Exiling the Poor from the Insurance Market

John Roberts’ jurisprudential wizardry in NFIB has been compared with the artistic genius of pro wrestlers and rappers. Poor Americans in states newly empowered to resist the ACA’s Medicaid expansion may need even more ingenuity to get themselves insured. Both Kevin Outterson and my colleague John Jacobi have observed the perplexing predicament imposed on the poor in states that keep Medicaid 1.0, and resist Medicaid 2.0. From Jacobi’s post:

The reform provides insurance subsidies through tax credits. The credits are calculated on a sliding scale, according to household level, for people with income up to 400% of FPL [the federal poverty line] — subsidizing more generously someone earning 200% of FPL, for example, than someone earning 350% of FPL. But, under 26 USC 36B(c)(1), credits will not be distributed to those with incomes below 100% of the FPL. Why? Because Congress assumed states would take up the Medicaid expansion, obviating the need for exchange-based subsidies for the very poor. . . .Bottom line: states rejecting Medicaid 2.0 will not only forego about 93% federal funding for the program between 2014 and 2022, but they could also be depriving the poorest of the uninsured from any shot at coverage — potentially affecting millions nation-wide.

Georgia hospitals are already worried about the “unexpected prospect of lower reimbursements without the expanded pool of patients” to be covered by the Medicaid expansion:

Last year, Georgia hospitals lost an estimated $1.5 billion caring for people without insurance. The promise of fewer uninsured is what led the national hospital industry to agree to the health law’s $155 billion in Medicare and Medicaid cuts over a 10 year period. The Medicaid curveball comes at a time when Georgia hospitals are already in the throes of a massive industry transformation to improve quality and efficiency driven by market forces as well as the new law. Hospitals face lower payments from insurers and pressures to consolidate. One in three Georgia hospitals lose money. All are busy preparing for new standards under the law that, if not met, could mean millions of dollars in penalties.

It’s hard to imagine how hospitals like Grady can continue to act as a safety net in that environment. The article notes that “Georgians already pay for the cost of care provided to people without insurance through higher hospital bills and inflated insurance premiums.” If that trend continues, all the states refusing Medicaid 2.0 may end up doing is shifting the cost of the Medicaid expansion population from national taxpayers to Georgians with insurance. The superwealthy Americans of Marin County and Manhattan ought to send Georgia Governor Nathan Deal a thank you note for keeping Georgians’ problems for Georgians themselves to solve.

No mandate? OK, but be prepared to pay

[Ed. Note: This commentary was published in the St. Louis Post Dispatch on Wednesday, 3/28, by  long time contributor to HRW, Thomas "Tim" Greaney, Chester A. Myers Professor of Law and co-director of the Center for Health Law Studies and John J. Ammann, director of Legal Clinics at St. Louis University School of Law.]

This week the U.S. Supreme Court is hearing three days of oral arguments on the constitutionality of the Affordable Care Act, the federal health care reform legislation. The pivotal question, whether a federal mandate to buy health care insurance can pass muster under the Commerce Clause, is one that has divided the lower courts and generated a backlash against this vital legislation.

Polls suggest that a strong majority of citizens agree with most of the specific provisions of the health care reform law, though many harbor doubts about its constitutional basis. While we believe there is ample precedent supporting the constitutionality of the law, it is worth considering whether a mandate-free health care reform law would be fairer or more effective. We think not.

Congress unquestionably could have avoided any serious constitutional questions by offering a carrot rather than the stick of a monetary penalty. For example, the law could have made the premiums for government-provided insurance such as Medicare less expensive for those who voluntarily purchase private insurance when they are young. While such an approach may strike some as more equitable, it would undermine effective health care reform. Indeed, this thought experiment exposes the short-sightedness of allowing unrestricted choice to trump all else in the health care debate.

The idea of the federal government using a carrot rather than stick to prompt certain behavior has a long and unquestioned pedigree in the law. Indeed, the federal government uses positive incentives in many aspects of American life to mandate compliance with its rules. For example, if states want federal highway funds, they have to follow federal transportation regulations. If states want federal education funds, they have to adopt federal guidelines such as those under the No Child Left Behind law.
Read more.

Ruane v. Levy: Both Sides of the Bar Meet in Health Care Fraud and Abuse Class

[Ed note: This article was authored by John Barry '13, a second year law student pursuing a Health Care Concentration at Seton Hall Law.  A native of New York, he graduated in 2005 from the University of Pennsylvania with a degree is psychology.]

Recently, Professor Zack Buck’s Health Care Fraud and Abuse class was treated to a spirited panel on the current state of health care fraud, prosecution and defense.  The panel, meeting again this year to allow students an opportunity to hear details about actual practice from both sides of the bar, was moderated by Chris Zalesky, the Vice President of Global Policy & Guidance for Johnson & Johnson in the Office of Health Care Compliance & Privacy.  Zalesky has more than 20 years of experience in regulatory affairs, quality assurance and research and development functions within the medical device and pharmaceutical industries. He has also taught as an Adjunct here at Seton Hall Law.

The panel included Maureen Ruane, Assistant U.S. Attorney and Chief of the Health Care & Government Fraud Unit for the United States Attorney’s Office, District of New Jersey, and Bruce Levy, an attorney with the firm of Gibbons, P.C.  Ruane served as Assistant United States Attorney from 1998 to 2004, and returned to the office in 2010 after working as a partner in the law firm of Lowenstein Sandler.  Levy, also formerly an Assistant U.S. Attorney, currently focuses his practice at Gibbons on criminal, civil, and administrative cases arising from federal and state health care fraud investigations, health care compliance, The False Claims Act and qui tam cases, corporate investigations, and white collar criminal law.

Touching on a wide variety of topics, Ruane explained that the “sea of health care fraud is so deep” that it affects all aspects of the American health care system, from hospitals to physicians to pharmacies and all other health care providers.  Many of the fraud prosecutions that flow through Ruane’s office come in the form of qui tam actions under the False Claims Act.  Coming from a Latin phrase meaning “[he] who sues in this matter for the king as [well as] for himself,” a qui tam action is a unique fixture of the False Claims Act that allows private citizens to act as whistleblowers and sue health care corporations for perpetrating fraud on the government.  The whistleblower, or “relator,” stands to gain a percentage of the civil damages awarded against the corporations.

Having seen countless relators over her time with the government, Ruane was in a rather unique position to speak about the underlying motivations behind the people who sue on behalf of “king and self.”  Contrary to common thinking, Ruane explained that whistleblowers generally did not act out of greed or a desire to hurt the company.  In fact, she felt the opposite:  most relators were actually intensely loyal to their companies and had usually tried to voice their concerns multiple times in-house before bringing a complaint to the attention of government prosecutors.

Working as defense counsel, Levy voiced the concerns of private industry, in particular about the lack of guidance in the current law.  He stressed that many pharmaceutical companies, hospitals, physicians and health care providers feel as if they are trying to act within the bounds of the law when in reality those boundaries are more blurry than clear.  As an example, Levy talked about how he felt the need for clearer guidance on pharmaceutical marketing of “off-label” medications.   When the Food and Drug Administration approves a medication for use in the U.S. health care market, the drug is approved for a specific use or indication.  However, clinical studies often show beneficial uses for medications for additional aliments, and it is legal for physicians to prescribe the drugs for these other uses.  In addition, Medicare and many private insurers will pay for use of a medication for different indications than what the FDA approved, in effect, subsidizing “off-label” use. There are thus competing federal agency views on medications, with the FDA only approving the drug for a particular use, but the Center for Medicare Services alternatively approving use of the drug for other, off-label uses.  Problems arise because there are complex, and Levy felt unclear, regulations as to how pharmaceutical companies may represent or market the drug for off-label use.  Levy explained that he felt new legislation was required to give clear guidance to the industry.

Both Ruane and Levy, approaching the bar from different perspectives,  engaged in lively conversation and took questions from the audience, giving students numerous real-world examples of the theories and topics they learn about in class.  As might be imagined, bringing with them contrasting prosecution and defense-side perspectives, the two often approached the same issues from opposing viewpoints, providing a unique experience for the class.  However, the one thing they both agreed on was that with rising health care costs directly on the government’s radar, aggressive prosecution of health care fraud will not slow down any time in the future.

Medicare Payment, a System in Need of Fixing

[Ed. Note: We are pleased to welcome Andy Braver, Esq. back to Health Reform Watch. Andy is a health care attorney who recently completed an LL.M in Health Law at Seton Hall Law. Prior to entering the LL.M. program, Andy spent five years as a healthcare provider, running a state of the art medical diagnostic imaging center.  During that time, he dealt with many important health law issues faces by providers today, including Fraud and Abuse, Medicare and Medicaid licensing and reimbursement, state and private accreditation organizations, private payers, electronic health records, and HIPAA and other privacy issues, to name just a few.]

Medicare’s fee for service payment system has many problems that need fixing.  While recent studies have predicted that Accountable Care Organizations (ACOs) may very well achieve better care and lower costs, any savings generated as a result of these new groups of providers will be just a drop in the bucket solution to a vast problem.

Medicare was projected to spend over $500 billion on patient care in 2010.  Notwithstanding the fact that the White House Office of Management and Budget believes $36 billion of the Medicare and Medicare Advantage payments made in 2009 were improper.

The problem is, there is no distinction made for the provision of quality medical care.  Conversely, there is no check in the system to make sure that the care provided is inadequate.  If you provide the service, you get paid.

I realize that in many areas of medicine, it is difficult or even impossible to create a system to accurately and impartially judge the adequacy of care provided.  How in fact do you measure the ‘quality’ of healthcare?  Do you look at the structure of an entity, its organization and ability to provide what is generally regarded as good care?  Or do you look at the actual process or provision care, measuring relative malpractice claims among other objective factors?  Many believe that better outcomes suggest better care.  While I do not believe that outcome or evidence based medicine is the answer to every problem, it certainly can be a solution to some of these challenges.

There are differences in the Medicare program based on geography, and local coverage determinations and reimbursement rates, whether using the PPS or RVU systems (Part A & B), vary greatly across the country.  That part of the system makes sense by taking into account cost of living, cost of employment, property costs, and local tax rates.

In my mind, however, these processes fail because they do not further take into account advances in technology, or reward investment in the future.  For example, Medicare pays the same amount of money for an MRI exam regardless of the type of machine that was used to take the picture, and without a thought given to the type of storage system employed by the medical provider.  Imagine a facility with a two decade old system, state licensed and able to take pictures, with a machine equivalent to the first generation digital camera I owned 15 years ago, and printed pictures that are stored in a file room.  Then imagine a state of the art facility with an HD camera taking high resolution digital pictures, stored in an electronic file system, in a format that is able to be sent electronically to specialists all around the country (or world), and accessed by the patient quickly and securely on the internet.  Are those two pictures worth the same to Medicare?  There certainly is increased value to the patient in the ‘new’ system.  Better picture quality undoubtedly leads to better diagnostic capability (better medicine), and fewer picture redos over time; long-term storage and record portability is certainly going to lower future treatment costs if the issue is a chronic one.  HITECH and the new EHR incentive programs recognize the importance of electronic medical records, but it remains to be seen how those requirements will affect licensing and reimbursement rates.  Will there be a license ranking and a tiered payment system based on perceived quality or outcome?

I certainly hope that payments are tiered when advanced technology is used, but not according to self-assessment rankings and quality benchmarks.  I would argue that medicine is the one area where any kind of ranking and result (or outcome) based assessment is virtually impossible.   People are not cars, and JD Power cannot provide meaningful answers when it comes to medicine; there is no way to objectively determine a specific course of treatment for a particular patient is better at one hospital versus another.  No two patients are the same, though it is entirely possible they might both drive the same car.  Determining quality in healthcare is exceedingly difficult.  Patient bases are different, whether because of socio-economic reasons, or geography.  So do you then look to the education of the physician to determine quality?  We don’t do the same for lawyers?  Or do we?  Do you look at healthcare structure (how an entity is organized, its equipment, etc…) to determine quality?  Or process (the # of lawsuits against it, for example)?  Better outcomes alone do not mean better healthcare, and none of these items taken alone should affect licensing of healthcare providers.  In the end, this highlights the fact that designing a system that is fair and without major flaws may never be possible with so much money in the system and with so many parties having opposed interests. But that doesn’t mean we shouldn’t try to fix the expensive and broken (the status quo is unsustainable), it just means that attainable reform could very well mean significantly less unfairness and less major flaws. Because ultimately, in this context, the perfect may be the enemy of the good.

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.

Recommended Reading: Recent Scholarship on Drug and Device Regulation

In Patients Over Politics: Addressing Legislative Failure in the Regulation of Medical Products (forthcoming in the 2011 volume of the Wisconsin Law Review and available on SSRN), Efthimios Parasidis proposes a significant expansion of drug and device companies’ responsibility to engage in “active post-market analysis” of drugs and devices, to be coupled with a new rule that only companies that conducted such analysis would benefit from preemption of state tort claims.  Professor Parasidis’ article includes a nuanced and revealing analysis of the historical and other reasons for the Food and Drug Administration’s heavy focus on pre-market review of drugs at the expense of post-market surveillance, as well as useful updates on both the caselaw regarding the preemption of claims involving branded drugs, generic drugs, devices, and vaccines and the ongoing efforts to use health information technology to glean information about the safety and efficacy of marketed products.  Most notable, though, is the article’s thorough explication of Professor Parasidis’ interesting proposal that “preemption laws, which often are enacted pursuant to industry lobbying efforts [be linked to] protocols that further the public health.”

In Enforcing Integrity (forthcoming in the 2011 volume of the Indiana Law Journal and available on SSRN), Katrice Bridges Copeland makes a strong case for her conclusion that neither the exclusion of pharmaceutical manufacturers from Medicare and Medicaid — a punishment which the government is reluctant to impose because it would spell the end for the company — nor the use of corporate integrity agreements coupled with large fines — which manufacturers agree to in order to avoid exclusion — works to deter illegal marketing activities.  As Professor Copeland notes, numerous companies have learned that “the punishment for multiple offenses is simply another CIA and another fine.”  She recommends that the government consider a number of alternative penalties for repeat offenders, including (1) requiring that manufacturers fund clinical trials studying the off-label uses for which they promoted their products, (2) requiring that they license the product or products at issue to other manufacturers, (3) holding high-level individuals criminally liable under the responsible corporate officer doctrine, and (4) amending the Social Security Act to allow for the exclusion of particular drugs (as opposed to entire companies) from Medicare and Medicaid.

Finally, I recommend Seton Hall Law’s own Jordan Paradise’s fascinating article, Claiming Nanotechnology: Improving USPTO Efforts at Classification of Emerging Nano-Enabled Pharmaceutical Technologies (forthcoming in the 2011 volume of the Northwestern Journal of Technology and Intellectual Property and available on SSRN), in which she argues that the United States Patent and Trademark Office’s system for classifying patents on nanotechnology-related inventions, “[w]hile undoubtedly helpful for internal purposes,” cedes too much to the courts.  Reviewing the facts of the recent case Elan Pharma International v. Abraxis Bioscience, which involved a dispute over two patents describing nano or near-nano scale versions of the same existing cancer-fighting agent and was tried to a jury verdict, Professor Paradise points out several ways in which the patents’ claims potentially overlap.  She argues that the courts are “a clumsy forum” for sorting out the “complex patent law issues that arise based on scale, size, and interactions at the nanoscale that transcend previously envisioned physical and chemical boundaries[,]” and offers concrete recommendations for steps the USPTO can take to improve its classification efforts to reduce the number of patents with potentially overlapping claims thereby making court involvement less necessary.

Investing in Time Banks: More than Just Feel-Good Potential

What distinguishes the time bank concept from established volunteer service organizations? Not much, really, since time banks — over 300 total in existence within 23 countries– allow individuals to join and indicate what service they would like to provide: ranging from home repairs, child care, visiting the incapacitated, and accompanying patients to the doctor. Anti-poverty activist Edgar Cahn, is often viewed as somewhat of a time bank pioneer; he wrote about the concept early, and has attributed the rise in time banks to the cuts in social programs during the Reagan years. The currency of time banks is, not surprisingly, measured in hours rather than dollars, and members may accumulate credits and use them on those services offered by other time bank members. The barter/exchange system is seemingly win-win, since individuals are able to provide services they feel comfortable providing, and may receive like-time in services they want. With time banks, all work is equally valued– as such, it is said to be deemed non-taxable barter.

While the social benefits and altruistic aspects of time banks can be clearly inferred, the health payoffs may not be as explicitly recognizable but are seemingly also present– perhaps evidenced by just how many time banks are sponsored by healthcare providers. According to the New York Times, “The largest one in New York City is the Visiting Nurse Service of New York Community Connections TimeBank.” Also according to the Times:

Elderplan, a New York health insurance company, also runs a time bank for members.   Hospitals such as the Lehigh Valley Health Network, based in Allentown, Pa., run time banks.  In Britain, even private medical practices have established time banks.  At Rushey Green Group Practice in London, Dr. Richard Byng was convinced that what many of his patients needed wasn’t medication, but friends, social connections and a way to feel useful and valued.  Now doctors there routinely prescribe that patients join the Rushey Green Time Bank.

Importantly, time banks often provide simple practical aid that may not be directly medical-related and might not be covered by Medicaid or Medicare: an elderly woman, for instance,  who was just released from the hospital but is still too frail to purchase her own groceries or get to a follow-up appointment receives these services. These not directly medical challenges, if not navigated, can easily land such patients right back in the hospital. Importantly, re-hospitalizations are monetarily disincentivized through Medicare and Medicaid. As such, hospitals are seemingly incentivized to facilitate such simple ancillary care which can decrease the recurrence of re-hospitalizations and the lack of reimbursement for repeat hospital stays. Time banks may be one way to offer those solutions for many.

Time banks have been shown to make people feel better and improve members’ health– in particular, they have shown benefit for those with  low-incomes and living alone. They are also, at least anecdotally, economically beneficial; but in order for more health care organizations and providers to actually invest in time banking efforts, quantitative data showing proven cuts in the cost of health care resulting from time bank initiatives is seemingly needed. But there is some. A briefing published by the New Economics Foundation (NEF) provided the following:

• Volunteer Caregiving in Richmond, Virginia, where asthmatics are enrolled in a telephone time bank and befriend other asthmatics: the experiment cut the cost of treating those involved by 73 per cent — a total of $80,000 saved in the first year of the asthma program, rising to $137,500 in the second year.

The Times also reports that

A study published by the Transportation Research Board, an organization funded largely by state and federal transportation agencies, found that providing rides to non-emergency medical appointments was cost effective for every condition studied – especially for asthma, pre-natal care, heart disease and diabetes.  Regular visits from neighbors can also catch early signs of serious problems.  One time bank, for example, asked people who worked with diabetics to pay special attention to early signs of glaucoma.

UK studies provide more evidence. In Britain, the Nu Social Health Organization (NUSHO) found a cost savings of £250,000 within its first year. An economic model by the London School of Economics (LSE) concluded that the cost of each time bank member would average £450 per year, but the economic value of each member’s contributions would exceed £1,300.

The relative lack of published quantitative evidence on the projected savings that time banks will create may have something to do with them not being yet widespread. But with the urgency our nation faces to cut health care costs, there is, seemingly, great potential in time banks. But as the Times writer noted, the evaluations of time banking perhaps need to focus more on monetary value outcomes so that the case for the economic impact of time banks can be more convincingly made.  With this kind of information, if available, perhaps a push can be made and the potential of time banks can be effectuated.

The CareMore Model and the Need to Better Coordinate Care for Dual Eligibles

In The Quiet Health-Care Revolution, an article by Adrian Slywotzky and Tom Main in the November issue of The Atlantic, the authors tell the story of CareMore, a for-profit company serving more than 50,000 elderly patients through 26 care centers located in Arizona, California, and Nevada.  Founded by Sheldon Zinberg, a gastroenterologist, CareMore was originally a group physician practice but it has since become a Medicare Advantage managed care plan.  As such, it is paid a capitated, risk-adjusted rate for each patient it serves, giving it a financial incentive to hold down costs.  Slywotzky and Main report that, through an emphasis on care coordination and creative “upstream” interventions, CareMore has improved outcomes, held down costs, and stayed in the black.

Each CareMore patient has a personal physician, called an “extensivist,” who ensures, with the help of an electronic medical record, that all of the members of the patient’s care team are communicating and coordinating with one another.  The extensivist is also charged with ensuring that the patient understands and is able to comply with his or her treatment plan.  One of Dr. Zinberg’s early decisions was that “noncompliance is our problem, not the patient’s.”  As a result, among other things, CareMore provides its patients with free-to-them transportation to medical appointments.

Going hand-in-hand with CareMore’s emphasis on coordination is a focus on “upstream” interventions. For a patient with congestive heart failure, a wireless scale transmits the results of her daily weigh-in to a clinic allowing fluid build-up to be caught early.  For a frail patient, “light muscle-training sessions and periodic toenail clipping” reduce the risk of falls.  And for a diabetic patient, aggressive treatment of a cut foot reduces the risk of infection and amputation.

How does all of this impact quality and cost?  Slywotzky and Main report that:

“CareMore, through its unique approach to caring for the elderly, is routinely achieving patient outcomes that other providers can only dream about: a hospitalization rate 24 percent below average; hospital stays 38 percent shorter; an amputation rate among diabetics 60 percent lower than average.  Perhaps most remarkable of all, these improved outcomes have come without increased total cost. …  CareMore’s overall member costs are actually 18 percent below the industry average.”

As with other, better known providers like the Mayo Clinic, whether the CareMore model is scalable is a question, one that may be answered in coming years because the company is growing and is likely to grow more after its purchase in August by WellPoint.

In a recently-released study conducted for AHIP–the industry group representing health plans–Kenneth Thorpe makes the financial case for enrolling more individuals, in particular those who are eligible for both Medicare and Medicaid, into health plans like CareMore that employ a coordinated, team-based approach to care.  As Thorpe explains, so-called “dual eligibles” are among the most chronically ill and therefore expensive of all patients, accounting, despite their relatively small numbers, for “36 percent of total Medicare spending and 39 percent of Medicaid spending.” In 2011, Thorpe writes, “the federal government–through Medicare and Medicaid–will spend over $230 billion on dual eligibles.” Currently, “[f]ewer than 2 percent of dual eligibles are enrolled in a coordinated care program that managed all Medicare and Medicaid covered benefits.”  Thorpe projects that if all dual eligibles were required to enroll in such a program, the federal government would save up to $125 billion and the states up to $34 billion over the next ten years.

Achieving better alignment of Medicare and Medicaid for the benefit of dual eligibles is not without its complications, of course.  Yesterday, AHIP issued a proposal reviewing key differences between the programs-including the nature and scope of covered services, eligibility and enrollment rules and procedures, provider networks and access requirements, and beneficiaries’ right to information and to appeal-and recommending ways to eliminate or work around them.  Among AHIP’s recommendations is that “States be given opportunities to share with the Federal government and with health plans, as appropriate, in savings generated through increased integration.”  As it stands, “it may be difficult for States to justify State investment in efforts to generate such savings, for example through programs intended to decrease acute hospitalizations or increase reliance on Medicaid-covered [i.e. partially State-funded] services.”

Man Robs Bank for Medical Treatment

We’ve talked often on this blog about the difficulties experienced by the uninsured. About the expenses associated with health care and how hard those expenses fall on some– how people eschew treatment because of cost, and even how a governor, by releasing two inmates, rid his state of the cost of care for dialysis and  possible transplant. Maybe the following is just a natural extension of the premise–or the flip side of the governor as a cost-shifting state benefactor in a down economy amidst rising healthcare costs.

A 59-year-old former truck driver took it upon himself, with the tools available to him, to engage in some cost shifting as well. In need of medical care and unable to afford it– and seemingly unwilling to bankrupt himself or his family through medical expense– he robbed a bank.

After losing his truck driving job of 17 years and a short lived driving job thereafter, James Richard Verone, who took a job as a convenience store clerk in a failed attempt to make ends meet, entered into a Gastonia, N.C. bank and, with a note, demanded of the cashier the sum of $1 and some medical attention. He then told the teller he would sit and wait for the police.

The convenience store job, apparently, took its toll on Verone. Yahoo News reports that

But Verone’s body wasn’t up to it. The bending and lifting made his back ache. He had problems with his left foot, making him limp. He also suffered from carpal tunnel syndrome and arthritis.

Then he noticed a protrusion on his chest. “The pain was beyond the tolerance that I could accept,” Verone told the Gaston Gazette. “I kind of hit a brick wall with everything.”

Verone knew he needed help–and he didn’t want to be a burden on his sister and brothers. He applied for food stamps, but they weren’t enough either.

So he hatched a plan. On June 9, he woke up, showered, ironed his shirt. He mailed a letter to the Gazette, listing the return address as the Gaston County Jail.

“When you receive this a bank robbery will have been committed by me,” Verone wrote in the letter. “This robbery is being committed by me for one dollar. I am of sound mind but not so much sound body.”

Mr. Verone is being held awaiting trial under a charge of larceny. As of last week, he was scheduled to see a doctor this week. Mr Verone is said to have observed, “If you don’t have your health you don’t have anything.”

Why Reduce Health Care Costs?

One rare point of elite consensus is that the US needs to reduce health care costs. Frightening graphs expose America as a spendthrift outlier. Before he decamped to Citigroup, the President’s OMB director warned about how important it was to “bend the cost curve.” The President’s opponents are even more passionate about austerity.

Journalists and academics support that political consensus. Andrew Sullivan calls health spending a “giant suck from the rest of the working economy.” Gregg Bloche estimates that “the 30% of health care spending that’s wasted on worthless care” is “about the price of the $700 billion mortgage bailout, squandered every year.” He calls rising health spending an “existential challenge,” menacing other “national priorities.” Perhaps inspired by Children of the Corn, George Mason economist Robin Hanson compares modern medicine to a voracious brat:

King Solomon famously threatened to cut a disputed baby in half, to expose the fake mother who would permit such a thing. The debate over medicine today is like that baby, but with disputants who won’t fall for Solomon’s trick. The left says markets won’t ensure everyone gets enough of the precious medical baby. The right says governments produce a much inferior baby. I say: cut the baby in half, dollar-wise, and throw half away! Our “precious” medical baby is in fact a vast monster filling our great temple, whose feeding starves our people and future. Half a monster is plenty.

But when you scratch the surface of these sentiments, you have to wonder: is the overall level of health care spending really the most important threat facing the country? Is it one of the most important threats? There are many ways to raise revenue to pay for rising health costs. Aspects of the Affordable Care Act, like ACOs and pilot projects, are designed to help root out unnecessary care.

I am happy to join the crusade against waste. But why focus on total health spending as particularly egregious or worrisome? Let’s explore some of the usual rationales.

Terrible Tax Expenditures and Suspect Subsidies?

Employment-based insurance gets favorable tax treatment, and much Medicare and Medicaid spending is drawn from general revenues. So, the story goes, medicine’s big spenders don’t have enough “skin in the game.” Once health and wealth are traded off at the personal level (as the Harvard Business School’s Clayton Christensen advocates), people will be much less likely to demand so much care. Government can attend to other national priorities, or individuals will enjoy higher incomes and will be free to spend more.

I respect these arguments to a point, but I worry they partake of the “nirvana fallacy.” If I could be certain that leviathan would repurpose all those wasted health care dollars on infrastructure, or green energy, or smart defense, or healthier agriculture, I’d be ready to end tax-advantaged health insurance in an instant. But I find it hard to imagine Washington going in any of these directions presently.

Giving tax dollars back to taxpayers also sounds great, until one processes exactly how unequal our income distribution is. In 2004, “the top 0.1% — that’s one-tenth of one percent — had more combined pre-tax income than the poorest 120 million people.” To the extent health-related taxes are cut, very wealthy households may see millions per year in income gains; the median household might enjoy thousands of dollars per year. Sure, middle income families will find important uses for those funds (other than bidding up the price of housing and education). But at what price? What if the insurance systems start collapsing without subsidies, and more physicians (who are already expressing a desire to work less) start seeking out pure cash practices? A few interactions with the the very wealthy may be far more lucrative than dozens of ordinary appointments.

Consider the math: billing a $20,000 retainer from each of 50 millionaires annually may be a lot more attractive to physicians than trying to wrangle up 500 patients paying $2000 each—or, worse, getting the money from their insurers. There are about 10 million millionaires in the US; that’s a lot of buying power. One $10,000 score by a cosmetic dentist from such a client could be worth 400 visits from Medicaid patients seeking diagnostic procedures. Providers are voting with their feet, and a Medicaid card is already on its way to becoming a “useless piece of plastic” for many patients. Given those trends, simply reducing health care “purchasing power” generally risks some very troubling outcomes for the very people the health care cost cutters claim to protect. No one should welcome a health care plutonomy, where the richest 5% consume 35% of services, regardless of how sick they are.

Is Anyone Underpaid in Health Care?

Health commentators rightly draw attention to big insurer CEO paydays. Top layers of management at hospitals and pharma firms are also getting scrutiny. Wonks are up in arms about specialist pay. Read more

Medicaid Incentives for Healthy Behavior: Turning That Cigarette Back Into Cold Hard Cash

The Centers for Medicare and Medicaid Services (CMS) recently announced a $100 million program through which states can reward Medicaid enrollees who adopt healthy behaviors. The grant program is part of the Patient Protection and Affordable Care Act and allows states to offer incentives for tobacco cessation, controlling or reducing weight, lowering cholesterol or blood pressure, and avoiding the onset of diabetes or improving management of the condition. The goal of the program is prevention, as spending on chronic conditions is said to account for more than 75 percent of annual healthcare expenditures in the U.S.

According to CMS Administrator Dr. Donald Berwick,

With the right incentives, we believe that people can change their behaviors and stop smoking or lose weight. Not only can preventive programs help to improve individuals’ health, by keeping people healthy we can also lower the nation’s overall health care costs.

States are not limited to direct cash incentives– proposed plans could include waiving premiums, deductibles and coinsurance payments, or offering coupons or gift certificates for weight management classes or tobacco cessation counseling.

CMS has based the program on data suggesting a short-term change in behavior when people are offered monetary incentives. Current research shows that while people may be internally motivated to make healthier decisions because of future consequences, they don’t often weigh those delayed outcomes with the immediate reward of engaging in the behavior. For example, knowing that smoking increases lung cancer risk 20 years from now isn’t always going to stop someone from smoking a cigarette. The benefit of monetary incentives is therefore their immediacy– they replace one unhealthy reward with another less harmful one. In short, CMS is betting that someone would put down that cigarette right now if you just paid them to.

But the experience of making healthy decisions seems to align more with what Mark Twain opined in Following the Equator,

He had had much experience of physicians, and said “the only way to keep your health is to eat what you don’t want, drink what you don’t like, and do what you’d druther not.

Though an individual may make a healthy choice now because they would prefer a cash incentive, that doesn’t automatically change their instinctual behavior. Someone could theoretically be convinced to take a grocery store gift card instead of buying a fast food dinner, but that does not change how much they enjoy the taste of a cheeseburger. In many circumstances, people engage in certain behaviors simply because they like to. For this very reason, critics are quick to point out that monetary incentives are unlikely to spur long-term changes in unhealthy habits. Critics also note that there is little research on whether these incentives will be successful in the Medicaid beneficiary population.

What may redeem the initiative from these criticisms is that CMS is candidly calling it a  ”demonstration program,” designed to figure out which strategies produce long-term behavioral changes. By allowing states to develop their own programs and keep data on the experience, CMS seems to be hedging its bets, wagering that at least one program will provide a successful model. Further, CMS can use the data to evaluate other factors such as the administrative costs incurred by states in rendering the programs.

Could $100 million federal grant dollars be used to support preventative health in a different way? Of course. But as long as this money is being set aside to incentivize healthy behavior, we may get an answer to whether external motivators spur long term behavior change. I, for one, would love to know just how much money it costs to convince someone to stop smoking, or to consistently trade in that Big Mac for some broccoli. It almost has to be cheaper than what we’re doing right now.

Reform Rodeo

1. 10 Most Wanted: Taking a page out of the FBI’s playbook, HHS’s Office of Inspector General is now publishing a top ten list — with pictures – of the most wanted health care fraud and abuse fugitives.

1. Straight to the Source: Jonathan Cohn discusses what Richard Foster — the chief federal actuary for Medicare — thinks about the chances that health care reform will hold down costs.

2. Individual Mandate Mandatory? NPR has a story investigating whether health reform could be implemented without the individual mandate.

3. Dartmouth Research Questioned: Maggie Mahar discusses a recent Institute of Medicine report which posits that in some circumstances,  an increase in health care spending may lead to better outcomes.

4. Value-Based Purchasing: The Health Care Economist has an interesting post detailing Oregon’s experience with value-based purchasing.

Jonathan Blum, CMS Deputy Adminstrator, Speaks on ACOs

We’re waiting for the Department of Health and Human Services to release proposed regulations on Accountable Care Organizations.  This site has previously discussed the potential good and bad of ACOS (see here, here, and here).   I attended a conference last week at which an innovative model of “Medicaid ACO” was discussed.  The Medicaid ACO would be authorized in New Jersey under a bill pending before the NJ Legislature.  It is an exciting idea that will attempt to reach the poor and vulnerable who often lose out in health reform programs.  The godfather of the Medicaid ACO project is Jeff Brenner, about whom Atu Gawande recently wrote in the New Yorker.   (subscription required)    I’ll be blogging about the New Jersey bill in a future post.  The conference was funded by the Nicholson Foundation and presented  by the Health Care Quality Institute.

Speaking at the conference was Jonathan Blum, Deputy Administrator and Director of the Center for Medicare at CMS.  In discussing “Accountable Care Organizations and the Affordable Care Act,” Blum was in the difficult position of speaking about a topic of great interest, while not being able to discuss the contents of draft regulations that are no doubt nearing completion. Nevertheless, he made some interesting points that I’ll pass along.

Blum’s talk focused on policy positions that are driving HHS as it drafts the regulations.  The overriding policy positions he described included:

• The ACO regulations will not be “one size fits all.” He emphasized that CMS will be looking for innovative models, with different payment systems, and with different “on ramps” to formation and approval. He emphasized that CMS is interested in models that serve “safety net populations,” as CMS wants to ensure that the poor and underserved get the same opportunities as “suburban” folks. The primacy (at least in order of presentation) was welcomed by the NJ folks, whose model is directed to Medicaid recipients.
• The orientation, consistent with much of the ACO literature, is “patient first.” He distinguished this orientation from one that would see ACOs as a means for powerful interests to gain market share. That tension is, of course, evident in the ACA’s ACO provisions, as has been pointed out most eloquently by Tim Greaney. Blum described CMS as being focused on care systems’ sensitivity to patient and family concerns, and with payment programs oriented to health care “journeys” and not episodes.
• Clinical quality is key. CMS will focus on outcomes measurements “much more” than in the past. It will be interested in particular in quality measurements and patient experience.
• He spent a fair amount of time emphasizing that CMS does not regard the ACO program as static. CMS will constantly review payment and quality issues, with an eye toward updating oversight and program requirements. It will use payment incentives to drive quality improvements. He indicated that there is some tension between CMS’s interest in having quality be data-driven in ACOs with its insistence on protecting patient confidentiality and privacy issues. CMS is interested in encouraging patient advocacy efforts to support continued emphasis on patient privacy and confidentiality.
• In response to a question, Blum recognized the substantial tension between the ACO model’s emphasis on improving quality and reducing cost through organization of care on one hand, and the ACA’s continued embrace of patient choice of provider on the other. He indicated that this tension might best be addressed by ACOs and their constituent providers creating a sufficiently attractive delivery model that patients will want to be involved — exclusively. (Reaching this goal would clearly require unprecedented patient education efforts.)

The Q & A following Blum’s presentation was predictably frustrating on both sides, as could be anticipated in connection with a talk about not-yet-finalized regulations.  He recognized several outstanding issues that he was not at liberty to discuss, but which had been occupying those drafting the regulations, including:

• Will physicians be able to join more than one ACO? CMS is apparently considering different rules for primary care physicians and specialists, although Blum acknowledged that such overlapping provider networks will make the computation of “gain” difficult when gainsharing is implemented.
• Blum, although asked, would not bite on the question of “who will lead” (physicians or hospitals). He anticipates a variety of models, but stressed that no ACO would flourish without physician buy-in.
• The question of geographic exclusivity for ACOs engendered a similarly noncommittal response. Blum acknowledged the conceptual difficulties presented by such overlap, but also pointed to the negative implications of exclusivity on the robustness of competition.

So, it was an interesting discussion of general principles, whetting our appetites to see how HHS will “square the circle” — or circles — in the upcoming regulations.

Donate a Kidney and Get Out of Jail

I can’t read another paean to Mississippi Gov. Haley Barbour for granting a release from imprisonment to Gladys Scott on condition that she “donate” a kidney to her sister.

The Scott sisters were sentenced to life 16 years ago for an armed robbery that yielded them $11. The women will be eligible for parole in 2014.

Civil rights advocates have sought the two women’s release for some years, arguing that their sentences were excessive.

Barbour’s decision has been hailed by the NAACP President and CEO as “a shining example of the way a governor should use the power of clemency.” A primary reason cited by Barbour for his decision is that sister Jamie’s dialysis is costing the state a lot of money. According to Gladys Scott’s attorney, the idea that she donate a kidney to her sister was her own, which is why he included it in the petition for release.

While available reports do not provide sufficient facts for robust legal-moral analysis, this story raises issues that should give us pause.

First and foremost, I am concerned on Gladys Scott’s behalf that a kidney donation is in neither her short- or long-term best interests – I can only wonder whether her own health makes her an ideal donor after serving a 16-year prison sentence.

We don’t know what led to Jamie’s end-stage renal disease, but it is crucial that Gladys know what her own risk for the disease is before she gives up a healthy kidney. Will her physicians feel comfortable recommending against the surgery if her long-term prognosis is poor – would such a decision result in the revocation of the prison release, or is the release contingent upon a medical “OK” for the procedure?

Compromise

To what extent will the transplant physicians be required to compromise their own ethical duties to the health of these women to accommodate their desire for freedom?

Hopefully, Barbour’s release decision depends upon Gladys’ willingness to be considered as an organ donor, as opposed to her having to actually go through with it.

While I believe it possible that Gladys wishes to donate her kidney to save her sister’s life, the conditions under which she has made this decision are hardly ideal to voluntariness, which our law normally dictates is a necessary condition precedent to organ donation.

These women have been incarcerated their entire adult lives, and have likely made very few decisions on their own behalf, much less life-and-death ones.

Other doubts haunt this scenario. If indeed the Scott sisters merited a suspension of their sentences because they are excessive, then the governor should have made his decision for that reason, thereby enabling the women to resolve how to proceed in addressing Jamie’s kidney failure in the context of their private lives, without state compulsion and outside the glare of the media.

I hope they have significant and stable support upon their release – in addition to undergoing a significant medical procedure, they may not be well-prepared for successful reentry even in the best of circumstances.

Barbour cites the opportunity to save the state health costs by releasing the sisters to pursue the transplant. If the transplant is both a cost-effective and humane alternative to dialysis (which I believe it is) why wasn’t it allowed during the sisters’ incarceration?

While the state may be expecting to save money for the sisters’ health care, it is presumably Medicare that will be covering the cost of the transplant and the extremely expensive post-surgical anti-rejection drugs that Jamie will require (although Jamie’s eligibility for Medicare will likely be fraught with hurdles).

Thus, a large part of the state’s motivation here seems to be the chance to shift Scott from the state’s Medicaid roll to the federal government’s Medicare program.

A fragmented system

While this might work out in the end for the Scott sisters, it represents yet another perversity of our fragmented health care system.

The Scott sisters must be wonderfully excited about their imminent release, and the possibility of saving Jamie’s life, and I am pleased for them.

I am less excited, however, about Barbour’s decision becoming a precedent for other governors.

This article originally appeared in The Record, New Jersey’s most awarded newspaper.

Obama Signs Provision Contrary to Fraud Enforcement Trend

On December 15, 2010, President Obama signed the Medicare and Medicaid Extenders Act of 2010 (the Medicare Physician Pay Fix Bill).  In addition to its one-year delay of a 25% cut in Medicare reimbursements to physicians, the act repeals § 6502 of the Patient Protection and Affordable Care Act which would have become effective on January 1, 2011.  This move stands in stark contrast to a recent trend toward increased individual liability, specifically the increased exclusion of individuals from federal healthcare programs for fraud and abuse violations.

Enforcement Trends

The federal government, through the Department of Health & Human Services Office of the Inspector General (OIG), has increased its focus on individuals, with exclusions for fraud and abuse violations.  As previously reported, OIG released an internal advisory document on October 20, 2010, setting out nonbinding factors for permissive exclusions under § 1128(b)(15) of the Social Security Act.  The new Guidance changed the permissive exclusion standard to a quasi-mandatory standard, by creating a presumption in favor of exclusion when an individual exercises ownership, operational or managerial control over a sanctioned entity and there is evidence that such individual knew or should have known of the prohibited conduct.

OIG swiftly acted on the new Guidance by excluding Marc S. Hermelin, Chairman of the board and majority shareholder of K-V Pharmaceutical.  As a result, K-V announced on November 17, 2010 that Hermelin had resigned and agreed to divest himself of all K-V stock.  On December 7, 2010, Gregory E. Demske, Assistant Inspector General, announced that the exclusion of Hermelin was “preview of things to come.”

Further, on November 9, 2010, former GlaxoSmithKline Vice President and Associate General Counsel Lauren Stevens was charged with obstruction of justice and making a false statement in response to a Food and Drug inquiry.  Michael W. Peregrine, with McDermott Will & Emery LLP, told BNA that, “the Stevens prosecution is a piece of a broader puzzle based in part on the responsible corporate officer doctrine and reflects the government’s heightened interest in fostering individual accountability and that is consistent with other recent attempts by prosecutors to target individuals they believe are responsible for corporate misconduct.”

Section 6502

Section 6502, which was repealed on December 15, would have continued the trend toward increased individual liability.  It would have mandated state Medicaid agencies to exclude an individual or entity that “owns, controls, or manages” a Medicaid-participating entity that:

• Has delinquent, unpaid Medicaid overpayments
• Is suspended or excluded from participation in Medicaid, or
• Is affiliated with an individual or entity that has been suspended or excluded from participation in Medicaid

The Medicaid exclusion authority of § 6502 is different than § 1128(b)(15) of the Social Security Act.  Unlike § 1128(b)(15), which provides for permissive exclusion from all federal health care programs,  § 6502 would have provided for mandatory derivative exclusion from Medicaid only.  Laurence Freedman, an attorney with Patton Boggs told BNA that “this mandatory Medicaid exclusion needed to be repealed to avoid a broad, and I believe, unintended impact.  It would have reached former executives or board members of excluded subsidiaries, for example.”

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