The Doc Fix

This is the most succinct discussion of the so-called doc fix (change in the standard growth rate for Part B payments) that I have seen from Ezra Klein's blog. He both gets at what the SGR is, sets it in some context compared to other recent legislation, identifies the fact that addressing it has been delayed many times since 1998 (true bipartisanship!) and how it is not a persuasive means of attacking the reform bill just passed. Rep. Ryan was welcome to bravely lead the charge to fix the SGR back when Republicans controlled the House, Senate and White House.

In fact, it would be a great chance for the President to gain some cred on spending/deficits by proposing a long term SGR fix and paying for it. If you are looking for suggestions, wrap up some more med mal reforms, the estate tax along with this and go from there.

Deficit Commission Meets

for the first time April 27, 2010. Expectations seem to be fairly low for what they will achieve since there is no mechanism to preference their recommendations with respect to congressional action. There was such a commission in the works that appeared poised to pass against some powerful Democrats wishes, but 7 Republicans who had supported such a commission early during this current Congress changed their mind in January, 2010 and it died by a 53-56 vote (because everything takes 60 votes in this Congress. However, the problems with the long term structural deficit (meaning the degree to which the ins don't match the outs over time after the economy is roughly normal) are immense and will not get better without strong action. Erskine Bowles, co-chair of the commission says his mother urged him not to touch Medicare. His quote in response sums up what we have to do.

"We have to touch Medicare. We have to touch Social Security. We have to touch Defense. And we have to take a strong look at revenue."

The TARP and the Recovery Act, are all irrelevant to this, meaning that even if we hadn't had those or even if we hadn't had a terrible recession, we would still be sunk long term if we don't have some large reforms, mostly because the baby boomers had fewer children than their parents.

Some good background material here. And if you are sick of talking about health policy but ready to talk about the deficit.....Medicare and Medicaid are at the heart of the deficit issue. Social Security as well, but it is a much simpler program and since benefits are indexed to inflation, it cannot grow at 2-3 times overall inflation like a health care program can (and has been doing for 3 decades).

Prices

The main reason that the U.S. spends so much money on health care is prices....meaning how much is paid per unit of care. Here is an interesting article about medical tourism. Good old fashioned shopping won't work for some types of care, but for others it could. It will be interesting to see if the trend toward medical tourism increases, and whether providers (mostly hospitals and health systems) have to began to respond to the competition.

Long Term Care and CLASS Act

The Woodrow Wilson School of Public Policy Quarterly has a bit on a paper I did on private long term care insurance and the use of genetic markers as underwriting tools. The CLASS Act is one of the parts of the new reform law that will need a great deal of policy making to implement the law well. I will be writing about that in the next weeks.

I haven't been blogging much...end of the semester back log. But, one great bit of news: I got tenure!

More on malpractice

WSJ blog on a study that they say shows that fear of malpractice suits leads doctors to do more test, etc. They note that CBO looked at the savings that would amount from national application of a mix of tort reforms....a $54 Billion reduction in the deficit over 10 years, or around a 0.2% decrease in total health spending due to lower malpractice insurance premiums and a 0.3% decrease in total health spending that would result from reductions in defensive medicine and increases in tax receipts. The tax receipt increase ($13 Billion over 10 years of the $54 Billion deficit reduction that CBO projected) would occur because if health spending slows, then rate of growth of insurance premiums would slow, and wages would rise since employers view compensation in totality [meaning wages and benefits]). An increase in wages is taxable, while an increase in health insurance premiums paid by an employer is tax free income. You can stump your friends at the next cocktail party with that one....one of the ways tort reform would reduce the deficit is via increased tax receipts.

The $54 Billions savings is substantial as compared to what CBO scored as expected 10 year deficit reduction for the health reform bill (~$138 Billion/10 years), but far lower than they estimates often used by proponents of tort of reform, in political discourse. Roughly speaking, add a zero if making a Republican stump speech....

It should be noted that the study on defensive medicine noted by the WSJ blog is based on a survey whereby doctors are asked about the non-medical reasons for doing a given test. They asked doctors** why they did things, and focused on non clincial reasons to order tests, here focused on cardiac catherization procedures. 24% said fear of malpractice was a non clinical reason to order a test, while 27% said belief their colleagues would order a test influenced them (a new take on peer pressure). 5 of the 598 doctors surveyed said they commonly or frequently ordered more cardiac cath procedures to increase 'financial stability' of their practice.

So, there are multiple explanations or motivations for what is termed defensive medicine. I have written that malpractice reform is needed, but as a step 1 toward a patient safety based system. However, more stringent malpractice reform is needed if we will substantially address the rate of health care cost inflation because any attempt to alter the practice of medicine to slow cost inflation will be met with the retort from docs 'what are malpractice?' From a policy stand point, we must do more because: (1) it will result in lots of savings (I suspect CBO is about right here; it is big or small depending on your perspective); (2) because it is a route to more comprehensive patient safety/quality improvements (most definitely); and (3) it will remove an easy cultural out for the medical profession when discussing payment rates and movement toward paying based on quality/value. Note that it is certain that there are both overpaid and underpaid doctors (across speciality, geography, and skill)....the aggregate effect on payment to doctors as class is ambiguous. The distributional effects would likely be huge. Most everyone will say they want to move toward pay being based on quality/value, but I suspect alot of the providers (docs, hospitals, health systems) either don't mean it, or don't understand what it would mean for the revenue.

**If you did a survey of professors, you would find out that we are smarter than you think we are, you should listen to us more, and we are very underpaid.

A Culture of delusion

Writing columns in the Raleigh (N.C.) News and Observer about health reform has been been harder than I thought it would be, but also more interesting. The columns are to the right side of the blog page. I have had the privilege of interacting with many people whom I never would have met had it not been for my writing in the paper, and gotten to speak with many people and groups.

One of my bottom line conclusions from all of this is that there is a certain delusional quality to what many of us think about health care, especially as it relates to costs.

When I go and talk about reform with groups, I tend to focus on the unsustainable nature of the system. By unsustainable, I mean we can't keep doing what we are doing, it will bankrupt our nation. As I talk through various sets of slides and numbers that illustrate this, there are always knowing nods of agreement. Indeed, it is hard to find someone who won't assent to the notion that we spend too much and that we must do something about it. Then comes the delusional part.

If you talk about things that could slow the rate of cost inflation, low and behold the people who think we spend too much really don't think that at all. Or at least they don't want to do anything to slow the rate of cost inflation. End the tax exclusion of employer paid benefits? That is a tax increase, I work hard for my benefits! Develop lists of procedures that Medicare won't pay for under certain situations? Why that is rationing of care, don't you love your grandmother! And on and on and on.

David Leonhardt has a nice article running through this cultural delusion in the U.S. We say we want to slow the rate of cost inflation, but don't like any of the things that might actually reduce spending. It turns out we want a magic solution, like a ride at Disney World. Not the reality that a dollar of saving is either a dollar of reduced care and/or a dollar of reduced revenue for someone.

One answer that Leonhardt suggests is focusing on the quality side. It turns out that there is lots of evidence that the most expensive thing is not always the best thing. We certainly seem to start with a belief that it is, and efforts to focus more on quality of life improvements and life extension would actually lead to spending reductions in some areas.

I have done some work showing that hospice reduces Medicare expenditures in the last year of life. This is a case whereby people who are in a very difficult situation and are imminently dying choose hospice, a choice the literature says improves quality of life both for patients and their families. And actually saves Medicare a bit of money. Focusing only on end of life or last year of life costs will not be enough, in part because it is not clear when the last year of life began until it ends. More generally, we need to move toward providing patients and providers and payors with information that helps us purchase health care that is productive. By productive, I mean care that increases life span and/or improves quality of life. The reality is that a great deal of what we spend doesn't meet either of these criteria. In the abstract, many will say, ok lets do that. But, once we start to try, they will go insane.

However, we have to do this. We have to take it on head on. There are many policy changes needed. Most importantly, we need a cultural conversation and change that doesn't demonize even asking the questions.

More on Donald Berwick

President Obama's nominee for the head of the Center for Medicare and Medicaid Services (CMS). Policy types are excited and encouraged about him in this role, and the job typically exists and is carried out in the minutiae of the health policy world. Given the passage of reform, his confirmation hearings in the Senate will be far more public, and he doesn't have experience as a politician, as Kathleen Sebelius, a former Governor who is now the Secretary of Health and Human Services has. There is lots of detailed policy making to be done at CMS, and hopefully the confirmation hearings will get going soon.