Here is a summary of my take-aways from a couple of recent discussions on health care cost control — one at the Kennedy School and one sponsored by the Brandeis Health Policy Forum. Feedback appreciated.
There is a broad consensus, including leading health care executives, that health care costs are too high and growing too fast and that they are compromising other priorities — from corporate capital investment to public education. At the Brandeis forum, even Gary Gottleib, the CEO of Partners Health Care, seemed to have found religion on this issue. This was theme emphasized in the Globe piece on the Brandeis event.
There also seems to be a lot of consensus that to control costs, we need to get away from fragmented, fee-for-service medicine and that by so doing, we can also improve quality and patient satisfaction. As long as doctors and hospitals make their money by doing procedures, they will have an incentive to overprovide. As long as care is organizationally fragmented, it will be hard to improve quality and reduce waste.
These aren’t new ideas — Health Maintenance Organizations (HMO’s), creatures of the 80s and 90s, were a first attempt in this direction. HMO’s employ physicians and might include a hospital or might contract with hospitals. They contract with employers to meet the health care needs of a population for a fixed price. In an HMO, it is the responsibility of the primary care physician to manage care by specialists and hospitals.
HMO’s failed to gain wide market share for a combination of reasons. Small providers — e.g., individual physicians or physician group practices — felt they were being asked to assume too much risk: They could lose a lot of money if they happened to end with some very sick patients. Even larger providers like hospitals often lacked the information to adequately assess the risks they were taking. Perhaps most importantly, patients felt that they were giving up too much freedom of choice. Managed care, more generally, involves insurer pre-approval of care decisions — very frustrating for both physicians and patients.
The new buzz idea, enshrined as a pilot option in the national health care reform bill, is the Accountable Care Organization. Think HMO with better technology, an emphasis on quality, and some lessons learned about management. At the Brandeis forum, most of the speakers offered hope, based on the experience of their own organizations, that doctors and hospitals could come together and organize health care networks. Instead of sharing risk, physicians might have the opportunity to share in savings from a baseline expected cost. For an informative video on ACO’s — and some skeptical comments — see the New England Journal of Medicine, at this link.
In the ACO model, physicians maintain their autonomy, but function within a care-giving team. In the team, they would be encouraged to work at “the top of license” — leaving routine care to others. Freed from the mundane, they can spend more time with each patient diagnosing complex conditions and working with patients to develop care plans that meet their individual needs. Good conversations with patients help patients and physicians make better decisions about care — often patients will choose less care if fully informed of what the care will and won’t do for them.
The ACO is also intended to reduce clinicians’ paperwork load. The extended care team (nurses, social workers, community health workers, office assistants) do more of the care management: making sure patients fill their prescriptions, scheduling follow up appointments, coordinating multiple appointments, helping patients with diet and exercise plans, making sure specialists who treat the patient know about all of the patient’s conditions, test results, etc.
Better information technology helps physicians understand the cost implications of their decisions. Integration may be more virtual (by technology) than physical (putting people in the same building).
At the Kennnedy School Forum, Jonathan Kingsdale — with decades of experience in the insurance industry — took a more pessimistic view of the possibility of controlling health care costs generally. In his view, high health care costs go back to chronic diseases and end-of-life health care episodes. Chronic diseases spring from irremediable human frailty (it’s just hard for people to make healthy choices) and when push comes to shove at the end of life, most people just want to keep living. But at the Brandeis forum, I came away with more hope — the practitioners there seemed to offer credible approaches to improving quality and lowering cost. Perhaps, Kingsdale’s experience reflects the difficulty of driving costs down by exerting external payor pressure — integrated health care networks may be able to develop structures that foster a positive cost/quality culture.
It isn’t crystal clear that major state legislation is needed. It may be entirely within the powers of the executive branch to collaborate with federal Medicare and Medicaid administrators to expand ACO experiments in Massachusetts. It is important that the major health care payors move together in this direction so that emerging ACO’s don’t have to deal with too many different payment regimes. But Medicare, Medicaid, the Group Insurance Commission together with Blue Cross (which is already moving towards ACO’s) account for more than half the market so if they move, the rest of the market will move.
It may be that some legislation may be necessary to clarify the authorization for the executive branch agencies to move toward payment arrangements that support ACO’s. But my working belief is that legislation fully defining those payment systems or defining how ACO’s should organize is as likely to be harmful as helpful. I am also skeptical of state leadership in information system coordination — at the Brandeis forum, I got the strong sense that insurers and proivders are doing pretty well at solving interface problems to give physicians the data they need. Controlling costs will involve using hospitals less and the legislature is likely to retard progress in the name of protecting weak hospitals; the one priority we do need to attend to is the protection of safety net hospitals and care providers. At the Brandeis Forum, titled “Achieving Accountable Care in Massachusetts”, protection of the safety net was the only positive legislative prescription that came out in three hours of excellent discussion about how to make ACO’s work.
Certainly, Medicare and Medicaid and GIC as well as private payors are going to continue to exert increasingly heavy cost-control pressure, given the growing elderly population and the tight finances of government. Perhaps these pressures combined with new organizational models and technology will suffice to bend the curve. The Patrick administration has already shown its willingness to push cost-control aggressively by limiting insurer rate increases.
Will-thanks for providing link to MA insurance mandate informtation. As you are probably aware from my various comments, my outlook on government involvement is generally- less is more. So it should come as no surprise that I believe cost controls could be best achieved by repealing some of the mandates. Doing so now would demonstrate real leadership. For starters take a look at infertility treatements. The report estimates annual cost at 96 million. Not sure if that’s high or low. Who cares? What matters to me is that this optional treatment is required and therefore impacts all of our premiums. I’m not a hard hearted individual so I can sympathize with a couple’s desire to “have a baby”. Still, the misfortune of being unable to conceive is hardly life and death. Also, let us not forget the poster child for this mandate- “Octomom”.
Where’s tort reform fit into this discussion?? Is this the 3rd rail of insurance cost debate? You would think that given its ommission it plays no role in rising insurance costs. What is the average premium paid by a MD? Surgeon?
It’s hard for me to seriously consider your assertion that the Patrick administration is agressively pushing cost control. He’s too busy pandering to new constituencies (i.e. immigtation reform) to help solve problems of everyday citizens…we need leaders to act now!
The most pressing need to gain control over health care costs, is to get providers to have real prices. Providers, suppliers and insurance companies in health care are engaged in an expensive and administratively complex game of secrets, smoke and mirrors over what things really cost. We know the pricing system has overly complex pricing because the public prices a doctor and provider list as what things cost has nothing to do with what they actually will provide services for. What they will provide care for is shrouded in a murky system of discounts granted to insurers and government programs, and opaque pricing.
I had a procedure. The hospital and doctor billed the insurance 1600 dollars. but because of the insurance contract, and my deductible, I got to pay 650.00 dollars for this procedure which covered the entire cost of the procedure. The price billed by the provider had nothing to do with what the procedure actually cost. Wouldn’t be better to have a real price list which said the price of the procedure is 650.00 dollars and if you paid cash or used insurance or medicare or public assistance that was the cost of the procedure. Once prices are transparent and real, we can being to see what things cost and begin to have a discussion of whether they should cost as much as they do and that the should be covered. Until prices are real it is difficult to fix the system because you don’t know what things cost and providers and payers are in a race to screw their counter party undermining the very notion of cost control in many situations. Kind of like the old nuclear arms race, MAD. Only they are destroying the health care system for all but the wealthy and best insured. Everyone else gets less coverage for more insurance cost.
Secondly if prices were real, there can be a wholesale reduction of the cost of administering the health care system because it will be much simpler for providers, insurers and patients to have certainty about the cost of doing any particular procedure. When I had my previously mentioned procedure I knew it might be fully covered, or cost me money, but not how much money. The complexity and uncertainty of what things cost makes it very expensive to administer our heath care and drives the cost of running it. Eliminating much of the complexity would make the system cheaper.
The secret discounts lead to attempts of insurance companies to squeeze bigger discounts from providers. Uncertain fees for services leads to attempts of providers to squeeze patients into paying more unless they have a favorable discount pre-arranged and cause government programs to underpay for many services and over pay for some. Insurance and top quality providers like the complexity because it allows them to divide up patients and charge more for same services for many and less for some. But it becomes stupid and silly when the system becomes so complex one one can trust they are getting either value for service or full service for the money charged.
It would be a good start to require that providers and government move to a public price list for services and outlaw both excessive and secret discounts by private insurance. this would lead to great transparency and allow for a real analysis and market forces to bare down on the cost of health care.
By changing the bulk of health care into a price driven business both for providers and insurance we will be able to lower or hold the line on costs. And by having a system which at a certain point allows access to specialty and advanced care for complex and difficult situations when the generic care is not good enough we can preserve our reputation for advanced medical care. The trick is to figure out how and where to design the system so that both occur.
I think the problem is that, in reality, it is extremely hard to realistically price individual procedures — there are so many components and so much overhead. That’s why the global payment (ACO) direction is appealing.
Daniel-you are right on! I shared a procedure cost story on a reply to one of Will’s posts (11/14) You might be interested-here it is:
“Will-Thanks for being so thoughtful about the health insurance cost debate. People need to do a better job connecting the dots before they assign responsibility as to who is to blame for the skyrocketing costs. 28 years ago I was treated for a broken thumb at Sancta Maria Hospital in Cambridge. When I questioned the Dr.’s office about the bill I was told by the office administrator- “why do you care what was charged-insurance will pay for it”…I think this story serves as a reminder that when someone else is picking up the tab-people don’t care as much.”
Daniel, Can you imagine this stuff has been going on for this long? This experience has stayed with me all this time. It resurfaces every time I hear the same tired old diatribe about the evil insurance industry gouging consumers. I don’t mean to suggest the industry’s profit motives aren’t part of the picture but come on. This is business 101. Did you hear the case study of the rampant auto insurance fraud in Lawrence…Geez why are auto insurance rates so high in Lawrence…I agree with you wholeheartedly-the elected officials charged with seeking a solution should be drilling into these procedure costs and expose them to the public-in the meantime, I’d be happy if we can rid ourselves of the prospect of a MA version of “Octomom”…let’s lose this mandate…
Thanks for providing us with such in-depth information on the issue of health care costs and asking us to weigh in on both this and the ethical issues involved in legislators providing recommendations for job seekers.
Let me give you my thoughts on health care costs as an ex-pat with experience in the health care systems not just of the two countries in which I have lived long-term but also – at least superficially – in some 20 European, Middle Eastern and African countries in which I have had short-term assignments.
The three major issues that I see – and there certainly may be more – are:
1. The notion that health and preventive care are luxuries not human rights
2. The notion that health care institutions and services are businesses that should turn a profit – beyond the provision of good salaries for skilled professionals
3. The enormous mark-up on drugs (and their excessive use)
The first two, while conceptually different, are intertwined in practice. We need to ensure that everyone has access to both preventive and curative care – not just because it is the decent thing to do but also because this is an investment in the country’s future well-being and ultimately saves money – which may not be obvious on any particular legislator’s watch. We need a long-term vision here. It’s much the same as investing in education or good infrastructure. We do it not just to gain short-term points (and votes) but because these things ensure a sustainable quality of life and a reasonably secure future.
Germany’s health care system has – regrettably – begun to evolve into a profit-making business venture – and the results are already apparent. Some of my work involves assessing hospitals involved in the WHO/UNICEF “Baby-Friendly Hospital” Initiative (BFHI). In the course of this I see dedicated staff pushed to (and sometimes beyond) their limits as fewer and fewer staff are responsible for more and more work. I observe this as well in care for the elderly and the non-elderly who need to be hospitalized. It brings to mind the words of a friend who, with a small group of women including me, established the “Children in Hospitals” group in Boston in the early 1970’s. “If you are sick enough to be in the hospital, you are too sick to be there alone.” – and this does not only apply to children.
If hospitals and health insurers are looking to make a profit – and some of them have even gone on the stock exchange – then the focus is not going to be on quality health care for all but rather on saving money by rationing treatment, minimizing staff and keeping their salaries low. Health insurance companies have enormous administrative costs [and bonuses] which could be saved with a single payer system.
Drugs are notoriously overused – the number of deaths annually due to inappropriate prescribing of drugs is astronomical (not just in the US) – and they are expensive. One of the most egregious abuses of power during the Bush administrations was the refusal to allow Medicare and Medicaid to negotiate lower drug prices. And this too is not just confined to the US. Germany has the highest drug prices in the EU – not-so-incidentally Bayer [the aspirin people] is located in Germany [just around the corner from me, actually].
I think we need a whole new paradigm for thinking about health care. We need to be looking to preventive measures – have a look at the Website for the United States Breastfeeding Committee http://www.usbreastfeeding.org/ to see what sort of contribution to maternal and child health – and the savings – breastfeeding can make.
An article published in the Scientific American in April estimates a savings of $13 billion a year if most mothers were to exclusively breastfeed the first six months. http://www.scientificamerican.com/article.cfm?id=breastfeeding-benefits-mothers
This would involve some adjustments in the work place – the new health care reform makes a start at this and the USBC also has more information. And this is just one low/no cost “intervention”. Michelle Obama’s anti-obesity program is another.
And – as I said above – we need to be looking at health care from a human rights’ perspective as well as the perspective of its being an investment in the future well-being of the country.
As for the job recommendations – That is a thorny thicket. I liked the way you differentiated among [probably] legal/illegal, [probably] ethical/not ethical and hard to keep clean. Legislators have a very difficult row to hoe here because you are supposed to represent us all – but providing citizen services – and mentoring people – are also part of the job. Many jobs are only accessible through connections and if you don’t have any Skull and Bones buddies – your legislator is the next place you look. It’s tricky – and it is important to keep addressing ethical issues in an open way – in part because transparency is important and in part because what’s right is not always black or white. People get very anxious with ambiguity – but that’s what being a grown-up entails.
Thanks again for all you are doing to raise awareness of issues and keeping your constituents in the loop.
Best regards from snowy Cologne,
Elizabeth-Wish I were in Cologne…while I do not agree with your assertion that health care is a human right, I would state that given the associated costs it is approaching luxury status for all citizens. Rep. Brownsberger and the MA legislative body can and should act now to bend the cost curve downward. Daniel & I have cited several “reasonable” ways of accomplishing this. Will, what is your stance on the following:
1) Require hospitals to publish fee structure for all standard care/surgical procedures.
2) Repeal infertility mandate
3) Field a study to analyze the costs of liability insurance for Dr.s and its impact on health care costs. Study should not be funded by the Trial Lawyers Assoc…lol
I like the reply from the lady in Cologne, in which she identifies what to me also are the major issues:
1. the notion that health and preventive care are luxuries, not human rights
2. the notion that health care institutions and services are businesses that should turn a profit – beyond the provision of good salaries for skilled professionals (who need to pay for their professional education)
3. the enormous mark-up on drugs (and their excessive use)
These are the issues on which there is a crying need for public discussion. I’m actually a single-payer supporter, but a public option is already on the way to that, and I am proud that Massachusetts has one.
I would also add these issues:
— grants to hospitals and health networks to get their computers to access one another’s records. I’ve had several tests repeated because there was no such access.
— affordable diet counseling might benefit many patients and prevent illness. As it stands, you have to go into debt to have even one appointment with a dietician hereabouts.
Thanks for working on this, it’s a heavy issue.
Will- Did you support House Bill 2128? What is its status? Here’s a link for those who may be interested in the estimated costs of not addressing tort reform:
This is a Peisch/Creem bill – An Act creating a special task force to make an investigation and study on issues related to the practice of defensive medicine. Sure, I do support it.
The status is that was reported favorably by Public Health Committee on 6/2/10, with a new draft now numbered H4720. H4720 was then referred to Health Care Financing and on 7/8 Health Care Financing reported out favorably the bill with an amendment substituting the text, and the bill was then numbered H4862. On 7/8 H4862 was sent to House Ways & Means where it has remained.
It looks like it isn’t moving further in this session, but I’ll let Rep. Peisch know my support of her bill.
Thanks Will. I see from looking at the bill that the study may take up to one year after the bill’s inception…doesn’t appear there is much urgency in using tort reform as a means of bending the cost curve. I’m disappointed but not surprised. Some of the stats I’ve seen project a 10% reduction in premium costs as a result of tort reform. 2k/ year/famly is a lot of money. Especially given the current rise in food and fuel costs…
What are your thoughts on publishing a hospital’s medical procedure costs & repealing the infertility mandate?
I’m all for transparency on costs. What we want to get away from though is procedure costs — if you charge for a medical procedure, you have incentive to do more of them, whatever the cost is. We need to get towards global payment.
I tend to think infertility is a fair health issue.
Global payment? What does that mean exactly? Also, not sure I understand completely your view of MA insurance mandate for infertility…”I tend to think infertility is a fair health issue”… and the costs of a MA resident’s infertility should be borne by others…” sound about right?
You stated: “It isn’t clear that major state legislation is needed to advance experimentation with new health care cost-control models in Massachusetts.” I couldn’t disagree more this comment. MA has the highest insurance premium costs in the country and our elected officials choose to do nothing??…again I’m disappointed but not surprised…
Hey Spencer, I don’t mean that the state should do nothing. Rather that the executive branch may have most of the tools it needs to make change happen. To say the legislature may not be the main player is not to say that government should do nothing.
Global payment is one of the buzzwords in the same vein as Accountable Care Organizations — refer back to the original post above.
I understand that you feel that insurance mandates and tort reform are an important part of controlling health care costs. Perhaps you could point more specifically to sources of the numbers you are looking at. So far, you are right, these strategies aren’t high on my list, but I’m willing to be educated.
Will-you can’t be serious…”I think the problem is that, in reality, it is extremely hard to realistically price individual procedures — there are so many components and so much overhead. That’s why the global payment (ACO) direction is appealing.”
Where do I start?…have you ever put a service or product out to bid? All that matters is the details. This reminds me of your budget amendment vote to maintain the Legislature’s operations payroll without knowing the headcount…sorry to revisit but it’s the same ‘ole story. Beacon Hill is disinterested in the details and lowering the healthcare costs of its citizens. Too bad, that skill set could come in handy when you try and bridge the 2 billion dollar deficit we’re facing. God help us…
Of course, I’ve solicited, made and accepted many proposals — that’s why I understand how squishy overhead allocations are.
Just about everyone involved in health care cost control is now leaning towards global payment — across the political spectrum.
This isn’t about not being detail oriented. There is noone who has done more to surface the details of house operational spending than I have.
Let’s hash this out over a cup of coffee.
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