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RUC-rolled

A few years ago, I noted that the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) has a dominant role in suggesting payment levels to CMS.  It raises hard questions about price-setting in the health care sector, many of which cannot be answered because its processes are opaque.  Now we know that judicial relief will not improve things any time soon.  As Brian Klepper reports, “On January 7, a federal appeals court rejected six Georgia primary care physicians’ (PCPs) challenge to the Centers for Medicare and Medicaid Services’ (CMS) 20-year, sole-source relationship with the secretive, specialist-dominated federal advisory committee that determines the relative value of medical services.”  What was the complaint?

The core of the … physicians’ legal challenge was that the RUC is a “de facto Federal Advisory Committee,” and therefore subject to the stringent accountability requirements of the Federal Advisory Committee Act (FACA). This law ensures that federal bodies have panel compositions that are numerically representative of their constituencies, that their proceedings are open, and that methodologies are scientifically credible. In other words, FACA ensures that advisory practices are aligned with the public interest.

The RUC adheres to none of these and is an object lesson in how special interests can be insinuated into and capture regulatory processes, displacing the public interest. For example, when the legal challenge was first filed, only 3 of 29 RUC panelists (10 percent) represented primary care, even though some 30 percent of US physicians practice primary care. RUC meetings are closed to the public, unless an invitation is extended by the Chair, and admission is tied to the guest signing a nondisclosure agreement. Determination of a procedure’s value has been based on as few as 30 survey responses by physicians who know that their reimbursement will be linked to how they have answered the questions.

This is a sad example of opacity in health pricing. In ordinary markets, publicity would tend to narrow the price differential between similar quality services.  In health care, however, there is a triple layer of agency between care and patients whose physicians’ recommendations are often constrained by an insurer that is chosen by the patient’s employer or government. Even if we assume away the agency problems in such an arrangement, it is difficult for buyers and sellers to truly understand “market” dynamics, or even the governmental processes that underlie them.

Originally posted at Health LawProf Blog.

Giving Patients a Piece of the Action: Appealing Proposals from Richard Frank and Christopher Robertson

In a recent edition of the New England Journal of Medicine, Richard Frank discussed recent efforts on the part of federal and state governments to enroll so-called “dual eligibles,” that is, individuals who qualify for both Medicare and Medicaid, into health plans that use “a strong care-management system under a unified budget.”  Many believe that such plans have the potential to both save the government money and provide better coordinated, higher quality health care.  (I discussed the need to better coordinate care for dually-eligible people here.)  Individual beneficiaries are not necessarily convinced, however.  Frank reports that it has been “very difficult to lure” them into “state-designed care coordination entities.”  Beneficiaries may be hesitant to leave their fee-for-service doctors and other providers; they may also be afraid of the incentive to restrict services that a capitated global payment creates.

To get beneficiaries to make the switch from fee-for-service to coordinated care, states are taking a page from Nudge and making enrollment in a coordinated care plan automatic.  The burden is then placed on the beneficiary to opt out if he or she so chooses.  The use of “passive enrollment” will no doubt “work” to increase the rolls of coordinated care plans, but Frank wants states to aim higher, to strive to “promote self-determination for vulnerable populations and offer them a reason to engage with a new care delivery system with coordinated-care arrangements[.]”

As Frank explains, “[c]oordinated care for dually eligible people is built on a financial structure known as shared savings, in which three of the parties involved –- the federal government and state governments and the [coordinated care plan] –- share any financial gains from coordinating care.”  Frank proposes that beneficiaries, too, be given a share of the expected savings– a share that they would be permitted to use to pay for “supplemental services and supports such as transportation, home modifications, and personal assistance with activities of daily living.”  The prospect of (limited) control over a share of the expected savings would serve as an incentive to beneficiaries to engage in care coordination, while also “promot[ing] self-determination and the exercise of real options.”

Frank’s very appealing idea brought to mind the proposal Christopher Robertson makes in The Split Benefit: The Painless Way to put Skin Back in the Healthcare Game, which is forthcoming in the Cornell Law Review.  While Frank would give beneficiaries an incentive to opt in to coordinated care, Robertson would give them an incentive to opt out of inefficient, high-cost care.  Specifically, Robertson proposes that when a physician “prescribes a high-cost treatment that the insurer reasonably believes is inefficient[,]” the insurer would “[p]ay a small but substantial part of the insurance benefit”—-what he terms the “split benefit”—-in cash directly to the patient beneficiary.  Then, “[i]f the patient chooses to proceed with the treatment, the patient takes the cash payment to the provider (along with any required cost share obligation), and the insurer matches it with the balance of the insurance benefit[.]”  Patients who choose not to proceed with treatment, however, could spend the cash differently, on a “treatment that is not covered by the insurer (whether it is acupuncture, an alternative diet regimen, a concierge doctor, or visiting nursing services), paying money to a member of the family to stay home and provide care to the dying patient, or purchasing disability insurance to help cope with the symptoms of the illness.”  They could even use the money to pay for non-health-related expenses.  As Robertson explains, the split benefit would save insurers (and, down the line, purchasers of insurance) money by giving beneficiaries a financial incentive to turn down high-cost, low-value treatments.  In Robertson’s words, the patient autonomy movement has been “cramped” by the fact that patients have been offered only “a walled garden of medical choices.”  His split benefit, by contrast, “embraces a value-pluralism, respecting the patient’s weighing of medical and non-medical values.”

I highly recommend both Frank’s and Robertson’s pieces to anyone who—-like me—-is interested in ways to give patients a piece of the action when it comes to the multiplicity of current efforts to coordinate and rationalize their care.

Physician Privileges and Employment Laws

Apparently, some hospitals are now requiring older physicians to undergo physical examinations as a condition of maintaining privileges. According to the Washington Post, this is in response to the aging of America’s physician population and some notable examples of physicians who have continued practicing long after their abilities have declined to unacceptable levels.  State licensing authorities don’t address the problem directly, thus impelling hospitals to do so. According to the Post, “a small but growing number of hospitals — including the University of Virginia Health System, Stanford Hospital and Clinics, and Driscoll Children’s Hospital in Corpus Christi, Tex. — have recently adopted policies requiring doctors over a certain age — 70 at U-Va. and Driscoll, 75 at Stanford — to undergo periodic physical and cognitive exams as a condition of renewing their privileges.”

Whether or not it is a good idea in the abstract, such a policy generates a number of legal questions. Most obviously, it raises the issue of whether such requirements can be squared with employment discrimination laws, in particular the Age Discrimination in Employment Act and maybe the Americans with Disabilities Act. If applicable, the former law would likely bar age-based examinations, and the latter might well preclude such examinations unless the hospital could document its concerns.

The quick response might be the traditional one: doctors with admitting privileges are not “employees” of hospitals, and, thus, are beyond the reach of employment discrimination statutes (including the ADEA and ADA) which only protect “employees” from discrimination by their “employers.” inapplicable.   But this might well be wrong for two reasons.

First, there is at least one recent court decision that suggests that the increasing control hospitals exercise over physicians who practice there might be sufficient to convert such physicians into employees.  Salamon v. Our Lady of Victory Hosp., 514 F.3d 217, 228-229 (2d Cir. 2008), reversed the district court’s finding in a sex discrimination case that plaintiff’s exercise of professional judgment was sufficient to negate employee status: the lower court’s “reasoning would carve out all physicians, as a category, from the protections of the antidiscrimination statutes.”  Rather, the proper focus was on the relationship between the parties, and, taking plaintiff’s allegations as true, the hospital “exercised substantial control not only over the treatment outcomes of her practice, but over the details and methods of her work. Members of the OLV administration were designated as her supervisors, with the job of ‘maintain[ing] continuing surveillance of [her] professional performance.’” In short, the hospital’s   application of its quality assurance standards might result in the requisite level of control to make plaintiff an employee. It is true that Salamon has not been much followed yet, but it’s definitely a straw in the wind.  Indeed, pay-for-performance and the variety of on-going CMS demonstration projects attendant to health care reform advance the trend of hospital influence if not control over physicians’ practice, thereby increasing the chances that other courts will be persuaded to subscribe to the Second Circuit’s analysis.

Second, and even if Salamon is wrong, hospitals have for years had some physician-employees and are now busy acquiring physician practice groups, see recent story here, and the acquired physicians may well be viewed as hospital employees. It’s possible, of course, that corporate structures will insulate the hospital from liability (although there will be many other considerations that factor into the decision how to structure the acquisition of a practice group), but that is by no means a sure bet.  Employment law has doctrines such as “integrated enterprise” and “joint employer,” which could render a hospital responsible as an “employer” for its privileging decisions under the antidiscrimination statutes regardless of the formal structure.  One might expect hospitals to claim that privileging is separate from any (direct or indirect) employment relation, but the notion that an employer could avoid liability by claiming its action were taken when it was wearing a non-employment hat may be a nonstarter.

That takes us back to whether requiring physical and cognitive examinations may violate the law.  We have ADEA cases that answer that question yes when the examinations are triggered by an age cutoff. In EEOC v. Massachusetts, 987 F.2d 64 (1st Cir. 1993), the court struck down a Massachusetts law requiring government officials to pass a physical examination at age 70 as a condition of continued employment. It’s true, as the Supreme Court had noted in EEOC v. Wyoming, 460 U.S. 226 (1983), an earlier case challenging retirement at age 55 for game wardens, that such a policy could be justified if the employer could show that the age criterion was a “bona fide occupational qualification.” However, the requirements of the “BFOQ” are stringent, and it is by no means clear that hospitals could satisfy them. For example, the varying ages pegged by the hospitals now using such policies – 70 and 75 – raise questions about the justification for the particular policies. Of course, subjecting a particular doctor to such tests on the basis of a reason to suspect declining competence would pose no ADEA problem, as long as such suspicion is truly formed on the basis of age-independent facts or occurrences.

As for the ADA, again assuming the hospital is an employer, the law is somewhat more complicated. Physical examinations (which presumably would include cognitive tests) are not prohibited entirely for current employees, but their permitted uses are limited. See EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees (July 27, 2000). Once employment has begun, an employer may require medical examinations only upon a showing that the inquiry or examination is job-related and consistent with business necessity. That would include situations where a physician’s performance raised doubts about her continued fitness.  Even a policy requiring all physicians to periodically undergo such tests (whether or not at a given age) is permissible when the demands of the job require checks of employees’ ability to do the job, with the burden on the employer to make the necessary showing.

Most of the cases upholding examinations are in law enforcement; indeed, the EEOC’s Guidance regarding periodic medical examinations is phrased in terms of “employees in positions affecting public safety (e.g., police officers and firefighters),” and its examples are limited to those contexts. Nevertheless, it’s not much of a stretch to bring physicians within this framework.  An analogy is theADA cases approving limitations because of the risk an HIV-positive provider poses to patients.

The more serious question is whether the examinations “are narrowly tailored to address specific job-related concerns [and thus] are permissible.”  Further, of course, identification of a particular condition by such an examination is only the first step in the analysis. The EEOC requires an employer who decides to take an adverse action (in this context denying or severely limiting privileges) to “demonstrate that the employee is unable to perform his/her essential job functions or, in fact, poses a direct threat that cannot be eliminated or reduced by reasonable accommodations.

Further, there’s even a question about the intersection of the ADEA and ADA, although the courts haven’t addressed this yet.  Given the multiple physical and mental conditions that may affect physician performance, one might wonder why a hospital would use an age cutoff rather than conditioning all renewals of privileges on passing physical and cognitive tests.  This approach would conduce to patient safety and avoid any ADEA problems. On the other hand, such a policy might be too broad to pass muster under the ADA, since it might not be “narrowly tailored” to the most significant risks.

Finally, there is one more twist to this interesting problem: the ADA covers employment, but a separate Title bars discrimination on the basis of disability in “public accommodations.” While we tend to think of public accommodations as physical venues, there is at least one case that views a hospital as providing a public accommodation by virtue of its privileging decisions and therefore that the ADA applies to those actions. Menkowitz v. Pottstown Mem’l Med. Ctr., 154 F.3d 113 (3d Cir. 1998). This would suggest that the commands of that statute might have to be met entirely without regard to employment.  Still, as with a number of the matters previously discussed, the future trajectory of ADA public accommodation doctrine as applied to hospital privileging decisions remains highly uncertain.

Charles A. Sullivan

Andrea J. Catania Endowed Professor of Law

Seton Hall Law School

 

Sunder on Patents and Access to Medicine

Last week, the blog Concurring Opinions featured a symposium on Madhavi Sunder’s new book, From Goods to a Good Life: Intellectual Property and Global Justice. A chapter relevant to health law scholars is available online, here.  The chapter focuses on access to drugs in less developed countries (LDCs), and makes the following case:

Not too long ago, an HIV-positive diagnosis was tantamount to a death sentence — for people in the East and the West, in the South and the North. The drug companies that perfected the antiretroviral therapies invested princely sums to find these miracle cures. To justify their investment, they rely on the promise of a patent . . . . Thus patents have saved countless lives. But this structure has its limits. Indeed, the evidence is mounting that in crucial ways patents fail to promote the health of people in the developing world, and in some cases in the developed world as well.

The chapter begins by telling the moving story of Thembisa Mkhosana, one of thousands of South Africans who cannot afford the third-line antiretroviral treatments needed to survive AIDS.   “My blood test results have worsened dramatically,” Mkhosana told a reporter, “And now I suddenly have fever and am in pain. I’m really worried.”  ”I know that I’m going to die,” she said, but “who is going to look after my children?”  Her story appears in this video.

Mkhosana’s plight raises difficult interpretive issues.  Is she “collateral damage” from a patent system that depends on the strict rules that deny her access to the medicine she needs? Or is this an entirely avoidable tragedy, a consequence of misapplied and misinterpreted laws?  Sunder makes the case for the latter view very convincingly, while providing a compact and accessible account of the development of international patent policy over the past 20 years.

Sunder acknowledges the importance of patent law to incentivizing the development of new drugs. However, as she wisely notes, one can’t squeeze blood from a stone, however important the “skin in the game” ideology has become to advocates of “free-market” healthcare.  According to Sunder, “creation of generic drug markets for the poor ought not significantly impact the bottom line of Big Pharma, which derives only 5 to 7 percent of its profits from this part of the world.”  It may well be possible to make up for some of that figure by cutting back on promotional budgets in the developed world. It’s also a rather trivial figure compared to tax avoided or evaded on the tens of trillions now hidden away in tax havens.

On the other hand, Big Pharma has a number of justifications and excuses for aggressive assertion of their patents. Spokesmen aver that they are only concerned about what would happen to their profit margins if drugs circulated in an uncontrolled manner. They claim that, if poor countries are permitted to manufacture vast quantities of their drugs, those countries may sell them on the black or grey markets. That, in turn, would reduce the return on such drugs in the developed world, leaving less money for research in the future. Sunder responds that, “The grey-markets concern is a valid one—but . . .the World Trade Organization has begun to craft creative solutions to this problem (requiring generic drugs made for developing world markets to be distinctively labeled, for example).”  As surveillance of both people and goods is better perfected by state security apparatuses and RFID technology, the grey market concern should also become more technologically manageable, enabling finer-grained and more effective price discrimination.

Access to drugs is a key area where ordinary markets simply can’t be expected to achieve humane and rational results.  In 2008, the purchasing power of the average American dog was higher than that of forty percent of the world’s population. Given the extensive extant involvement of the U.S. government both in the domestic pharmaceutical industry and in the international negotiations determining its powers and duties abroad, there is a special moral obligation for U.S. citizens and politicians to assure the widespread and equitable distribution of lifesaving drugs. As Sunder states:

Economists call the millions of people who need a drug but cannot afford it “dead weight loss.” But the millions who die needlessly because of the patent system—a number that some scholars calculate as nine million in the developing world annually—are more than an inefficiency in the system. . . . We must both adopt alternative mechanisms for developing and distributing medicines to the poor (including prizes), and fully support the use of compulsory licenses by developing countries to treat their sick poor. Patent law cannot draw the line at rectifying market failure. Our law must contend with moral failure as well.

Sunder’s eloquent case for access to drugs commends respect and admiration for the Health Impact Fund, Knowledge Ecology International, Medecins sans Frontieres, and other groups for trying to close this gap.

X-Posted at Bill of Health.

Finance vs. Financialization in Health Care

I’ve noted the issues raised by financialization in nursing homes, billing & payment systems, and hospital chains before on blogs.  I wanted to present a few paragraphs from a recent book review (of Robert Shiller’s Finance and the Good Society), which explore the problems raised by the finance sector’s interaction with pharma:

A Ph.D. cancer researcher with ten years of experience tends to make about $110,000 to $160,000 annually; a banker specializing in mergers and acquisitions, about $2 million. Top hedge fund managers make billions of dollars annually. The disparity fails to rankle Shiller, since the “scientists are mostly living comfortably doing what they really want to do.”

Unless, of course, they’re among the thousands of drug developers laid off by pharmaceutical firms, which have been pressured by Wall Street to focus on “core competencies” and cut R&D. Last year, investment managers punished Merck for investing in research, while rewarding Pfizer for cutting it dramatically. Investors and analysts also questioned R&D levels at Lilly and Amgen. The constant pressure for quarterly earnings makes each cut to scientific investment seem rational when it occurs, but its consequences are devastating in the long run.

Shiller is eager to praise financiers for funding innovation, but barely mentions the asset-stripping and short-term thinking that have devastated many industries over the past two decades. A study from the New Economics Foundation recently estimated that leading London bankers “destroy £7 of social value for every pound in value they generate.” In the United States, the Kauffman Foundation concluded that an “expanding financial sector” is “depleting [the] pool of potential high growth company founders.” Why go to the trouble of developing a new product or service when you can take on much less risk (and probably net a far bigger return) as a financier deciding which company merits investment? Whatever one thinks of their methods, at least the NEF and Kauffman are asking tough questions about finance’s role vis-à-vis the real economy of goods and services.

Whether we are contemplating drug shortages or lack of innovation in antibiotics, we should always complement critiques of policy failures with critical examination of the financial methods of those at the commanding heights of the economy.  Contemporary financialization is agnostic to human outcomes. We should not be surprised if it generates some troubling ones in health care.

The last thirty years have witnessed an exponential rise in financialization, the reduction of exchanged value in an economy (past or present, tangible or intangible) into financial instruments. Monetary promises that once seemed like fanciful bets were rationalized into derivatives (contracts that derived their value based on other price levels).   As these contracts and other forms of betting interact with advanced computing and telecommunications technology, they can cause volatility, instability, and a short-termist mindset that is inimical to the long-term planning necessary to rational public health and pharmaceutical policy.

On the other hand, there are some aspects of health care reform that will require financial skills.   Consider, for instance, risk adjustment among insurers, which can only be done well given complex modeling. There is a very good brief on the topic now available at Health Affairs.  The brief notes that, “Health insurance plans having costs at least 3 percent more than target projections will receive payments that have been assessed from plans having costs at least 3 percent less than projections.” As they explain,

Insurance market reforms under the Affordable Care Act are designed to . . . shed the current system in which health plans have an incentive to enroll healthier people while avoiding the sick. One of the arrangements that will make the new system workable is risk adjustment—-a process by which health insurance plans will be compensated based on the underlying health status of the people they enroll, and therefore protected against losing money by covering people with highcost conditions.

But implementing risk adjustment could prove challenging. The statistical methods used in risk adjustment are technically complex. There are questions about the ability of the states, which have to carry out the risk adjustment, to collect accurate data and implement methodologies that result in fair payments to plans.

Perhaps redundant Wall Street quants could step into these roles?  As Crotty has noted, the main negative consequences of financialization for some companies in the US are that “1) they cut wages and benefits to workers;  2) they engaged in fraud and deception to increase apparent profits and 3) they moved into financial operations to increase profits.”  Moving finance workers out of financialization, and into the workaday realities of risk adjustment in health, may be a way to direct those with quantitative skills toward more constructive ends. Risk adjustment is one more step toward a utility model for insurers–a welcome change that should be considered throughout the financial sector.

Medicaid Expansion: Winners and Losers

Governors and legislatures are keeping their options open as they mull over whether or not to expand their Medicaid programs.  Medicaid expansion was slated to be responsible for half of the realization of the Affordable Care Act’s promise to enroll 32 million currently uninsured people.  After NFIB v. Sebelius, that’s a harder lift, as the expansion can be regarded by the states as optional.  Some governors have promised to reject Medicaid expansion on federalism grounds, sometimes expressing themselves somewhat intemperately.  Others have raised pragmatic concerns, including the need to carefully assess the long-term budgetary effects, and questions about the value of Medicaid coverage.  Two recent publications add to the discussion.

The Congressional Budget Office on Tuesday issued estimates of the federal cost of the ACA in light of states’ possible refusal of Medicaid expansion.  The short takeaway is that the CBO projects that NFIB v. Sebelius will save the federal budget about $84 billion.  Why?  Because the CBO now projects that only one-third of the people newly eligible for Medicaid will reside in states that will fully accept the expansion, while one-half will live in states that strike a deal with the Secretary to only partially adopt the expansion (although the Secretary has not to this point indicated a path to that result), and one-sixth will live in states that reject the expansion in toto.  As the CBO points out, the federal budget savings are large because most of those denied Medicaid coverage in refusing states will not be eligible for federal subsidies in the exchanges — a point I’ve make several times on this site (see here, here,  and here).

In his excellent post on these issue on Balkinization,  Joey Fishkin points out that the real story isn’t the effect of state refusal on the federal budget, but on state and local budgets.  Fishkin argues that:

[T]there is a flip side to those federal savings.  In states that don’t expand Medicaid, there will be more uncompensated care.  Someone will have to pay for that: specifically, some combination of the state government, localities, and everyone in the state who pays insurance premiums.  The new CBO estimate thus underscores the fact that choosing to opt out of the Medicaid expansion entirely is, in fiscal terms, an extremely bad move for states and their people.

What about the value of Medicaid the poor people who get coverage?  Part of the push-back to Medicaid expansion has been the suggestion that the Medicaid system is dysfunctional and its extension is therefore unwarranted.  A group of researchers at the Harvard School of Public Health published a timely analysis in the New England Journal of Medicine on Wednesday providing some evidence that Medicaid coverage is, in fact, valuable to recipients.  The study examined the outcomes of Medicaid expansion to previously uncovered adult populations in three states, compared with the outcomes for similar populations in nearby states that did not expand Medicaid coverage.  The authors concluded,

Our study documents that large expansions of Medicaid eligibility in three states were associated with a significant decrease in mortality during a 5-year follow-up period, as compared with neighboring states without Medicaid expansions.  Mortality reductions were greatest among adults between the ages of 35 and 64 years, minorities, and residents of poor counties.

Correlation is not causation.  But this study provides some information suggesting that, when it comes to expanding Medicaid, the game is worth the candle.

Decisions regarding programs as large as Medicaid are properly reached after careful consideration.  Now, as governors and legislatures think through their Medicaid options, they have a bit more data to consider.  Refusing Medicaid expansion presents financial strains for state and local governments’ uncompensated care and safety-net financing, and may increase private insurance rates due to cost-shifting.  The decisions made by states and local governments under those circumstances may well cause dislocations for the safety net providers themselves, as they scramble for funds to make up for those they anticipated coming from increased Medicaid receipts.  And, as the Harvard study suggests, refusing states’ poor populations may face increased mortality, rendering a difficult financial decision one that is truly life and death.

Medicaid Donut Hole – Update #2: Professor Tyler Cowen gets it wrong in NYT

I didn’t think I’d be blogging on this again.  I’ve posted twice, here and here, on the trap the Supreme Court’s Medicaid decision created for the poor.  Briefly, NFIB v. Sebelius makes the ACA’s Medicaid expansion (“Medicaid 2.0″) optional with the states, allowing them to choose or reject the federal support for Medicaid expansion without facing any reduction in federal funding for original Medicaid.  The trap is the following: while it might seem that the poor single adults who were the beneficiaries of this expansion would, in states rejecting Medicaid 2.0, at least be eligible for the subsidies the ACA makes available for low-income purchasers of insurance through the Exchanges.  But no.  Under  26 USC 36B(c)(1), only persons at or above the federal poverty level qualify for the subsidies (because Congress assumed that the states would adopt Medicaid 2.0, and subsidies for the very poor were unnecessary in private markets).

Professor Tyler Cowen, writing in the Sunday New York Times business section, gets this point exactly wrong.  In a piece discussing the “tug of war” between the federal and state government, Cowen argues that states may have an incentive to turn down Medicaid 2.0 in order to shift the insurance costs for the poor to the feds.  After all, even with the very high level of federal funding for Medicaid 2.0, states will have some financial exposure.  Cowen says:

State officials know that limiting Medicaid will place more individuals in the new, subsidized health care exchanges, and that those bills will be paid by the federal government. The basic dynamic is that state and federal governments have opposite incentives as to how many people should be kept in Medicaid.

Wrong.  The fact is that all residents below the poverty level who are frozen out of Medicaid coverage in states that refuse Medicaid 2.0 are also ineligible for Exchange subsidies.  This mistake is significant; Cowen, suggests that states may be convinced to refuse Medicaid 2.0 (or perhaps not feels so bad about doing so) because they see an alternative source of coverage.  That error, if picked up by the many governors and legislatures now weighing  their options under the ACA, could lead to disastrous results.

The ACA raises charged issues between the Obama administration and the states.  It would be a shame if misinformation about the effects of a state refusal of federal funding for Medicaid 2.0 were to influence state decisions on Medicaid.

EMTALA and the Free Rider Problem

This tragic case may interest those who teach EMTALA:

[Anna Brown] yelled from a wheelchair at St. Mary’s Health Center security personnel and Richmond Heights police officers that her legs hurt so badly she couldn’t stand. She had already been to two other hospitals that week in September, complaining of leg pain after spraining her ankle. This time, she refused to leave.

A police officer arrested Brown for trespassing. He wheeled her out in handcuffs after a doctor said she was healthy enough to be locked up. . . . She told officers she couldn’t get out of the police car, so they dragged her by her arms into the station. They left her lying on the concrete floor of a jail cell, moaning and struggling to breathe. Just 15 minutes later, a jail worker found her cold to the touch.

For some context, here is an excerpt from a column from Steven Pearlstein on a far more notable battle last week:

[T]he solicitor general and several justices tried to make the obvious point that one reason so many Americans lack health insurance is that the market is inherently unlike any other in that we don’t deny medical care to sick people who can’t pay for it. It is from this anomaly that springs the “individual mandate,” a requirement that all citizens buy health insurance, to prevent them from becoming free-riders on a system paid for by others.

Rather than wrestling with this obvious anomaly, however, Scalia and Alito simply [blamed] the government for creating the problem in the first place by obligating hospitals to treat the sick even if they are uninsured and cannot pay for the care.

As the case of Anna Brown shows, there are many ways to “solve” the free rider problem.

Of Princes, Paupers, and Physicians

Why is US health care so expensive? We’ve long been told: “it’s the prices, stupid.” There is more confirmation here, as Ezra Klein explains why an MRI costs $1,080 in America and $280 in France:

[U]nlike in other countries, sellers of health-care services in America have considerable power to set prices, and so they set them quite high. Two of the five most profitable industries in the United States — the pharmaceuticals industry and the medical device industry — sell health care. With margins of almost 20 percent, they beat out even the financial sector for sheer profitability. The players sitting across the table from them — the health insurers — are not so profitable. In 2009, their profit margins were a mere 2.2 percent. That’s a signal that the sellers have the upper hand over the buyers.

I don’t agree that insurers are being bullied as buyers. If we’re going to bring up the financial sector, a better analogy would compare pay differentials between revenue-generating traders (providers) and the back office clerical and IT workers (insurers), rather than assume some common baseline of industrial profitability. The health care providers actually (try to) improve health; the insurers (are supposed to) support that primary effort. But overall, the story Klein tells here is broadly consistent with many other explanations of high prices in US health care.

What will solve that problem? Probably not health care reform, though regulators will struggle mightily to impose some discipline via IPAB and other entities. Followers of Clayton Christensen think pure technological innovation may wildly succeed where an oft-captured regulatory system is failing. Farhad Manjoo provides some empirical support for their hopes:

As computers get better, we’ll need fewer humans across a range of specialties. Look at mammography: One of the main ways radiologists can improve their breast diagnoses is by “double reading.” When two radiologists independently examine a collection of mammograms, the number of cancers detected increases substantially. A study published in 2008, however, found that a radiologist who uses ImageChecker can skip the second reading: A computer and a human are just as good as two humans.

[T]he doctors who are the juiciest targets for automation might not be the ones you’d expect. They’re specialists . . ., the most highly trained, highly paid people in medicine. It’s precisely these factors that make them vulnerable to machines. By definition, specialists focus on narrow slices of medicine. They spend their days worrying over a single region of the body, and the most specialized doctors will dedicate themselves to just one or two types of procedures. Robots, too, are great specialists. They excel at doing one thing repeatedly, and when they focus, they can achieve near perfection. At some point—and probably faster than we expect—they won’t need any human supervision at all.

Robots and automation are already taking on prominent roles in wars, factories, and political campaigns. The type of pattern recognition common to some medial specialties may be natural to them, particularly as electronic medical records and digitization take hold. Of course, an all purpose “physician robot” would be a much harder endeavor. In the context of a discussion of rationing, one health law textbook suggests that a mapping of possible interventions “would require rigorous scientific information on each of the almost 10,000 diagnostic entries in the International Classification of Diseases (9th ed.) (known as ‘‘ICD-9’’) and for each of the 10,000 medical interventions listed in the AMA’s Common Procedural Terminology (known as ‘‘CPT’’ codes).” ICD-10 has about 7 times more codes than ICD-9. But just as chess was once considered a field impenetrable to artificial intelligence, and now has been mastered by some computers, so too might medicine itself become subject to the exponential growth in information processing characteristic of mature digitized industries. It’s becoming clear that “the variety of jobs that computers can do is multiplying as programmers teach them to deal with tone and linguistic ambiguity.”

So will technology save us from ever-increasing health care costs? I’m not optimistic, because politics and economics are a constraint on all these developments. The same patterns of patronage and tribute that make comparative effectiveness research such a hard sell in the US may well restrain technology adoption. Just as specialists dominate the RUC, they can probably find ways to slow the adoption of technological substitutes for their hard-won expertise. As Umair Haque has observed, “In a neofeudal polity, patronage replaces meritocracy. ‘Success’ for an organization, coalition, or person is to become a client of a powerful patron, pledging your services (soft and hard, informal and formal), in perpetual alignment with the patron’s interests.” We’ll see many physicians in coming years invest time and effort in technological innovation, and others devoted to deterring its spread in order to protect current income streams.

At this point, you’re probably expecting me to side decisively with the technologists as heroes. But I can’t do so. I don’t buy an economic model premised on incentivizing innovation by setting off a race among radiologists (or, more realistically, financiers) to be the first to patent the machine that can replace all the other radiologists. Rather, I think the real foundation for radically productive innovation in this and other fields is a baseline of social support and commitment to retraining for professionals who could be displaced by the technology. I’m not saying, “pay radiologists what they make now, forever.” Rather, I’m trying to articulate a variant of a “guaranteed basic income” argument for those who invest heavily in learning about science, technology, and medicine. This baseline of educated users, improvers, and evangelizers of technology is the foundation of any venturesome economy. As Amar Bhide has explained,

[T]he different forms of innovation interact in complicated ways, and it is these interconnected, multilevel advances that create economic value. . . . To state the proposition in the terminology of cyberspace, innovations that sustain modern prosperity have a variety of forms and are developed and used through a massively multiplayer, multilevel, and multiperiod game.

We may well find that in decades to come, machines can do the jobs of radiologists and pathologists much better than people can. But if that transition occurs, it’s important to recognize how much current specialists invested to attain their skills, how hard they presently work to maintain a high level of medical skill in this country, and how future innovations may well dry up if people feel that those on STEM career paths are utterly vulnerable to being “kicked to the curb” once a machine does their job slightly better. Not only is “sole inventorship” a myth; we often fail to appreciate the complex educational and service apparatus necessary for innovation to take place. As Alperovitz and Daly have shown, any system that grants 93% of its gains to 1% of the people is an ongoing instruction in the economic futility of the efforts of the vast majority of its citizens.

Open House – MSJ Program in Health, Science & Technology Law at Seton Hall Law

The next MSJ Open House will be on Saturday, February 25, 2012, from 9 a.m. until 11:30 a.m. (registration begins at 8:30 a.m.). Advanced registration is required. Register here >>

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MSJ Program in Health, Science & Technology Law

Seton Hall Law School offers a Master of Science in Jurisprudence (MSJ) degree in Health, Science & Technology Law. The MSJ program provides professionals working in health care, information technology, telecommunication, pharmaceuticals and biotechnology with a solid foundation in the legal and regulatory aspects of these industries.

The MSJ is unique in that it provides a rigorous grounding in the law for students who do not want to become lawyers, but who, instead, want to use the law to enhance their effectiveness and marketability in a non-legal career. Combining this degree with their professional experiences, MSJ graduates have numerous opportunities available to them. Alumni work in a broad spectrum of positions as compliance officers, contract analysts, healthcare administrators, nurse managers, patent/trademark assistants, pharmaceutical financial analysts, quality assurance managers, supervisors, clinical operations directors, and lobbyists.

The MSJ Open House is an excellent opportunity for prospective applicants to meet and speak with faculty, students and administrators in a half-day long structured program.

The event will include an overview of the MSJ admissions process, the MSJ curriculum and course offerings, a question & answer session with the Director of the MSJ program, two mock classes led by current health law and intellectual property law faculty, information on financial aid, and tours of the law school. A relaxed lunch will allow for time to ask questions of special interest to you.

Please register for the Open House online or by contacting Helen A. Cummings, Administrator of Graduate Programs, at helen.cummings@shu.edu or 973-642-8380. Thank you for your interest in Seton Hall Law School’s MSJ program.

For more information on the MSJ Program as well as FAQs and Admissions criteria, click here.
For more information on the Open House, including a schedule, click here.

The Good News is that Health Care Spending is Down

The bad news is that the country’s too broke to be sick. The New York Times reports that health care spending rose just 3.9% in 2010, totaling $2.6 trillion or 17.9% of the Gross Domestic Product. The information was derived from the latest report from the government’s National Health Expenditure Accounts (NHEA), which are, according to the Center for Medicare & Medicaid Services, “the official estimates of total health care spending in the United States. Dating back to 1960, the NHEA measures annual U.S. expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care. The data are presented by type of service, sources of funding, and by type of sponsor.”

The Times notes:

Health spending normally grows much faster than the economy. But in 2010 growth rates were similar, so that health care accounted for the same share of total economic output in 2009 and 2010.

“U.S. health spending grew more slowly in 2009 and 2010″ than at any other time in the 51 years the government has been collecting such data, said Anne B. Martin, an economist in the office of the actuary at the Department of Health and Human Services.

How bad is it? The data is, well, record-breaking.

The Times:

In 2010, the study said, hospitals reported a decline in admissions and slower growth in emergency room visits and outpatient visits. Likewise, it said, doctor’s office visits declined, and spending for doctors’ services grew just 1.8 percent, to $416 billion in 2010. Total health spending averaged $8,402 a person, up 3.1 percent from 2009, the report said.

Doctors often prescribe drugs during office visits, and the decline in visits helped slow the growth of drug spending, as did the use of lower-cost generic medications. The number of prescriptions filled rose just 1.2 percent in 2010, and total retail spending on prescription drugs also grew 1.2 percent, to $259 billion, the slowest rate of growth in a half-century, the report said.

Those numbers of slowed growth are even more incredible given the context of a slowed generation of aging baby boomers.

But in the inimitable words of R. Hunter and J. Garcia,

Talk about your plenty, talk about your ills
One man gathers what another man spills

The Times notes:

For the first time in seven years, total private health insurance premiums grew faster than insurers’ spending on health care benefits, the administration said. Premiums totaled $849 billion in 2010, while spending on benefits totaled $746 billion. The difference includes administrative costs and profits.

There are a number of other interesting points to be found in the New York Times article, not the least of which is the growth in federal expenditures. It’s well worth a read.

Of provident kidney stones, health insurance and a CT Scan that may have saved my life

As we bid farewell to 2011 while ushering in the new year, some thoughts about health care — my own — emerge. I underwent major surgery this last year, having had roughly 15% of one kidney–or, more precisely, the cancerous portion of one kidney– removed. I chose to blog about the experience, chronicling the process from the onset, back when the tumor was initially thought to be a kidney stone or a cyst. But found early, it was small, they say they got it all and that it had not spread. I was lucky. A relatively rare form of the disease (roughly 50,000 cases per year), the survival rate for kidney cancer is not great because it is largely asymptomatic and is not generally tested without a family history for such.  Often, by the time someone wanders into a doctor’s office with complaints of an aching lower back or bloody urine, the tumor has grown to the size of a baseball, the cancer has spread, and the prognosis is not optimum. My tumor was found, as is so often the case, “incidentally” as they were looking at something else.

And that something else has me thinking; without it I’d be walking around with a ticking time bomb firmly ensconced and concealed in my kidney.  Which brings me to July of this past year when I awoke torn by excruciating pain from what I was to later discover were two kidney stones. Wave after wave of fortunate pain brought me to the emergency room. A CT scan discovered the stones–and something else– that ultimately turned out to be that cancerous tumor approximately 2.2 cm, lying in wait.

And there’s the rub. I had health insurance. Without health insurance I might have still gone to the hospital–the pain was immense– but I would have refused the CT scan.  I know of what I speak. A lack of health insurance is a state of affairs and a mindset that is distinctly different from that of having health insurance: as one deprives Peter to pay Paul “home medicine” takes on new meaning. And if forced to see a doctor, one minds the bottom line always ready to refuse treatment, especially avoiding diagnostic tests such as x-rays, CT scans and MRIs as they are the well traveled road to poverty if not bankruptcy.

And there it is. Without health insurance I would have refused the CT scan which may well have saved my life.

Instead, I ultimately had one of the nation’s top surgeons (the brilliant Dr. Paul Russo, most recently described by Maureen Dowd in the NY Times as “exuberantly blunt”) at Sloan-Kettering pluck the ticking time bomb from my body, while saving the affected kidney and me.

In the hands of a less skilled surgeon, my entire kidney may have been removed (it’s easier), and even if alive I’d have spent the rest of my life at a  increased risk for hospitalizing events from chronic  kidney disease, heart disease, and even hip fractures. The bill for my stay and surgery was roughly $27,000; my co-pay merely double digits (thank you Cigna).

And as I sit here reflecting on my good fortune and the providence of kidney stones timely sent, I cannot help but think of all those men and women across America without health insurance (or with junk insurance) who are left to face this coming year with health issues and hard economic choices each day–choices which will lead many to practice “home medicine” when faced with excruciating pain and the hidden harbingers of disease. Choices which will leave prescriptions unfilled. Choices which will lead many to refuse that costly x-ray, CT scan or MRI which might have saved their lives.

There but for the Grace of God–and a job with good health insurance.

And that’s not hyperbole: it’s a new year; it’s estimated that 45,000 people in America will die in it due to lack of health insurance.

The Nirvana Fallacy Among Health Care Cost Cutters

One of my fun little Christmas presents was the Gruber/Newquist/Schreiber comic book guide Health Care Reform: What It Is, Why It’s Necessary, How It Works.   It’s wonderfully illustrated and has a lot of good information.  It offers a very hopeful vision of what health reform can do.  It patiently explains the politics and policy that led to the ACA, portraying it as a compromise that both “left and right” should be able to support.

Unfortunately, the authors have chosen to portray virtually anyone who opposes the ACA, on both left and right, as either angry, exasperated, selfish, or unreasonable.  (This animated penguin reminds me of several of the characters in the book.) There are also some questionable implications in various parts of the book.  For example, on p. 21, it’s suggested that if employers didn’t have to pay so much for health care, they’d just pay that in higher wages to employees.  But in an economy where corporate profits are capturing “88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income,” why should we assume that will happen? Workers’ share of national income is declining; they have little bargaining power.  We can’t extrapolate the economic projections of the “Great Moderation” era to today’s Great Recession, where employers are exploiting the desperation caused by high unemployment to hold the line on wages and benefits.

One other objection: check out this graphic (my apologies for the poor camera-work), which suggests the deep problem in the US economy is that we’re spending too little on military or homeland security expenditures, and too much on health care:

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Dr. Donald M. Berwick, Formerly of CMS: an Exit Interview Worth Considering

It is received wisdom amongst Human Resource professionals that the exit interview–that which is had when an employee is departing –is an invaluable tool in understanding and improving an organization.

That said, Dr. Donald Berwick has left the Centers for Medicare and Medicaid Services, after 17 months of serving as its head.

His parting assessment?

According to the New York Times Dr. Berwick says

that 20 percent to 30 percent of health spending is “waste” that yields no benefit to patients, and that some of the needless spending is a result of onerous, archaic regulations enforced by his agency.

The official, Dr. Donald M. Berwick, listed five reasons for what he described as the “extremely high level of waste.” They are overtreatment of patients, the failure to coordinate care, the administrative complexity of the health care system, burdensome rules and fraud.

“Much is done that does not help patients at all,” Dr. Berwick said, “and many physicians know it.”

According to the U.S. Census Bureau, in 2009 we spent $2.4863 trillion on health care.

I’m going to write that out because as I’ve long maintained, most people (myself included) have difficulty understanding what a billion dollars is (ten, one hundred millions, or a thousand million), no less a trillion (ten, one hundred billions or a thousand billions )–nor 2.4863 of them.

That’s

$2,486,300,000,000.

Let’s just think conservatively for the moment and suppose, hypothetically, that contrary to all that Human Resources talk about frankness in departure, Dr. Berwick was disgruntled and doubled his numbers:

So instead of 20 to 30% waste we’re looking at 10 or 15%

10% = $248.63 billion or $248,630,000,000  in waste.

15% = 372.945 billion or $372,945,000,000 in waste.

And if he’s approximately right? If somewhere between “20 percent to 30 percent of health spending is ‘waste’ that yields no benefit to patients”

25% = $621.575 billion or $621,575,000,000 in waste.

Some context is in order. What can you do with a wasted (10%) 248 or (25%) 621 billion dollars?  This below, is from the Congressional Budget Office. The 2009 numbers are actual, the rest of the years are outlay projections– in billions. And no, that’s not a typo– Social Security cost $678 billion, Medicaid $251 billion.

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