Industry Voices—This is the real issue that should be driving the national healthcare conversation

https://www.fiercehealthcare.com/hospitals-health-systems/industry-voices-real-issue-should-be-driving-healthcare-conversation?mkt_tok=eyJpIjoiTUdFNU9UQTFaV1U1TWpsayIsInQiOiJuOXFyQVwvWGx0NUFJdnhjK0ZEZ0ZwamdmMU8wXC9ZWkNPZkMydnJIOHR4eW9mT0RJVmphWGd5b3F4aFB6RTZaOG8yU21uZm91UVJFUGU4UWxBXC9DdXdoaWIwTFRFYW53dTlRWVwvRUs1dUN4WWtONjF1ZEJJemVCM2ZnQURGWnB1Z1EifQ%3D%3D&mrkid=959610&utm_medium=nl&utm_source=internal

Healthcare is traditionally one of the top issues voters say they want Congress to address. This year, the sentiment has intensified. From presidential town hall meetings to congressional hearings to recent public opinion polling, an overwhelming majority of Republican and Democratic voters want Congress to address rising healthcare costs.

But employers and their employees have more at stake than just the cost of utilizing a drug or service, the narrative that is driving today’s healthcare discussion in Congress.

Indeed, employers are at a crossroads in addressing the critical issue of healthcare costs. The fact of the matter is that most employers have no idea how their benefit programs affect employee health outcomes. While it sounds logical that employers understand the link between the benefits they purchase and their employees’ long-term health status, they don’t. Most employers manage their benefits program in separate silos with a single-minded focus only on short-term costs.

When employers focus only on unit costs and transactions in healthcare, employees are undertreated and employers overpay.

Instead of a short-term cost approach, designing healthcare benefits that align the interests of employees and employers around health, and focus on connecting employee health status, care options and outcomes will help employers attain the ultimate goal of a healthy, productive workforce that drives business value for the company.

Employers are recognizing the urgency of this choice but aren’t yet doing enough to address it. If employers don’t start doing a better job of purchasing benefits that help keep employees healthy and productively at work, in part through effective treatment of manageable diseases, our future global competitiveness will be greatly challenged.

For example, better use of medicines can improve health and overall quality of life, which can lead to improved productivity from lower disability and fewer missed days of work. A study found adults with multiple sclerosis that improved medication adherence by 10 percentage points decreased the likelihood of an inpatient or emergency room visit by 9% to 19% and days of work lost by 3% to 8%. Another study found that for workers with asthma or chronic obstructive pulmonary disease, better medication adherence resulted in less time out of work and more than $3,100 in savings on average per worker annually.

Yet, time and again when it comes time to decide on benefits coverage, the choice offered to employers by payers centers on the cost of therapy and not the value it delivers.

What should employers do to define the best path ahead? We believe that when it’s time to negotiate benefits packages with payers, employers must take a more holistic approach to foster key components of healthy, productive workers by addressing the following guiding principles:

  • The health and well-being of a workforce is a long-term investment for employers.
     
  • Tangible outcomes for both employers and employees should be clearly defined and include input from both stakeholder communities.
     
  • Benefits should be designed to optimize positive outcomes (both health-related and readiness for work) for the heterogenous population of covered lives.
     
  • Employers should be able to access data to see both unit cost and total cost of care for any given mix of interventions. Employers should evaluate currently available data to define gaps and call on vendors to aid in bridging those information voids.

As price and upfront cost continue to dominate the headlines, a substantive policy conversation among all different healthcare stakeholders about what constitutes value is needed. Without such inclusive dialogue, the value narrative will continue to revolve solely around “whether to pay or not to pay” for a particular intervention. For employers at the crossroads who know that determining value isn’t a binary exercise, the correct path forward is focusing on a definition of value that includes broader outcomes and recognizes the heterogeneity of covered lives.

Our employees depend upon it.

 

 

 

 

Segment 6 – Why Healthcare Cost is a Problem

Segment 6 – Why Healthcare Cost is a Problem

Slide14

This segment reviews the impact of relentless increase of U.S. healthcare spending on the economy, politics and society.

In Segment 4, we showed some statistics on relentlessly rising healthcare spending. And in Segment 5 we looked at the Perfect Storm — how rising costs are literally built into the system as it is now.

In this Segment, we will ask the question, So, why is it so bad for health spending to increase? After all, health care is good and noble. By the way, it also creates good-paying jobs.

My answer is that healthcare spending is good, of course, but only up to a point. Past a certain point it is not worth the cost, it sucks money from other important purposes, and it fuels social and political unrest.

Let’s look at each of these arguments. First, are we getting our money’s worth?

Here’s the slide from the last lecture showing the benefit from each additional dollar spent. This is what economists call “marginal benefit.” If you’ve already spent 1,000 dollars, what more do we get by spending 10 or 100 more dollars? The answer is, we get less and less, the more we spend.

On the left side is the column of highly valuable health services like public sanitation and immunizations. For very few dollars spent, we prevent disease and save lives. The next column, moving right, are routine services that give good value for the money spent, like kidney dialysis, chemo for treatable cancers and heart bypass up to age 70. The next column are lower-value services like keeping dying patients in uncomfortable ICU beds. Then we reach a cut-point where we get no added benefit from extra spending, what economists call the “flat of the curve.” This is unnecessary testing, treatments, or drugs, which are wasteful. Here is a list of examples.

Slide06

Doctors and specialists have recently gotten together to identify some worthless habits of care that can be eliminated. They call it the Choosing Wisely campaign, and are trying to get all doctors to break the habit of getting these. Here are some other examples.

Slide21

The last column shows that sometimes giving too many treatments or drugs can actually be harmful. As a geriatric specialist taking care of the elderly, I can tell you that over my years of practice I have definitely cured more people by stopping unnecessary drugs than by overprescribing.

The bottom line is that most experts agree that the US is not getting any more bang by spending more bucks, and in some cases actually doing more harm than good.

The next reason is that health spending is taking money away from other equally important purposes. This is what economists call “opportunity costs.” By spending an extra dollar on healthcare, we are missing the opportunity to buy better education, business investment, housing or infrastructure.

The third reason is budget squeezes. Healthcare is driving up Medicare and Medicaid, for example, which increases the federal budget deficit. It also squeezes states’ share of Medicaid costs, driving up taxes. It squeezes corporate expenses, cutting into investments and employee pay. This also hurts US competitiveness abroad, and it drives some jobs overseas.

Slide14

And the last reason I’ll give is its effect on take-home pay. I showed this graph in Segment 3. The RAND think tank calculated that between 1999 and 2009 Americans were 30% more productive and got 30% more wage compensation, but all of that increase went into health premiums (shown in red), not into take home pay (shown in blue). Healthcare costs are making us feel poorer.

Slide05

I think people are finally getting angry about so much healthcare spending. That’s one big reason they voted for Donald Trump, hoping he could do something dramatic to fix it.

Slide19

I am worried that if left unchecked, soaring healthcare costs will cut into defense spending, drive up the national debt, and ultimately weaken us as a nation.

Slide17

And so, what is the conclusion?

The conclusion is that exorbitant spending is the problem. Health spending eventually leads back into your wallet, and my wallet, and our grandchildren’s wallet in the future.

Slide18

In the next episodes we will discuss how to stop the excessive spending. This will require us to fix the whole healthcare system, not just tinker with insurance, Obamacare markets, and Medicaid. We will also look at some of the ethical issues and the political challenges involved. I’ll see you then.

 

 

 

Healthcare Triage: Hospital Competition Can Impact Your Health

https://theincidentaleconomist.com/wordpress/healthcare-triage-hospital-competition-can-impact-your-health/

Image result for Healthcare Triage: Hospital Competition Can Impact Your Health

It turns out, hospital and health system consolidations can result in worse outcomes for patients. These mergers reduce competition, and it turns out that hospitals compete more often on quality than they do on prices. The result is that quality suffers in markets with less competition.

 

 

A review of health care costs: deck chairs and the Titanic, part 2

https://stateofreform.com/news/federal/2019/02/breaking-down-health-cares-cost-dilemma-part-ii/

Related image

This article is Part II of a two-part series on the cost of health care and its component parts. Part I explores the recent growth of health care costs in the United States as well as the utilization inputs in the cost equation. Part II breaks down the pricing component of cost, determined by market leverage and the cost of delivering services. 


The Titanic

This brings us to the second category of costs: the Titanic. Or, to use our equation here of THC = U x P, the Titanic I’m talking about is the pricing component of cost.

In other words, health care leaders should do everything they can to make sure that utilization is the right care at the right time in the right setting. This makes a meaningful difference in the quality of our health care system.

But, if we focus on health care utilization alone, the health care system is still going to sink under the weight of costs. Our efforts will still be deck chairs on the Titanic.

To keep our ship afloat, we have to address the pricing input of our cost equation.

Like our cost equation above, pricing also has a simple equation of two inputs that determine price. According to a seminal study out of Massachusetts, which has been reaffirmed in additional studies (and by the experience of many network relations vice presidents across America’s health plans), this equation is straightforward.

Pricing is determined by a combination of market leverage (ML) and service delivery costs (SDC), where market leverage is 75 percent of the pricing structure and the cost of delivering the service is 25 percent.

This is true for either the plan or the provider, depending on where market leverage exists. This equation looks like this: P = ML(.75) + SDC(.25).

If we put this together, the math equation would look like this: THC = U x (ML(.75) + SDC(.25)).

Here’s how the study put it:

Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers. 

While addressing the utilization component of the cost-growth problem is essential, any successful reform initiative must take into account the significant role of unit price in driving costs. Bending the cost curve will require tackling the growth in price and the market dynamics that perpetuate price inflation and lead to irrational price disparities.

But here is what the numbers say: between 2004 and 2017, adjusting for age and sex factors, 68 percent of the growth in overall national health care expenditures came from increases in medical prices. Only 32 percent of growth came from utilization of services.

In other words, pricing is more than twice as important as utilization in the growth of health care costs – costs that are increasing more rapidly than ever.

 

 

Put graphically, while we have two inputs into total health care costs or expenditures, it’s incorrect to think of them as weighted equally, as demonstrated in image 1 above. It’s more accurate to think of these two pieces weighted as shown in image 2. And, if we are honest about the role of market leverage in health care pricing, market leverage alone is more than half of the overall problem in health care costs – more than all of the service delivery costs and utilization combined.

 

Keeping the Titanic afloat

Let’s restate the challenge we face here in our trans-Atlantic metaphor. Cost is the biggest problem in health care today. Those costs are made up by pricing and utilization, where pricing is more than twice as impactful in cost growth as utilization, and where market leverage is three times more impactful to pricing than are service delivery costs.

In order to keep our health care system afloat, we must address costs. And to address costs, we must address pricing.  And to address pricing, we must address market leverage.

If we move every deck chair around, but fail to address the cost consequences of market leverage, our ship will sink.

In our capitalist economy, we view consolidated market leverage as a market failure. It’s why we have antitrust statutes and an active regulatory regime to manage and push back against consolidation. Where the market failure is in the area of a public good, the American political system has often regulated those consolidated markets like public utilities or quasi-public entities.

Think of energy and Enron, of railroads and BNSF, of telephones and Ma Bell.

As health care nears 20 percent of the US economy, and where even urban states like California suffer from a “staggering” concentration of market leverage among health care providers, the lesson for health care policymakers and senior health care executives is this: If you want to get your hands around cost, you’re going to have to address market leverage to do that. Everything else is just deck chairs.

 

 

A review of health care costs: deck chairs and the Titanic, part 1

https://stateofreform.com/news/federal/2019/02/deck-chairs-and-the-titanic-part1/?utm_source=State+of+Reform&utm_campaign=ccf3275364-5+Things+CA+July+2_COPY_01&utm_medium=email&utm_term=0_37897a186e-ccf3275364-272256165

Related image

This article is Part I of a two-part series on the cost of health care and its component parts. Part I explores the recent growth of health care costs in the United States as well as the utilization inputs in the cost equation.

Part II will break down the pricing component of cost, determined by market leverage and the cost of delivering services. 


 

If you ask policymakers, industry leaders, and health care consumers, many will tell you that their number one concern with health care today is the cost.

For the most part, as a society we’ve moved past the days when access or quality were of primary concern to stakeholders. I would wager it’s not because those issues aren’t important.  Everyone knows we have wild challenges still with access and quality.

Rather, the acuity of the cost problem has risen so much, so quickly, that cost as an issue overshadows everything else.

This is a big topic, but it’s not really that hard to understand. Health care costs are actually a simple story.

There are only two categories of health care costs in America today. There are the deck chairs, and there is the Titanic.

Context matters, so let’s start there

Here’s one data point, but it’s largely the same point everywhere you look in health care.

These are average annual premiums for single and family coverage in the employer-based market. Those costs have doubled in the last 14 years, reflecting an average annual growth rate of roughly 5 percent since 2004.

 

 

Here’s another data point. According to CMS in an article in Health Affairs, “health care spending growth averaged 4.3 percent per year during 2008–17, compared to an average annual rate of 7.3 percent over the 1998–2007 period.” That might seem like costs are slowing, but it’s not the whole story.

Remember the “Great Recession?” It was the period of time when the economy almost fell apart. So, measuring health care spending growth should be done within some context of the overall economy.

For this, we can use a standard inflation calculator of the overall economy to compare its growth to the growth of health care costs. When viewed this way, health care inflation grew at a multiple of 2.7x the broader economy’s inflation rate between 1998-2007 and a multiple of 3.0x during 2008-2017.

So, not only are costs high in health care today, but they are growing faster than ever compared to overall inflation in the US economy.

 

Moving around the Titanic’s deck chairs

Let’s explore this metaphor a bit.

The Titanic is a big ship with a big deck. And so there are lots and lots of deck chairs to move around. And moving them around can cause authentic improvement to the quality of the experience.

A view out over the bow at a setting sun is a much better view than the one provided by a chair facing the steam funnel. Sometimes, chairs facing other chairs can foster comity and community through conversation. Sometimes, having alone time to ponder the stars in the night sky from the ship deck is nice.

How the chairs are deployed has a meaningful impact on the user’s experience of sailing on the Titanic.

I run with this analogy because there are a lot of things we do in health care today that meaningfully improve the experience, outcome and cost of health care.

You can probably name 10 such efforts without blinking an eye: improved care coordination, tele-health, community health workers, shared risk payment methods, integration of behavioral health, access to oral health, strong vaccination standards, online forums for shared patient experiences, good bedside manners, etc., etc.

All of these initiatives, as well as others, improve care and the user experience. They all can address cost in various ways, too. They can reduce hospital utilization, allow patients to access care remotely, reduce re-admissions or complications from drug interactions. There is a lot to like here that is meaningful and worth our time as a society to implement.

Put differently, in the cost equation where total health care cost equals utilization times prices (THC = U x P), I would categorize these initiatives as part of the utilization input of the cost equation. All of these initiatives address how we access and use health care in our system today.

But, at the end of the day, these are deck chairs.

 

 

A Billion Dollars Won’t Make You Happy, but This Will

https://www.inc.com/jessica-stillman/bill-gates-a-billion-dollars-wont-make-you-happy-but-this-will.html?cid=nl029week09day26_3&utm_source=newsletter&utm_medium=email&utm_campaign=Inc%20Must%20Reads&position=1&partner=newsletter&campaign_date=26022019

Gates just opened up about his happiness and what he believes holds many people back from peace of mind.

Yesterday, on his seventh Reddit AMA (that’s “Ask Me Anything,” for the uninitiated), Bill Gates took on a simple but profound question: “Are you happy?” You might think the answer is obvious. The man is a billionaire, after all. Why wouldn’t a phenomenally rich guy like Gates be happy?

And indeed, the Microsoft founder answered with a resounding, “Yes!”

But even as Gates celebrated his own contentment, he also made a point of explaining that it isn’t his billions that make him happy. Instead, it’s something much simpler that, unfortunately, is increasingly out of reach for many Americans.

Gates and science agree: Not worrying about money makes you happier

When another Reddit user asked Gates, “Do you think being a billionaire has made you a happier person than if you were just a middle class person?” he offered a forthright “Yes.”

But it isn’t the trampoline room in his house or the fact he frequently flies via private jet that makes the difference. Instead, it’s the freedom to not stress about money. “I don’t have to think about health costs or college costs. Being free from worry about financial things is a real blessing. Of course, you don’t need a billion to get to that point,” he explains.

Gates reads a lot of research so he’s no doubt aware that science is on his side on this point. Study after study shows that making more will increase your happiness about up to the point where you can stop worrying about covering essentials and absorb the shocks and setbacks life inevitably throws your way. After that, having strong relationships and more time are greater predictors of well being.

The trouble with Gates’s happiness advice

So far, Gates’s thoughts on money and happiness seem sensible and straightforward. But there’s one big complication when it comes to the relationship between finances and well being. As Gates acknowledges, getting to that magic point where you can stop worrying about money and cover basics like college and health care is becoming harder and harder for most Americans.

“We do need to reduce the cost growth in these areas so they are accessible to everyone,” he adds in his answer.

Later, he elaborates on the problem of health care costs in America. When a Redditor asks, “Is there something that is incredibly important in your opinion that hasn’t garnered as much interest generally as it should have?” he replies: “In the US I would say getting bipartisan consensus on how to reduce health care costs is a critical issue that doesn’t get enough focus.”

The numbers (as usual) bear him out. The average cost of health insurance, adjusted for inflation, has increased ninefold since the 1960s. Total spending on health care rose from $74.6 billion in 1970 to $3.5 trillion in 2017. Meanwhile, the cost of an undergraduate degree at a public school rose 213 percent just from the late ’80s.

These statistics put a grim spin on Gates’s answer. Sure, you don’t need a billion dollars to be happy. You don’t even need a million dollars. (And no, don’t write me enraged tweets–no one, including Gates, who also writes about his joy in his kids, is saying money is everything when it comes to happiness.) But it is super helpful not to worry that, if your child gets sick, you won’t be able to afford her medicine. And that sadly, is too high a bar for many Americans.

What’s to be done about this? Unfortunately, this isn’t one of those columns where I can offer you an easy takeaway, except maybe to call your congresspeople and express outrage about the situation. Because Gates and a ton of research are right: In America, it’s getting a lot harder to reach the point where money isn’t a drag on happiness.

 

Health Care Is on Agenda for New Congress

https://www.scripps.org/blogs/front-line-leader/posts/6546-ceo-blog-health-care-is-on-agenda-for-new-congress

After months of polls, mailbox fliers, debates and seemingly endless commercials, the mid-term elections are over and the results are in. As predicted by many, the Democrats have won back the majority in the U.S. House of Representatives, while the Republicans have expanded their majority in the Senate.

This means that for the first time since 2015 we have a divided Congress, which leaves me pondering the possible consequences for Scripps Health and the broader health care sector.

Without a doubt, health care will be on the agenda for both parties over the coming months. That became apparent during pre-election campaigning as voters on both sides of the political spectrum voiced concerns about a wide range of health care-related issues.

Exit polls found that about 41 percent of voters listed health care as the top issue facing the country, easily outpacing other issues such as immigration and the economy.

That’s really no surprise. Health care affects all of us, whether we’re young or old, poor or well off, or identify as more conservative or more liberal. And despite all of the division around the country, most Americans seem to agree on at least a few things – health care costs too much, more needs to be done to rein in those costs, everyone should have access to health insurance, and pre-existing condition shouldn’t be a disqualifier for getting coverage.

When the new Congress convenes on Jan. 3, a wide range of health care issues will be on the agenda.

Here are a few of the issues that I’ll be watching as our lawmakers adjust to the reshuffled political dynamics in Washington.

  • Repealing elements of the Affordable Care Act (ACA) is likely off the table now that Democrats control the House. Previously, House Republicans had voted to change a number of ACA provisions that required health insurance policies to cover prescription drugs, mental health care and other “essential” health benefits. But even before the election, Republicans had reassessed making changes to measures that protect people with pre-existing conditions as that issue gained traction with voters.
  • Efforts to expand insurance coverage and achieve universal health care will likely increase. A number of newly elected Democrats vowed to push for a vote on the single-payer option, but other less politically polarizing options such as lowering the eligibility age for Medicare and expanding Medicaid likely will draw more support.
  • While Republicans used their majority in the House to reduce the burden of government regulations in health care and other industries, Democrats might use their new-found power to initiate investigations on a wide range of matters such as prescription drug costs.

We could see some significant changes take place at a more local level as well. On Tuesday, voters in three states approved the expansion of Medicaid, the government program that provides health care coverage for the poor.

And here in California, we will be watching newly elected Governor Gavin Newsom to see what plans he will put forward for expanding health care coverage in this state.

At Scripps, we believe everyone should have access to the health care services that they need, and we have worked hard in recent years to do all that we can to bring down the costs of delivering that care to our patients.

In this new world of divided government, gridlock likely will prevail and President Trump’s initiatives will struggle in the Democrat-controlled House. Everyone will be focused on positioning themselves and their party for the next presidential and congressional elections in two years.

Compromise and bipartisanship are clearly the best options for addressing the health care challenges we now face in ways that have the best chance to win wide public support.

If Democrats in the House fail to reach across the aisle to Republicans or try to make too many changes too quickly, they surely will face many of the same pitfalls that confronted Republicans over the last two years.