the risk of disability.

• TRANSLATION: The Secretary cannot use CER to deny or try to persuade a patient from choosing a treatment that may prolong their life but leave them severely disabled. Alternatively, the Secretary cannot prevent a patient from choosing a treatment which may improve the quality of their life, as opposed to an alternative treatment which may extend the length of life.

‘(2)(A) Paragraph (1) shall not be construed to–

‘(i) limit the application of differential copayments under title XVIII based on factors such as cost or type of service; or

• TRANSLATION: The extant differential copayment guidelines are unaffected. 

‘(ii) prevent the Secretary from using evidence or findings from such comparative clinical effectiveness research in determining coverage, reimbursement, or incentive programs under such title based upon a comparison of the difference in the effectiveness of alternative health care treatments in extending an individual’s life due to that individual’s age, disability, or terminal illness.

• TRANSLATION: See 1182(c)(2) discussed above.

‘(3) Nothing in the provisions of, or amendments made by the Patient Protection and Affordable Care Act, shall be construed to limit comparative clinical effectiveness research or any other research, evaluation, or dissemination of information concerning the likelihood that a health care treatment will result in disability.

• TRANSLATION: This section is straightforward. The Institute can compare various treatments and determine which is more likely to result in a disability, and disseminate those findings.

‘(e) The Patient-Centered Outcomes Research Institute established under section 1181(b)(1) shall not develop or employ a dollars-per-quality adjusted life year (or similar measure that discounts the value of a life because of an individual’s disability) as a threshold to establish what type of health care is cost effective or recommended. The Secretary shall not utilize such an adjusted life year (or such a similar measure) as a threshold to determine coverage, reimbursement, or incentive programs under title XVIII.’

• WHAT IS A QALY?: The Quality-Adjusted Life Year (QALY) is defined by the NIH as:
  • (1) A unit of measure of utility which combine life years gained as a result of health interventions/health care programs with a judgment about the quality of these life years.
    (2) A common measure of health improvement used in cost-utility analysis, it measures life expectancy adjusted for quality of life. (See NIH’s Health Economics Information Resources, Glossary, at http://www.nlm.nih.gov/nichsr/edu/healthecon/glossary.html#QALY)
• The goal of the QALY is to ensure that healthcare resources are allocated in a manner which is most beneficial. Because healthcare resources are scarce, however, the $/QALY looks to allocate those resources economically. The QALY ipso facto discounts the value of life due to a disability. This is because the QALY works by assigning different states of health along a continuum, with perfect health being 1 and death being 0. The QALY is interested in whether different treatments provide more QALYs, In other words, QALYs are interested in whether one treatment provides more years at a better state of health (i.e., closer to 1) than another treatment. See M. Weinstein, Spending Health Care Dollars Wisely: Can Cost-Effectiveness Analysis Help? (2005)

• TRANSLATION: The Institute cannot utilize a $/QALY ( or a similar measure) as a threshold to establish what treatment is cost-effective, recommended or incentivized. (It is, however, noteworthy that in describing “similar measure,” both “age” and “terminal illness” are not expressly excluded as prohibited criteria in the development of a metric, as they are throughout the text of other portions of the provision).

• Note: 1182(c)(2) does allow for a disability to be taken into account when comparing various treatments for an individual. That section must be distinguished from the current section (1182(e)), where the upshot is that the dollar valued QALY cannot be a benchmark by which to allocate resources. If we are only determining which of two resources to a given individual shall be reimbursed, then the individual’s disability may be taken into account, i.e., treatment effectiveness under the individual’s circumstances  is a metric for which CER may be utilized; however, dollar value of life quality is not a permitted metric or criteria for treatment.

Comparative Effectiveness Research Under Health Reform, “The Institute”

“Bend the cost curve” has been the mantra of many students of health care reform. The Dartmouth Health Atlas has shown that up to 1/3 of care may be unnecessary. But how do we find out what care is unnecessary? One tool that holds promise is comparative effectiveness research.   Now that health reform has been signed into law, there is greater certainty as to the future of comparative effectiveness research (CER). The Stimulus bill had already allocated $1.1 billion dollars to investigate CER. The newest health reform law continues to build on that start. So what about HR 3590, also known as the Patient Protection and Affordable Care Act? Will they ration care? Pull the plug on your grandmother? Get between you and your doctor? To start answering these questions, I will provide a brief overview of CER under the new law, and describe the law’s vision for a new institute for CER research.

Part D of  H.R. 3509 is entitled “Comparative Clinical Effectiveness Research.” Section 1181 of  Part D defines CER as: “research evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of 2 or more medical treatments, services, and items described in subparagraph (B).” Subparagraph B goes on to describe various services and goods associated with health care.

The Institute
Section (b) of 1181 is where the rubber hits the road. Under this this section, the law creates a nonprofit corporation to be called the “Patient-Centered Research Institute,” known as “the Institute,” which is neither an agency nor establishment of the United States. This is rather interesting, and I did not know that our federal government created such corporations, but I suppose it could be compared to a nonprofit Amtrak.

Funding
The Institute will be backed by a Trust Fund created by money transferred from the Medicare Part A and B trust fund. It will receive, for year 2013, an amount equal to 1$ multiplied by the number of individuals entitled to benefits of Medicare Part A or enrolled under Part B. For years 2014 through 2019 the multiplier is $2.

The Purpose and Duties of the Institute
The purpose of the Institute is stated as what amounts to the typical reason for CER: making better health care decisions based on the evidence.

The duties of the institute are listed as:

1. Identifying and adopting (by majority vote within the Institute) research priorities and establishing research project agenda
2. Carrying out research project agenda by doing
   1. Systematic reviews of previous (and future) research (often known as meta-analysis), and
   2. Primary research including randomized clinical trials. The primary research the Institute conducts can be subcontracted to other institutions, under certain constraints.
3. Data collection from various electronic sources like those at the Center for Medicare and Medicaid Services.
4. Appointing expert advisory panels for clinical trials
5. Supporting patient and consumer representatives
6. Establishing a methodology committee to study new ways to measure and conduct CER.
7. Providing a peer-review process for primary research conducted by the Institute. Notably, if the Institute subcontracts, they can use the peer-review process of the organization to which they contract with.
8. Release of research findings to clinicians, patients, and the general public. The Institute must also release an annual report.

Governing in the Institute
The Institute will be run by a Board of Governors. The breakdown of the Board of Governors is quite interesting, and possibly telling:

• The Director of the Agency for Healthcare Research and Quality
• The Director of the National Institute of Health
• 17 members appointed by the Comptroller General of the U.S. The 17 members must be composed of:
  • 3 members representing patients and health care consumers.
  • 5 members representing physicians and providers, including at least 1 surgeon, nurse, State-licensed integrative health care practitioner, and a representative of a hospital.
  • 3 members representing private payers, of whom at least 1 member shall represent health insurance issuers and at least 1 member shall represent employers who self-insure employee benefits.
  • 3 members representing pharmaceutical, device, and diagnostic manufacturers or developers.
  • 1 member representing quality improvement or independent health service researchers.
  • 2 members representing the Federal Government or the States, including at least 1 member representing a Federal health program or agency.

This very well may be one of the handouts that the Senate provided Big Pharma and device manufacturers to get them on board. Remember that CER may very well show that a drug that a company has invested hundreds of millions of dollars in turns out to be ineffective when compared to its competitor. Thus, it is not surprising, for the cynics among us, that the Board has at minimum 3 industry reps from pharma and devices while there is a minimum of only 1 doctor. You start to wonder why the AMA supported the bill if physicians are only guaranteed 1/17th of the positions. After all, it is undeniable that physicians will be interacting with the CER data more than anyone, and they have on the ground experience using CER and related decision aids like Clinical Practice Guidelines.

Mammography, Cervical Cytology Screens, and Rationing

The recent recommendations on mammography and cervical cytology screens by the US Preventive Services Task force and ACOG (American College of Obstetricians and Gynecologists), respectively, have added a new dimension to reform discussions.  Some are inclined to say “gotcha,” suggesting that the recommendations are evidence of a creeping denial of needed care that would follow governmental insinuation into health finance and benefits design.  Others see the reports as serendipitous irrelevancies, unconnected to reform discussions.  The truth is, not surprisingly, more complex.  The irony is that consumers will be more represented in health technology assessment in a public plan than they have been in private insurance.

It seems inevitable that any future health finance system will rely on evidence-based assessments of new (and old) technologies for both quality and cost purposes.  Our experience with the widespread use of affirmatively harmful (e.g., hormone-replacement therapy) and apparently useless treatments (e.g., knee arthroscopy for osteoarthritis) points to the possible risks of rapid  or uncritical adoption of new technologies.  As Sara Rosenbaum and others have pointed out,  (subscription required) we don’t want to confuse population data with individually-applied diagnostic and treatment judgment.   Both reports, to their credit, got this part right, and advised individual patients and physicians to assess each case in context, notwithstanding the general population-level guidance.  But evidence-based population data on the efficacy and comparative benefit of new and expensive interventions will be of enormous assistance in future treatment and funding decisions.

How should such health technology assessment be done, if not by expert panels?  As Bill Sage has observed, private health plans were opaque and inconsistent when they were in the technology assessment business.  (They have pretty much gotten out of that field, leaving cost control to others.)   One criticism of the mammography and cervical cytology reports has been that they should have included a more public process before issuing recommendations.  As the reports are merely advisory, it is not clear that post-publication comment doesn’t get the job done.  Where, as may be the case in the future, such expert analysis has instrumental effect, pre-implementation public process is essential.   Two guides for public health technology assessment advise as much.  The Institute of Medicine, in guidance issued earlier this year for comparative effectiveness analysis funded by the stimulus bill, observed that,

Clinicians and patients do not always consider the same factors when weighing the tradeoffs posed by important health care alternatives.  To ensure that the fruits of CER support consumers’ health care decision making, the CER Program should focus on the questions of patients as well as their health care providers.

Similarly, a health technology assessment guide created by the European Observatory on Health Systems in 2008 describes well-functioning technical assessment as consultative and transparent:

Social accountability permeates the whole knowledge production and is reflected not only in the interpretation and diffusion of results but also in the definition of the problem and the setting of research priorities.

We don’t want a health system — public or private — that is blind to either sound evidence-based technology assessment or the particular health needs of individual patients.  One advantage to a public system is that the assessment of technologies can and should include a robust public process.  We didn’t get that with private managed care.  The mammography and cervical cytology reports should call our attention to the opportunity for public process in decision making in publicly-funded coverage, and the need for close attention to the implementing regulatory processes if and when a bill is signed.

Principles for the Homestretch

House and Senate leaders will soon have to reconcile several different versions of health reform bills. The bills are complex, but some simple principles should guide the process of integrating them into a final product. As the press reports on a whirlwind of proposed laws, we need to ask of any particular proposal: Does it . . .

1) Increase productive competition in health care? Everyone talks about “increasing competition” among insurers and providers, but there are many ways to compete. Hospitals and doctors can game the reimbursement system. Insurers may not directly discriminate against the sick, but can find other ways to keep high-risk patients out of their plans, as even the most market-oriented health policy experts realize:

[T]o avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania’s Wharton School.

Both the Netherlands and Switzerland have already experienced problems in this area, even though the Netherlands has implemented risk-adjustment methods (which attempt to deter such “cherrypicking” and “lemondropping”) far more serious than anything proposed in current bills in the US. As Karen Pollitz has repeatedly argued, we’re going to need a much greater investment in insurance regulation to make any reform bill work.

2) Make it easier for uninsured or underinsured individuals to buy coverage? Many of the proposals for allocating and awarding subsidies for coverage sound exceedingly complex. We’re hearing about serious limitations on access to exchanges, subexchanges, burdensome “free rider” provisions, etc. Any particular provision may sound good in the abstract, but taken as a whole they could become an obstacle course that makes obtaining insurance coverage a miserable and exasperating experience for those supposedly aided by reform. During the second Bush administration, hundreds of thousands of children eligible for subsidized health insurance were not enrolled because states failed to make enrollment convenient enough for time- and cash-strapped parents. As Liebman and Zeckhauser remind us, “we must design systems for mere mortals, not the people who inhabit the models of traditional economists.” What seems easy to one of DC’s privileged elite can be very hard for an overworked mom or minimum wage-earning service worker.

I believe that the main reason a solid 2/3 to 3/4 of the country supports a public option is because it is a straightforward, transparent way to provide a backstop of health insurance for everyone. If Congress both rejects a public option and makes subsidies for private insurance as complex as the tax code, health reform risks becoming a model case of government failure. Last week’s negative votes on Rockefeller’s strong and Schumer’s weak public options could easily become a “you broke it, you bought it” moment for centrist Democrats and Republicans on the Senate Finance Committee.

3) Fairly distribute the burdens of reforming the health care system? This is the tax and finance question, and it promises to generate some epic battles on Capitol Hill. However the Senate Finance proposal ultimately evolves, it will be in tension with a House of Representatives that sees progressive taxation as a foundation for financing reform. The Baucus proposal to tax “high end”/Cadillac/”gold-plated” health plans may seem progressive, but it promises to gradually engulf even normal plans. While David Leonhardt offers some good economic arguments for such a tax, policymakers should be guided by Leonhardt’s observations on the propriety of taxing those at the very top of the income scale, who have disproportionately benefited from economic trends and tax cuts of the past decade.

4) Provide incentives for long-term cost-saving and preventive medicine? Comparative effectiveness research is a crucial tool for focusing pharmaceutical research on drugs that save lives. We have a shortage of primary care doctors vis a vis specialists. Reimbursement systems are too easy to game. Insurance markets are concentrated and need more competition and transparency. Any bill that ignores these problems (or fails to empower HHS or another agency to address them) can’t lead to truly sustainable universal coverage.

The health reform fight has been bruising, disappointing, and frustrating for many who care about health policy. Many unwise assumptions are already baked into leading bills. In the Senate, ostensibly Democratic lawmakers are promoting what are essentially Republican ideas and granting enormous subsidies to industries that may well betray them at the next electoral cycle. Nevertheless, there remain many opportunities for improving the final product at the beginning of the end of the legislative process.

Greaney on the Public Plan

Is genuine health reform possible? Several recent developments are promising. President Obama’s big Congressional majorities (plus the Specter defection) are reminiscent of the Johnson-era milieu that led to Medicare and Medicaid. Key interest groups are less “Harry and Louise” and more “try to appease.” Most importantly, the failures of managed care, consumer-directed health care, and other artifacts of the “ownership society” are now self-evident. As unemployment rises, lack of insurance spikes, compounding the misery of many of those unlucky enough to get thrown out of work.

What could derail real health reform? Most likely, fake health care reform, particularly the kind that assumes there is something near a “free market” in operation now. As health care antitrust scholar Thomas Greaney argued yesterday, markets for health care are often very concentrated or riddled with barriers to entry:

The unfortunate fact is that a majority of the country is served by a few dominant insurers. (In 16 states, one insurer accounts for more than 50 percent of private enrollment; in 36 states, three insurers have more than 65 percent of enrollment). Likewise, because of lax antitrust enforcement, most markets are characterized by dominant hospital systems and little competition among high-end physician specialists.

In these circumstances, which economists call ‘bilateral monopoly,” the players often reach an accommodation in which they share the monopoly profits rather than compete vigorously. A prime example is the experience in Massachusetts, where Blue Cross/Blue Shield, the dominant insurer, reached an understanding with the dominant hospital system, Partners Healthcare, that entrenched higher prices for health insurance and hospital care.

Some might hold out hope that the Obama administration’s new emphasis on antitrust enforcement might solve that problem, but I would not hold my breath. After losing seven hospital merger cases in a row, the government is not exactly in a position to go storming into health care markets to demand competition. Only new antitrust laws are likely to accomplish much in that direction, and even if they were by some miracle adopted this year, I can’t imagine them having much effect within any reasonable time frame.
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