November 09, 2007

Radical Republicans

This Time article by Ramesh Ponnuru is terrifically misleading. "Most Americans of working age get their health insurance through their employers. The Democrats running for President want to keep it that way. The Republicans don't," he writes. "[T]he truth is that it's the Republicans who make more radical proposals. They want to make a break with more than six decades of government policy."

Reading Ramesh's article, you'd think that the Republicans wanted to eliminate the employer deduction. And he's right: That would be a radical change! But they don't want to do that. George W. Bush's plan, which Ponnuru touts, doesn't do that. Giuiliani's plan, which is less ambitious than Bush's, also doesn't do that. Romney's plan doesn't do that. McCain's plan might do that, but when I called the campaign for confirmation, they never called me back, so I'm going with "no."

So yes, if they were doing this radical thing Ponnuru is proposing, then their plans might be radical. But they're not. They're not even coming close. And their tweaks to individual insurance, making it somewhat more viable, won't destroy the employer-based system either. Ponnuru misses or doesn't mention the other major reason people purchase their health insurance through their employers: Risk pooling. Within an employer's pool, your preexisting conditions don't matter, your coverage doesn't get terminated for inexplicable reasons, your insurer doesn't pick through your medical history -- you, in other words, don't become a bad deal the second you get sick. You're protected and subsidized by your colleagues. Which is important: What you want in health insurance is for it to be stable, safe, secure.

The Republicans plans don't offer that. But Ramesh knows they need to seem like they do. So he writes, for instance, of Bush's plan will "make it possible, for example, for [people] to keep their policies when they switch jobs." Yes, Bush's plan makes it possible, but not likely. Conversely, the Democrats' plans actually allow you to keep your policy when you switch jobs.

November 9, 2007 in Consumer-Directed Health Care | Permalink | Comments (26)

November 03, 2007

On TVs and Angioplasties

Among the main bones of contention between me and conservative health reformers is that I simply don't believe a majority -- or even hefty fraction -- of patients will ever have information good enough to exert serious control over their health care decisions. Comparing TVs is easy enough, and if you make a mistake, the worst that happens is you're left with a bad TV. Deciding what heart surgeries you need -- particularly going against a doctor's judgment on the subject -- is much dicier.

But I was thinking about the TV comparison at breakfast today, and something else occurred to me. Even in consumer goods, where the information is pretty good, where we can rent the game or listen to the stereo in Best Buy, we recognize that consumer information is still pretty imperfect. For that reason, we allow people to return goods they've already bought, recognizing that amassing more information as to the product's quality or versatility can, and should, overwhelm the previous, less-informed, judgment. Quite obviously, you can't do that with an angioplasty or a lumbar surgery. So not only do you have way less information to start with, but you don't have the ability to act on post-purchase information.

Update: I should probably make my conclusion here a little less implicit. There are basically a limited number of places where micro-level treatment decisions can be made. Insurance companies, but no one wants that. The government, but no one wants that. Patients, and I'm arguing against centering the system on them. And Doctors.

Doctors tend to be my choice. The problem is, their incentives are, at the moment, all mucked up. As Jerry Avorn writes in this month's American Prospect, "what is distinctive about our system is that it provides economic incentives that encourage doing the most expensive thing all of the time to everyone who can pay for it or have it paid for." You can cut that down by making sure fewer people can pay for it, which is the Right's solution, or you can change the incentives governing the professionals who recommend the treatment, which is closer to my solution. There are a variety of policy changes that would help with this, including putting more doctors on salary rather than on fee-for-service structures, financially incentivizing the use of cost-effective treatments, putting much more money into the gathering of evidence on cost-effectiveness, etc. For more on this, Shannon Brownlee's new book, Overtreated, is supposed to be excellent. (I haven't read it yet, but will soon.)

November 3, 2007 in Consumer-Directed Health Care | Permalink | Comments (12)

October 29, 2007

Rudy and "Socialized Medicine"

I used to believe that one of Bush's primary problems was that he was governor in a state with an absurdly weak governorship. In Texas, the executive is only the fifth most powerful position, and so Bush's disengagement with public policy made sense. He'd never needed to be engaged. I hoped Giuliani would actually be better, as his time in New York required real substantive involvement with policy analysis. And yet it's the same old crap. Here's Rudy's new radio ad on health care:

Rudy's wandering around with the old prostate care canard. It's -- no pun intended -- crap. England and America have vritually the same mortality rates from prostate cancer. In England (as of 1997), 28 males of every 100,000 died from prostate cancer. In America, then number was 26. The difference comes in "incidence" -- there are many more diagnoses of prostate cancer in America, as we have an aggressive screening process:

Problem is, most of those cancers simply aren't deadly, or even necessarily damaging. They're slow-moving and benign. It's like saying we have a lower death rate from car crashes because we record more near-misses in the statistics. We may indeed have a slight advantage of prostate treatment, but it's not what Guliani is suggesting it is.

Not only are Giuliani's numbers wrong, but the whole metric is off. Prostate cancer isn't the only illness we treat. If what you're interested in is years of life lost due to the health care system, well, we have data on that too. This is from the same source as the prostate cancer stats (which are, I'm pretty sure, the ones Giuliani is using, as they're the ones Cato, who started this argument, uses):

America, you'll notice, doesn't do so well. And to make the old point one more time, we're actually having an argument over which system is better, even as Americans pay more than twice as much for care as the British. At that cost differential, there should be no debate. That there's any dispute at all is evidence that we're doing something terribly wrong. But don't worry. Giuliani is proposing a tax deduction...

Assignment Desk: Wouldn't it be interesting to find out if the gold-standard care Giuliani got during his prostate cancer came while he was on government-provided health insurance? He was mayor at the time, suggesting his care was coming through the city, which would suggest it was through the state insurance pool, which works very much like FEHBP -- which is what the Democrats are proposing to expand to all Americans, and what Giuliani is calling deadly, socialized medicine.

October 29, 2007 in Consumer-Directed Health Care, Health of Nations | Permalink | Comments (120)

Medical Tourism

Andrew Sullivan's very excited by the fact that Britain has a burgeoning medical tourism industry. "Tony Blair poured millions into Britain's socialized healthcare system," he writes, "pumping unprecedented resources into a healthcare system that Michael Moore admires and the American left loves. This is the result." Take that, mediocre-to-bad health care system that nobody on the Left suggests we should copy!

Of course, Britain spends 41 percent what we do per capita -- and no one thinks Blair made up that shortfall, or anything close to it. So detractors are probably best served by not making funding the issue. I wouldn't have thought, however, that they'd try to move over to medical tourism as a point of comparison. But we can have that discussion. We can talk about the 50,000 Americans who go to Bumrungrad hospital in Thailand every year for cheaper surgeries. We can go into this article, about the Indian hospitals primarily serving Americans, or this one, about the waves of Americans traveling abroad because they're unable to afford heart surgery. Indeed, there are more Americans -- 100,000 -- traveling abroad for cosmetic surgery alone than there are Britons seeking any type of services in foreign lands.

America is actually driving the medical tourism industry that some Britons are taking advantage of. The growth of foreign treatment centers aren't a result of the failings of the British health care system (of which there are many). They're a result of the cost of American health care, and the huge numbers of sick individuals we price out. You'd think, paying two-and-a-half times what the Brits do for health care, that we could all access care, and wouldn't need to fly to India. But you'd be wrong. The Brits also have a bad health care system, but theirs is, on the bright side, very, very cheap. Ours isn't.

October 29, 2007 in Consumer-Directed Health Care, Health of Nations | Permalink | Comments (46)

October 24, 2007

The Regressivity of Consumer Directed Health Care

This may not shock anybody, but a new paper from Health Affairs finds that consumer-driven care -- also known as the Republican Party's answer to universal health care -- "would probably widen socioeconomic disparities in care and redistribute wealth in 'reverse Robin Hood' fashion, from the working poor and middle classes to the well-off. Racial and ethnic disparities in care would also probably worsen."

The reasons for this are largely issues we've talked through in the past. Health Savings Accounts and their ilk are attractive to the healthy, unattractive to the sick, and thus worsen "risk segmentation" in the market. Without healthy individuals subsidizing sick folks, more sick folks will be priced out of care. It's possible that attracting health individuals would actually lead to a net increase in those with something called "coverage." But the losses would be concentrated among those who most need health insurance.

The paper also brings up a finding from the RAND health care experiment. Cost-sharing didn't affect the health outcomes of most participants. But among the poor, higher cost sharing resulted in "elevated death rates, worse control of hypertension, and other inferior health outcomes." We now know, though, that a large number of participants in the cost sharing plans dropped out when their health took a turn for the worse. Going by the rules of the experiment, upon dropping out, their insurance reverted back to its pre-RAND state. So those who dropped out, we can infer, had pretty good insurance, which probably means they were high-income. Low-income folks don't generally have good insurance, and so they stayed in -- and showed worse health outcomes. So we can both say, with some certainty, that consumer-driven care will result in worse outcomes for the low income, and suggest, with good reason, that that result is generalizable up the income scale.

I also want to highlight this argument about consumer-driven care and coordinated care, which I'll quote in full:

Especially in cases of complex and chronic illness, involving multiple specialties, coordination of clinical services is crucial to the pursuit of quality.28 Errors of omission and duplication, missed diagnoses, toxic treatment interactions, and failure to see the clinical "big picture" are among the pathologies that ensue from fragmentation of care. The least advantaged among us are especially vulnerable to this fragmentation, since they tend to be less able than others to negotiate complex organizational arrangements. Recent efforts to improve patient safety and clinical quality have prioritized systems approaches, including integration of diagnostic and therapeutic efforts for every patient. Such approaches promise both to improve the overall quality of care and to reduce disparities, by pushing health care systems toward best practices for all.

The consumer-directed model pushes back against this quality improvement strategy by calling on patients to plan their own care. Its cost-sharing requirements discourage patients from compliance with coordinated care based on best practices. This, in turn, discourages providers from developing the organizational arrangements and information infrastructure necessary to improve quality by coordinating care. The spread of this model would be problematic for all patients from a quality-of-care perspective but especially troubling for those least able to negotiate complex systems of care on their own.

That's a very important point. Chronic disease is a massive driver of cost growth, and all available evidence suggests that we need to respond by better coordinating care, incentivizing prevention, and encouraging routine treatment and adherence to therapies. Consumer-driven care does none of that, and in fact, fights against most of it. That chronic diseases are more common amongst the poor, who are least likely to use health savings account in the platonically optimal way, simply ensures that the worst impacts of consumer-driven care will come in the communities who can least afford the harm.

I'll also quote this bit on the regressivity of consumer-driven care:

The spread of the consumer-directed model is likely to redistribute money from the less advantaged to the prosperous in several ways. The most obvious is tax-deductibility of contributions to HSAs—transparently a greater benefit to higher-income Americans and thus a burden for the less well-off. Compounding this inequity is the greater ability of the well-off to contribute to these accounts in the first place. At times of health crisis, the less prosperous are more likely to exhaust their (smaller) balances entirely, and thus more likely to spend post-tax income on care that the well-off can cover with pre-tax dollars.

A less obvious "reverse Robin Hood" effect, not addressed in published criticisms of the consumer-directed model, arises from a feature that accounts for much of its cost-control potential. Outpatient diagnostic work-ups, which high cost sharing discourages, often trigger cascades of care (including hospitalization)—and spending that exceeds out-of-pocket maxima. Insurance then picks up the bill—more frequently for those who are able and willing to pay out of pocket for the triggering diagnostic work-up. Whether for worse or for better from a therapeutic perspective, those who are less able and willing to pay out of pocket, outside the hospital, receive less of the high-cost care that exceeds annual maxima and is therefore insured in full. These less prosperous policyholders thus tap the insurance pool to a lesser degree. Yet for employment-based coverage, at least, all who subscribe to a given plan pay equally into the pool. The result is a cross-subsidy from the less well-off to the more prosperous via premiums and pay-outs from high-deductible plans.

So the GOP's answer to the current health care system, where the healthy help subsidize the sick, is to encourage the poor to help subsidize the rich. That should play well.

October 24, 2007 in Consumer-Directed Health Care | Permalink | Comments (24)

July 25, 2007

How Do HSAs Ration?

Bob Galvin is a smart guy. So I was interested to read his interview with consumer-directed health care advocate Regina Herzlinger in the latest Health Affairs. But this is just crap:

Galvin: On the whole, wouldn't you say the jury is still out on whether a single-payer system can control quality better?

Herzlinger: No, no. The OECD and Commonwealth data showed that the U.S. had better preventive care, diabetes care, and childhood leukemia scores in addition to breast cancer. And measures of diseases like asthma and diabetes, which have significant genetic components, must be adjusted for the composition of the population before they begin to make sense.

Fundamentally, single payer controls costs by rationing care to the sick, while consumer-driven health care controls costs through innovations in the care of the sick.

Interviewers can't let their subjects get away with lying like that. Consumer-driven health care controls costs by pushing more spending onto the consumer so that they can afford less care. It rations by income. It's not even deceptive about this: That's literally what "skin in the game" means. When you're paying more for your care, your price sensitivity increases, which in turn makes you both less able and willing to pay for care, which in turn will make you more likely to purchase valuable care and discard bad care.

That, at least is what advocates hope will happen. Whether you believe them depends on whether you believe consumers can make smart care decisions, and whether you believe wasted care can be cut out by bluntly disincentivizing all care. But the cost controls here have nothing to do with innovation; they have everything to do with increasing financial exposure so we're less willing and capable to purchase medical services.

July 25, 2007 in Consumer-Directed Health Care | Permalink | Comments (27)

June 14, 2007

HDHPs and Pregnancy

In more evidence that high-deductible health care plans are bad for women and poor for routine medical expenses, a new study shows those enrolled in traditional health care plans pay about $1,455 for a normal pregnancy, those in the government's high-deductible plan pay $3,000, and those in the average high-deductible plan offered by small businesses pay a whopping $7,000. And the gap tends to get wider as the pregnancy grows more complex, at least until you slam into the plan's out-of-pocket limit. Moreover, much routine prenatal care that individuals think is covered as preventive is, in fact, not covered at all. "If you are contemplating having a baby or having any kind of big health event, this is not the policy for you," said study co-author Karen Pollitz.

Got that? If you're actually expecting to use any health care, don't get a high-deductible plan. But tell me, what's the theory here? Do we want to discourage pre-natal care? Pregnancies? Is there a reason we believe paying more for the associated treatments will have a positive effect on health outcomes or bank accounts? Or are we just down for the cause of shifting risk and cost from business and society down, down, down to the individual?

Update: Link fixed.

June 14, 2007 in Consumer-Directed Health Care | Permalink | Comments (27)

June 12, 2007

The Consumers Are Speaking

The Wall Street Journal reports on a Kaiser study showing slow adoption and low satisfaction for consumer-directed health care plans. Growth between 2005 and 2006 was a mere 300,000 -- from 2.4 million to 2.7 million -- and much of that comes on the individual market, where there are few affordable options, or because employers force the change. "Where employees do have a choice," the Journal reports, "only 19% choose the newfangled plans." In the Federal Employee Healht benefits Program, where the plans have been available for years and word-of-mouth could be expected to popularize a cheap, useful new alternative, only 50,000 of the 8 million members have signed up for the free-market wonders. The consumers are directing their health care plans, and they're directing them away from health savings accounts.

Satisfaction is low, too. The employee-benefits firm Towers-Perrin recently did a survey of the plans, and while the exact numbers aren't included in the article, David Guilmette, managing director of Towers Perrin's health-care consulting practice, summed them up: "If I were a product manager in any other industry and saw scores this low in customer satisfaction and understanding, I'd be thinking of pulling that product from the shelves or retooling it."

The really scary finding is that only 29 percent of those with the plans actually report saving money for health expenses. The whole point of health savings accounts is that you can sock away money tax-free for health expenses. With that cash lying in wait, you enjoy the low premiums and have a ready storehouse if disaster strikes. But for the vast majority of families, that cash isn't in wait, and the reduced coverage and increased deductibles will hit with full force.

So employees aren't signing up, they don't like the plans when they do sign up, and they don't use them correctly when they're enrolled. Some policy innovation. Some fix.

June 12, 2007 in Consumer-Directed Health Care | Permalink | Comments (21)

April 12, 2007

The Progressive Case For More Cost Sharing

Here's the piece on Furman's plan I've been promising. It also reflects my thinking that there's more for liberals in HSAs than first meets the eye, but they have to be constructed progressively, smartly, and within the context of a universal structure. The American Prospect doesn't yet allow comments, so put discussion in this thread. I'll be curious to hear what you guys think.

April 12, 2007 in Consumer-Directed Health Care | Permalink | Comments (36)

April 11, 2007

Are HSAs Unfair?

Responding to the study showing HSAs end up costing women are $1,000 more per year, Julian writes:

I feel a bit churlish quibbling about this, but wouldn't an equally reasonable frame here be that the more common low-deductible plans amount to a $1,000 cross-subsidy to women?

Well, which more common lower-deductible plans? According to the Kaiser Employer Health Benefits Survey, 63% of individuals in HSAs are in HSAs with deductibles of over $2,000. And 71% of families in HSAs have deductibles over $3,000. So I'm not sure who's in all these $1,000 HSAs, but they're certainly not getting picked up in the literature. Worse, these are employer-sponsored HSAs, and we'd expect those purchased on the individual market to have higher, not lower, deductibles.

So take the average individual HSA, which has a deductible of $2,011. For a male, out of pocket expenses will average $500. For a female, they'll average $1,200. And women make less anyway. Now, one of two things can happen here. Women can continue using health care at their current rate and pay more, or the expected cost effects will occur and women will begin using less health care. Given that the $1,200 number is for routine care -- mammograms and the like -- we don't want to disincentivize their routine, preventive care. So what we're really doing is simply making them pay more for health care because...they're women. And because we haven't thought this through very much.

We can, however, exempt some of these costs from the deductible. Some HSAs currently do that for pregnancy-related care, mammograms, cervical cancer screenings, etc. We could expand that across a range of preventative, routine, or cost-effective services and erase the gap. But given that HSAs are not generally $1,000 deductible plans, the study's conclusion stands: Women are getting screwed.

Update: Julian IMs to clarify that by "low-deductible plans," he didn't mean low deductible HSAs, but current health insurance plans. So he was saying we currently subsidize women to the tune of $1,000, and HSAs can be seen as simply eliminating that subsidy. As a quick response to that, I have no problem subsidizing individuals for medical needs beyond their control, and would prefer a system that subsidizes cost-effective care on grounds of both justice and efficiency, so I find the point unconvincing. But there it is.

April 11, 2007 in Consumer-Directed Health Care | Permalink | Comments (27)