• Medicaid Worsens Your Health? That’s a Classic Misinterpretation of Research

    The following originally appeared on The Upshot (copyright 2017, The New York Times Company). It was coauthored by Aaron Carroll and Austin Frakt.

    As a program for low-income Americans, Medicaid requires the poor to pay almost nothing for their health care. Republicans in Congress have made clear that they want to change that equation for many, whether through the health bill that is struggling in the Senate or through future legislation.

    The current proposal, to scale back the Affordable Care Act’s Medicaid expansion and to cap spending each year, would give incentives to states to drop Medicaid coverage for millions of low-income Americans. It would offer tax credits toward premiums for private coverage, but those policies would come with thousands of dollars in new deductibles and other cost sharing. Despite the much higher out-of-pocket costs, some policy analysts and policy makers argue that low-income Americans would be better off.

    To take one highly placed example, Seema Verma, the leader of the agency that administers Medicaid, recently cited studies questioning the program’s effectiveness and wrote that the health bill “will help Medicaid produce better results for recipients.”

    What is the basis for the argument that poor Americans will be healthier if they are required to pay substantially more for health care? It appears that proponents like Ms. Verma have looked at research and concluded that having Medicaid is often no better than being uninsured — and thus that any private insurance, even with enormous deductibles, must be better. But our examination of research in this field suggests this kind of thinking is based on a classic misunderstanding: confusing correlation for causation.

    It’s relatively easy to conduct and publish research that shows that Medicaid enrollees have worse health care outcomes than those with private coverage or even with no coverage. One such study that received considerable attention was conducted at the University of Virginia Health System.

    For patients with different kinds of insurance — Medicaid, Medicare, private insurance and none — researchers examined the outcomes from almost 900,000 major operations, like coronary artery bypass grafts or organ removal. They found that Medicaid patients were more likely than any other type of patient to die in the hospital. They were also more likely to have certain kinds of complications and infections. Medicaid patients stayed in the hospital longer and cost more than any other type of patient. Private insurance outperformed Medicaid by almost every measure.

    Other studies have also found that Medicaid patients have worse health outcomes than those with private coverage or even those with no insurance. If we take them to mean that Medicaid causes worse health, we would be justified in canceling the program. Why spend more to get less?

    But that is not a proper interpretation of such studies. There are many other, more plausible explanations for the findings. Medicaid enrollees are of lower socioeconomic status — even lower than the uninsured as a group — and so may have fewer community and family resources that promote good health. They also tend to be sicker than other patients. In fact, some health care providers help the sickest and the neediest to enroll in Medicaid when they have no other option for coverage. Because people can sign up for Medicaid retroactively, becoming ill often leads to Medicaid enrollment, not the opposite.

    Some of these differences can be measured and are controlled for in statistical analyses, including the Virginia study. But many other unmeasured differences can skew results, even in studies with such statistical controls. The authors of the U.V.A. surgical study and of studies like it know this, and say as much right in their papers. They practically shout that the correlations they find are not evidence of causation.

    That hasn’t stopped policy makers and others in the media from asserting otherwise.

    Other approaches to studying Medicaid more credibly demonstrate the value of the program. The most straightforward way is a prospective randomized trial, which gets around the subtle biases that plague studies that use only statistical controls. There has been exactly one randomized study of Medicaid, focused on an expansion of the program in Oregon.

    Because demand for the program exceeded what Oregon could fund, in 2008 the state introduced a lottery for Medicaid eligibility. A now famous analysis took advantage of this lottery’s randomness, finding that Medicaid increased rates of diabetes detection and management, reduced rates of depression and lowered financial strain. It did not detect improvements in mortality or measures of physical health, but it did not have enough sick patients or enough time to detect differences we might have expected to see. In other words, it was not powered to detect changes in mortality or physical health.

    Saying that this study proves Medicaid doesn’t work ignores this limitation. Regardless, there was nothing to indicate that having Medicaid worsened health.

    Another way to tease out the causal effect of Medicaid is to look at variations in Medicaid eligibility rules across states. With respect to health outcomes, these state decisions are effectively random, so they act like a natural experiment. Older studies based on this approach, using data from the 1980s and 1990s, have not found that Medicaid causes worse health.

    Findings from more recent studies looking at expansions in enrollment, in the 2000s and then under the Affordable Care Act in 2014, are consistent with older ones. One can argue that Medicaid can be improved upon, but the credible evidence to date is that Medicaid improves health. It is better than being uninsured.

    Here’s another telling way to test the idea that Medicaid is harmful. Some of the studies that associate Medicaid with worse health, as compared with private insurance, also find the same association with Medicare. No one argues that Medicare is making people sick.

    A very recent New England Journal of Medicine review by Ben Sommers, Atul Gawande and Kate Baicker found that Medicaid increases patients’ access to care and leads to earlier detection of disease, better medication adherence and improved management of chronic conditions. It also provides people with peace of mind — knowing that they will be able to afford care when they get sick.

    Research is clear on how people react when asked to pay more for their health care, as the Senate would ask many of those now on Medicaid to do. As the Congressional Budget Office reported, many poor people would choose not to be covered, because even if they could afford the premiums with help from tax credits, deductibles and co-payments would still be prohibitively expensive. No studies prove that removing millions from Medicaid in this way would “produce better results for recipients,” at least as far as their health is concerned.

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  • The mystery of back surgery’s variable popularity

    The following originally appeared on The Upshot (copyright 2017, The New York Times Company). It was jointly authored by Austin Frakt and Jonathan Skinner. It also appeared on page A3 of the February 14, 2017 print edition. Click through to the original post to see a video of changes in geographic variation in back surgery rates over time.

    You might think that once drugs, devices and medical procedures are shown to be effective, they quickly become available. You might also think that those shown not to work as well as alternatives are immediately discarded.

    Reasonable assumptions both, but you’d be wrong.

    Instead, innovations in health care diffuse unevenly across geographic regions — not unlike the spread of a contagious disease. And even when studies show a new technology is overused, retrenchment is very slow and seemingly haphazard.

    Back surgery is a great example. In the early 1990s, when John Wennberg’s Dartmouth Atlas of Healthcare first started tracking treatment rates among older Medicare users, back surgery was relatively uncommon; 1992 rates were as low as one case per thousand in cities as diverse as New York and Johnson City, Tenn.

    By 2006, average rates of back surgery had increased to 4.9 per thousand. The procedure had spread rapidly across the Northern Plains and Mountain States. Growth was especially significant in certain cities elsewhere — like Lubbock and Harlingen, Tex. Yet rates in New England and some parts of the Midwest had barely budged.

    Even as back surgery’s popularity as a treatment for back pain began to rise in the 1990s, there was little solid evidence of its effectiveness. It wasn’t until 2006 that the first large randomized trial on the subject was published.

    That study showed relatively modest benefits of surgery for many conditions that lead to back pain. While many patients felt better after a year, so did a nearly equal proportion of people in the control group who didn’t have surgery. However, years before that evidence was available, some regions had adopted back surgery at a high rate, while others had not.

    The rates of back operations performed in hospitals began to flatten after 2006, but little was known about growth in the treatment in outpatient clinics, the same-day facilities with greater convenience and lower costs. Recently, Brook Martin and Sandra Sharp, two Dartmouth researchers funded by the National Institute of Aging, tracked outpatient as well as inpatient procedures through 2014. The finding: Rates of Medicare back surgery had grown 28 percent since 2006, with no decrease in regional variations; rates in 2014 ranged from 3 per 1,000 in the Bronx to 11.5 per 1,000 in Casper, Wyo.

    The puzzling thing is why back surgery became more popular in certain broad regions, but not in others. Why, for example, did rates grow so rapidly in the Northern Plain states while rates in New England barely budged?

    Our best guess comes from a study by Harvard and Dartmouth researchers, not on back surgery, but on cardiac treatments. It found that regional variation in Medicare spending is associated with variation in physician preferences for intensity of cardiac treatments, and to a greater degree when the evidence is ambiguous. Patient preferences exerted almost no influence. It’s likely that the pattern holds for back surgery, too, though it has not been studied in the United States.

    It’s tempting to conclude that there are simply regions where the intensity of care of all types is higher — that some regions invest in all of the latest shiny technologies, while others don’t. This is too simple; Miami and McAllen, Tex., the two most expensive regions in the United States for overall Medicare spending, also clock in with among the lowest spine surgery rates. Instead, we see what Mr. Wennberg calls a surgical signature: Casper Wyo., has the highest back surgery rate in the country, but its cardiac bypass surgery is well below the national average.

    This puzzling pattern once again points toward idiosyncratic physician beliefs. Orthopedic surgeons in a particular hospital may be more aggressive, while the cardiologists there are less so.

    Though we can’t say this is the answer with 100 percent certainty, we can rule out some other explanations. One is how much surgeons are paid. Since Medicare pays the same price for the procedure (adjusted for cost of living) across the country, prices can’t explain the paradox. The high rates in Denver could also be explained by back pain sufferers who flock to star surgeons and well-known hospitals there, but this doesn’t hold water either. The way the statistics are compiled, if a medical tourist traveled from Des Moines to Denver, the Medicare record keepers would assign that operation back to the tourist’s home in Iowa.

    Maybe it’s differences in health. Perhaps areas with rapid growth in back surgery were those where more people had back pain. Yet northern New England retirees had similar histories of hard physical labor in farming, lumbering and manufacturing, and were no more affluent than their counterparts in the Northern Plains states.

    Another explanation might be that patients prefer surgery in some regions of the country. One study observed large variations in back surgery across small regions in Ontario, but these weren’t explained by patient preferences. That study, like others, found physician beliefs about the benefits of surgery were associated with surgical variations.

    If physicians are driving back treatment choice, even for procedures not supported by evidence, what can be done? One approach is to provide patients with unbiased information about the potential benefits and risks of back surgery relative to nonsurgical therapy so they can make informed choices. But the concern remains that for people in intense pain, when the doctor says that “I get good results with surgery, and my patients generally feel much better,” the back surgery option, with little out-of-pocket cost, will be hard to resist.

    Another option is for hospitals or insurance companies to audit outlier physicians, as in a recent example of a back surgeon with a pattern of unusually high billing. In his audit, nine of 10 procedures were deemed not medically necessary.

    A third option is to push people toward high-quality back surgery centers. Walmart created a network of high-quality spine centers for its employees that includes Virginia Mason Hospital in Seattle and the Mayo Clinic. It charged hefty co-payments to anyone getting surgery outside the network. The company found about a third of referrals didn’t need back surgery.

    Often discussed, the big challenge in health care is to reduce spending by cutting wasteful care. It seems just as important, though, not to let more waste creep in as it did with back surgery. Once it spreads widely, it’s very hard to undo.

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  • Premium support is back. What is it?

    The following, jointly authored by Aaron Carroll and Austin Frakt, originally appeared on The Upshot (copyright 2017, The New York Times Company). It also appeared on page A3 of the January 31, 2017 print edition.

    A number of Republican health care policy proposals that seemed out of favor in the Obama era are now being given new life. One of these involves Medicare, the government health insurance program primarily for older Americans, and is known as premium support.

    Right now, the federal government subsidizes Medicare premiums — those of the traditional program, as well as private plan alternatives that participate in Medicare Advantage. The subsidies are established so that they grow at the rate of overall per enrollee Medicare spending. No matter what Medicare costs, older Americans can be sure that the government will cover a certain percentage of it. That’s the main thing that panics fiscal conservatives, because that costs the government more each year.

    Premium support could quiet that fear. Subsidies would be calculated so they don’t grow as quickly, thus protecting the federal government (that is, taxpayers) from runaway spending. There are lots of variants, but there are really two principal ideas.

    The first is to set the subsidy to a level established by the market, as opposed to one established by the government, as it is now.

    One way to do that is to tie the subsidy to the average premium of all Medicare plans, including that of traditional Medicare. This is how the Medicare drug program, Part D, already works. For Part D, Medicare collects bids from all plans that reflect their costs of providing the required, minimum level of drug coverage. Then it sets the subsidy at 74.5 percent of the average bid.

    Beneficiaries pay the difference, which will be higher for more costly plans that may offer more generous benefits, and lower for cheaper plans. The system also includes additional subsidies for low-income beneficiaries.

    The thinking is that the market drives the subsidy. Because insurance companies want to attract more enrollees, they are motivated to drive their bids downward, driving subsidies downward as well and saving taxpayers money.

    If this sounds somewhat similar to how the subsidies for the Affordable Care Act marketplace plans work, it’s because it is similar. Obamacare ties the premium subsidy to the second-lowest premium instead of the average. If an enrollee wants a plan with more benefits but at a higher premium, he or she would pay the difference, not the government.

    But even though the approach is similar to Part D — which was passed by a Republican Congress and signed into law by a Republican president — and the A.C.A. marketplaces — established with only Democratic support — it does not have bipartisan endorsement.

    That’s just one more example of how congressional actions and attitudes on health care reform are inconsistent. Republicans think subsidies based on bids is an excellent way to reform Medicare, but they don’t laud the Affordable Care Act for adopting the same approach. When it comes to the A.C.A., of course, Democrats supported this mechanism, but they’ve opposed it when it comes to Medicare reform.

    Obamacare’s creation of the insurance exchanges and subsidies to expand coverage was a move leftward, supported by Democrats and opposed by Republicans. Anything that relies more heavily on private Medicare options would be a move rightward, and it would probably be opposed by Democrats and supported by Republicans. Such is Washington.

    It’s worth noting that progressives are also concerned that this plan might erode traditional Medicare. It could do that because, for a variety of reasons, private plans are likely to bid lower than traditional Medicare. If people have to pay more for traditional Medicare, relative to private plans, they’re likely to leave it, weakening that arm of the program.

    The second main idea included in some premium support plans is to further protect the government from rapidly growing expenditures by explicitly capping the growth in subsidies. This could be layered on top of the bidding approach. It would work like this: Plans bid, and the government picks the average or second lowest. Then the government makes sure it doesn’t pay a predetermined amount more than last year — a growth cap.

    This kind of cap on subsidy growth is an even more contentious issue. As anyone who follows health care spending knows, it has grown significantly faster than inflation for the past several decades. Putting a more restrictive cap on growth will make budget projections look better. The problem is that such action assumes that there are ways we haven’t previously figured out to reduce Medicare spending without reducing benefits, reducing reimbursement or increasing cost-sharing.

    Progressives fear that, given our inability to control health care spending in other ways, this would most likely wind up transferring more and more of the cost of health care onto older Americans themselves. Many would be unable to afford care. The same problems we’re seeing with underinsurance and cost-related access barriers in the private insurance market could become more prevalent.

    The entire point of premium support is to rely on the market to innovate and come up with more efficient ways of providing health care and health insurance for it. As such, one cannot say in advance how it would keep costs below a growth cap.

    Some people deride this as “market magic,” and it’s easy to see where they’re coming from. It’s not crazy, however, to think that care could be better managed to produce good outcomes more efficiently, at least to some extent. This, in fact, is the theory underlying some of the Affordable Care Act’s reforms, like accountable care organizations.

    But the bottom line is this: With premium support, no one can be certain how things will work out. As we consider any premium support approach, we will need to acknowledge that one of the easiest ways to cut premiums is to shift more health care costs to older Americans.

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  • Executive actions Trump could take to change the ACA

    This post was coauthored by Nicholas Bagley and Adrianna McIntyre. 

    The executive order President Trump signed on Friday does not have any immediate policy effect, but it does call attention to the wide range of administrative actions that a Trump administration could take to change the Affordable Care Act—all without legislation from Congress.

    We’ve compiled a list of those actions. It’s not exhaustive; there is a lot more a Trump administration could do. Nor do we mean to suggest that these actions would be legal. Declining to enforce the individual mandate, in particular, would be problematic, although the Trump administration might seek cover from dubious enforcement decisions made by the Obama administration (like the “like it, keep it” fix and employer mandate delays).

    Whether and which actions a Trump HHS chooses to pursue will depend on the administration’s willingness to gamble the stability—already quite fragile, in some states—of the individual market. And it will depend, too, on what Congress is willing to do through legislation. If Congress wipes out the individual mandate, for example, there’d be no need to change the rules governing hardship exemptions.

    Individual insurance market

    • End the cost-sharing payments to insurers.
    • Narrow the essential health benefits rule.
    • Refuse to settle the risk corridor litigation.
    • Change the rules governing risk adjustment.
    • Reduce reinsurance payments to insurers.
    • Expand or curtail hardship waivers from the individual mandate.
    • Decline to enforce the individual mandate.
    • End the “like it, keep it” fix.
    • Alternatively, expand the “like it, keep it” fix to exempt a wider range of plans from insurance rules.
    • Limit special enrollment periods.
    • Reduce insurer assessments for participating on HealthCare.gov.
    • Make it easier for online brokers like eHealthInsurance to sell subsidized coverage.


    • Allow work requirements, premiums, and more cost-sharing under 1115 waivers.
    • Allow states to limit how long beneficiaries can be continuously enrolled in the program under 1115 waivers.
    • Permit more states to use Medicaid dollars to subsidize private exchange coverage.


    • Expand the reach of the contraceptive mandate accommodation (currently available to religious nonprofits and closely-held for-profit companies).
    • Striking contraception from the list of women’s preventive services, or eliminating women’s preventive services altogether.
    • Delay enforcement of the employer mandate.
    • Delay enforcement of taxes on the insurance, pharmaceutical, and medical-device industries.
    • Eliminate the Hill fix.
    • Delay enforcement of the Cadillac tax in 2020.
    • Allow commingling of savings for 1115 and 1332 budget neutrality calculations.
    • Adjust the guidelines for 1332 waivers.
    • Adopt rules under section 1333 to enable more flexible cross-state insurance sales.
    • Pull the plug on mandatory (or voluntary) demonstration projects through the Innovation Center.
    • Curb nondiscrimination protections, which the Obama administration interpreted to cover gender identity.

    @nicholas_bagley & @onceuponA

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  • Consequences of repeal and delay

    The following originally appeared on The Upshot (copyright 2016, The New York Times Company).

    Republicans in Congress will soon be able to repeal Obamacare, as they have long wished to do. The Upshot’s health care columnists, Aaron E. Carroll and Austin Frakt, discuss the possibilities — the practical and the political.

    Austin: Though they could change their minds, members of the Republican majority in Congress have said they want to repeal portions of the Affordable Care Act very early in the Trump administration. They’d target key provisions like premium and cost-sharing subsidies; the individual mandate; and various taxes that finance the expansion of coverage.

    Instead of repealing these immediately, they will probably delay the repeal so it takes effect in a few years. During that time, they would work (or could work) to develop a replacement plan, possibly with the involvement of Democrats, though that is highly uncertain.

    To some people, that might sound like a prudent course of action: to delay major changes so there is time to provide another way for people who rely on Obamacare to get health insurance.

    But such a delay is also necessary, because congressional Republicans have not yet coalesced around a replacement plan. That’s not a big surprise because, until now, there was never a reasonable prospect of repeal, so getting specific about replace wasn’t necessary. Also, developing a coherent replacement plan involves challenging policy trade-offs and political risks. It will take considerable time for it to come together.

    Aaron: I think the prudence goes even further than that. I’ve seen no proposal for repealing the A.C.A. that doesn’t result in a major disruption of health insurance. Such disruptions are usually extremely unpopular. It’s unlikely that Republicans want to see an electorate mobilized like we saw in the 2010 midterms after the passage of the A.C.A.

    Delaying any changes until 2019 or later means that no changes will go into effect until after the 2018 House and Senate elections. No one will yet feel the pain of having to change insurance or providers. Republicans can go into their campaigns claiming to their base that they met their promises to repeal Obamacare without actually having to deal with any repercussions. They could also theoretically claim a mandate for continued change if they retained power.

    This isn’t too much different than how the Democrats delayed the implementation of much of the A.C.A. until after the 2012 presidential election. Of course, that didn’t protect them from the backlash they felt in 2010. It’s not clear that delaying would completely shield Republicans either. There are other potential downsides from this plan.

    Austin: By downsides, you’re probably thinking of how uncertainty associated with delay will affect health care markets and providers. Think about the major stakeholders:

    Insurance companies considering offering marketplace plans might wonder if the investment in the market is worth it. If the A.C.A. will go away — and with any replacement uncertain — perhaps they’ll decide to wait and see. Likewise, insurers already offering plans might decide not to continue to do so since it’s not so clear there’s a future in it.

    Hospitals will worry about whether they’ll see an increase in uninsured patients who are unable to pay for their care. That would certainly happen under repeal and is likely to happen under the types of replace plans Republicans are considering, which cover fewer people. Additionally, if some markets are left without plans because all insurers withdraw, hospitals will also experience greater demand for uncompensated care.

    Drug and device companies will also worry about potential loss of revenue if fewer people are covered in the future and, therefore, cut back on care and prescriptions.

    Finally, states that have expanded Medicaid might retrench, worried they’ll be left with the full costs of expansion once repeal goes into effect. And, states that haven’t expanded are more likely to hold off. Again, why invest in a program that’s going away?

    None of this is good for patients and consumers who just want affordable coverage and accessible care. Are there other downsides I’ve not mentioned?

    Aaron: It’s the downsides on the patient end that I think are being ignored most of all. Sure, this would be bad for insurance companies, hospitals and device and drug companies. But I think the largest group hit would be the 20 million people who could stand to lose their insurance overnight if repeal kicked into gear without a replacement plan ready to go. Can you imagine the turmoil if people with chronic illnesses are constantly worried about losing their plans?

    Speaking as someone with a chronic illness, which I’ve written about before, the thought of losing my insurance would keep me up at night. If my child was ill, I’d be even worse off.

    I think we could even get into a situation where people are delaying life decisions until this is resolved. Some women on an A.C.A. plan might put off getting pregnant as long as there’s a chance that they could lose their insurance and not be able to get on a new plan because pregnancy is now a “previously existing condition.” I don’t think it’s crazy to believe that repeal and delay could have a noticeable impact on the birthrate in this country.

    Austin: We’re in agreement that even repeal with delay would be very disruptive, and possibly harm health care markets and consumers. If we’re right — and we’re far from the only ones predicting this — do you think there’s a chance Republicans wouldn’t follow through, or that they’d wait for a replacement plan before repealing?

    Aaron: I really can’t see them waiting long to pass something. They’ve been campaigning on this for so long that I think they probably feel they have to act pretty fast. There’s so much work needed to get a replacement plan done, scored and passed that I think something like repeal and delay is a real possibility.

    Call me a pessimist, but I think this could also turn into a long-term problem for Congress and the country. Back when we lived under what was called the “sustainable growth rate,” we had to go through a “doc fix” scare every six months to a year as it looked as if Medicare reimbursement rates were going to fall off a cliff. Instead of fixing the problem, Congress just kept kicking the can down the road and letting doctors and hospitals freak out every so often that the world was going to fall apart. (After more than a decade, the “doc fix” issue was finally resolved last year.)

    I think the health care system can sustain more panic than many believe. I also think kicking the can down the road is one of Congress’s specialties.

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  • The problem with one-size-fits-all health insurance

    The following originally appeared on The Upshot (copyright 2016, The New York Times Company). It is jointly authored by Nicholas Bagley and Austin Frakt and appeared on page A3 of the December 6, 2016 New York Times print edition.

    A co-worker struggling to make ends meet comes to you with a problem. The price of admission to a dear colleague’s retirement party at an upscale establishment is beyond her means, though not yours.

    You both feel obliged to attend. She’d rather bring some refreshments to a conference room than spend what she cannot afford on a lavish event. You like the idea of a grand send-off for your retiring colleague. There can be only one party.

    A similar, underrecognized conundrum arises in health insurance. Both you and your less fortunate co-worker are obliged under the law to obtain coverage (which you both want anyway).

    But you differ in what you’d prefer to pay for. A high-level manager who makes, say, $200,000 per year is probably willing and able to pay more for health care than someone who makes $50,000.

    Unfortunately, neither person really has a choice because the plans all cover “medically necessary” care, meaning any care that offers a clinical benefit. That includes lots of expensive and technologically sophisticated care that is no better, or only slightly better, than cheaper alternatives. You may be just fine paying for high-tech care of marginal value. For your colleague of more modest means, it’s a stretch.

    Consider, for example, treating prostate cancer with proton-beam therapy. It’s more expensive than alternatives like intensity-modulated radiation therapy, but isn’t proven to be any better. If given the choice, many people — especially those with lower incomes — might rather buy health insurance plans that exclude high-cost, low-value treatments.

    The trouble is that insurers rarely sell those sorts of plans. Even insurers that try to exclude a particularly expensive and unproven technology from coverage are often rebuffed by legislatures and the courts.

    This one-size-fits-all approach to insurance coverage disproportionately hurts low-income people, many of whom might reasonably prefer to devote their scarce dollars to housing or their children’s education. To some extent, subsidies and other monetary adjustments can mitigate this problem. Medicare and Medicaid, for example, are financed in large part out of federal income taxes. And within the Affordable Care Act marketplaces, lower-income people receive subsidies that cover some of their costs.

    People who receive coverage through their employers, however, don’t get that kind of help. Perversely, employer-sponsored health insurance is more highly subsidized for the rich than the poor. The subsidy comes in the form of an exclusion of health-insurance premiums from taxation. Since income tax rates are progressive — that is, the rich pay a higher rate of income tax than the poor — lower-income families get less of a benefit.

    But both high-wage and low-wage workers at the same company are effectively forced into the same plans. To qualify for the tax exclusion, federal law requires that companies offer the same plans to all or most of their employees, with no consideration for the variable demand for health care. Employees then pay for their fringe benefits by taking home lower wages — and a flat, across-the-board cut in wages burdens low-wage workers disproportionately.

    In theory, the labor market could adjust in ways that might lessen the problem: Low-income workers, for example, could demand higher wages for being forced into plans that are more expensive than they’d prefer. These would have to be made up by reducing the wages of high-income workers, something it’s not clear they would accept. There’s no evidence that labor markets actually work this way.

    “The notion that labor markets perfectly offset the varying preferences for health insurance among workers by giving higher wages to those who value health insurance less is a comforting but crazy idea,” said Amitabh Chandra, a Harvard economist.

    The problems with one-size-fits-all insurance run deeper. In some insurance markets, like those for small businesses in Massachusetts, employees across companies are pooled together and pay the same premium. A recent report from the Massachusetts attorney general showed that workers in companies that receive health care at less expensive hospitals effectively subsidize those at comparable companies who receive care at more expensive ones.

    The uniformity of insurance plans also affects the pace and composition of technological innovation. To extend our party metaphor, if everyone — even those who preferred simpler events — were effectively forced to pay for any retirement party, regardless of how lavish, we’d see, and pay for, retirement parties of ever-escalating extravagance.

    In much the same way, medical innovators respond to the size of the market for new technologies. The fact that health plans routinely cover all medically necessary care sends an “if you build it, we will pay for it” signal. Innovators are not getting the right signals, the right incentives, to develop high-value or cost-saving treatments. It’s more lucrative, instead, to develop pricey new therapies, even if they offer only marginal clinical benefits. The result is lots of new treatments that don’t provide much bang for the buck.

    Those new treatments pose a continuing challenge to efforts to bend the cost curve. Economists have long known that technology is the primary driver of escalating health expenditures. Indeed, in 2012 medical technologies that were not offered a decade earlier accounted for almost a third of Medicare spending delivered by physicians and outpatient hospital departments.

    What’s to be done? Managing technological innovation would require us to consider policy changes that would have been unthinkable a generation ago. “The tax code could be restructured to make extravagant health insurance less appealing,” Mr. Chandra suggested. Employers might then offer health plans that appealed more to low-income workers.

    The Cadillac tax on expensive health plans, which is scheduled to go into effect in 2020, is a step in that direction, but according to Mr. Chandra doesn’t go far enough. And it is unpopular across the political spectrum. Other ideas — like incorporating cost-effectiveness criteria into Medicare and private plan coverage criteria — are sure to prompt disagreement.

    Contentious solutions they may be. But as the cost of health care and health insurance rises, it won’t be a party for politicians feeling more pressure from consumers.

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  • Will Obamacare be repealed? If so, what then?

    A version of the following originally appeared on The Upshot (copyright 2016, The New York Times Company). It also appeared on page A3 of The New York Times print edition on November 22, 2016.

    The election of Donald J. Trump gives the Republicans in Congress a chance to act on their often-stated desire to get rid of Obamacare, a wish that Mr. Trump mostly says he shares. Aaron E. Carroll and Austin Frakt, our health policy columnists, discuss: Then what?

    Aaron: I think it’s safe to say few in Congress thought they’d have this opportunity. But like the proverbial dog who has finally caught the car, after untold futile attempts, Republicans have finally come within reach of repealing the Affordable Care Act. Now comes the essential question: Will they actually do it? They’ve been promising it forever, but I am still skeptical that it will happen. I believe you disagree. I’m going to let you go first. Why do you think they’ll do it?

    Austin: I think they’ll do it because they so thoroughly own the idea of repeal, having passed bills to repeal, partly repeal, delay or defund the A.C.A. in the House something like 60 times. Just the other day Senator Mitch McConnell endorsed repeal (again). The House and Senate also agreed to do so, in large part, in a budget reconciliation bill earlier this year. The only thing that prevented it was that President Obama vetoed it. I doubt Mr. Trump would do the same if given a similar opportunity.

    Now, I know that a budget reconciliation dismantling of the law is not a full repeal, because according to the rules it can only touch budget-related provisions. This excludes things like requiring insurers to take all comers for premiums that vary only by age and smoking status or preventing them from imposing coverage caps and lifetime limits, among other measures.

    I also must add that I’m much less confident of a repeal (or partial repeal) without agreement on a replacement. But I’ll turn it back to you, Aaron. Do you think the G.O.P. has to offer a full replacement to get its members to sign on to repeal? Or can it offer something that would cover fewer people and with fewer benefits?

    Aaron: I think they can get away with slightly fewer people and somewhat skimpier benefits, but not too much. There’s a part of me that thinks many in Congress were always so willing to vote for a “repeal” because they knew it had no chance of being signed into law. They got credit for the vote without ever having to face the downside. Actually repealing without replacing would mean effectively stripping more than 20 million people of their health insurance, without anything in return.

    This would be an unmitigated political disaster. The stories — of people with cancer, diabetes and more who were suddenly stripped of their insurance and left out in the cold — would very likely dominate our discussion for months. That leaves more than enough time to lead to significant repercussions in the 2018 midterm elections. With no Democratic leaders in any branch of government to blame, I think this would be akin to what happened in the 2010 elections, but in reverse.

    Now, if they can coalesce around a “replace” plan that doesn’t leave too many people out, then I think they could move forward. But in all the years since the A.C.A. was passed, Republicans haven’t been able to do that. Do you think they can? What do you think that plan would look like?

    Austin: One way to get from repeal to replace that minimizes immediate downside political risk is to pass a plan that doesn’t call for repeal for several years, at least after the 2018 midterms, though possibly after the 2020 election. Between now and then, there would need to be some kind of transition to whatever replaces Obamacare that didn’t just dump people off coverage with no alternative.

    But the alternatives could just be not as comprehensive or costly. Absolutely there will be bad stories. But keep in mind, there will be bad stories under Obamacare, too. Rocketing premiums, huge cost sharing and markets with few choices is not a recipe for political success. Republicans now own the task of fixing those things and doing so in a way that does not look as if they’re making Obamacare better.

    They’re actually in a tough policy spot. They’ll get the blame if they don’t fix or repeal the A.C.A., and they’ll get the blame if they don’t replace it with something people like better. Health policy is a very difficult and thankless task. I think they’ll opt for something they can call repeal and replace, but they could also just let Obamacare struggle and die. Neither looks good.

    One other way to get out from under the issue is to kick it to the states. Do you think a Trump administration, working with a G.O.P. Congress, will offer greater flexibility to states to design their own coverage plans that could diverge from Obamacare? If so, what are some ideas states might try?

    Aaron: I think it’s very likely those in Congress could punt Medicaid to the states. For years, they’ve been trying to change Medicaid funding to a block grant that they can then constrain over time. This will be enticing for them because it will allow them to reduce Medicaid spending in the future, while forcing states to make the tough decisions — and take the blame — for cuts in either beneficiaries or services.

    Fixing the markets for those who are getting health insurance through the Obamacare exchanges, though, is a different story. Without some sort of market regulation, which they’ve generally been opposed to, the same problems that existed pre-A.C.A. with respect to pre-existing conditions and individual ratings will exist. Many people will become uninsured. Annual and lifetime limits could reappear. Lots of people will have problems getting insured.

    Moreover, I have yet to be convinced that a significant number of Republicans in the House might coalesce around such a plan. Maybe for Medicaid, but I’m not sure about the exchanges. Even if they could, it’s likely the Democrats in the Senate would try to filibuster either of these plans. Don’t you think?

    Austin: Yes, I think Democrats would filibuster anything they could. The filibuster is not set in stone. A Senate majority can change it, and some are already calling for the G.O.P. to do so. But that doesn’t appearto be what the Senate will do — they’ll retain the filibuster. This could play to their favor, since they can propose things they like, let the Democrats filibuster them and take the blame when repeal kicks in with no replacement. Perhaps that’s another way for Republicans to get out of their political bind.

    Aaron: I’m sure we’ll have more to discuss as President Trump’s administration comes into power.

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  • Does Medicare Advantage save traditional Medicare money?

    The following is co-authored by Austin Frakt and Garret Johnson. Garret is a research assistant for Dr. Ashish Jha at the Harvard T.H. Chan School of Public Health, where he also works with Austin on Medicare Advantage studies. 

    The recent paper by Kate Baicker and Jacob Robbins estimates a spillover effect from Medicare Advantage (MA) to traditional Medicare (TM). The idea is that MA, through care management, influences patterns of care in such a way to reduce costs, which then affects the quality and costs of care for TM beneficiaries as well. (Prior posts on this kind of spillover here and here).

    We wanted to convey the estimates in the paper in a different way, one we find more helpful. Here, using their results, is the answer to the question, for the marginal dollar spent on MA, how much is saved in TM?

    • They find that $1200 in additional payment per MA enrollee per year yields 2.2 pct points higher MA market penetration.
    • They also calculate a $252 per TM beneficiary per year in spillover “savings” for every 10 percentage points in higher MA market penetration. (The savings come through more efficient use of hospital services, in particular shorter lengths of stay, mediated by a concurrent increase in less costly outpatient service use. Therefore, it’s not really immediate savings to Medicare since diagnosis-based Medicare hospital payments aren’t sensitive to shortening lengths of stay. But, longer term, perhaps these savings could be captured through changes in rate increases.)
    • Therefore, combining (1) and (2), for each $1200 per MA enrollee per year in additional payment there’s a $252 × (2.2/10) of spillover savings per TM beneficiary per year, or $55.44. Dividing, that’s $0.0462 of spillover per TM beneficiary for every $1 of payment for an MA enrollee.
    • There are a lot more TM beneficiaries than MA enrollees, so we need to scale these. At the midpoint of the authors’ study window (2005), MA had a market penetration of 13%, leaving 87% in TM. Multiplying these by the figures from (3), we get $0.040 of spillover per $0.13 in MA payment. That’s $0.31 of savings per $1 of payment.
    • The results of (4) is at the particular margin examined. Not every $1 of MA payment is associated with 31 cents of savings. Extrapolating out of sample, today, when the MA/TM enrollment split is 31%/69%, the savings is closer to 10 cents on the dollar. (This is just repeating the calculation in step (4), but with 31%/69% instead of 13%/87%.)

    There are lots of caveats:

    • We mentioned it above, but it should be emphasized that these figures only pertain to the time period (1999-2011) and range of MA payment (from about 5% to 15% above TM costs) and market penetration (9%-11.9%) examined. In particular, our out of sample extrapolation is not likely to be correct. We just did it to illustrate how the results change a lot as market penetration changes.
    • Related, the results above are for the marginal dollar spent on MA. What about all the other dollars? No doubt, some of them contribute toward TM savings, but some do not. In the paper, the authors estimate TM utilization as a quadratic function of MA penetration. For some lower range of penetration, MA is associated with higher per person TM costs (perhaps due to favorable selection into MA). Spillover effects probably taper off at a higher range of penetration, too.
    • What the total cost or savings of MA to TM is today, we cannot tell. We don’t even know if it’s net positive or negative. That estimate would require more estimation work and a bunch of assumptions.

    This is, on the one hand, interesting. Some MA spending is associated with a high degree of TM savings (31 cents on the dollar circa 1999-2011 is HUGE). To the extent that MA growth makes TM “cheaper” for taxpayers, then some amount of payment above TM rates to MA plans may be efficient. On the other hand, this is unsatisfying. We don’t really want to know if the marginal dollar spent on MA in, say, 2005 saved money. We want to know if, in total, MA is saving or costing money today. We just don’t know.

    @afrakt & @garretjohnson22

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  • Just marking the moment. It may not happen again.

    It has all the appearances of bragging, but really we’re just amazed and want to mark this moment. Who knows if it’ll happen again.

    On June 16, Austin and Aaron had the number 1 and 2 most emailed NY Times articles, among those published in the prior week:


    On June 22, Aaron and Austin had the number 1 and 3 most emailed articles, among those published in the prior month:


    What a great ride. Thank you, readers, for all your support.

    @afrakt and @aaronecarroll

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  • Beyond disclosure: How to think about conflicts of interest and the regulation of medical science

    This post is co-authored by Bill Gardner and Austin Frakt.

    The recent controversy about disclosure of conflicts of interest (see Bill here and here; Austin here and here) has called renewed attention to pervasive quality control problems in the scientific literature. We agree with Ian Roberts that

    the challenge is not to describe the flaws in the current system but to create a better one, where decisions about healthcare are informed by valid and reliable evidence.

    We also agree with Mick Watson that

    Open science describes the practice of carrying out scientific research in a completely transparent manner, and making the results of that research available to everyone. Isn’t that just ‘science’?

    How can we get serious about creating an open, valid, and reliable scientific literature?

    We recommend starting by acknowledging our moral response to the problem, and then putting it aside. It’s impeding our thinking. We’re struck by how often we hear that the problem in bias is the “corruption” of some researchers or the “perversion” of the research process. There are many contexts in which it’s important to view science in moral terms. But we doubt that focusing on the virtues or vices of researchers will get us much closer to a solution. Instead, we should think about what institutions and policies will advance scientific learning.

    In an ideal world, peer review of science should concern the evidence—data and methods—and the interpretation of findings in the light of existing knowledge. Facts about the authors ought to be extraneous. Aaron Kesselheim found that reviewers downgraded their ratings of the methodological rigor of clinical trials when they believed that the trials were funded by industry. That seems wrong: Consider how you would react if a study showed that reviewers downgraded their ratings of articles written by women, for example.

    But this is the real world, and you can also make a case that the reviewers in Kesselheim’s study were behaving rationally. We may want reviewers to evaluate a research report based on the data and methods, but authors can only document so much in a paper. Given the limits on what authors can document, there’s reviewer uncertainty about the quality of the evidence. Bayesian inference suggests that the more uncertain you are about the evidence, the more weight you should give to your prior probabilities concerning the credibility of a report’s authors. Therefore, the evidence that studies funded by pharmaceutical companies are biased toward the companies’ products would seem to justify some weight on a prior to distrust their research.

    In practice, though, humans may not compute like perfect Bayesians. We may use real or perceived COIs to over- or under-correct. So the better response, in the long-term, is to reduce our uncertainty about the data and methods. With less uncertainty about the evidence, priors about the authors would matter less and applied (or misapplied) less.

    There are several strategies for reducing this uncertainty that the scientific community has applied (though not uniformly) or could apply going forward (perhaps with some infrastructure development). These strategies include:

    1. Registration of trials and reporting of all registered analysis (or clear metrics of the extent to which they are not reported);
    2. Archiving of trials’ analytical data files (see BMJ‘s Open Data campaign and GlaxoSmithKlein‘s commitment to provide access to anonymized patient-level data);
    3. Archiving of statistical programming (reproducible research);
    4. Expert evaluation of study methods by an individual or individuals without conflicts of interest;
    5. A possible future extension of these strategies is: Archiving of the transformations required to generate the analytic data files.

    Pursuing these strategies would likely increase the transparency and reproducibility of research, the quality of scientific practice, and reduce uncertainty about its credibility and validity. To our knowledge, there are no scientific reasons not to pursue these strategies.

    But there are economic, psychological, and ethical reasons. For example, we can’t make data sets public unless we can make sure that research participants can’t be identified from them. We should also consider the costs in researchers’ time, attention, and resources in complying with more rigorous standards of documentation, with parallel costs to society in possible delay of projects. It is true that science requires a meticulous attention to detail. Nevertheless, humans have finite attention and limited capacities for decision making. More time and attention spent on documentation might mean less time spent thinking and reading.

    We should not take the existence of these potential costs as an excuse to do nothing about improving science and its credibility. We should do something while, reasonably, taking them into consideration.

    There are reasons to believe that improvements in technology and the self-regulation* of research will facilitate our ability to do better science without unduly burdening researchers or endangering research participants. We are more likely to develop those technologies and self-regulations if we frame our considerations more in terms of questions about how to improve the validity, reliability, and transparency of science, as well as the rate of scientific progress, rather than questions about the moral virtues of researchers.

    Disclosure of financial conflicts of interest should be retained as a necessary, though insufficient, tool of scientific integrity. But we must get beyond disclosure, and beyond our outrage over what we think it signals, to tighten up the process of science directly. In a world of competing interests, humans, unfortunately, do not always do good science by accident or because it’s the “right thing to do.” Science is important. We need to treat it as such, and tighten up our regulation of it.

    * “Self-regulation” means regulation by scientists, not the government. The scholarly community must find ways to adequately regulate itself, e.g., through a consensus about the requirements of publication in top (or all) medical journals. Having said this, we acknowledge that NIH requirements on grantees—which we support—are an interesting and important case in which a governmental body can advance open science.

    @Bill_Gardner and @afrakt

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