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Saturday, July 19, 2014


 Healthcare Economics
There is something of a flap going on in Massachusetts over the desire of Partners Health Care System (formed by the merger of Massachusetts General Hospital and Brigham and Women’s Hospital) to acquire three more hospitals in the Boston area, two in the north shore and one south.
Partners has for some time dominated health care delivery in eastern Massachusetts.  Its reputation is such that it would be nearly impossible to sell a health insurance policy in the area that didn’t cover its services.  Taking advantage of that, Partners has been able to leverage health insurance companies into paying it considerably higher rates than are paid to other providers.  That has caused some grousing, but up until now not enough to spur much in the way of action.
Partners’ proposed acquisitions require regulatory approval and a few weeks ago Martha Coakley, the state’s Attorney General, announced that she had reached agreement with Partners on conditions that would allow them to proceed, subject to approval by the Suffolk County Superior Court.  That has produced a small storm of protest.  Competing hospitals have filed objections.  Two gubernatorial candidates have come out against it.  Now the state’s Health Policy Commission, an advisory group, has expressed reservations.  The story has received coverage in the local press.
In my mind, the Partners merger should never have been allowed.  Its almost sole purpose of gaining negotiating power with payers was clear at the time to anyone who understood health care institutions and has been confirmed by its actions ever since.  But people have not wanted to believe that.   We have been very slow to accept that health care providers are not simply organizations engaged in the healing ministry, but also entities that engage in economic behavior.  When they find themselves with economic power, they exercise it. 
Maybe we are becoming more realistic about the matter.

 

Saturday, July 12, 2014

Buying Care

I have always been skeptical about the popular idea that healthcare would be better if consumers (i.e., patients) had an incentive to pick providers based on cost and quality.
One reason for my skepticism is that the psychology prevailing at times of illness or injury doesn’t seem to me to be conducive to cool judgments about where to get care. 
Another was illustrated by a front page story in the July 6 issue of the Omaha World Herald headlined Best bang for buck at hospitals is no easy call.  It seems that Blue Cross Blue Shield of Nebraska is asking Alegent Creighton Health hospital and physicians to lower their rates which, it claims, are some 10 to 30 per cent higher than those of comparable systems.  Alegent claims the difference is justified by higher quality which reduces things like complications and re-admissions.
The World Herald tested the claim by comparing ten systems in the area, using 20 Medicare price and quality measures.  Based on the evidence, as shown in 12 lists and 12 bar charts, the World Herald decided that the insurance company’s claim was justified, but took a full page of text to explain its conclusion.
Even so, the article conceded that there was evidence on both sides of the issue.  For example, each of the ten hospitals ranked first in one category.  Seven ranked last in one.  Imagine, then, a patient faced with a medical need trying to go through a similar process.  Creighton, the hospital that gave rise to the issue, ranked first in four categories and last in five.
If we want to employ market forces in an attempt to make health services both better and more efficient, I think there is no avoiding dependence on insurance companies to develop packages that they claim offer the best value and then convince consumers that they are right.

 

 

Saturday, June 21, 2014

Cost

The article on page 8 of the May 5 issue of Modern Healthcare was titled Spending jump puzzles providers.  The article on facing page 9 was titled Insurers brace for high-cost Sovaldi.  Sovaldi is the medicine that treats Hepatitis C at a cost of $84,000 per patient.
While we are understandably concerned about the high and rising cost of care, we pay no attention to how we got into this situation.
For most of recorded history, healthcare was paid for by the sick and injured.  Patients paid for care when they received it.
Then in the 1930’s, somebody in Dallas invented what became Blue Cross.  For a modest monthly payment, school teachers who subscribed were guaranteed that when they needed hospital care it would be paid for, within defined limits.  So now hospital care was being paid for by well people rather than by the sick and injured. 
During World War II, the federal government, responding to pressures to raise wages, decided that employers could provide health insurance to employees without its value being considered taxable income to the employee.  Under that arrangement, health care would be paid for by employers.
During all this time, health care for those unable to pay – the so-called medically indigent – was largely the responsibility of local governments and private charity.  The cost of care gradually grew beyond the capacity of these sources and in 1960, the federal congress enacted the Kerr-Mills bill, which provided matching grants to the states to be used to pay for health care for the medically indigent aged.  This added federal and state treasuries to the sources of money that supported health care.
Kerr-Mills never worked very well and Medicare and Medicaid were adopted in 1965.  Medicaid was a more workable federal and state program of funding health care for the medically indigent.  Medicare was for seniors, and was financed by a national payroll tax – causing health care for retired seniors to be paid for by the employed population.
Medicare as originally adopted did not cover prescription drugs.  That omission was rectified in 2003 with the enactment of Part D – which included a healthy federal subsidy.
Despite all these initiatives, a sizeable portion of the population remained uninsured, an issue addressed directly by the Patient Protection and Affordable Care Act (aka Obamacare) which was passed in 2010.  It made health insurance mandatory, so that much of the care for which providers had previously not been compensated would now be paid for.  The program also greatly expanded the number of people eligible for Medicaid and provided federally financed subsidies for those considered unable to pay the full cost of health insurance.
And during all this time we have been encouraged by the tax laws to donate money in support of health care.
So although we have long claimed to be worried about the high cost of care, what we have done over the years is to tap every available source of money to support it, with each measure increasing the amount of money funneled to providers.
And we wonder why health care costs so much.

Friday, June 13, 2014

Planned vs Market Economy

We remain attracted to the idea that health care should be organized as a planned economy rather than as a market, but we aren’t sure about it.
The issue is nicely illustrated by a current situation in Massachusetts.  Partners Health Care, formed some years ago by the merger of two health care giants – Massachusetts General Hospital and Brigham and Women’s Hospital – has been enlarging its network by acquiring hospitals and medical groups in eastern Massachusetts and now seeks to acquire two hospitals in the North Shore area and one in the South Shore, together with some 500 doctors.
Partners, with its two premier hospitals, is a powerhouse in the Boston area healthcare market – sufficiently so that it is almost impossible to sell a health insurance policy that does not include them.  Taking advantage of that, Partners has forced health insurance companies to pay them rates that exceed by considerable margin what they pay anybody else.
In any other form of enterprise that would look very much like a monopoly but apparently not so in health care.  Martha Coakley, Massachusetts Attorney General and Democratic candidate for governor, recently announced the general terms of an agreement being negotiated with Partners, under which the acquisitions would be permitted but Partners would be limited in how much it could raise its rates during the next five to ten years.
If Partners was in the business of making ball bearings or oatmeal, we would depend on the market to limit what it could charge.  But General Coakley apparently thinks it better if she does it.
Competing hospitals have in the past been rather subdued in their complaints about Partners but apparently no longer.  As reported in the June 11 issue of The Boston Globe, they have submitted a letter of protest to the Attorney General, claiming that the announced Partners deal would increase cost and perhaps cause some hospitals to close.
My own view is that the Partners merger should never have been allowed in the first place, that it has contributed significantly to the cost of health care by exercising the power that resulted, and that the proposed acquisitions would just make things worse.
We’ll see how it all comes out.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuesday, June 10, 2014

Choice

We have to get past this idea that free choice of physician is some kind of inalienable right.
When we move to another town far away we change physicians.  When our physicians die or retire, we change.  If we are in an HMO and our physician goes to work somewhere else, we change.  When wife Marilyn got her second knee, the surgeon who did the first one was no longer doing them and referred her to another one.  In none of those cases do we complain.
But if an insurance company asks us to change, we cry ‘foul.’  And “choice” remains a favorite word for inclusion in health insurance advertisements.
All of that was brought to mind by an article in the June 7 issue of The Boston Globe titled Mass. Seniors lose choices on doctors.  It seems that UnitedHealthcare has announced its intention to remove up to 700 physicians from the Massachusetts panel of 16,800 that it has offered to subscribers of its Medicare Advantage health insurance plans.
The rather long article discussed various aspects of the issue, but on the subject of why UnitedHealthcare would risk alienating a group of its subscribers by making them change physicians, it only quoted the company as saying it was doing it to reduce cost and, perhaps, improve quality. 
One has to assume that the doctors being dropped were practicing in a way that was unusually costly and, perhaps, not of the best quality.
Maybe people ought to appreciate learning that the physicians they have been using are not very good, but that is a lot to ask.  It would be better if they got the information from some source other than their insurance companies, but at present that seems to be the main one.

Friday, June 06, 2014


Medicine and Science
To the extent that medicine is a science, we don’t need doctors.
If, when feeling ill, one could stick a finger in a machine and learn with scientific certainty the diagnosis and best treatment, there would be nothing for a doctor to do.
With biological science having grown greatly over the years, it should therefor follow that the need for doctors would decrease.
Evidence of that appeared in an article appearing in the May 31 issue of The Boston Globe under the headline “A new source for the old house call.”  The article reported a plan by EasCare LLC, a Dorchester, MA ambulance company, to make its Emergency Medical Technicians (EMTs) available to provide in-home care for “patients with infections, minor wounds, injuries from falls, and problems associated with chronic diseases like diabetes and congestive heart failure.”
When you think about it, it makes a lot of sense.  If we can rely on EMTs to care for us in life-threatening events like heart attacks, strokes, and car accidents, surely it is reasonable to look to them for treatment of more minor complaints.
Scientific progress has made it feasible, both by adding to the certainty of diagnosis and best treatment and also by making information more readily available for the use of both caregivers and those responsible to supervise them.

Tuesday, May 27, 2014

Paine vs. Burke

“Do we want to fix our health-care system by empowering expert panels armed with the latest effectiveness data to manage the system from the center or by arranging economic incentives to channel consumer knowledge and preferences and address some of the system’s discrete problems?”
That sentence comes from the concluding chapter of a book I have just finished reading.  Yuval Levin’s The Great Debate is a summary of the competing philosophies of Thomas Paine and Edmund Burke who were famous essayists and pamphleteers during the last part of the 18th century, and particularly during the American and French revolutions.  They are given credit for having articulated the disparate points of view that underlie what we have come to know as the liberal and conservative branches of politics.
To oversimplify, Paine – seen as a father of liberalism - believed that as individuals we are able, through the application of reason and principles, to reconstruct society in whatever way we see fit without regard to what came before or will come after.  Burke – a conservative - saw the institutions of society as reflecting the accumulated wisdom and experience of the past and believed that changes and improvements should come incrementally. 
As with so many other things, perhaps the truth lies somewhere in between.  In general, I find myself agreeing with Burke, but as the same time I can identify with Paine’s high regard for the importance of the individual and impatience with those who resist measures that seems to be logical and reasonable.
Paine and Burke made enormous contributions to the modern, Western world as we know it and for that we should all be grateful.  And it is sobering to realize that the opinions we think we invented ourselves often have their roots in the thinking of people we never heard of.

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