The rhetoric of “choice” has been pervasive in U.S. health care reforms and the consumerist health care culture for a long time. The idea is that giving patients more choices over doctors and insurance plans would increase competition in the industry and consequently improve the quality of health care patients receive. However, Allison Hoffman made a convincing case debunking this seemingly intuitive idea in this week’s HLS health law workshop. She argued that reform efforts aimed at increasing consumer choice often fail to empower patients to make better health care choices, and instead, create a wasteful market bureaucracy that is anathema to free market ideals. Her argument reminds me of one of my earlier blog posts on U.S. drug prices, where I compared insurance companies to the Central Planner in a socialist economy. Indeed, there are ironically many institutions and features in the so-called market-driven U.S. health care system that resemble authoritarian and technocratic practices that are directly against the principles of a laissez-faire health care economy.
I will expand Professor Hoffman’s argument by making a few additional points. First, her presentation discusses a number of revealing ways in which the market-based competition creates a false sense of choice in health care. Even Obamacare, which is supposed to offer patients more choices in the Exchange, fails to transcend the falsity of consumer choice. Most patients do not make the best available choice, even when they’re “nudged” by experts in the decision-making process. I’d like to also point out that even if consumers are capable of making the best choice for themselves, whether by thinking with perfect rationality or by accepting “expert opinions,” the choice they ultimately make could still be suboptimal or even disastrous. To understand why this might be the case, it is important to realize that the target population for Obamacare is the minority of people who do not have adequate employer-sponsored plans. Thus, many people enrolled in Obamacare may not have stable jobs and income levels. Nonetheless, the mechanism that determines how much premium for which one qualifies is predicated on an estimation of that individual’s projected annul earnings – a number that is hard to know in advance for those without stable income levels. Hence, a person who made the “right choice” by selecting a silver plan with only $100 monthly premium after receiving a $900 subsidy to cover a $1,000 plan at the beginning of a year may find herself owing the federal government thousands of dollars at the end of the tax year, if she happens to end up with a much higher income level. Had she known the future outcome, she would have chosen a less expensive plan to begin with, but either choice would be a gamble for her. This arbitrariness must be attended to in future health reforms. Continue reading →
This blog has often covered the problem of outrageous medical bills, and explored whether patients have a responsibility to pay the balance on charges that are not covered by insurance. One common pattern is that the patient agrees to pay “all reasonable charges” when they arrive at the emergency room or other provider, and then months later receives an incomprehensible bill for seemingly outrageous amounts. The costs of the same healthcare can vary wildly from provider to provider, even in the same locale, and there seems to be little rhyme or reason. (This is a common refrain of Elizabeth Rosenthal’s 2017 book.)
According to very basic contract law, when the agreement between a buyer and seller does not specify the prices to be charged (aka an “open price contract”), the seller may not demand more than a “reasonable” amount. Years ago, I was involved in nationwide litigation against non-profit hospitals, raising this theory and alleging that their billing practices contradicted their state and federal “charitable” tax exemptions, since they were driving poor people into bankruptcy and foreclosure. That litigation had a few notable wins, when several hospital systems agreed to adopt explicit charity care policies and stop some of the more egregious practices, such as putting liens on their patients’ houses. Some of these reforms became an industry standard and then part of the Affordable Care Act.
Overall, however, this litigation was challenging, because courts tended to hold that the reasonableness of each patient’s medical bills had to be litigated individually – often with expert witnesses and comparable data from the healthcare provider and other competitors. With only a few thousand dollars at stake for each patient, the courts’ refusal to aggregate the litigation left many consumers without an effective recourse to challenge their unreasonable bills. Contingent-fee attorneys tend to look for larger stakes to make their investment of time and expenses worthwhile. Continue reading →
As part of the Project on Advanced Care and Health Policy, the Petrie-Flom Center hosted two convenings on Critical Pathways to Improved Care for Serious Illness. Through roundtable discussions and working sessions at these convenings, expert panelists reviewed innovative programs designed for the aging population with chronic illnesses, focusing on those with declining function and complex care needs. These convenings contributed to the development of a framework to guide healthcare providers in developing and scaling programs to deliver high quality care to individuals with serious illness, which is of increased importance given the growth of this population and the development of alternative payment models. The convenings were held in March and June, and the panelists, agendas, slide decks, and related program materials remain available on the Petrie-Flom website (Session 1 & Session 2).
C-TAC, which collaborates with Petrie-Flom on the Project on Advanced Care and Health Policy, now has published a Report, Toward a Serious Illness Program Design and Implementation Framework, to help providers develop, replicate, and scale programs across a variety of serious illness populations and settings. The Report’s Framework provides steps to allow healthcare organizations to assess evidence-based options for each facet of care model design and implementation. As noted in the Report, the Framework is designed to:
Inform serious illness program development, replication, and scaling;
Integrate with care model payment design;
Inform care model and proforma simulator development;
Inform other aspects of design and development such as policy, standardized measurement, and regulatory analysis.
2017 is going to be terrific. Tremendous, even. Things are going to change, big league.
The new President has promised fantastic reforms to the drug industry. He’s going to get the big players in the pharmaceutical industry around a table and negotiate huge price reductions. Of course, he’s not going to touch their bottom line. If anything, he’s going to improve it. Innovation is being choked by over-regulation and he’s going remove burdensome FDA hurdles. But he has Executive Orders to give and walls to build, so he’s drafting in the very best people to help. We’re still waiting for those people to be officially named. Meanwhile, the media have had a month and a half of fun and speculation. The volume and variety of names being thrown around make it feel like a food fight at a Chinese buffet. One of those names is Peter Thiel.
This article was originally published as part of research issued by the Jefferies Biotechnology Equity Research group.
Since the Amgen v. Regeneron ruling that resulted in Judge Robinson of the District Court of Delaware granting a permanent injunction removing Regeneron’s Praluent from the market (pending appeal), there have been a number of media and twitter commentaries providing their insights on the case.
These reactions have overall been of the opinion that it is a “shocking” precedent for a judge to remove an FDA-approved drug from the market for patent infringement – a remedy which patent owners, even pharmaceutical manufacturers, are justly able to obtain under the circumstances outlined in eBay v. MercExchange.
Given this, there are a few facts that have been overlooked in these reviews that lead us to disagree with some of the conclusions they reach, and also which led us to anticipate an injunction in this case. Continue reading →
This anonymous woman is only the latest casualty in a war against antibiotic-resistant bacteria — a war that we are losing. Although most bacteria die when they encounter an antibiotic, a few hardy bugs survive. Through repeated exposure, those tough bacteria proliferate, spreading resistance genes through the bacterial population. That’s the curse of antibiotics: The more they’re used, the worse they get, especially when they’re used carelessly. […]
Pet ownership is incredibly popular in the United States. There are almost 70 million companion dogs spread across 43 million American households. This isn’t particularly surprising, given that study after study has shown that companion animals promote healthier, happier, longer lives for their owners. Despite pet popularity and prevalence, though, many pet owners don’t fully understand how expensive their four-legged family members can be — especially if they end up needing extensive veterinary care. Every year, millions of companion animals are euthanized because their owners lack the financial resources to pay for necessary veterinary services. Unlike in human medicine, pets in the hospital with readily curable ailments often go untreated for financial reasons.
How can we help people keep and care for their pets — capturing companion animal health benefits while also ensuring those pets receive the veterinary care they need? The answer might be found in the synergies between animal and human health — and the benefits they entail for health insurance providers.
You go to your local urgent care with a headache and a fever, and the doctor suggests a trip to the hospital for further evaluation — just to make sure there isn’t anything serious causing your symptoms. She offers an ambulance, and you accept. You could probably walk or Uber, but you’re not feeling well, and the doctor has offered to arrange the ride. Why not?
This was the story of Joanne Freedman. She didn’t think too much about it, until she received a $900 bill for the two-block ambulance ride she took to the hospital. While Joanne’s experience was particularly egregious, it is not wholly uncommon. Ambulance pricing is one of the most variable and least transparent components of health care costs, with rides ranging from tens to thousands of dollars. This is in part because there are many ambulance providers, and they all have different relationships with different insurance companies. It’s also in part because ambulance rates are generally set according to the services the ambulance is equipped to provide, not necessarily the services actually provided. Some ambulance companies have contracts with municipalities that make them the only game in town, while others are in more diverse markets with multiple providers competing for patients. All this combines to create an incredibly complex industry with very little consistency from ambulance to ambulance.
But is this disjointed, free-market system the best way to structure emergency transportation? The arguments underlying the justification of a free, unregulated market hinge on the ability of consumers to police the industry through choice. If the seller of a good sets the price too high, consumers will buy from a different seller until she brings the price down to what consumers are willing to pay. This is, in theory, what allows markets to find the right prices for goods and services more efficiently than any government agency or regulator ever could. Continue reading →
Drug prices have been making waves in the news recently. The most recent case is the huge price hikes of the EpiPen, which provides potentially life-saving automatic epinephrine injections to those with severe allergies. Mylan, which makes the EpiPen, has raised its price some 450% over the last several years. The EpiPen is a particularly problematic—and media-friendly—story because the emblematic use case is the kid in school who can’t breathe because she came into contact with peanuts. Jacking up the price on something that’s not optional—for parents and for schools—seems heartless. Thoughtfulpieces have pointed out how the EpiPen price increases demonstrate problems with our health care system and drug/device approval system in general.
Other big recent cases that have hit the news include huge increases in the price of insulin, and, of course, Turing Pharmaceuticals’/Martin Shkreli’s ~5000% price hike on the drug Daraprim. The EpiPen and Daraprim are especially notable because patents mostly aren’t involved—the effective monopoly appears to come from the delay or challenge in getting generic products approved by FDA (although the EpiPen itself also seems tough to make). And, of course, drug prices aren’t regulated in the US the way they are in much of the world.
These stories seem crazy, cruel, and fascinating. And they raise (for me, anyway) the question: what’s changed? This seems like a relatively new phenomenon. But FDA’s had a backlog for a while, and drug prices have long been unregulated. Continue reading →
Pharmaceutical companies are making breakthrough drugs to cure diseases, but no one knows how to pay for them. In 2013 and 2014, FDA approved Solvaldi and Harmoni, which can cure hepatitis C in more than 90% of patients. Solvaldi and Harmoni cost $84,000 and $95,000, respectively, for a standard course of treatment. Government payers and health plans, without a good solution for providing Solvaldi and Harmoni to patients who need them, have restricted coverage of the drug to only those patients with advanced hepatitis C. Last year, Germany approved Glybera, a gene therapy that enables patients with lipoprotein lipase deficiency to produce the deficient enzyme. Glybera is expected to cost $1 million, and it is doubtful whether any payer could shoulder such a price.
Last week, MIT professor Andrew Lo proposed a new way of paying for these high-priced therapies: securitized consumer healthcare loans (HCLs). HCLs would function as mortgages for large healthcare expenses. Because the benefits of some therapies occur upfront, HCLs would allow consumers to pay for the value of their therapies over time, instead of in one upfront payment. The paper proposed two frameworks to govern HCLs. The first is a consumer-funded loan, where the patient borrows a loan to pay the upfront costs of the drug, and pays back the loan over time. The second framework operates similarly to the consumer-funded loan, except that private payers and government agencies assume the debt. Under this model, insurance companies could take the debt associated with the patient’s treatment then shift the debt onto the next payer if the patient changes insurance companies. Continue reading →
At AcademyHealth’s 2016 National Health Policy Conference earlier this month, payment reform was a pervasive theme. Its prominence was not surprising. Indeed, in early 2015, HHS Secretary Sylvia Burwell announced the agency’s goal to have 30% of traditional, fee-for-service Medicare payments tied to quality or value through alternative payment models by the end of 2016, and 50% by the end of 2018. As the current sea change in health care moves the system towards these goals, the conference’s panelists explored various aspects of the transition to value-based payment. Speakers who discussed the issue included leaders in government, clinical practice, and private insurance. They sent an overarching message that payment reform efforts will continue to take a variety of forms — on parallel tracks with cross-cutting themes — rather than a single approach. Representatives from provider organizations particularly stressed the necessary groundwork for these efforts to be effective.
The Center for Medicare and Medicaid Innovation (CMMI) under the federal Centers for Medicare & Medicaid Services (CMS) is operating dozens of payment- and quality-focused models and demonstrations across the country. The breadth of payment models and their varying degrees of success represent different approaches to health care reform, such as population- and episode-based payment. On his panel, CMMI Deputy Director Dr. Rahul Rajkumar noted that this breadth is designed to appeal to diverse providers that differ in type and readiness for payment reform. Indeed, a health care system that has operated for decades with multiple payers, little care coordination, fragmented use of technology, and inconsistent definitions of quality care is undergoing monumental transformation. The transition from fee-for-service to value-based payment thus involves some experimentation to identify the most effective approach. Continue reading →
This summer, four of the five largest national health insurance companies proposed mergers – with each other. The acquisition of Cigna by Anthem and Humana by Aetna would reduce the “big five” to three. Provider groups, including the American Hospital Association and American Medical Association are alarmed, citing the potentially anticompetitive nature of these mergers.
It is true that many aspects of the health insurance market are already highly concentrated. In 2013, there were states where the individual and small group markets were dominated by companies with upwards of 70, 80, and even 90 percent market share. The Affordable Care Act introduced health insurance exchanges in an effort to stimulate competition – and it seems to be working. On the Medicare side, a new report by the Commonwealth Fund found that only one (!) of the nation’s 2,933 counties had a competitive Medicare Advantage market. Medicaid has so much going on that it is the subject for another post entirely – but worth noting here that Medicaid managed care is on the rise and projected to cover more than 75 percent of enrollees within the coming year, so the role of private insurers in Medicaid is growing rapidly.
The insurance companies argue that the upside of consolidation is increased bargaining power with providers, enabling them to negotiate better rates and value-based contracts. It’s important at this point to note that while some provider groups are decrying insurance mergers as anticompetitive, there is a tremendous amount of consolidation underway on the provider side, too. A recent analysis finds that half (150/306) of hospital referral regions (HRR) are highly concentrated, and none are highly competitive. There is evidence that concentrated markets reduce price competition, and may also have implications for quality.
Just when the Affordable Care Act (ACA) has won a second major Supreme Court victory in King v. Burwell, conservative critics of the ACA are back on the attack, this time directing their ire towards the medical device tax. Having lost the battle on subsidies, they are now focusing on the device tax as the prime target in their attempt to overturn parts of the ACA. This 2.3% excise tax levied on the medical device industry is stipulated as one of the tax provisions in the ACA. The rationale is that since the ACA provides coverage for many more people, thus bringing more business to the industry, it is reasonable to ask the industry to pay something back to support the programmatic mission of the ACA.
From the beginning, the medical device industry has strongly objected to the excise tax, claiming it will stifle innovation by taking away funds that would otherwise be used for new product research and development. For example, Dr. Thomas Stossel of Harvard Medical School, a conservative voice on health issues, recently wrote: “A 2.3 percent tax on sales can easily mean the difference between commercial success and bankruptcy: borderline profits become losses and investors flee to less risky ventures. Brute force taxes destabilize the fragile innovation ecosystem.” Continue reading →
The Supreme Court’s decision in King v. Burwell brings an important chapter of the Affordable Care Act’s (ACA) implementation to a close. The fight about health reform is not over, with Republican presidential candidates promising to repeal the law while supporters of the law push for Medicaid expansion and the development of Accountable Care Organizations.
But it is important to pause and reflect on what we have learned the last five years. This is uncharted territory for supporters of comprehensive health reform who for so many decades studied why legislation was so difficult to enact rather than how complicated it is to implement. […]
The core of the Affordable Care Act (ACA) has now survived its second trip to the Supreme Court.
Chief Justice John Roberts wrote for the majority in King v Burwell, holding that the federal government may provide subsidies for citizens to purchase health insurance on exchanges that were established by the federal government, rather than by their own state.
A ruling for the challengers (the “King” in King v Burwell) would not only have stopped the flow of subsidies to 6.4 million people currently receiving them, but it would also have disrupted the functioning of the individual insurance markets in the 34 states that have not established their own exchanges. Continue reading →
The Affordable Care Act (ACA) provides a number of tools to address longstanding problems in our fragmented health care system. At the national level, the Centers for Medicare and Medicaid Services (CMS) are redefining Medicare through initiatives that promote payment and delivery reform, such as Shared Savings and Value-Based Purchasing. States are also seeking their own opportunities to move away from inefficient systems that reward volume over quality. In particular, state Medicaid programs have the potential to play a major role in these efforts.
Given the number of individuals Medicaid covers, it has the biggest potential impact in improving health care. Medicaid covers more than 1 in 5 Americans, funding more than 16 percent of total personal health spending in the United States. With ACA Medicaid expansion, enrollment increased in 2014 by 8.3 percent and led to an increased overall Medicaid spending growth of 10.2 percent. Total Medicaid spending growth in 2015 is expected to be 14.3 percent with a 13.2 percent enrollment growth. This is not an insignificant portion of both state and federal health care dollars. Thoughtful and concerted reforms to Medicaid have the potential to reduce spending and improve care quality. […]
Wellness programs have been enthusiastically embraced by employers seeking to promote health and hoping to control costs. On April 20, 2015, program proponents received long awaited news: the Equal Employment Opportunity Commission (EEOC) issued a proposed rule clarifying how the Americans with Disabilities Act (ADA) would apply to wellness programs. Many large employers likely breathed a sigh of relief upon reading the rule, but the rule is not final and may reignite a longstanding debate over the appropriate use of wellness incentives.
Wellness programs have become common in the workplace. A 2014 Kaiser Family Foundation survey found that among large employers offering health benefits, just over half offered an opportunity to complete a health risk assessment (HRA), a questionnaire that is often a gateway for the provision of health risk information and other wellness program components (Exhibit 12.8 in the Kaiser survey). A similar fraction offered biometric screenings (Exhibit 12.1), such as tests for cholesterol or blood pressure, or measurement of body mass index. Some screening programs test for cotinine, which is associated with nicotine exposure.
Some wellness programs offer financial incentives such as premium adjustments or gift cards. The 2014 survey found that more than half of large employers using HRAs provide incentives for their completion, and more than a third of these incentives equaled or exceeded $500 (Exhibit 12.10). A federally commissioned report prepared by RAND suggests that incentives are effective in increasing HRA completion. […]
What role did geography, advertising, community, Navigators, and the controversy surrounding the Affordable Care Act (ACA) play in consumers’ decisions whether to purchase health insurance in the individual marketplaces? The percentage of potential exchange marketplace enrollees who actually made use of the marketplace to purchase insurance varied widely from state to state for 2014 and 2015.
As of February 22, 2015, for example, there were eight states with enrollment at 50 percent or greater and eight states with enrollment at 25 percent or lower. (Per the Kaiser Family Foundation, the top eight were Vermont, Florida, Maine, DC, Delaware, Pennsylvania, New Hampshire, and North Carolina. The bottom eight were Colorado, Ohio, Alaska, Hawaii, North Dakota, Minnesota, South Dakota, and Iowa).
It would be an interesting and challenging task to explain this variation empirically. Generating reliable statistical inferences from inter-state comparisons is notoriously difficult, and the variables at play here range from the easily measured (percent of population eligible for subsidies, navigator grant amounts, number of participating insurers, premiums) to the not-so-easily measured (enthusiasm for Obamacare, efficacy of state or federal outreach efforts, geography, education, availability and usefulness of charity care and emergency Medicaid, functionality of state exchange website, population health, availability of health services). […]
A new New England Journal of Medicine commentary by Peter A. Ubel, M.D., David A. Comerford, Ph.D., and Eric Johnson, Ph.D. highlights significant flaws in the way information is presented to insurance shoppers on state and federal exchange websites. The authors present original survey data to support the argument that subtle aspects of current website designs inappropriately bias decision making. The authors make their case most strongly in an analysis of the well-known gold, silver and bronze labels:
Consider the decision to lump health plans into categories with names such as bronze (for low monthly premiums and high out-of-pocket costs) and gold (for higher monthly premiums and lower out-of-pocket costs). These labels could have unintended effects on people’s attitudes toward which plans are best. After all, gold, silver, and bronze convey best, second best, and third best through association with sporting events, but the best plan for one enrollee will be different from the best plan for another.
To test whether such associations might influence people’s perceptions of insurance plans, two of us recruited a convenience sample of participants from public buses in Durham, North Carolina, and asked them which category of plans they would look at first if they were shopping for health insurance. To half the people, we described the gold plans as having higher monthly premiums and lower out-of-pocket costs — the language used by many exchanges. For the other half, we switched the gold and bronze plans, describing the gold plans as having lower monthly premiums and higher out-of-pocket costs.
Dame Sally Davies, the Chief Medical Officer of England, warns that we are approaching an antibiotic apocalypse. A former chief economist at Goldman Sachs estimates that unless dramatic action is taken now, antimicrobial resistance could kill 50 million people a year and cause $100 trillion in cumulative economic damages.
In the US, dire warnings have issued from the Centers for Disease Control and Prevention (CDC), the President’s Council of Advisors on Science and Technology, and the President himself through an Executive Order on Combating Antibiotic-Resistant Bacteria in September 2014 (summary here). The President’s new budget asks for $1.2 billion to be spent on antibiotic resistance. […]