Lake Wobegon was a place where “all the women are strong, all the men are good looking, and all the children are above average.”  We all recognize that Lake Wobegon is a quaint fiction; so why then do we act as if our doctors and hospitals come from a place where all are superhuman and there are no below-average doctors or hospitals?

A recent article in the WSJ highlights the benefits of using top-rated hospitals…that by making transparent the success rate of various procedures in Pennsylvania, companies that work with the best performing hospitals find significantly better outcomes for their employees…and save lots of money.

Although at times premium care can be exorbitant, there’s evidence some in Pennsylvania saved money using top-rated hospitals. Hershey Co. offered workers medical coverage based on the state agency’s reported outcomes, and cut the company’s expenses by 50% over several years. The Philadelphia police union’s benefits-management company says it uses the state reports to steer officers to the best hospitals; as a result, it say its costs fall about 17% below those of comparable plans.

Tom Lamb, administrator of Philadelphia police health benefits, says he frequently explains to members why they should go to hospitals with better outcomes. “If an officer’s 7-year-old daughter has to go in for surgery,” he says, “I’ll sit down with the father and say, ‘Are you just going to shake your head yes when your pediatrician wants to send her to his golfing buddy?’ ”

So what is keeping us from seeing the tremendous shift of patients from sub-par to above-average performers?  In a word…its a coverup.  Data allowing consumers to objectively understand performance have been kept from them…so that there is no objective way to compare performance.  Payment via claims is locked into a group discount model…better performers see no rewards financially or through transparency.  Reputation tends to be based on institution rather than individual performance…and so varies tremendously between physicians.

It is differentiation…and the celebration of better performance that pushes the rest of our economy to offer better, more segmented value propositions to sophisticated consumers.  Why, when it comes to our health, are we left to hope that we get lucky and get someone above average?

Related articles by Zemanta

• Learning From the Best (usnews.com)
• Health-Care Secret Revealed, Again: More Is Not Better (blogs.wsj.com)
• Health Execs Wary of Ending Fee-for-Service Payments for Docs (blogs.wsj.com)

Was struck today that I have heard very little about the role of Medigap in the current health insurance debate…despite massive discussion of Medicare, Medicare Advantage, payment reform…etc.  In addition, it highlights how difficult it is to sort through the tangled web of money and influence…not sure how much I believe it, but its certainly food for thought.

This thought was triggered by Michelle Milkin’s post on AARP’s dependance on royalties from selling sponsored insurance plans:

A Hill source summed it up for me this way: “AARP has endorsed a huge reduction in funding of Medicare Advantage, which touches over 10 million middle-lower income seniors. If Medicare Advantage funding is reduced, and seniors are forced out of the program, they become potential buyers of the heavily-promoted and very profitable Medicare Supplement program sponsored by AARP (MediGap is 70% of AARP’s annual income). Medicare Supplement is a huge source of revenue to AARP. At a minimum, AARP should be required to disclose this every time they discuss Medicare Advantage.

Since AARP makes a substantial amount of money on a competing product that serves to drive up demand by eliminating co-pays, deductibles, and other elements of cost-sharing for a flat premium; it would make a bit more sense as to why they’re willing to sacrifice the Medicare Advantage improvement in benefits.  Per Bloomberg:

Laupus stumbled onto something that many members of the world’s largest seniors’ organization don’t know: The group, formerly called American Association of Retired Persons, collects hundreds of millions of dollars annually from insurers who pay for AARP’s endorsement of their policies.

The insurance companies build the cost of these so-called royalties and fees, which amounted to $497.6 million in 2007, into the premiums they charge AARP members, according to AARP’s consolidated financial statement for that year.

AARP uses the royalties and fees to fund about half the expenses that pay for activities such as publishing brochures about health care and consumer fraud — as well as for paying down the $200 million bond debt that funded the association’s marble and brass-studded Washington headquarters.

In addition, AARP holds clients’ insurance premiums for as long as a month and invests the money, which added $40.4 million to its revenue in 2007.

‘Fatting the Coffers’

“At the end of the day, it’s all about fattening the coffers of the organization,” says Thomas Orecchio, who was chairman of the Arlington Heights, Illinois-based National Association of Personal Financial Advisors until September. AARP, he says, is sponsoring insurance for its members at inflated prices.

“It’s the dirty little secret,” he says.

During the past decade, royalties and fees have made up an increasing percentage of AARP’s income, rising to 43 percent of its $1.17 billion in revenue in 2007 from 11 percent in 1999, according to AARP data.

So what of Medigap?  Here’s a comparison to Medicare Advantage in terms of how each may add upon the basic Medicare entitlement.

Medicare Advantage vs. Medigap

Members pay an upfront premium with Medigap to eliminate co-pays, co-insurance, deductibles, and other financial restraints on services.  This seems a little odd, when you think that the reason these were put in place was to reduce unnecessary utilization.

So why then isn’t Medigap part of the overall health reform debate in addition to Medicare Advantage?

Related articles by Zemanta

• Catastrophic Medicare Reform (meganmcardle.theatlantic.com)
• Hmmm: Is the AARP getting “kickbacks” from Obamacare? (michellemalkin.com)
• Is an IOM v. CBO Smackdown Looming on Health-Reform Costs? (thehealthcareblog.com)
• Numberscruncher: The Magic of Medicare (popdose.com)
• Seniors And Healthcare (andrewsullivan.theatlantic.com)
• The AARP and Seniors: Clashing Views on Health Reform (time.com)
• Why Aarp Hearts Obamacare (healthcarebs.com)

Sustainable health reform requires a solid foundation…unfortunately the proposals we’re seeing out of Washington create a more elaborate house of cards, as we continue to create an elaborate health care ponzi scheme.  The House that built Medicare has already saddled our country with Trillions in unfunded liabilities.  The proposals we see look to continue to reward a medical-industrial complex that creates and manages diseases rather than focusing on optimizing the health of people.

So what are the criteria of a sustainable health system?

1. Individuals receive fair value for premiums: Cost-shifting is a major foundation for today’s system.  We take money from the healthy to subsidize the sick.  We negotiate group discounts, undercutting the individual/ small group market.  This creates a phenomenon where insurers cherrypick the young and healthy who overpay and try to avoid the older or sicker who underpay.  THIS IS MADNESS.  Auto insurance has a system where we each pay based on our actuarial risk.  This is the only sustainable approach to health insurance…and may take a multi-year, lump-sum payout type approach.
2. Health Insurance is actual insurance (ie doesn’t insure pre-existing): Insurance, by definition, is a premium paid against a risk.  You can’t insure something that has already happened.  By creating an insurance structure to “insure” what has already happened, we’re looking only to pass cost off to someone else…and the insurance model is the most expensive way to pass along these subsidies.
3. Comprehensive services exist to Actively Manage Chronic Conditions: Chronic conditions (pre-existing) need active management.  We need to have tiers of services that are coordinated and judged against their impact, convenience, and cost.  Those doing the best job at reducing existing risk need to be rewarded…and today are marginalized with a PMPM (per member per month) approach that doesn’t reward the best management of risks.
4. Subsidies occur Transparently: Health care can be expensive and may require government intervention.  However, in an atmosphere where these subsidies are hidden, the subsidized payments tend to be used for many other things than providing the best care for the individual being served.  PCPs should be paid market value for Medicare patients, allowing a thriving primary care landscape (as opposed to starving the PCPs which has resulted in a declining number of gerontologists as we face the baby boom retirement…while numerous specialists will inflate the overall treatment bill).
5. Retail Competition based on Differentiation: Providers are allowed to compete…and price, quality, service approaches, and service levels are all part of the mix.  Is there any reason why we should pay the same amount for an overnight housecall as a 6 minute office visit with an hour’s wait?  There’s a reason why higher levels of convenience and service are not available today.  By the same token, a visit to a nurse practitioner just out of school probably shouldn’t cost the same as the world’s expert on your disease… Until we acknowledge that its ok that innovators are allowed to pursue either higher-priced models for better care or lower priced models for “good enough” high-volume care, we won’t see the innovations that will drive service excellence and efficiency in the same markets.

I’m all for fairness and equality and everyone having access to an affordable health system.  I’ve laid out the principles that I think create a sustainable system that doesn’t take advantage of anyone or just try to play “pass the cost potato”.  For those who disagree, what criteria would create a SUSTAINABLE system that incented efficient care?

Related articles by Zemanta

• Does anybody really understand the health care debate? (themoderatevoice.com)
• Baucus’ Budget Impact is “Voodoo Savings” Achieved by Taxing the Middle Class (seminal.firedoglake.com)
• The Cost of Health Care Reform (meganmcardle.theatlantic.com)

When I was a kid, I hit my head a fair bit, including getting knocked out once at football practice.  Initial care involved an evaluation, but scans weren’t the norm.  Now that they’ve become increasingly common in the evaluation of head injuries in youth, have we gained much?

The  Value of CT Scans in Youths Is Questioned in this study in the Lancet (article in NYTimes).

The study, one of the largest of its kind, enrolled 42,412 children ages 18 and younger who sought emergency care at dozens of medical centers after suffering mild head injuries in bike collisions, car crashes, falls and other accidents. Of the total group, 14,969 of the children, or just over one-third, had CT scans, but only 780 of the scans, or about 5 percent, picked up traumatic brain injuries, the study found.

The paper, published online in the Sept. 15 issue of The Lancet, offered a list of six indicators that could be used to determine whether a child was at risk for a serious brain injury, with a separate list for children under 2. The highest risk factors for children of all ages are an altered mental state and signs of a skull fracture.

Other factors to consider are loss of consciousness and whether the child was involved in a serious incident like a car crash. Vomiting and headaches are predictors in older children, while swelling of the scalp and abnormal behavior are warning signs in younger children.

The surprising stat to me was that after triage, only 5% of those who received a CT scan actually showed an issue (we’ll ignore potential false positives).

42,412 went to the emergency room

14,969 had a CT scan (35%)

780 showed traumatic brain injury (1.8% of ER visitors, 5.2% of those scanned)

It would seem that better triage would get us closer than a 1 out of 20 hit rate.  But in the current environment, why would a medical staff take the time to run through the 6 indications and risk a bad outcome?

Related articles by Zemanta

• Vital Signs: Screening: Value of CT Scans in Youths Is Questioned (nytimes.com)
• Not All Kids with Head Injuries Need Brain Scans (nlm.nih.gov)

Interesting turnaround of the “boycott” created by government health reform suppporters…those supportive of Mackey’s stance have now created a “buycott” movement.

Tea Party Buycott in Support of John Mackey and Whole Foods.

Dana Loesch of the St. Louis Tea Party explained that a Tea Party Buycott asks supporters to gather [in this case] at the Whole Foods store to show economic support. “We are asking supporters to do all their week’s grocery shopping that night. Most tea party supporters are not regular customers of Whole Foods, and we want to show our support for Mr. Mackey’s championship of free market health care reforms.”

Kevin Jackson, St. Louis-based conservative black author said of the event, “This Tea Party Buycott will send a message that many Americans share Mr. Mackey’s concerns. We support his message and his company. We also say to other CEOs with the courage of Mr. Mackey, we will support you as well.”

Michael Patrick Leahy, national spokesperson for the Nationwide Tea Party Coalition said  “We’re taking the Alinsky boycott tactic and we’re turning it on its head. We’re making a positive statement of support, showing that fiscally conservative Americans have purchasing power, and we are more than willing to exercise it in support of great companies like Whole Foods and great CEOs like John Mackey.”

Its interesting to see the creativity being deployed in bringing fiscal conservatives to the table to highlight their opposition to the approach being taken by the left.  In all arguments, there are two sides, and I’m glad that the complexity of health care is bringing out a passionate debate in both!

Related articles by Zemanta

• Whole Foods Boycott on Facebook Swells to 22,000 Users (mashable.com)
• Lowering the cost of health care (outofpocket.com)
• Whole Foods CEO Causes Scandal Over Anti-’Obamacare’ Article (treehugger.com)
• Wonder Why CEOs Don’t Blog? This Is Why (mizzinformation.com)
• A market force roils health care (timesunion.com)
• Whole Foods, Healthcare, and Boycotts (burningbird.net)

“No one should die because they cannot afford health care, and no one should go broke because they get sick. If you agree, please post this as your status for the rest of the day.”

How about just changing it to “no one should die, and no one should go broke”? I’d be in favor of that, too.

We need to take the discussion about health care past the broad platitudes and really ask ourselves what we want from health care and how we’re going to pay for it.  To date, the debate has largely been about how I can get what I want and have someone else pay for it– and in the end we’re all paying anyway, which puts a crimp into that approach.

So, what do I want…I want a convenient and responsive everyday delivery system (that works like most retail services) and protection against unpredictable catastrophic events.  I’d also like some help getting my weight down and my exercise up in a way that fits a hectic schedule.  I’m willing to pay a few hundred dollars a month for this…  What is it that you want and how much are you willing to pay?

For those who haven’t seen it, its a terrific read, and highlighted by David Brooks as the first thing he would ask President Obama to do in preparation for his health care speech.  An excerpt below:

Hospitals implementing Pronovost’s checklist had enjoyed almost instantaneous success, reducing hospital-infection rates by two-thirds within the first three months of its adoption. But many physicians rejected the checklist as an unnecessary and belittling bureaucratic intrusion, and many hospital executives were reluctant to push it on them. The story chronicled Pronovost’s travels around the country as he struggled to persuade hospitals to embrace his reform.

It was a heroic story, but to me, it was also deeply unsettling. How was it possible that Pronovost needed to beg hospitals to adopt an essentially cost-free idea that saved so many lives? Here’s an industry that loudly protests the high cost of liability insurance and the injustice of our tort system and yet needs extensive lobbying to embrace a simple technique to save up to 100,000 people.

And what about us—the patients? How does a nation that might close down a business for a single illness from a suspicious hamburger tolerate the carnage inflicted by our hospitals?

While those of us in health take this current state for granted, it is a reminder of how morally corrupt the incentives are that promote physician convenience over patient outcomes, that promote aloof and unaccountable treatment approaches, and that take little interest in examining failures to constantly improve results.

I’m reinvigorated as I’m refocused on improving health, not engaged in all the insurance goobledygook going around in the “health care reform debate”.

Related articles by Zemanta

• How Healthcare Killed His Father (andrewsullivan.theatlantic.com)
• Are We Looking at Health Care Reform All Wrong? [Health Nuts] (jezebel.com)
• A very good article on health care economics (marginalrevolution.com)
• Your MUST READ on Healthcare (firstthings.com)
• There’s Something Happening Here (bravenewfilms.org)
• In praise of mediocre health care (economist.com)
• Kids, Don’t Let Me Die At The Hospital (cehwiedel.com)

Gold Plated Wheelchairs

Does low administrative cost or pooled purchasing lead you to the best values?  When it comes to government purchasing, the results are surprisingly bad– the Medicare fee schedule rate for medical supplies can multiples higher than the cash price an individual can command.  HHS’s Inspector General, Daniel Levinson, gives us the shocking details in his report on Power Wheelchair Acquisition Costs for the Medicare program (via CNN.com)

The Executive Summary is a fascinating rebuke of Congress’ ability to remove pork from the Medicare program, driving up costs for both taxpayers and beneficiaries.  It also is a cry for help for a Medicare Administrator to take the steps required to appropriately run the government’s payor– we’ve missed the leadership a Mark McClellan can provide in the role (there hasn’t been a Senate-confirmed Medicare head since 2006).  Is this the future of a govenment plan focused on minimizing administration?

Medicare’s fee schedule amounts are based on manufacturer-suggested retail prices. They include reimbursement for the power wheelchair acquisition cost and services performed in conjunction with providing the wheelchair, such as assembling and delivering it and educating the beneficiary about its use. Prior Office of Inspector General (OIG) reviews have found that consumers can buy power wheelchairs for lower prices than Medicare and its beneficiaries. In May 2006, the Centers for Medicare & Medicaid Services (CMS) proposed a revised methodology for setting new fee schedule amounts that would not rely upon manufacturer-suggested retail prices and is responsive to the market. As of May 2009, CMS had not finalized this proposal.

CMS planned to use supplier-submitted competitive bids to establish reimbursement amounts for power wheelchairs and other durable medical equipment (DME), beginning in July 2008. Medicare and beneficiary payments under the Competitive Bidding Acquisition Program would have decreased by an average of 26 percent across all included categories of DME, saving up to an estimated $1 billion annually. However, Congress delayed the program and exempted complex rehabilitation power wheelchairs from future competitive bidding. To offset the cost savings lost by this delay, fee schedule amounts were reduced in January 2009 by 9.5 percent.

Medicare allowed an average of $4,018 for standard power wheelchairs that cost suppliers an average of $1,048 in the first half of 2007. Medicare and its beneficiaries paid almost four times the average amount paid by suppliers to acquire standard power wheelchairs during the first half of 2007. The beneficiary’s copayment ($804) covered 77 percent of suppliers’ average acquisition cost.

Medicare Pays 4X market rate for wheelchairs

In English, we’re paying based on a MSRP rate, that, like any sticker price is stuffed with a high profit margin.  In this case, comparing the lowest internet cost available to consumers in the category with 75% of the purchases was enlightening– the low price via the internet of $1452 was well under the average price (in a space where retail price competition doesn’t matter) of $2959 and the average government reimbursement of $4024.  In fact, in a world where we move to the efficient supplier, we need much less insurance…the price isn’t dramatically higher than the out-of-pocket being paid today.

Medicare is classicly setting paper tigers on its path to reform.  The opportunity is not to transition from an extremely high cost to the average cost that consumers can already find today.  The goal needs to be to use volume to drive below the lowest retail price available to the consumer– around 50% of the cost of the average purchase today (in an environment where no one shops for price).  There are big dollars that can be saved by moving to the most efficient intermediaries.  Even simple transparency tools would allow consumers to save hundreds of dollars and drive massive volume differences to the efficient players.  Imagine the WalMart effect spreading to other health care purchases.

Gandhi was quoted as saying, “Be the change you would see in the world.”  As President Obama looks to transform health care, perhaps he should start with the government agency he already controls, which should then make the benefits of moving to that model clear to the rest of us.

Related articles by Zemanta

• CMS Updates FAQs on Medicare Recovery Audit Contractor Program (medicareupdate.typepad.com)
• OIG Releases Compendium of Unimplemented Recommendations (medicareupdate.typepad.com)
• Lack of Medicare Appointee Puzzles Congress (nytimes.com)
• One wheelchair — one lesson of problems in health care reform (cnn.com)
• CMS Updates FAQs on Medicare Recovery Audit Contractors (medicareupdate.typepad.com)
• Double-Digit Medical Expense Trend to Continue (usnews.com)

I keep hearing about Comparative Effectiveness and how evidence needs to used in medical practice.  Then I remember my days in the clinic/hospital, where complex patients presented in ways that didn’t fit textbook definitions and whose multitude of issues offered contradictory readings from the literature.

So how are we to move forward?  I’m a strong believer that the best evidence needs to be used in clinical decision-making…the issue is in making this evidence usable in the field in a way that doctors can trust will be relevant to the person in front of them (as opposed to 300 carefully selected and studied patients in Finland).

So what will the new paradigm look like?  My sense is the RCT will fade as consumer-focused care comes into play.  If the best of science is directed to the patient sitting in front of a doctor, the goal will be to combine the information of others just like them (across multiple segments and disease phases) to predict both the natural course as well as the potential options for improvement (and their predicted results).

After all, isn’t it less important to know what a treatment does for the average study patient in Finland and more about what it does in people just like you in the real world?

Real-world data from Patients Like Me

Related articles by Zemanta

• Behavioral Change & Web-based Tools (chilmarkresearch.com)
• For Patients – Perception is Reality of What is Important (company.changehealthcare.com)
• Cancer research and clinical trials (scienceblogs.com)
• Studies Question Spine Treatment (nytimes.com)
• Overdiagnosis of breast cancer due to mammography (scienceblogs.com)

Check us out at http://www.consumerfocusedhealth.com/blog