Value Based Benefit Design: It's a Break Even Proposition

Here is the link to a major research study of a value based benefit design, specifically reduced RX copays for a major employer group: http://content.healthaffairs.org/cgi/content/full/29/3/530.
The study reveals it is a break even result though it does not take into account the benefits from reduced absenteeism and higher productivity among employees.

ACOs: Some Thoughts

I have blogged in the past about how ACOs might be a good answer to lowering health care costs and increasing quality at the same time. However there might be two factors that get in the way of this. First is that there are no penalties for missing quality targets. Given this, one could see how FFS payment would continue to be more appealing to providers. Second is that spending targets are calculated on past spending patterns so previous inefficiencies are "baked" into the calculations. Thus prospective ACOs even have an incentive to spend more before onset of the program to build up their historical spending base. Theoretically, a program that offers shared savings without any financial downside provides weak incentives for providers to change behavior.

And it looks like health insurance companies are concerned about being cut out of the picture (http://www.healthleadersmedia.com/page-2/HEP-258288/Could-Health-Plans-Derail-ACOs).
Key excerpt:

But the reality is that everyone will protect their own interests, which has health plans knocking on doors not only at the Centers for Medicare & Medicaid Services (CMS), but also at the Federal Trade Commission (FTC) and Department of Justice (DOJ), making sure they're aware that collaboration among already powerful healthcare providers under the ACO model also includes the risk collusion.

As I have said in the past, health plans owned by a provider group have the best chance of partnering to form an ACO.

The Quest for Cost Data Continues

Interesting article on California hospital costs disparity in Kaiser Health News (http://www.kaiserhealthnews.org/stories/2010/october/17/california-hospital-costs.aspx) A critical excerpt:

The hospitals haven’t made it easy for consumers to comparison shop. State law requires hospitals to reveal their charges for specific services. But those charges don’t reflect the lower negotiated rates insurers actually pay – rates hospitals usually insist be kept secret. The California Hospital Association has opposed legislation to ban such "gag clauses"; the most recent of these bills died in the state Assembly in August.

Hospitals have also resisted a four-year campaign by the Pacific Business Group on Health, a large employer coalition, and CalPERS to create a "hospital value initiative" that would allow hospital comparison based on and quality of care.

Rarely able to evaluate hospital costs and quality, patients often defer to their physicians when deciding on a hospital. Rochelle N. Doble had a seriously infected toe amputated at Sutter Delta Hospital in Antioch in 2007. Her doctor told her the bill would be about $1,400, but when she arrived at the hospital, Doble says Sutter told her it didn’t contract with her insurer and that she would be billed for the full amount—more than $5,400.

Doble, 54, says the only reason she went to Sutter was because her doctor chose it for its convenience. "His practice is in Antioch," she says. "He did it five minutes from his office."

Doble refused to pay and her account was sent to collections. In July, Sutter agreed to lower the bill to $1,400 after JustHealth, a Santa Rosa-based advocacy group, helped her protest it, according to correspondence from Sutter provided by Doble.

Stacey Wells, a Sutter spokeswoman, said the hospital couldn’t discuss Doble’s case. She said the bill for this kind of procedure would be determined by the number of hours spent in the operating room and recovery areas and charges for all supplies.

John Metz, JustHealth’s executive director, says few people bother to challenge their bills as Doble did. "Most people trust hospitals are going to treat them right," he says. "When they get these bills, they are literally impossible to understand, and people just accept them."

Given this difficulty on obtaining good info on price and quality, I think it is nearly impossible to expect consumers to make informed decisions when it comes to their health care. So what is the answer? Push subscribers to use providers in designated high performing networks.

Provider Pricing: The Elephant in the Room

Most everyone agrees we spend too much on health care in this country with poor results. One of the main reasons for this high cost is what we pay providers for their services. And this may just get worse in the future as more and more providers consolidate and exert hteir power when negotiating fees. From the Health Affairs blog:

A growing imbalance between payers and providers. As MacGillis notes, the market imbalance between payers and providers may be getting worse due to increasing provider market and consolidation, a phenomenon that has been discussed by other Health Affairs authors. For example, in an April 2010 Health Affairs article focusing on market conditions in California, Robert Berenson, Paul Ginsburg, and Nicole Kemper wrote that “providers’ growing market power to negotiate higher payment rates from private insurers is the ‘elephant in the room’ that is rarely mentioned.” The authors warned that, unless precautions are taken, the Affordable Care Act’s push toward “accountable care organizations” and other integrated care models could increase prices:

If accountable care organizations lead to more integrated provider groups that are able to exert market power in negotiations—both by encouraging providers to join organizations and by expanding the proportion of patients for whom provider groups can negotiate rates—private insurers could wind up paying more, even if care is delivered more efficiently.

Republicans, who seem poised to make big gains in next week’s elections, have argued for shifting more power in health care decision making, and more risk, to consumers. That would “only make the fundamental imbalance of information, power, and expertise” in favor of providers even worse, Vladeck said in his presentation at the Health Affairs event.

Berenson, Ginsburg, and Kemper concluded: “Unless market mechanisms can be found to discipline providers’ use of their growing market power, it seems inevitable that policy makers will need to turn to regulatory approaches, such as putting price caps on negotiated private-sector rates and adopting all-payer rate setting.” In the September-October 2009 Health Affairs issue, Robert Murray, executive director of the Maryland Health Services Cost Review Commission, wrote that had the state’s all-payer rate-setting system for hospitals been adopted nationwide, it might have saved $1.8 trillion over three decades.

The Polls and Health Care Reform

From the New Republic:

Polling on health care reform remains as reliable as ever, which means that you shouldn't consider it particularly reliable. Voters have mixed feelings and few actually understand what it's in the law, which means answers depend a lot on how the survey firms word their questions.

But the polls do provide some insights. And they've consistently undermined the claim that Americans are clamoring to scrap the Affordable Care Act because it tries to do too much.

The latest evidence comes from the new Associated Press-GfK poll, which Greg Sargent flagged on Friday. In the survey, 32 percent of registered voters responding said they wanted to repeal the law completely while another 9 percent said they wanted to revise the law so it did less. But 39 percent said they wanted to revise the law so it did more and 18 percent said they wanted to leave it as is. Opinion tips more towards scaling the law back if you consider only likely voters, but even then only 37 percent want repeal and less than 50 percent want to scale the law back at all.

Put it together with polling that shows Americans overwhelmingly favor the individual elements of health care reform--like guarantees of coverage for people with pre-existing conditions--and it's hard to make a credible argument that most Americans want repeal. As Steve Benen, who also noticed these new results, says

I wonder what the discourse would be like if equal attention were paid to those who want even more ambitious health care reforms as compared to those who think the Affordable Care Act some sort of secret communist plot.

Good Series of Posts on HC Quality

Defining quality is the "holy grail" in health care. Here is a series of posts looking at it in the US:

http://theincidentaleconomist.com/how-do-we-rate-the-quality-of-the-us-health-care-system-introduction/

Two surprising findings: Japan is more CT and MRI crazy than we are. Also the US does not have an inordinate amount of specialists.

Anthem Premium Increases in Connecticut

CT regulators have come under criticism from HHS for approving premium increases of up to 39% by Anthem for their various individual plans. In response the CT regulators said they thoroughly reviewed the requests and said that the increases were justified as Anthem made benefit changes to comply with the PPACA. Specifically:

In his letter, Sullivan noted that because of some provisions of the federal reform law, insurers had to raise several of their benefits to be in compliance. This, he wrote, was a contributing factor to the premium increases. He cited as an example one of Anthem’s prescription drug benefits that previously had a maximum limit of $500 annually and now has been raised to $750,000 to be in compliance with the reform law. According to Sullivan, this hike alone will result in a nearly 23% cost increase for that plan.