Triage for U.S. healthcare: Families USA's Stop the Bleed campaign

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In the United States today, as rising healthcare costs for individuals and government alike approach a crisis point, major systemic change enacted by legislation feels utopian. Behemoths stalk the healthcare landscape: Mega-insurers control major PBMs, large numbers of physician practices, and tech tools to maximize billing; hospital systems dominate their regions; pharmaceuticals maximize pricing power over fractured payers; private equity firms roll up major physician specialist practices within target markets and dominate target services like hospice and dialysis.

These powerful actors deploy our corrupt campaign financing rules to deter elected officials from both parties from enacting legislation that would fundamentally threaten their current revenue sources. A single-payer system, or a strong public option available to all, or a national system of all-payer rate-setting, are not likely to happen this side of revolution (including, on the hopeful side, political revolution).

In tacit acknowledgment of those facts, Families USA has launched Stop the Bleed — almost literally a triage campaign to provide some cost relief to the people of this country. The campaign invites healthcare advocates — and anyone who wants to sign up — to ask candidates for electoral office from both parties and at any level what they propose to do to control healthcare costs.

A question for healthcare economists (update)

I have a question for healthcare economists. Bear with me through a few bullet points to get there. [Note update at end: there's an answer of sorts in Kenneth Thorpe's analysis of Bernie Sanders' plan.]

• It's well known that the U.S. pays far more for healthcare -- per capita, per procedure, and as percentage of GDP --  than any of its developed-world peers. According to the OECD, the US spent 16.4% of GDP on healthcare in 2013. The next highest spenders, Holland and Switzerland, spent 11.1% of GDP.
  
• A main reason, if not the driving reason, is that in the U.S. healthcare payers are fragmented, diminishing their buying power. Private insurers and self-funded employers pay rates that may average 150-160% of Medicare rates.
  
  

Did Obama read Atul Gawande? - cont.

Last week, I wondered whether Obama had read Atul Gawande's eureka-inducing article on why U.S. healthcare costs are so high, noting that Obama cited Gawande's chief example of a care center where costs are low and outcomes excellent, the Mayo Clinic, while highlighting before a Senate audience the imperative to reduce dramatic variations in costs among different communities.

Had I done my homework, I would have known that the answer was "yes" -- or more precisely, that Obama's brain on healthcare, Peter Orzag, not only read read Gawande, but went to town blogging on Gawande's conclusions and in particular on Gawande's spotlight on McAllen TX, the low income town with one of the highest per capita Medicare tabs in the country. On May 28, Orzag noted that Gawande's tale of two healthcare markets richly illustrated his own theme that some markets pay dramatically more for healthcare than counterparts, with no apparent benefits. Then, on June 4, he delved deeper into McAllen's high costs, comparing them with his own favorite poster child for low costs/good outcomes, Grand Junction, CO:

For example, at the end-of-life, nearly half of all McAllen Medicare patients see 10 or more physicians, significantly more than the national rate of 30 percent (and in Grand Junction, Colorado, it is just 11% – more than four times less than the rate in McAllen). Also, McAllen’s Medicare patients have 50 percent more cardiac surgery procedures as the national average (about 24 per 1000, versus about 16 per 1000), four times the ambulance spending during end-of-life, and eight times the home health care costs. Medicare spending per enrollee in the last two years of life also varies greatly among McAllen and other peer hospitals.

This week, Orzag was at it again, converting Gawande's core contrast into a policy mantra:

It’s certainly true that medical innovation is essential to improving treatment – and thus health outcomes – for us all. And it’s also true that we need to encourage doctors and researchers to explore and experiment in ways that lead to medical advances that save lives and improve their quality. But, today, the American health care system doesn’t always reward the best medical innovations – and one need look no further than McAllen, Texas to see that this is so.

Despite having a demographic profile similar to El Paso, Texas, and despite having had similar Medicare expenditures as El Paso as recently as 1992, McAllen’s spending grew about five times faster in the years since than in either El Paso or the United States as a whole. In return, McAllen got more medicine (more tests, more surgeries, more time in waiting rooms), but it didn’t get better health – McAllen scores lower than El Paso (and the U.S. average) in measures of health care quality. McAllen "innovated," and certain doctors and hospitals were financially rewarded, but I think we can all agree that this isn’t the kind of innovation we desire.

To get the most from innovation, we need to align incentives toward quality rather than intensity. The Mayo Clinic, synonymous the world over with cutting-edge medicine, has among the country’s lowest Medicare costs per beneficiary. Smaller medical markets, too, have managed to achieve such results: Grand Junction, Colorado is one of the lowest-cost and highest-quality places in the country to be treated. We need to reform the health care system so that it rewards the right kind of innovation – the Mayos, not the McAllens. And the Administration’s proposals aim to do precisely that through bundling of payments, incentives to reduce hospital readmission rates, and (as discussed below) a process through which MedPAC’s recommendations would enjoy fast-track protections in Congress (my emphasis).

Obama is singing from the same choir book. As in his June 2 address to senators, so in his June 2 letter to Senators Kennedy and Baucus, he highlighted the Mayo Clinic, replicating Gawande's thesis in the process:

We should ask why places like the Mayo Clinic in Minnesota, the Cleveland Clinic in Ohio, and other institutions can offer the highest quality care at costs well below the national norm. We need to learn from their success and replicate those best practices across the country (my emphasis).

Compare Gawande:

Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina—all of which have world-class hospitals and costs that fall below the national average. If we brought the cost curve in the expensive places down to their level, Medicare’s problems (indeed, almost all the federal government’s budget problems for the next fifty years) would be solved. The difficulty is how to go about it. Physicians in places like McAllen behave differently from others. The $2.4-trillion question is why. Unless we figure it out, health reform will fail.

Among other cost-cutting measures, Obama also called for "'accountable care organizations'" to improve the quality of care for Medicare patients - apparently a bid to create the kind of outcomes-focused peer group Gawande highlighted in the Mayo Clinic.

Not to mix up cause and effect: Orzag has seized on Gawande's field research because it so precisely illustrates his own pet theses. But still it's remarkable to see that high quality piece of research and writing working its way so swiftly into the political process.

Updates:
Did Obama read Atul Gawande part 3
Orzag hones in on doctors' incentives

Did Obama read Atul Gawande?

It looks like Barack Obama read Atul Gawande last week.

Gawande's article in last week's New Yorker examining why healthcare is so expensive in the U.S. drew eurekas from hosts of readers. The main culprit, Gawande's exhaustive look at one of the country's most expensive healthcare markets suggests, is paying doctors by the procedure and thus creating financial incentives for prescribing expensive treatments. Gawande's Exhibit A is McAllen, Texas, where Medicare spends twice as much per capita as it does down the road apiece in El Paso. The reason seems to be that doctors in McAllen infected one another with an "entrepreneurial spirit":

One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.

“Medicine has become a pig trough here,” he muttered.

Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.

Gawande's Exhibit B is the Mayo Clinic, where those incentives have been neutralized:

The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.

“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.

No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.

Now listen to Obama, addressing Senate Democrats working on healthcare reform (as excerpted by Jonathan Cohn):

I want to just make mention of something that I've talked to many of you privately about. I want to say this publicly. As we move forward on health care reform, it is not sufficient for us simply to add more people to Medicare or Medicaid to increase the rolls, to increase coverage in the absence of cost controls and reform. And let me repeat this principle: If we don't get control over costs, then it is going to be very difficult for us to expand coverage. These two things have to go hand in hand. Another way of putting it is we can't simply put more people into a broken system that doesn't work.

So we've got to reform the underlying system. And this means promoting best practices, not just the most expensive practices. And one of the things I'm going to be discussing with the health and the finance committees is how can we change incentive structures so that, for example, places like Mayo Clinic in Minnesota are able to provide some of the best health care services in the country at half or sometimes even less of the costs than some other areas where the quality is not as good. What we should be--and by the way, that's not just unique to Mayo. The Cleveland Clinic in Ohio, same thing: top-notch quality, lower costs.

Now, the Mayo Clinic's success is not exactly a secret, and Peter Orzag, Obama's budget director, is one of the country's foremost experts on healthcare costs. So maybe this exhortation didn't come straight out of Gawande. But it's hard to shake the impression that the article was in Obama's mind.

UPDATE: Peter Orzag, Obama's healthcare brain, has been all over the Gawande article.

"Why healthcare costs so much"

Andrew Sullivan has a series of blog posts, Why healthcare costs so much, in which various blind men describe their part of the elephant. Atul Gawande, writing in the current New Yorker, has the answer -- beyond a shadow of a doubt:

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

Gawande focuses on McAllen, Texas, a poor community that is one of the most expensive healthcare markets in the country. In McAllen, he learns, an "entreprenuerial spirit" has become the dominant culture among doctors:

One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.

“Medicine has become a pig trough here,” he muttered.

Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.

The antidote, unfortunately, is not readily apparent. Creating the right incentives -- or unwinding the wrong ones -- is complicated. Some institutions have done so by creating systems in which doctors essentially oversee each other and the institution holds itself collectively responsible for outcomes. Some, like the Mayo clinic, produce excellent outcomes at low cost. But how to replicate their successful cultures is not yet clear:

McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering....

This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of care—to reduce our uncertainty about which systems work best for communities.

Deflation nation?

Most Americans lucky enough to own any assets have lost - and are still in process of losing - a significant portion of their wealth in the current crisis. Home values will probably have dropped at least 30-40% before bottoming out. People with half their savings in stock funds have lost in the neighborhood of 20% since the fall 2007 peak-- often more, since most bond funds lost too, and most managed funds have outpaced the broad indexes in the downward dive. Those lucky enough not to have lost jobs or gotten seriously ill probably have lost/will lose about quarter of their nominal net worth.

At the same time, wealth is a fluid and relative thing. What we've lost -- if it doesn't reach the level of something that massively impacts current life, like a home or health -- won't be clear for a long time, and may even turn to gain, if we build on more sustainable foundations. That is, if our collective wealth is more equitably and efficiently shared, if we succeed in reforming education and rebuilding effective public safety nets and fostering innovation in sustainable industries. . Life is long, as Salman Rushdie characters bent on revenge like to say -- and so are our economic biographies.

One large set of variables in assessing economic losses is the potential upside of deflation, broadly understood. Deflation, as officially defined by economists, is both a very bad thing -- perhaps the main precondition of a true Depression -- and relatively modest in percentage terms. Like headline inflation over the last two decades, any official deflation we undergo is likely to register in low single digits.

But headline inflation has not captured a far more rapid inflation in the "Three H's" of economic well-being -- homes, higher education, and healthcare. Add to those high costs the increase of major risk in middle class American life -- job loss, loss of health insurance (or loss of adequate health insurance), loss of defined benefit pensions -- and we've clearly suffered a major "inflation" in the sense that solvency and security are more difficult to obtain than they were a generation ago. The convergence and bursting of our several debt bubbles has made it clear that much of our national wealth was illusory.

If real inflation has outstripped officially measured inflation, perhaps a more broadly understood deflation, enabled in part by good policy, will not only far outstrip any official cost-of-living deflation (or co-exist with official inflation), but actually make prosperity and security more attainable. The linchpins of economic well-being should become relatively easier to obtain:

• Housing: In my New Jersey suburb, 20 miles from New York City, small starter homes scraped $600,000 in 2005. How could even affluent young couples afford, say, a $550,000 mortgage? Probably by taking on some exotic interest-only loan, with the rate escalating in 2-3 years - taken on the assumption that the couple could then either refinance or trade up, financing a more expensive home with profits from the first one. In a year or two or five, that same starter home may cost $400,000 or less, with a mortgage -- if the couple can obtain one -- at a fixed rate under 5%.
• Higher education: I've never really understood the massive runup in college costs, topping out today at over $50,000 per year at prestigious private colleges. Today it's hard to imagine schools, themselves slammed by the fiscal crisis, lowering costs. What should improve fast, though, is the disgustingly exploitive privatization of the student loan business, whereby schools have steered students into loans with opaque terms and usurious rates, sometimes scraping 20% for students in trade schools training for relatively low-wage professions. Expanded opportunities to trade tuition aid for service commitments should also help to bring college within reach for many. At the same time, a swift, massive cultural shift away from all kinds of spending, stemming from economic hardship, should at least slow tuition inflation.
• Healthcare: Effective health insurance reform that provides affordable coverage for the uninsured and mandates adequate coverage of catastrophic costs will halt an enormous source of wealth destruction for Americans. If we can't get this done, and at least bring our healthcare costs and outcomes to the levels enjoyed by most advanced democracies, there's simply no hope for continued American prosperity. Can we afford it in the midst of the economic meltdown? As Obama asked in a Dec. 11 press conference: How can we afford not to?
  
• Debt and consumption: Harsher bankruptcy laws were supposed to discipline borrowers. Now, a massive wave of bankruptcies is disciplining lenders. In hard times, people will take on less discretionary debt and save more. That's bad for the economy short-term, but it will mean less money spent on debt service for many Americans. Debt servicing aside, spending less money on what you don't need makes you wealthier. And while vast numbers of Americans have been driven deep into debt and bankruptcy by circumstances beyond their control, such as uninsured or underinsured illness, there's no doubt that we've all been culturally inclined to spend more than we need to on nonessentials.
  

I've always daydreamed occasionally about being offered fairy tale choices, such as Achilles' choice between a long and happy or short and glorious life. One such imagined supernatural game show question that I posed to myself at various points in the election cycle: would you give up, say, a quarter of your worldly wealth to see Obama elected? That is, to have a shot at this country rolling back the shredding of our civil liberties, belligerent adventurism abroad, growing economic inequality at home, accelerated global warming, etc. etc.? Framed as a purely economic choice: would you stand for a drastic downward revaluation of your assets this year, as part of a national and indeed worldwide revaluing and rebalancing, forcing national and international efforts to restructure on a more sustainable footing? To get even deeper into the realm of nonsensical cosmic planning, this time from a future vantage: was it worth eight years of Bush to get us to Obama?

What's the point of framing up supernatural pseudo-choices? Only to get somehow at this: democracy's saving grace is the capacity to self-correct. In the past, the country has recovered from horrendous mistakes to move on toward renewed prosperity, and, as Obama likes to say, progress toward a more perfect union. The election suggests that American democracy has retained that capacity for self-correction. Will we be able to dig ourselves out the hole we've dug. Obama says "yes we can." For this long lovely moment, the country seems disposed to agree.

Clive Crook hazards a false moral on healthcare

Scouting the Obama healthcare plan for leaving employer based health insurance intact, Clive Crook succumbs to a Republican "ownership society" shibboleth. He'd have us believe that the runup in healthcare costs is driven mainly by consumers:

The real problem is slowing the remorseless trend of future growth. Until healthcare consumers are made to think about costs, that may be impossible. Consumers resist constraint because they think employers are paying for their health insurance; in fact, of course, workers are paying through lower wages.

In fact, the runup in healthcare costs is mainly driven by the incentive structure for doctors, who are paid by the procedure and have financial incentives to order costly tests and treatments (and the negative incentive of defensive medicine, thanks to our litigiousness); by drug companies, which deploy multiple means of bribing doctors to prescribe expensive (and often unproven) new medications, and who have lobbied their way to nearly unchecked pricing power; by insurers, who waste half of doctors' time with insanely arcane claims procedures and cherry-pick the healthiest patients; by the legions of uninsured, whose uncompensated care adds nearly a thousand dollars to the average family healthcare premium; and by the massive failure of our swiss cheese system to deliver preventive care.

It is counterproductive and immoral to induce people to access less healthcare by creating strong financial incentives to eschew treatment. In fact that's just what we do: there are tens of millions of people in this country halving their medication doses, going years without dental care, and avoiding visits to specialists they can ill-afford. You can't have adequate preventive care when every visit demands a consequential financial outlay.

Far from overconsuming healthcare, even Americans with insurance are increasingly underinsured. As reported by Jacob S. Hacker in The Great Risk Shift (2006):

Among insured Americans, 51 million spend more than 10 percent of their income on medical care. One out of six working-age adults are carrying medical debt,and 70 percent had insurance when they incurred it...nearly six in ten of the underinsured postponed needed medical care because of the cost, nearly four in ten had to put off home or car maintenance or repairs due to medical expenses, a third had to dig deep into their savings to pay for medical care, and more than one in five made job-related decisions based mainly on their health care needs. Strikingly, the median family income of the underinsured was $58,000--almost exactly the same as the median income of those with adequate coverage.

Crook has fallen victim to the Republican fallacy that adequate, affordable care creates "moral hazard" -- that patients will gorge themselves on on an open medical buffet if every item is not a la carte. In our healthcare system, the players morally at hazard are doctors who earn more if they prescribe more services, insurers who earn more by cherry-picking customers, and drug companies that earn more by turning doctors into shills. In the U.S., patients' hazard is physical and financial, not moral.

Belief among healthcare economists and policymakers that freedom from paying substantial fee-for-service sums leads patients to inefficiently overuse healthcare services rests largely on the famous RAND Health Insurance Experiment (HIE), a study of consumers provided with varying forms of health insurance over an extended period of time. The RAND HIE, begun in 1974 with results published in 1987 and 1993, purported to find that those in plans where they paid no fees for individual services used more healthcare than those in fee-for-service plans but did not enjoy any measurable health benefits as a result. In other words, the additional care accessed by those for whom services were "free" was effectively wasted.

This conclusion was effectively debunked in an analysis by John A. Nyman, published in October 2007 in the Journal of Health Policy, Politics and Law. Noting that all participants in HIE had the option of dropping out at will and returning to the health plan they held prior to the experiment, Nyman reported that sixteen times as many participants dropped out of the fee-for-service plans as out of the free plans. Since participants were given a financial incentive to remain in the experiment, the inescapable conclusion is that those who dropped out of the fee-for-service plans did so because they became seriously ill or were injured badly enough to need expensive care. In Nyman's analysis, "moral hazard" is exposed as essentially another word for "risk sharing." Those who need expensive healthcare access it if it is not financially prohibitive; those who don't need expensive procedures subsidize those who do. That's what insurance is for.