We know that sugary drinks can contribute to a host of health problems, including obesity and diabetes. So, why do fruit juices, which can have as much or more sugar than soda, get a pass? We serve them to kids as a healthy option, but they really aren’t.
That’s the title of a new NEJM Perspective by Michael Chernew and me. After crunching the numbers, our argument is that for long term cost control we will probably need to address growth in per capita health care utilization. The easy “solutions” won’t be enough.
Much of the projected increase in inflation-adjusted spending on health care entitlements, particularly for Medicare, stems from assumed increases in utilization (e.g., 2.75 percentage points of the 5.33% annual projected growth for Medicare spending). Strategies for holding utilization growth below projections (and more in line with very recent historical growth) will thus be central to the success of any attempt at cost containment.
[One approach] is to dissuade patients from seeking care by charging them more at the point of service. About 85% of Medicare beneficiaries have supplemental plans (e.g., Medigap) that reduce their out-of-pocket costs. Policies that limit the generosity of such plans could reduce Medicare spending considerably. However, such strategies would increase beneficiaries’ financial risks, reduce access to care, and probably exacerbate health disparities.
A second strategy is to help beneficiaries improve their health by enhancing long-term care management and preventive services with the goal of avoiding more expensive services. Evidence suggests that although this type of approach is probably beneficial to patients and may be cost-effective, it is generally not cost saving.
The piece continues with some more promising approaches, in our view. Click to read it in full (unfortunately pay-walled though).
Research for the Perspective was supported by the Laura and John Arnold Foundation.
The following originally appeared on The Upshot (copyright 2018, The New York Times Company). Research for this piece was supported by the Laura and John Arnold Foundation.
It takes only a glance at a hospital bill or at the myriad choices you may have for health care coverage to get a sense of the bewildering complexity of health care financing in the United States. That complexity doesn’t just exact a cognitive cost. It also comes with administrative costs that are largely hidden from view but that we all pay.
Because they’re not directly related to patient care, we rarely think about administrative costs. They’re high.
A widely cited study published in The New England Journal of Medicine used data from 1999 to estimate that about 30 percent of American health care expenditures were the result of administration, about twice what it is in Canada. If the figures hold today, they mean that out of the average of about $19,000 that U.S. workers and their employers pay for family coverage each year, $5,700 goes toward administrative costs.
Such costs aren’t all bad. Some are tied up in things we may want, such as creating a quality improvement program. Others are for things we may dislike — for example, figuring out which of our claims to accept or reject or sending us bills. Others are just necessary, like processing payments; hiring and managing doctors and other employees; or maintaining information systems.
That New England Journal of Medicine study is still the only one on administrative costs that encompasses the entire health system. Many other more recent studies examine important portions of it, however. The story remains the same: Like the overall cost of the U.S. health system, its administrative cost alone is No. 1 in the world.
Using data from 2010 and 2011, one study, published in Health Affairs, compared hospital administrative costs in the United States with those in seven other places: Canada, England, Scotland, Wales, France, Germany and the Netherlands.
At just over 25 percent of total spending on hospital care (or 1.4 percent of total United States economic output), American hospital administrative costs exceed those of all the other places. The Netherlands was second in hospital administrative costs: almost 20 percent of hospital spending and 0.8 percent of that country’s G.D.P.
At the low end were Canada and Scotland, which both spend about 12 percent of hospital expenditures on administration, or about half a percent of G.D.P.
Hospitals are not the only source of high administrative spending in the United States. Physician practices also devote a large proportion of revenue to administration. By one estimate, for every 10 physicians providing care, almost seven additional people are engaged in billing-related activities.
It is no surprise then that a majority of American doctors say that generating bills and collecting payments is a major problem. Canadian practices spend only 27 percent of what U.S. ones do on dealing with payers like Medicare or private insurers.
Another study in Health Affairs surveyed physicians and physician practice administrators about billing tasks. It found that doctors spend about three hours per week dealing with billing-related matters. For each doctor, a further 19 hours per week are spent by medical support workers. And 36 hours per week of administrators’ time is consumed in this way. Added together, this time costs an additional $68,000 per year per physician (in 2006). Because these are administrative costs, that’s above and beyond the cost associated with direct provision of medical care.
In JAMA, scholars from Harvard and Duke examined the billing-related costs in an academic medical center. Their study essentially followed bills through the system to see how much time different types of medical workers spent in generating and processing them.
At the low end, such activities accounted for only 3 percent of revenue for surgical procedures, perhaps because surgery is itself so expensive. At the high end, 25 percent of emergency department visit revenue went toward billing costs. Primary care visits were in the middle, with billing functions accounting for 15 percent of revenue, or about $100,000 per year per primary care provider.
“The extraordinary costs we see are not because of administrative slack or because health care leaders don’t try to economize,” said Kevin Schulman, a co-author of the study and a professor of medicine at Duke. “The high administrative costs are functions of the system’s complexity.”
Costs related to billing appear to be growing. A literature review by Elsa Pearson, a policy analyst with the Boston University School of Public Health, found that in 2009 they accounted for about 14 percent of total health expenditures. By 2012, the figure was closer to 17 percent.
One obvious source of complexity of the American health system is its multiplicity of payers. A typical hospital has to contend not just with several public health programs, like Medicare and Medicaid, but also with many private insurers, each with its own set of procedures and forms (whether electronic or paper) for billing and collecting payment. By one estimate, 80 percent of the billing-related costs in the United States are because of contending with this added complexity.
“One can have choice without costly complexity,” said Barak Richman, a co-author of the JAMA study and a professor of law at Duke. “Switzerland and Germany, for example, have lower administrative costs than the U.S. but exhibit a robust choice of health insurers.”
An additional source of costs for health care providers is chasing patients for their portion of bills, the part not covered by insurance. With deductibles and co-payments on the rise, more patients are facing cost sharing that they may not be able to pay, possibly leading to rising costs for providers, or the collection agencies they work with, in trying to get them to do so.
Using data from Athenahealth, the Harvard health economist Michael Chernew computed the proportion of doctors’ bills that were paid by patients. For relatively small bills, those under $75, over 90 percent were paid within a year. For larger ones, over $200, that rate fell to 67 percent.
“It’s a mistake to think that billing issues only reflect complex interactions between providers and insurers,” Mr. Chernew said. “As patients are required to pay more money out of pocket, providers devote more resources to collecting it.”
A distinguishing feature of the American health system is that it offers a lot of choice, including among health plans. Because insurers and public programs have not coordinated on a set of standards for pricing, billing and collection — whatever the benefits of choice — one of the consequences is high administrative burden. And that’s another reason for high American health care prices.
The ACA expanded Medicaid coverage to a lot of people, and it was implemented differently in lots of states. So, what happened? Lots of studies are coming out about expanded access, and how that access has changed outcomes.
The Trump administration announced its intent to stop making risk adjustment payments to insurers on the ACA marketplaces. Just… watch.
The following, coauthored by Aaron and Austin, originally appeared on The Upshot (copyright 2018, The New York Times Company).
When Jodie Ofosuhene learned she had breast cancer at age 29 in 2016, she got more than standard medical care. She was connected with Noel Peters, a former patient who serves as a mentor to new ones. “Noel helped me tremendously,” Ms. Ofosuhene said in an interview. “Every time I had a question about my response to treatment — whether it was normal — she had answers from her own experience.”
In an ideal world, when we are faced with a new health problem, a clinician is available to sit down and address all our questions and anxieties about the condition and its treatment. This ideal is rarely met in the United States health system. More typically, we’re rushed through doctor visits that fly by too quickly for us to gather our thoughts.
Other patients can help. They have (or have had) your condition, as well as your anxieties and questions, and they’ve found a path through. Their journeys can be informative and helpful, and can also help you prepare for the next session with a doctor.
“There’s a lot about the patient experience that doctors and nurses cannot convey because they haven’t gone through it,” Ms. Peters said. “You can get a much better sense of what it means to be a patient from another patient.”
We know this from experience. Both of us have health conditions that were once new to us. Aaron wrote about his ulcerative colitis and mental health. Austin has written about his insomnia, minor heart condition and sleep apnea. At first, we sought lots of advice, and not just from doctors. In turn, once we gained experience, we shared what worked and didn’t.
Sharing health stories and learning from one another in an unpaid way (like in-person mentorship, online chats or phone calls) is known as peer health advice or peer-to-peer health care.
“After that diagnosis, you get home and you’re alone,” said Susannah Fox, an advocate and scholar of peer-to-peer health care and a former chief technology officer of the U.S. Department of Health and Human Services. “But you don’t have to be alone.”
The internet has made finding other people with your health problem easier. For example, the Database of Patients’ Experiences is an international collection of videos of patients sharing their experiencesabout various health conditions. This kind of sharing is similar to something humans have always done. When we have problems, we discuss them with others. We routinely get advice about where to get our car fixed and which plumber to call, for example.
One in four people receive information or counsel from someone with a similar condition. Few of us can read everything about our condition. Those who have gone before us can help sift through the mountain of information for what’s most useful. Studies of diabetes management found that those who participated in peer-to-peer health care lowered their blood sugar level more than those who didn’t. Studies of the effect of peer-to-peer health care in a variety of other areas, many of them randomized controlled trials, show the same.
The peer review process for awarding NIH grants has some problems. Less money is being awarded, and the buying power of the NIH has declined. It’s not clear that grants are being awarded as fairly as possible, either.
New York Times reporter Rukmini Callimachi is appalled to learn from an article in her paper that some of the immigrant children being held by the US government are being medicated with psychiatric drugs.
After everything I’ve read about immigrant children separated from their parents, this paragraph in today’s @nytimes piece is still shocking. The children in some facilities are “heavily dosed with psychiatric drugs” in order to treat their depression and anxiety? pic.twitter.com/NP6B6ZcODH
— Rukmini Callimachi (@rcallimachi) July 7, 2018
However, my reaction was, “Of course some children are being drugged.”
Why is Callimachi shocked while I am not? Certain psychotropic drugs are often prescribed to patients who do not have the mental disorders for which these medications are approved. These drugs have significant harmful side effects. Therefore, in my view, many of these prescriptions are misuses of the drugs.
So why are these drugs prescribed? Because they have powerful sedative effects, which is why the children are sleeping at their desks. There are high rates of antipsychotic prescriptions in foster care, in nursing homes, and — I will bet — many other institutional settings. The goal of sedation is often not to treat a diagnosed illness but rather to control the behaviour of someone who is institutionalised and difficult to manage.
The many readers or viewers of One Flew Over the Cuckoo’s Nest may imagine that the problem is that these institutions are run by sociopaths like Nurse Ratched who are unable to tolerate happy, free-spirited souls like Randle Patrick McMurphy. I don’t think that’s a common situation, but I have never been committed to a hospital. (Or at least not yet.)
There are situations where institutions that provide long-term care have legitimate concerns about unruly patients. People who have dementia are sometimes disinhibited. They can be aggressive or engage in unwanted sexual behaviours that terrify and endanger their vulnerable co-residents. Institutionalized children have often been exposed to horrific violence and, sometimes, experience paroxysmic anger. Some of these children have minimal self-control and, because they are already institutionalised, have nothing to lose. A young child with a piece of silverware can do a lot of harm.
There are two options here. First, you can physically restrain someone, e.g., by strapping them to a bed. The restraints protect the staff and the institutional residents. But it isn’t therapeutic for the patient.
Or you can use a powerful sedative as a “chemical restraint.” The patient is stupified and becomes docile for an extended period. Sedation may be more humane for the patient and is certainly easier for the institution. Of course, if you can’t or won’t do anything to prevent recurrence of disruptive or threatening behaviour, you will be chronically sedating the patient.
Is there a way to avoid these grim choices? Not completely. So long as severely-impaired people need to be institutionalised, there will be situations where some of them need to be restrained. Desinstitutionalizing these unfortunate souls transfers the risk to a family or to other people living on the streets.
Nevertheless, we can reduce the institutional use of physical or chemical restraints by not institutionalising people who do not need to be institutionalised. One population that comes to mind is normal children who are taken from their parents as hostages to frighten potential immigrants from seeking entry to the US.
For those who must live in institutions, there are ways to reduce the need for physical or chemical restraints. Many long-term care facilities are understaffed or staffed by workers who lack training in managing disinhibited or enraged residents. There is a shortage of specialized facilities for profoundly impaired residents.
However, institutions with humane staffing levels are far more expensive than those relying on chemical restraints. I support better supervision of long-term care and foster care. Likewise, we should carry out research to find cost-effective ways to manage impaired institutional residents humanely. But do not delude yourself: decent care for vulnerable and disabled children and the elderly will require more spending on the government programs that care for these populations. If you refuse to be taxed to provide better care for these people, you are choosing to sedate them instead.
On Friday evening, the Wall Street Journal reported that the Trump administration would be suspending risk adjustment payments due for 2017 and 2018. The next day, CMS scurried to clarify that the suspension was a necessary response to an adverse court judgment out of New Mexico. “As a result of this litigation,” Administrator Seema Verma said, “billions of dollars in risk adjustment payments and collections are now on hold.”
I don’t buy it. Neither should you.
* * *
The Affordable Care Act’s risk adjustment program tells insurers with relatively healthy enrollees to fork over some of their premiums to health plans with relatively unhealthy enrollees. Risk adjustment isn’t remotely controversial. It’s also used in Medicare Advantage and Medicare Part D, and it aims to discourage insurers from competing over how best to attract healthy people to their plans.
That doesn’t make risk adjustment easy. No one can perfectly predict risk, and any given methodology will reward some health plans relative to others. Plus, bigger players with more experience with risk adjustment tend to be especially good at gaming the methodology. In the ACA’s early years, the new co-ops in particular felt that they were getting the shaft. So they sued to challenge the rule that CMS had adopted to calculate risk adjustment transfers.
In February, a district court in New Mexico brushed back most of the co-op’s arguments but agreed that CMS hadn’t adequately explained why risk adjustment had to be budget neutral. That failure to explain, the court reasoned, also undermined the agency’s justification for using a statewide average premium, as opposed to the insurer’s own premiums, to calculate risk adjustment transfers.
The court thus invalidated the rule. In so doing, the court acknowledged that “nothing in the statute forbids neutrality and designing risk adjustment to be budget neutral may be a reasonable policy choice.” But the agency had to offer a better explanation for making that particular choice. In the meantime, “[t]he Court sets aside and vacates the agency action as to using a statewide average premium for the 2014, 2015, 2016, 2017, and 2018 rules and remands the case to the agency for further proceedings.”
* * *
The court’s opinion wasn’t compelling, to put it mildly. The point of risk adjustment isn’t to subsidize insurers with especially unhealthy populations. The point is to adjust risk among insurers. That’s why risk adjustment has to be “budget neutral.” It’s totally senseless to compel CMS to explain something that was obvious to the agency and to every stakeholder in the process. As I see it, the judge’s decision typifies the kind of mistake that generalist judges make in reviewing complex rules that they only dimly understand.
That was also the Justice Department’s view, at least initially. In a somewhat unusual move, it filed a motion for reconsideration, and asked the court (among other things) to leave the regulation intact while CMS corrected the rule’s deficiencies. (The practice is known as remand without vacatur.) The court held a hearing on the motion on June 21, and could address it any day now.
* * *
In the meantime, the court’s order remains in place. And so CMS says that the ruling “prevents [the agency] from making further collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, until the litigation is resolved.”
That’s wrong. The truth is that the Trump administration has lots of options. It’s just choosing not to exercise them.
First and foremost, CMS could have moved quickly to adopt a rule to address the judge’s concerns. Indeed, it’s already done that for the 2019 risk adjustment year, where it proffered precisely the sort of explanation that the judge says he’s looking for. For prior years, CMS could have issued an interim final rule (i.e., one that took immediate effect) offering the same explanation for prior plan years, after which it could have solicited notice and taken comments. With that interim final rule in hand, it could have sought to vacate the district court’s decision.
Second, the Justice Department could have filed a notice of appeal (even while the motion for reconsideration is pending) and sought a stay pending appeal, first from the district court and, failing that, from the Tenth Circuit or even the Supreme Court. That’s what I expected the Justice Department to do: it’s a completely natural move for a litigator. And this is precisely the sort of case in which a stay would be appropriate. The district court’s decision is weak, the rule’s deficiencies can be easily addressed, and allowing the decision to take immediate effect would be immensely disruptive.
Third, although the court “vacate[d]” the agency rule, it didn’t say exactly what it meant by that. The conventional rule is that “injunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to the plaintiffs.” Against that backdrop, the Justice Department could have construed the court’s order to apply only to the plaintiff that brought the suit, or perhaps (more generously) to any insurer in New Mexico. Risk adjustment could have continued uninterrupted elsewhere.
Yes, it’s possible that the New Mexico court meant to impose a nationwide injunction, even though it never said so. But the Justice Department believes that district courts lack the power to enter that kind of nationwide injunction. Indeed, it recently filed a cert petition pressing that point. And for good reason: no single judge should have the power to throw vital federal programs into disarray.
The executive branch thus has strong institutional and constitutional incentives to resist broad interpretations of district court injunctions. It could and should have resisted such an interpretation here. If that created a (small) risk of being held in contempt, well, so be it. The executive branch is a co-equal branch of government. Sometimes it has to act like it.
Even these options don’t exhaust the toolkit. Creative litigators could have pushed even harder (mandamus, anyone?). But I think I’ve carried my point: the Justice Department could’ve put up a fight, and it didn’t. Like Neymar when he’s tapped in the penalty box, the Trump administration flopped.
* * *
In one sense, the furor over the risk adjustment program may be overdrawn. The 2019 rule has been fixed, so we’re really talking about accounts receivable at this point. They’re big accounts receivable, amounting to hundreds of millions of dollars, but most insurers can handle a short delay in getting paid.
In another sense, however, the needless suspension of the risk adjustment program is a signal that the Trump administration remains intent on sabotage. Already, insurers were stiffed on their risk corridor money. Then the cost-sharing payments evaporated. Now, even risk adjustment money may go up in smoke. What’s next? This is no way to run a health program, and no way to run a government.
Whether this latest act of sabotage winds up being a big deal will depend on whether the Trump administration acts with dispatch to bring this litigation to a close. If it does, this episode may pass without too much pain. But if the administration continues to falsely claim that the litigation has tied its hands, and if it doesn’t move to clarify that 2019 risk adjustment payments are secure, the individual insurance market could deteriorate even more than it already has.
My latest JAMA Forum post, with Elsa Pearson, is about health information technology’s (HIT’s) role in administrative costs. It’s disappointing.
HIT doesn’t actually seem to be providing substantial [administrative] savings. A 2014 review of early adoption of HIT among thousands of US hospitals showed no notable cost savings 5 years after implementation. One study of an EHR implementation pilot program in Massachusetts found the average projected 5-year return was negative, with a loss of almost $44 000 per physician.
Additionally, C. Scott Kruse, PhD, MSIT, MHA, MBA, of Texas State University, and colleagues found cost to be the most cited barrier of HIT implementation in long-term care facilities, and a 2012 study of computerized physician order entry for a particular medication found no reduction in daily cost of therapy.
Instead, studies show HIT contributes to something else: improved clinical outcomes.
Go read the rest.
Research for this piece was supported by the Laura and John Arnold Foundation.