CBO Wrong on Health Care Reform Cost Numbers

Just as opponents of  the current Health Care Reform plans often cite reports from The Lewin Group, which, as we posted the other day, turns out to be wholly owned by one of the Nation’s leading insurers, UnitedHealth; they also cite to recent reports by the Congressional Budget Office (CBO) as to the relative fiscal impact of the various plans. Although the CBO does not seem to be owned by UnitedHealth (though recent statements by the CBO (as made clear by Professor Frank Pasquale here) they are certainly susceptible to being labeled “partisan” for exceeding the scope of their role), CBO is prone, it seems, to being wrong.

Professor Pasquale’s post, “Politicized Prognostication at CBO,” details and quotes a number of experts who have expressed grave doubt as to the methodology of the CBO as well as the resultant numbers. For example

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.

Mr. Vladeck, Maggie Mahar, Timothy Jost, Frank Pasquale and Timothy Westmoreland have more company for their doubts regarding the CBO’s numbers.  The rather politic but wholly effective Commonwealth Fund reports that

Over the last 30 years, the Congressional Budget Office (CBO), which assesses the costs of health reform and other legislation as it moves through Congress and is widely respected for its competence and integrity, has underestimated the amount of savings and overestimated the costs that major changes in the health care system would bring, says Jon Gabel in an op-ed published in today’s New York Times.

Drawing on Commonwealth Fund-supported research, Gabel, a senior fellow at the National Opinion Research Center of the University of Chicago, analyzed CBO’s forecasts of three major changes in the Medicare program relative to their ultimate outcomes.

What he found was alarming:

In the first, in the early eighties, Congress adjusted the way in which Medicare would pay hospitals-under the new law paying a fixed amount per admission based upon primary medical condition. “CBO predicted that by 1986 total spending would be $60 billion. Actual spending in 1986 was $49 billion.”

That’s $11 billion on 60. That’s wrong by more than 18%.

In the second, Commonwealth Fund reports that Gabel “found that savings from the Balanced Budget Act of 1997, which changed the way skilled nursing facilities and home health services were reimbursed under Medicare, turned out to be 50 percent greater in 1998 and 113 percent greater in 1999 than the budget office forecast.”

Wrong by 50% and by 113%.

In the third, Commonwealth Fund reports that “CBO predicted that drug prices would rise following the Medicare Modernization Act of 2003, which added prescription drug benefits to Medicare, estimating that spending on the drug benefit would be $206 billion. Actual spending was nearly 40 percent less than that, Gabel found.”

Wrong by nearly 40%.

Combining the error rates for the two years stated in regard to the Balanced Budget Act of 1997, that’s three major Health Reform changes with an average error rate of  more than 46%. That’s nearly half. Wrong by nearly half.

According to the Commonwealth Fund,

Gabel explains that when CBO analyzes initiatives aimed at reducing costs, it requires considerable evidence that similar previous policy changes have saved money. When there is a lack of historical examples, the “unknown” variable often becomes zero. The task for the budget office becomes even more challenging when it considers the impact of more than one change simultaneously-changes that might have synergies.

Considering that we are entertaining unprecedented Health Care Reform which relies upon  the manifold synergies of numerous changes for cost reduction, the CBO process which ascribes a numerical dollar value of  zero to that which is new, seems particularly ill-equipped to assess the fiscal impact of the proposed changes.

The Commonwealth Fund reports that

Gabel observes that underestimating savings that can come from cost-control initiatives in Medicare and throughout the health system could undermine efforts to pass health reform legislation. “As Congress now works on its greatest push for health care reform in generations, the budget office needs to revise the methods it uses to make predictions about costs,” he says.

Failing the methodology revisions requisite to make the CBO’s estimate’s  of cost reduction a valid measure of fiscal impact, the least they could do is preface their lofty and dire pronouncements with an accurate disclaimer: “Historically, Give or take, roughly 50%.”

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

HHS OIG Report Finds Part D Private Insurers Overcharged for Billions, Lack of CMS Oversight

According to a recent report by the Department of Health & Human Services, Office of Inspector General, private insurance companies that operate plans under the Medicare prescription drug benefit have overcharged Medicare beneficiaries and the program by several billion dollars since the program began in 2006.

According to the report, 80% of health insurers that operate plans under the Medicare prescription drug benefit overcharged the program by about $4.4 billion in 2006 alone. In addition, The McClatchy/Raleigh News & Observer reports that the Centers for Medicare & Medicaid Services (CMS) remains unaware of the total impact of the practice because of its failure to perform required audits.

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More Prescriptions Go Unfilled, is Uncle Sam “Penny Wise?”

The New York Times reports that “One in seven Americans under age 65 went without prescribed medicines in 2007″ and that “that figure is up substantially since 2003, when one in 10 people under 65 went without a prescription drug because they couldn’t afford it, according to the Center for Studying Health System Change in Washington, D.C.”

The Times also reported that Laurie E. Felland, a senior health researcher at the center and lead author of the study, noted that because these numbers are from 2007, they may well be higher now due to the recession.

“The people who were least able to afford medicine were often those who needed it most, Ms. Felland said: uninsured, working-age adults suffering from at least one chronic medical condition. Almost two-thirds of them in the survey said they had gone without filling a prescription.”

The affect among those with chronic conditions is particularly disturbing in light of the data on the relative expense of treating chronic conditions, and the additional expense that neglect in treatment can cause. The Department of Health and Human Services (HHS) has reported that

Chronic Conditions Contribute to Higher Health Care Costs

Twenty-five percent of the U.S. community population were reported to have one or more of five major chronic conditions: ·

• Mood disorders
• Diabetes
• Heart disease
• Asthma
• Hypertension

Spending to treat these five conditions alone amounted to $62.3 billion in 1996. Moreover, people with chronic conditions tend to have other conditions and illnesses. , according to 1996 MEPS data. On an individual level, treatment for the average patient with asthma was $663 per year in 1996, but when the full cost of care for asthma and other coexistent illnesses is taken into account, the average cost was $2,779.

When the other illnesses are added in, total expenses for people with these five major chronic conditions rise to $270 billion, or 49 percent of total health care costs

Expenses for people with one chronic condition were twice as great as for those without any chronic conditions. Spending for those with five or more chronic conditions was about 14 times greater than spending for those without any chronic conditions. Persons with five or more conditions also have high hospital expenditures. In New York State during 2002, of the 1.3 million different persons admitted to the hospital, the 27 percent with five or more chronic conditions accounted for 47 percent of all inpatient costs. (emphasis added, footnotes omitted).
Perhaps as we consider the large number of persons with chronic conditions who are not taking prescribed medications, we should also consider a recent five-year retrospective study of almost 5 million California residents which found that “People who have spotty Medicaid coverage are more than three times likelier than those who maintain continuous coverage to be hospitalized for an illness that could have been managed outside the hospital with doctors’ visits and medication.”

Hospitalization is expensive.

Also, as we noted in a recent post, the Kaiser Foundation has shown that many seniors , who account for a great deal of the health expense in this country (but are not included in the the Center for Studying Health System Change report), also cease or diminish the use of their medications as a result of “the donut hole” in Medicare prescription drug coverage-a gap in coverage which leaves many seniors “on their own” for payments of thousands of dollars per year.

Health Care Jobs Up & Expected to Stay That Way

The sickness of one is the work of the other. The Wall Street Journal reports that “Health care saw a net gain of 419,000 jobs in 2008 and its growth outlook continues to be strong through 2016, according to the Bureau of Labor Statistics.”

According to WSJ, Dennis Damp, “the Pittsburgh, Pa.-based author of ‘Healthcare Job Explosion’ and editor of Healthcarejobs.org, a free recruiting Web site,” said that “about half of the BLS’ 30 fastest-growing occupations through 2016 are health-related.”

An examination of the latest BLS report (p. 25) shows that employment numbers were up in every category of health care jobs tracked. WSJ reports that “among specific occupations, the number of registered nurses grew the most, adding 168,000 jobs through November as hospitals and agencies tried to address a nationwide nursing shortage.”

The Journal also reports that “The number of home care aides grew by 64,000 in 2008, the BLS said. Office and administrative support workers such as medical-records clerks accounted for 14% of the overall increase in health-care jobs year over year.” That 14% increase would be equivalent to approximately 59,000 jobs.

John Challenger, chief executive of outplacement consulting firm Challenger, Gray & Christmas in Chicago is reported by WSJ to have said that in health care, “Long-term forces are outweighing the short-term recessionary forces.” Mr. Challenger cited “the aging of the baby boomers, rapid product development in biotechnology and increased momentum for comprehensive national health-care reform” as being “likely to drive job growth this year.”

Mr. Challenger also noted that “There’s strong demand for geriatricians, physical therapists and nurses of all kinds….noting support work is hot as well, especially as the incoming Obama administration takes up health reform. ‘A commitment to a new kind of more universal health-care system is going to create a new structure and consequently new jobs.”

Read the full WSJ article here.

Health Care and Productivity, a National Cost

Having just returned from my family physician (who stayed open past hours to see me), perhaps you will forgive me if, not feeling well myself, I dwell for a moment upon the cost of illness and inefficiency. Not as a matter of out of pocket cost, per se, but as a matter of macroeconomic cost–a roughshod (I am sick) calculus based upon diminished productivity and national opportunity cost: simply put, if I am busy being sick, I may well have to forego the productivity of work–or I may perform that work at a lesser level ( I suppose this post will tell).

In addition, if my family physician and his staff of two are grudgingly forced to devote numerous hours to a maddening array of paperwork and phone calls (”it gets worse every year”) in an attempt to navigate the various streams of insurance authorizations and payments (”some of it seems designed solely to frustrate and slow or prevent payment”) –he will not be seeing patients. Tomorrow, he will not be seeing patients; he will be trying to catch up on paperwork–as will his staff.

Perhaps then, when we consider that Health Care costs amount to 16% of the GDP, we might also consider that this number does not take into account the difficult to guage loss of national productivity. And although the sickness of one can be the work of another, the exchange does not seem to be an even one as it relates to national production: the doctor functioning, in a sense, as a support and enabler to the productivity of others. Having said that, if that doctor is unavailable (through lack of insurance or remoteness) to remedy the ills of the now unproductive (or the less productive) the nation suffers for it. If the doctor is needlessly enmeshed in tasks, inefficient and ancillary to patient treatment, the nation suffers for it.

One of the first national health lessons this country received came on the heels of World War I.

“With the United States’ entry into the battle, hundreds of thousands of military personnel were drafted and trained for combat. After the war was fought and won, statistics were released from the draft with disturbing data regarding fitness levels. It was found that one out of every three drafted individuals was unfit for combat and many of those drafted were highly unfit prior to military training. Government legislation was passed that ordered the improvement of physical education programs within the public schools.”

“During the period from September 1917 through November 1918, records show that 2,801,635 men were inducted into the Army. Out of the approximately 10,000,000 registered men, roughly 2,510,000 were examined by local draft boards. During the first 4 months of mobilization, roughly one in three men were rejected on physical grounds, but the rejection rate dropped to one in four during the following 8 months.” (p. 149)

Having put forth the effort to remedy such, we were better physically prepared when it came time to fight World War II. We will be fortunate if some cataclysmic event does not lead us now to some statistical reckoning of our “unfit” and “extremely unfit” as regards our national productivity.

I do not point this out as a means of suggesting that we need to actively prepare ourselves for some form of larger global military conflict. But perhaps in some ways the “event” has already occurred, and only the reckoning remains. In his inaugural address President Barack Obama entreated us:

“Let it be told to the future world … that in the depth of winter, when nothing but hope and virtue could survive…that the city and the country, alarmed at one common danger, came forth to meet (it).”

“America, in the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children’s children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God’s grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.”

He’s right. We must “come forth to meet it.” We cannot turn back and we cannot falter as we struggle to deliver this hard won gift of freedom to future generations. And it would be best if– as we brave these icy currents in this winter of our hardship– we were not sick. And if we were sick, that we all had doctors. And if we all had doctors, that they were not too busy filling out paperwork designed to frustrate them. As we learned through World War I, as a nation, we simply cannot afford to squander our physical and intellectual capital.

Is the Medicare Advantage Program Really Advantageous

CQ Politics reports that President-elect Obama is committed to the elimination of Medicare Advantage plans. Obama told ABC’s “This Week” that Medicare Advantage plans are an example of cost-cutting government initiatives that do not work.

This is especially interesting in light of the Centers for Medicare and Medicaid Services ordering WellPoint to temporarily suspend enrollment and marketing efforts for its Medicare plans on Monday. The Los Angeles Times reports that the sanctions followed a “sharp” increase in complaints. Reportedly, some customers of WellPoint were unable to receive their prescription drugs while others were overcharged because of computer mistakes.

Along with President-elect Obama, Senate Majority Leader Harry Reid (Nev.) has signaled his intent to “scale back” the Medicare Advantage Program, according to The Hill. Medicare Advantage plans offer health insurance to more than 10 million of the 45 million Medicare beneficiaries. However, the Medicare Payment Advisory Committee reports that Medicare Advantage plans cost the government 13% more per beneficiary on average than Original Medicare in 2008.

Democrats say that $15 billion of the annual $94 billion in subsidies granted to Medicare Advantage plans are the result of “overpayments.”

Surely, any attempt to eliminate Medicare Advantage plans from the Medicare program will be met with fierce opposition from private insurance companies. In response to the threat of elimination, America’s Health Insurance Companies said that the so-called “overpayments” are used to help purchase prescription drug coverage, vision care, and chiropractic services for which Original Medicare does not pay.

There may be some merit to this argument as Original Medicare is lacking in many crucial coverage areas, including dental services which left untreated can be fatal. Thus, it is quite possible that the elimination of Medicare Advantage plans could result in many seniors facing reduced benefits, limited health care choices and higher out-of-pocket costs, according to America’s Health Insurance Companies.

Unemployment, Uninsured and Medicaid Rolls Up

The New York Times reports that
“The nation lost 524,000 jobs in December…. The unemployment rate, meanwhile, jumped to a 16-year-high of 7.2 percent, the Bureau of Labor Statistics reported on Friday.”

This is up from 6.7% in November, 2008; up from 4.7% in November 2007.

Last week, in a post about prognostications for health care in 2009 (”Ringing in a New Year in Health Care, For Whom the Bell Tolls?“), we quoted the following from Jane Sarosahn Kahn in The Health Care Blog:

Keep in mind the Kaiser Family Foundation’s metric on unemployment: an increase of 1% unemployment leads to 1.1 million uninsured, and 1 million more people added to Medicaid. This was the math that worked in 2007-8. The metric will probably change in 2009 as Governors struggle to balance budgets while providing medical services, education, and safe streets to citizens. The National Governors Association, and the individual state heads, have all warned that Governors will inevitably cut services in 2009 and into 2010 if tax receipts continue to decline.
In response, we stated:

According the U.S. Bureau of Labor Statistics, in November of 2007 the unemployment rate was 4.7%. For November of 2008 it was 6.7%. Regardless of the metric, the consequent health insurance math is less than reassuring.

Regardless of its lack of reassurance, perhaps the math should be done.

Using the Kaiser metric, understated as it may be for 2008-9, the half per cent increase in unemployment in December (7.2% from 6.7% in November) is equal to:

• 550,000 more people without health insurance
• 500,000 more people on Medicaid

This is in addition to a two per cent raise in unemployment from November 2007 (4.7%) to November 2008 (6.7%).
That 2% equals:

• 2,200,000 more people without health insurance
• 2,000,000 more people on Medicaid

Total from November 2007 (4.7% unemployment) to December 2008 (7.2% unemployment) equals:

• 2,750,000 more people without health insurance
• 2,500,000 more people on Medicaid

CMS Physician Quality Reporting Initiative, Experience

The American Association of Family Physicians (AAFP) has authored a somewhat disturbing article on the recent Center for Medicare and Medicaid Services (CMS) report “that examines participation data from its 2007 Physicians Quality Reporting Initiative, or PQRI, and also addresses physicians’ frustrations with the program.”

According to the CMS report, Physician Quality Reporting Initiative, 2007 Reporting Experience

The Centers for Medicare & Medicaid Services (CMS) is working to transform the Medicare program from a passive payer into an active purchaser of high-quality care by linking payment to the value of care provided. Initially, CMS developed a voluntary quality reporting program in 2005, the Physician Voluntary Reporting Program (PVRP), to encourage physicians to report information on the quality of care they were delivering. As authorized by Congress, the PQRI builds on the PVRP by linking payments to reporting quality information. The PQRI is an important first step toward establishing a value-based purchasing program for physicians.

The Tax Relief and Health Care Act of 2006 (TRHCA), enacted on December 20, 2006, required the Secretary to implement less than seven months later by the start of the first reporting period on July 1, 2007, a system for the reporting of data on quality measures. CMS termed this system “PQRI.” This implementation schedule required rapid finalization of the detailed specifications for 74 clinical quality measures (covering hundreds of procedure and diagnosis codes), the development of an expanded infrastructure to support the reporting system and extensive outreach to more than 700,000 professionals about the requirements they needed to follow to submit data on quality measures.
Physicians who successfully submitted the quality information were eligible for an incentive payment capped at 1.5% “of total allowed charges for covered Medicare Physician Fee Schedule services.”

Not quite 16% of eligible physicians participated; of those who did participate, “Of the more than 14 million quality data codes submitted, 51.6 percent were submitted correctly; 48.4 percent of submissions were invalid.”

AAFP offers this summary of the Submission Data

• According to the new CMS report, the agency paid eligible providers slightly more than $36 million in incentive payments for the 2007 PQRI reporting period. The average bonus paid to individual providers was $635. The average bonus paid to practice groups was $4,700.
  Of the more than 14 million quality data codes submitted, 51.6 percent were submitted correctly; 48.4 percent of submissions were invalid.
  CMS says that nearly 16 percent of all eligible providers and groups submitted at least one quality data code during the 2007 PQRI reporting period. Of those 109,359 providers or groups,
  92.5 percent submitted at least one quality data code that was valid;
  64 percent correctly reported quality data on 80 percent of eligible cases for at least one measure;
  52 percent earned an incentive payment by successfully reporting data on one to three applicable measures for 80 percent of applicable cases; and
  1 percent were subject to the PQRI incentive cap.

In the report’s executive summary, CMS says it is “committed to a successful PQRI program,” and promises to “reduce or eliminate” the issues identified in the report. As such, among other modifications, CMS warrants to revise the analytics, redesign the physician feedback report system– registration to which was “both cumbersome and time consuming,” and increase educational outreach. In addition, “CMS has established new reporting options making it easier for EPs to participate in PQRI for 2008.”

AAFP reports that “Earlier this month AAFP Board Chair Jim King, M.D., of Selmer, Tenn., blasted CMS for its bungling of the distribution of PQRI bonus payments and told CMS Acting Administrator Kerry Weems that if problems weren’t addressed, physicians might refuse to participate in the program.”

Read the full AAFP article here.

Ringing in a New Year in Health Care, For Whom the Bell Tolls?

Jane Sarasohn Kahn of The Health Care Blog has offered up some interesting, if not dismal, prognostications for 2009. Although issuing the caveat that “there are too many uncertainties that preclude us from doing a straight-line forecast for 2009, especially in health and health care,” she offers some insights based upon the present macroeconomic backdrop. They are worth noting, and a few may be found here below.

She asks us to take heed of the following:

Keep in mind the Kaiser Family Foundation’s metric on unemployment: an increase of 1% unemployment leads to 1.1 million uninsured, and 1 million more people added to Medicaid. This was the math that worked in 2007-8. The metric will probably change in 2009 as Governors struggle to balance budgets while providing medical services, education, and safe streets to citizens. The National Governors Association, and the individual state heads, have all warned that Governors will inevitably cut services in 2009 and into 2010 if tax receipts continue to decline.

According the U.S. Bureau of Labor Statistics, in November of 2007 the unemployment rate was 4.7%. For November of 2008 it was 6.7%. Regardless of the metric, the consequent health insurance math is less than reassuring.

As noted by Professor Frank Pasquale on this blog last week, the “Governors’ struggle” has already commenced. The Washington Post having reported that regarding Medicaid

“Already, 19 states — including Maryland and Virginia — and the District of Columbia have lowered payments to hospitals and nursing homes, eliminated coverage for some treatments, and forced some recipients out of the insurance program completely.”

As such, this line of forecast may be a bit “straighter” than others. The cuts and further prospective cuts in state funding are, as Frank Pasquale noted, “one more sad example of the procyclical nature of federalism here–states have less tax revenue during recessions, when need is greatest. No one should be surprised if more and more of the jobless uninsured, denied even basic dental care due to such cuts, fall into a “death spiral” of unemployment, disfiguring ailments, and a tendency to be underemployed due to such ailments.”

Ms. Sarosahn Kahn also makes a very important point about medical infrastructure:

“Hospitals’ credit woes will continue to constrain providers’ operations. Reports from all of the major credit rating agencies, including Standard & Poors, Fitch, Best and Moody’s, have all negatively opined about the state of hospital finance for 2009. Fitch and Moody’s downgraded the nonprofit hospital sector to negative. The American Hospital Association’s survey in November 2008 found that 1 in 2 hospitals was considering or actually postponing capital expenditures. This would include renovations, increasing capacity, and other capital programs. The cost of borrowing money has made it nigh impossible to find hospital financing for improvements.”

This too would seem to qualify for “straight line” prognostication. Hospitals are closing, layoffs have ensued, and as we and A.P. noted earlier this week, industry consultants predict “More closings and mergers are on the way.”

The A.P further noted that

Hospitals, which employ 5 million people, are reporting that donations and investment returns are down, patient visits are flat and profitable diagnostic procedures and elective surgeries are declining as people with inadequate insurance delay care. But those patients are turning up later at ERs, seriously ill…
Ms. Kahn also points out that among the ill, prescriptions are not being filled.

Manhattan Research found that 40 million Americans didn’t fill prescriptions due to cost constraints by the fourth quarter of 2008. This number could increase in 2009, leading to worsening health outcomes. In particular, scripts for mental health conditions weren’t filled as frequently as Rx’s for other types of conditions.

All in all, the equation itself would seem to not require Daniel; if left unchecked, only the particulars of the miserable sum remain unknown.

There are a few bright spots in this analysis, however, Ms. Kahn points out that

“Clinical effectiveness is becoming part of the larger analysis for spending scarce resources. There’s no better time than a recession to bring this concept into play on a mass scale.
She’s right, when times are tough, people have a tendency to want specifics when they get the bill– and to know that what they paid for worked.”

And there is this larger point,

“Policymakers and influentials have come to understand that health is integrated into the larger macroeconomy. It is a welcome sign that those who will be at the helm of the new economy on Team Obama recognize the intimate relationship between health and the American economy. Peter Orszag, just out of the Congressional Budget Office and soon to lead the Office of Management and Budget, has spoken publicly about health care costs and the GDP over the past eighteen months. His sober and smart observations give me comfort insofar as he will be playing a key role in reshaping the broken U.S. Economy.”

As we ring in the New Year and begin to contemplate the inter-relatedness of the macro-economy and commence what may well be the “fall into a ‘death spiral’ of unemployment, disfiguring ailments, and a tendency to be underemployed due to such ailments,” it might be worth a moment to consider the often sudden and unexpected nature of both job loss and catastrophic illness– and John Donne.

The bell which John Donne refers to in his most famous quote is “the passing bell,” tolled by the Church for those who are dying. As Donne lay very ill in his bed and heard this bell being tolled, he wondered if he were, in fact, sicker than he thought. And that perhaps that bell was being rung for him personally. He came to realize, however, that whether that was the case or not was largely irrelevant because

“No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend’s or of thine own were. Any man’s death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee.“

Model Wanted

The NY Times reports that according to Dr. Atul Gawande, a surgeon at Brigham and Women’s Hospital in Boston and an associate professor at the Harvard School of Public Health, “there’s a drastic decline in the number of geriatricians - and just 300 new ones are being trained each year - yet the number of people over 65 will double in the next 20 years. Those who work in geriatric care are among the worst paid in the health care system.”

That last statement, as shown in a recent post regarding physician compensation, is backed up by numbers. According to the American Group Medical Association (AMGA) the median compensation for a geriatrician is $179,344. The median compensation for a podiatrist is $180,080. These AMGA numbers have been approved by the Center for Medicare and Medicaid Services (CMS) for use in CMS related calculations.

Dr. Gawande “and others see a pressing need for new approaches to keep aging patients as healthy as possible and living independently as long as possible.” The Times reports that “Dr. Chad Boult, a geriatrician at Johns Hopkins School of Public Health in Baltimore, says the goal should be care that is well coordinated, and patients and families who are involved in and educated about the care plan.”

To that end, Dr. Boult is participating in the testing of a “team approach” which is somewhat reminiscent of the subject of a recent post, Alaska’s Southcentral Foundation’s “medical home” approach. Southcentral’s “comprehensive” health care strategy has shown some promising results. The Times reports that

Dr. Boult is involved in testing a team approach, in which nurses trained in geriatrics are helping physicians in the Baltimore-Washington area provide coordinated care for 50 or 60 of their highest-risk older patients. The nurses go to patients’ homes, develop comprehensive care plans, help the patients in self-monitoring, help them overcome obstacles to self-care and connect patients and their families to community agencies.

According to geriatrics experts, social workers trained in the problems of the elderly can also participate by performing home assessments, for example, to prevent falls and costly, disabling fractures. They can help overcome barriers to good nutrition, and they can help make the community connections for assistance with the activities of daily living, like shopping.
Dr. Boult said that “The Baltimore team project has already demonstrated an improvement in the quality of care that ailing elderly patients receive, and by keeping patients out of the hospital, he expects it will save money for insurers like Medicare.

The NYTimes also reports, however, that the current fee for services compensation scheme has not yet been structured so as to provide monetary incentives for such prophylactic care. The Times states: “While current insurance systems pay many thousands of dollars for hospital-based care, they cover only a fraction of the far less expensive care delivered by doctors and nurses that can keep patients out of the hospital,” and that experts say “a new model of care is needed.”
Read full article here.

Physician Compensation II

Yesterday’s post displayed recent Bureau of Labor Statistic figures concerning physician compensation, and offered a link to recent median physician compensation data approved for use by Centers for Medicare and Medicaid Services (CMS) for calculations regarding direct graduate medical education under 42 CFR 413.78(f). The producer of this data, AMGA, also offers an interactive physician compensation survey which shows “average” and “starting” compensation for various specialties. A click on the arrow underneath “average” will sort from lowest to highest.

Here below is a list of a few of the CMS approved median physician compensation figures for a number of different specialties. The numbers are taken from the 2008 report.

The median compensation for a practitioner:

• Pediatric & Adolescent, Internal 161,444
• Pediatric & Adolescent, Infect. Disease 174,154
• Family Medicine, w/out Obstetrics 176,280
• Family Med., w/out Obst., Branch* 190,182
• Geriatrics 179,344
• Podiatry: 180,080
• Transplant Surgery, Kidney 368,750
• Dermatology, Branch* 301,111
• Dermatology, Mohs 423,848
• Not neural, Non-Interventionist, Radiology 420,858
• Mammography 540,028
• Orthopedic Surgery, Spine 611,670

*Branch is defined by AMGA as: These specialties have the same basic definition as the main specialty. These physicians located in small satellite or branch offices at least five miles from the main campus. The branch office practices primarily as its own separate entity, and often has different compensation and/or performance expectations than its main campus colleagues, there would be no teaching responsibilities at these locations.

With these numbers, over the course of ten career years, if calculated at a constant rate without regard to future increases in compensation, the median paid “Family Doctor, Branch” will have earned $1,900,182. During those same static ten years, a “Mammographer” will have earned $5,400,280. If the Family Doctor were to consult with the Mammographer at the end of those ten years, she would be doing so with someone who had made $3,500,098 more than she–nearly 3 times as much. If that same Family Doctor were to then consult with someone from the lowest paid of the three categories of Radiologist, Not neural, Non-Interventionist, she would be doing so with someone who had made $4,208,580 during that time-which would be $2,308,398 more than she–or more than twice as much.

Perhaps by way of consolation for the PCP, the Geriatrics specialist and the Pediatric Infectious Disease specialist would have fared worse, and even the Kidney transplant specialist who consults with the radiologist would be speaking with someone who had made a half of a million dollars more than he did.

But perhaps it is not consolation enough; the AMA has reported that the nation faces a shortage of 35,000 to 40,000 Primary Care Physicians.

Physician Compensation

The Bureau of Labor Statistics, U.S Department of Labor, Occupational Outlook Handbook, 2008-09 Edition, publishes the data shown immediately below regarding physician compensation. The BLS report lists Primary Care Physicians under “Family practice.” The Handbook states:

.
Total compensation for physicians reflects the amount reported as direct compensation for tax purposes, plus all voluntary salary reductions. Salary, bonus and incentive payments, research stipends, honoraria, and distribution of profits were included in total compensation.

Specialty	Less than two years in specialty	Over one year in specialty
Anesthesiology	$259,948	$321,686
Surgery: General	228,839	282,504
Obstetrics/gynecology: General	203,270	247,348
Psychiatry: General	173,922	180,000
Internal medicine: General	141,912	166,420
Pediatrics: General	132,953	161,331
Family practice (without obstetrics)	137,119	156,010
Footnotes: (NOTE) Source: Medical Group Management Association, Physician Compensation and Production Report, 2005.

Footnotes:
(NOTE) Source: Medical Group Management Association, Physician Compensation and Production Report, 2005.
Self-employed physicians-those who own or are part owners of their medical practice-generally have higher median incomes than salaried physicians. Earnings vary according to number of years in practice, geographic region, hours worked, skill, personality, and professional reputation. Self-employed physicians and surgeons must provide for their own health insurance and retirement.

The American Medical Group Association (AMGA) offers a 2008 Physician Compensation Survey which is more comprehensive than the BLS data and has been approved for use in conjunction with the Centers for Medicare and Medicaid (CMS) regulations at 42 CFR 413.78(f) pertaining to calculations of physician pay (median) in reference to Graduate Medical Education. It features a wide range of specialist compensation data.

The Congressional Budget Office Puts Numbers on It

Articles in both the NY Times and Kaiser.org explain the recently published CBO findings regarding the financial impact of various health reform proposals and parts thereof. The CBO issued two reports: “Key Issues in Analyzing Major Health Insurance Proposals,” and “Budget Options, Volume 1: Health Care.” Both CBO reports may be accessed through the hyperlinks above which include the reports, charts, and a CBO explanatory blog. The reports may also be accessed through the “Resources” section of this blog.

According to the CBO blog, “The first document, Key Issues in Analyzing Major Health Insurance Proposals, focuses on large-scale proposals, provides extensive background information, and explains CBO’s analysis of numerous issues that could arise should the Congress seek to enact major changes in the health insurance system.”

“The second document, Budget Options, Volume 1: Health Care, is much more specific and focused on discrete changes. It presents 115 discrete options, encompassing a broad array of issues related to the financing and delivery of health care. (Volume 2 of Budget Options, which will address policy options in other areas of the federal budget, will be issued in 2009.) The health care volume includes some options that would reduce spending and others that would increase it, as well as changes that would reduce or raise revenues.”

Health Benefit Costs Over Time

The U.S Bureau of Labor Statistics (BLS) offers a report: “Program Perspectives, On Health Benefits, recent data on employers’ costs and employees’ access.” The report (which also appears in the “Resources” section of this weblog) is user friendly and well worth the moment or two it would take to peruse it. It offers some interesting information on both relative cost and access. Of particular note, however, is “Chart 1,” which is a graphic representation of the “Employment Cost Index, private industry, 12 month percent change, health benefits and total benefits, 1982-2008.” Although BLS offers a caveat on the numbers, it cuts both ways.

BLS characterizes the data thus: “Over the last 25 years, health benefit costs for employers has moved in fits and starts.” The chart shows rapid accelerations in cost accompanied by periods of deceleration. In March1983 the cost of health benefits spiked 23.5% over the year prior; a similar (but not as large) rise may be seen from mid-1987 to mid-1988, and a protracted ascent may be seen from 1996 to 2002. BLS juxtaposes the health benefit costs with the costs of “total benefits;” in comparison, the movement of “health benefit costs” is precipitous.

BLS does not offer an explanation. It would be interesting to see charts which juxtaposed the cost of health benefits during this time period with the Inflation Rate, Interest Rates, Avg. ROI in the Stock and Bond Markets–and of course, the reported profit of the major commercial Health Insurance providers.