• What care for our pets tells us about health care for ourselves

    The following originally appeared on The Upshot (copyright 2017, The New York Times Company).

    In almost every year since the 1960s, health care spending has grown at least as fast as the overall economy, and often much faster. Health economists have long debated why.

    Strange as it may sound, how we care for our pets offers some answers.

    The pet care markets look a little like the market for human health care. Health spending by American households has grown 50 percent between 1996 and 2012. Pet care spending has grown by a similar amount, 60 percent, though from a much smaller base. (Americans spent more than $15 billion on pet health care in 2015, but $3.2 trillion on human health care.)

    An estimated 68 percent of households have pets; those families with higher incomes spend more, which is also true of human care. And they spend more toward the end of humans’ and pets’ lives alike.

    The supply of both physicians and of veterinarians has grown at a more rapid rate than overall employment. Since 1996, the number of physicians has grown by about 40 percent. The number of veterinarians is up 100 percent.

    “These commonalities made us think that something else may be behind the rapid growth in human health care spending,” said Amy Finkelstein, an M.I.T. economist and one of the authors of a recent study on pet care.

    She, along with her co-authors Liran Einav and Atul Gupta of Stanford, tried to find what that something else could be in their study on pet health care presented at the American Economic Association annual meeting in Chicago. “We often blame generous insurance and significant public sector involvement, but those are absent from pet care,” Ms. Finkelstein said.

    Some health economists say generous health insurance and significant government intervention in the health care market promote unnecessary spending. They note the United States spends more of its G.D.P. on health care than other similar advanced economies yet does not exhibit broadly better health outcomes, a sign of inefficiency. But other economists argue that health care is so valuable that we might reasonably spend even more on it than we do today.

    Which camp is right?

    The three economists pointed out that, in contrast with the market for human health care, there is much less government involvement in pet care.

    Pet health insurance is also much less common. More than 90 percent of Americans now have health insurance, an industry that has been with us since before World War II. But only 1 percent of dogs and cats are insured for pet care, a relatively new product. (According to the North American Pet Health Insurance Association, the first pet health insurance policy in the United States was written for Lassie, the TV dog star, in 1982.)

    So the economists’ focus turned to the commonalities. Human and pet health care are both provided by experts — doctors and veterinarians — who’ve undergone lengthy and expensive training and occupational licensing. That expertise commands high salaries. It also gives them the authority to recommend treatments and tests, the need for which most consumers cannot independently judge.

    You trust your vet as you would trust your doctor to do what is best, especially when an emotional decision is being made. Both human and pet health care are accompanied by strong emotions, making it hard to rationally weigh the value of options. Moreover, the need for care, whether it is for a pet or a human, is difficult to predict and often urgent, again threatening our ability and willingness to shop for the best deals.

    Technology plays a role, too. Complex procedures, new pharmaceuticals and high-tech imaging, which drive human health care spending, are no longer uncommon in pet care, increasing those costs.

    Though routine veterinary visits might cost pet owners only a couple of hundred dollars per year, a serious condition can be very expensive. A dog’s kidney transplant can run $25,000, and a cat’s cancer treatment can cost $10,000 or more. Even if such high costs are extremely rare, it is not as uncommon for a pet owner to encounter a $2,000 to $4,000 bill at some point, particularly near the end of a pet’s life.

    “It makes you think that the emotional nature of the treatment decision may be important in explaining high and sometimes heroic end-of-life health care spending,” Ms. Finkelstein said, “whether on your dog or on your mother.”

    If emotions are in fact driving the higher spending, will it hasten the trend toward more pet insurance? The pet health insurance industry is growing, with total premium volume up about 17 percent in each of the last two years. It’s one of the fastest-growing employee benefits; Delta Air Lines, Hewlett-Packard, Microsoft, U.P.S. and Xerox now offer it.

    The most common policies cover care for injuries due to accidents, as well as care for illnesses like arthritis or cancer, with monthly premiums starting around $22 for dogs and $16 for cats. But premiums can be higher depending on breed, age and where you live. Some other policies also cover preventive care, like vaccinations.

    In general, plans won’t cover pre-existing conditions, pregnancy and birth-related costs, or animals less than a couple of months old. Typically owners pay 20 percent of treatment costs, with plans picking up 80 percent, though some insurers offer other cost-sharing options.

    Is pet insurance a good deal? Consumer Reports explored its value last year and concluded it’s typically not worth the price. Only if your pet has very high care costs will insurance pay out more than you would pay in premiums. According to analysis by Ms. Finkelstein and her Stanford colleagues, nearly two-thirds of all pet care costs is spent by just 20 percent of households with pets. This guarantees that most policyholders won’t get back what they pay in. This is true of human health insurance, too, and for the same reason.

    But the point of health insurance — whether for humans or their pets — is to protect against the risk of catastrophically high costs, not to make money.

    Consumer Reports suggests an alternative when it comes to pet care: self-insuring. Many pet owners could probably build up several thousand dollars in an emergency fund that could be used to help cushion the blow of unusually high pet care costs. Saving enough to weather a serious, human medical condition that could cost tens of thousands of dollars year after year or more is not something most Americans could do.

    Though you might reasonably avoid pet care insurance, you really can’t do that with human health insurance. Human and pet health care may have some commonalities, but this isn’t one of them.

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  • JAMA Forum: Hospitals don’t shift costs from Medicaid to private insurers

    The Affordable Care Act (ACA) has allowed states to expand Medicaid. Medicaid pays hospitals prices that are lower than those paid by private insurers. Does this cause hospitals to charge private insurers even more to make up the difference, a cost shift?

    Nope. Read the details in my JAMA Forum post.


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  • AcademyHealth: An ACO performance update

    You’re busy. You don’t have time to analyze the data, but you want to know if ACOs are working. My latest AcademyHealth post is for you.


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  • The limits of price transparency

    The following originally appeared on The Upshot (copyright 2016, The New York Times Company). It also appeared on page A3 of the December 20, 2016 print edition.

    You probably know where to pump the cheapest gas and how to get price comparisons online in seconds for headphones and cars. But how would you find the best deal on an M.R.I. or a knee replacement? No idea, right?

    This lack of price transparency in health care has been cited as one of the reasons we spend too much on it. It’s easy to overpay. Health care prices vary tremendously. And there is no established relationship with quality.

    In Los Angeles and San Francisco, one analysis found, mammography prices vary by over a factor of five — from a low of $128 to almost $700. Prices for IUDs and lower-back M.R.I.s vary by a factor of three. An examination of Massachusetts health care prices found nearly a fourfold variation in M.R.I. prices. Despite these differences, even patients motivated to find the lowest price often can’t.

    That’s changing. Over half of the states have passed laws that either establish websites with health care prices or require plans, doctors and hospitals to disclose them to patients. Some employers and other organizations also provide health care prices to employees and the public.

    But improved transparency isn’t working as well as hoped. Health care pricing apps and websites don’t always help patients spend less.

    That’s the conclusion from a study published this year in The Journal of the American Medical Association. It investigated the effect of the Truven Treatment Cost Calculator, a website available to more than 21 million workers and their family members. It provides users with the costs — both the total price and the portion the user would be responsible for — from over 300 services, including various sorts of imaging, outpatient operations and physician visits.

    The researchers compared outpatient health care spending of about 150,000 employees who had access to the website with that of about 300,000 comparable employees who didn’t. (They did not examine inpatient spending because it is dominated by nonelective procedures that are not amenable to shopping.)

    Despite its features, the cost calculator wasn’t popular. Though 60 percent of employees with access to it faced a deductible over $500, only 10 percent used it in the first year of availability and 20 percent after two years. The study found that price transparency did not reduce outpatient spending, even among patients with higher deductibles or who faced higher health care costs because of illness.

    Study after study has showed the same thing. Health plans report that use of their price transparency tools is limited, with many enrollees unaware they exist. The vast majority of plans now provide pricing information to enrollees, but only 2 percent of them look at it. Aetna offers a price transparency tool to 94 percent of its commercial market enrollees, but only 3.5 percent use it.

    One study found that only 1 percent of residents of New Hampshire used the state’s health care price comparison website over a three-year period. Another study found that use of the price transparency platform Castlight Health was associated with lower payments for lab tests, advanced imaging and office visits. However, the study did not examine outpatient spending over all.

    Dennis Scanlon, a Penn State health economist, is not surprised. “Health care choices are different than most product and services,” he said. “Most decisions are driven by physician referrals, and insured patients usually face little variation in costs across options.”

    Another reason people may not price-shop for health care is that they could find the process too complex. Providing more information to consumers doesn’t always improve their decision making. In many settings, it can overwhelm a person and lead to poorer choices. It’s far easier to go on a recommendation, even if it costs more.

    And not every kind of health care is amenable to shopping. According to one analysis, only about 40 percent of spending on health care is. Patients can reasonably shop only for care that is for nonemergencies and would be motivated to do so only if they stood to gain. If patients’ out-of-pocket costs are the same at both a high-cost and low-cost doctor, what’s to prompt them to select the cheaper one? Insurance is paying for the difference anyway.

    Even consumers who use price comparison tools may select more expensive providers because they think higher health care prices imply higher quality, even if that’s often not the case. Yet only half of price transparency tools offered by health plans include information about quality. One study found that including easy-to-understand quality information alongside prices helped patients select higher-value care.

    But a 10-year study across 16 communities funded by the Robert Wood Johnson Foundation and published in the journal Health Services Research found that newly available reports comparing the quality of care of physician practices and physician groups had only a modest effect on the awareness and use of this information. Only about 5 percent of chronically ill people reported that they considered such information when making care decisions, an increase from just above 3 percent a few years earlier, although this increase varied across communities.

    Changes to how health insurance works might improve the effectiveness of price transparency. For example, when an enrollee in a plan for California’s retired public-sector employees selects a hip or knee replacement more expensive than a preset price, she pays the entire difference. The shopping that this motivates is credited with reducing hip and knee replacement prices by 20 percent.

    Direct outreach to patients to help them find services that cost less is another approach. One program used by commercial insurers targeted patients who had been referred to low-value M.R.I. providers. Getting them to voluntarily switch to ones with lower prices but adequate quality and convenience saved $220 per scan.

    If there’s one thing we’ve learned time and again, it’s that there’s no single best way for reducing health care spending. Price transparency may be part of the answer, but it clearly isn’t the entire answer.


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  • Social media impact factor

    Via Tom Gauld:



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  • AcademyHealth: Five lessons for social media translation and dissemination

    My most requested talk is on how researchers can promote their work via social media. My latest AcademyHealth post provides five lessons from it.



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  • Facts about Medicare Advantage I bet you don’t know

    Friend of the blog Bradley Flansbaum drew my attention to this MedPAC status report on Medicare Advantage (MA), presented by Scott Harrison and Carlos Zarabozo on December 8, 2016. It includes some MA facts I didn’t know, and I’m guessing you (or the vast majority of you) don’t know them either.

    • In 2017, the average, PMPM rebate to MA plans will be $89, higher than it has been since 2011. I don’t know what the figures are prior to that year. (The rebate is a percentage of the difference between an MA plan’s bid and the benchmark. The percentage, as well as the benchmark, varies by plan quality. Think of it as a kind of shared savings. Plans are required to use rebates to increase benefits or reduce cost sharing.)
    • For the 2017 plan year, the average MA bid was 90% of traditional Medicare spending (TM) for a comparable beneficiary. I do not recall it ever being that low, but could be wrong. Plans are still paid above their cost (hence the rebates), but in 2017, for the first time this century,* payments to plans are at parity with TM spending. This is something that MedPAC has advocated and is an ambition of the Affordable Care Act. Mission accomplished, with the caveat that MA coding intensity may still not be completely adjusted for. If so, plans could still be paid above a (properly diagnostically adjusted) TM rate.
    • MA payment rates are based on TM Part A and Part B costs. But — and this is something I never knew — this includes TM enrollees that only have Part A, and they spend less on Part A than those who also have Part B.** MA covers A and B, and 87% of TM beneficiaries have both (this proportion is shrinking over time). The upshot of this is that payment rates based on all TM beneficiaries are lower than they would be if they were calculated on Part A and Part B enrollees. Whereas, coding pushes payments up, this mismatch pushes payments down, by how much the status report doesn’t say.
    • MA enrollment growth is more rapid than Medicare as a whole, as it has been for many years.

    There’s more in the report, though not a lot more. It’s a PDF of a brief PowerPoint presentation. But I thought the above were among the most interesting, and less widely known, facts.

    * I could be wrong on this, but it’s certainly the first time since at least 2003.

    ** Just keep reading that sentence slowly. You’ll get it.


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  • Stuff for Health Care Systems (PHMD2350)

    What is this post about? Look here.


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  • AcademyHealth: Medicaid ACOs in Massachusetts

    The federal government recently approved Massachusetts Medicaid waiver that includes plans for an ACO program. Want the details? See my latest AcademyHealth post.



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  • Senator Lamar Alexander and endless can-kicking repeal

    Senator Lamar Alexander understand how hard crafting health policy is.

    Alexander said replacing Obamacare could take longer than the education bill he worked to pass last year, which took six years.

    “That was hard, but this is even more difficult because we spent six years as the Hatfields and the McCoys adopting our positions and shooting at each other,” he told reporters. “So building consensus in an environment like that is hard to do. But if we keep in mind that we’re trying to help people who are hurting and trying to keep people from being hurt, then that will encourage consensus.”

    More than six years! Making predictions in this environment is a fool’s errand, but I’ll do it anyway. I expect repeal with delay will happen by reconciliation. But the delay will be two years. (Maybe, maybe if members of Congress get a little spooked they’ll delay repeal for three or four years, but not six.)

    Then, if Senator Alexander is right, there will be no GOP replace plan in time. What then? Either Congress will kick the can and delay repeal further or key parts of the ACA will expire. This process will repeat itself indefinitely or until Democrats control the government again.

    If the GOP cannot craft a plan in two or so years, they will never do so. Never. Each election cycle will be too disruptive. A health care bill is much harder than an education bill. If you haven’t noticed, health care is a third rail onto which primary and general election opponents attempt to push one another.

    Endless, can-kicking repeal will be the best, achievable alternative.

    But the uncertainty is terrible for insurers, as well as hospitals and state legislators trying to manage Medicaid programs. Repeated delayed repeal will probably lead to states with no marketplace insurers, a cessation if not retrenchment of Medicaid expansion, and will threaten the movement toward value-based payment.

    Senator Alexander may get this, but I’m not sure the rest of his caucus does.


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