Wednesday, October 19, 2011

Super Committee and GME Funding....

SO, about that super committee. Surely you remember, the gang of 12 that was created by the showdown over the debt ceiling this summer. Well, they’re hard at work but among the proposals out there, is one that is causing some grave concerns.

As a health workforce researcher, I understand implicitly the difficulties that lie ahead and the underlying shortage of physicians that will worsen dramatically by 2025. Current estimates suggest a shortage of over a 130,000 physicians by that time. Many, if not most, do not realize that physician training, at least the post graduate residency phase, is paid for by CMS (Center for Medicare Services).

Currently, as we all know, if the super committee does nothing, there will be an across the board 2% cut to all federal discretionary spending. Some of the other proposals are a little more concerning. In 2010, direct GME expenses totaled 9.5 billion. IME or Indirect Medical Education expenses totaled an additional 6 billion.
IME represents an additional 5.5 % payment to teaching hospitals, as it is understood that they not only teach other health professionals, but that there may be extra costs associated with education. Current proposals are to cut that rate in half (first proposed by Simpson-Bowles) to 2.2%. Among other proposals which include Home Health Co-Pays, SNF (skilled nursing facility) shared payments, raising Medicare eligibility to the age of 67, lies a proposal by the House Ways and Means Committee to cut GME funding by 15 billion over the next ten years, or a 15.7% cut. It is unknown at this time if the Committee will pursue this, but this is problematic.

Adding to the problem is the current GME Cap placed in effect in 1997, when several organizations were predicting an oversupply of physicians. This is not our current concern. This cap is problematic, and with the current budgetary concerns has no chance of changing. By 2015, we will have had over a 30% increase in medical school graduates from 2000. There is significant concern that also by 2015, we will not have enough GME residency slots for all US graduates, without even mentioning the several thousand US citizens who go to foreign medical schools every year.

States have already reduced the amount of money in the GME system, with only 41 states participating, and contributing a little over 3 billion annually. Nine additional states are now likely to opt out as well.

We need a serious look at discretionary spending, but this will only compound and weaken an already distressed healthcare system. I hope that the Super Committee strongly considers this, and looks to other alternatives.

Free Market Mechanics and Healthcare

Now, I hear something all the time in my work in the health policy realm, and that is that the “free market” could lower prices.

I even recently had someone approach me after I mentioned that the PPACA had resulted in an extra million people aged 18-25 having health coverage this year. His statement? “That’s exactly the wrong direction, we need to have less people, far less people with health insurance.” I asked him his reasoning…of course, already knowing what his response would be. He reasoned that it would force people to compare prices, shop around, and would dramatically lower prices through the mythical, magical “free market”….

Of course, this ignores some rather real problems with this line of thinking. For starters, healthcare does not behave like normal commodities for a variety of reasons.

To start with, healthcare does not lend itself to price comparisons, and comparison shopping. The high costs are often related to trauma and emergency care/hospitalizations. It is simply not practical to ask which hospital in the area offers the best rates on cardiac catheterizations while you are being rushed to the hospital in the midst of an MI.

This impracticality also lends itself to probably the biggest problem. That is irrational behavior. Any of us who have taken even undergraduate economics remember the discussions of rational actors, and how prices were sensitive to rational behavior. Much of health care involves emotionally charged, heated, and oftentimes difficult decisions. Most patients and families can hardly be expected to act in a rational fashion about receiving the news of a terrible diagnosis such as cancer. Real world experience reveals this to be true. I wish I could count how many times I have presented various treatment options to patients, only to hear “Do whatever it takes”.

Hayek once wrote that spontaneous order was a result of market economies, and that it was “a more efficient allocation of societal resources than any design could achieve.” This of course, assumes rational behavior, and assumes that a market can be symmetric.

Because of this behavior, and because people view healthcare not as optional, but as a necessity, price elasticity scores generally trend around 0 or -1. This indicates an inelastic market.

Of course, the next time I have a 21 year old kid who comes in after a farm accident without insurance, and is badly injured, I’ll make sure to tell him that perhaps he should have shopped around.

Saturday, April 9, 2011

No Assumptions for a Change

Guest Post- Robert Bowman, M.D. (

Assumptions are often incorrect and the assumptions are incredibly inaccurate in primary care and in basic health access. When one starts with the assumption of more pay, then it is easy to rationalize more training or more complexity of care - even when there is little evidence other than assumption.

Primary care is often more difficult than specialty care. A major reason is that the design of health care in the United States destroys primary care delivery. Reasons for primary care to be challenging are the complexity of the patients, the lack of support staff, the lack of primary care trained support staff, the lack of experienced support staff, the broad scope of primary care, the lack of respect for primary care by those who clearly have little clue regarding primary care delivery, and participating in smaller operations that are neglected by the health care design.

The fragmentation of care with even more fragmentation on the way is a problem. The required context of care includes major care provided by Americans most left out of the designs for health and education – who often cannot access care other than the basics.

The reimbursement for primary care that is less than the rapidly increasing cost of delivering primary care forces primary care practitioners to do additional efforts outside of primary care to support their primary care practices.

The decision to pay more for care other than primary care is arbitrary. This design was set up beginning 100 years ago by those who envisioned domination of all of health care and who assumed their superiority. Even in the 1940s medical leaders still understood the challenges facing generalists – because some generalists still were in leadership positions and other leaders had been generalists prior to their specialization. Once the entire context of selection, training, and practice support was designed subspecialist, this understanding was lost and the current assumptions reigned unchallenged.

The subspecialty and academic forces reached their domination in the last decades, rebounded from the managed care reforms with even greater domination – and the United States has all of the cost, quality, and access consequences now that cripple our nation and its people.

There is supporting evidence for primary care complexity as greater at the current time. This includes the fact that two-thirds of primary care graduates (28,000 from six sources) depart primary care. All types are departing primary care with 55 – 85% of graduates after graduation other than family medicine graduates (who have fewest other options). There is lower national health spending on primary care (5% is all there is) and the locations where primary care workforce is highest percentage also receives lowest health care spending at 5% for rural locations and 5% for underserved locations. Established primary care practitioners have continued to depart primary care even during the 1990s periods of increasing policy support (PA, IM),

Few that are found in direct patient care primary care delivery from nurse, advanced nursing, nurse practitioner, PA, and IM training. Pediatric and medicine pediatric training both now yield less than a majority for primary care as well. In all of these types as well as in family medicine, a minority fraction of the training is spent on primary care. Primary care basics are taught, but it takes a lifetime of dedication to patients and to primary care delivery to even begin to comprehend primary care. Compare primary care and specialty care after a decade of care delivery. Who is worth more - my vote is for a dedicated primary care practitioner in a continuity location with a continuity team? Perhaps many if not most would contest this, but most comparisons are apples and oranges as primary care is so poorly understood.Training that yields primary care as a side effect of specialty care is also apples and oranges as the RN, NP, PA, MD, and DO primary care should be primary care in selection, in training, and in a lifetime of care delivered.

The US needs a foundation of primary care – a balance between primary care and other care. The designs must support this. Even 80% of physicians support more funding for primary care delivery (Leigh) but when asked to give up a few percentage points of reimbursement (that might not even impair pay), physician support melted away.

Once again I would note that nations need designs for care that serve nearly all in a nation nearly all of the years of their life in nearly all locations not a design that serves few for a few years in a few locations.

And there is always a nice video to review such as We're Number 37 in health outcomes, not to mention a health care design that cripples our economy, all levels of government from schools to federal, our children, and our children's children.

The current design insures more graduates from NP, PA, DO, and MD with each passing year as well as higher percentages entering non-primary care as well as higher percentages of primary care graduates entering non-primary care. What we have is more like fantasy as compared to assumption.

Robert C. Bowman, M.D

Friday, April 8, 2011

Primary Care Pay Disparity...

Okay, now this is something that I have talked about at some length for some time.

No one should argue that specialists should earn a little more than primary care due to their longer residencies, fellowships, and training. The question is, and has been how much more?

In 2008 dollars, the average Family Medicine physician earned approximately 148,000 dollars. Meanwhile, a comparison to Neurosurgeons, again using 2008 dollar figures, reveals that the average Neurosurgeon makes about 475,000. That is over a 300% increase over their primary care colleagues. This is not sustainable and is a primary driver of rising healthcare costs. Why?

Cause the specialty lobbies have fought hard for the current reimbursement system which is heavily biased towards procedures. It is far more lucrative for a cardiologist to simply cath a patient with persistent chest pain, than to sit down for an hour, and review all of the patients history, testing, and make a conservative treatment decision.

NOW, NOW, I am not implying that ALL cardiologists do this, however, the incentives are perverse.

This is a great article in the WSJ talking about this discussion.

I remember a year ago seeing a specialist quoted as saying "Sure, primary care deserves more pay, but you cannot take it from us"...

Apparently he is not aware of the pie concept.

Interesting ACO concept....

We've discussed ACO's for some time, both here, and on Angry Bear. There is still a lot of nervousness regarding their implementation based on their pilot project results.

Wyoming however, is coming up with a new, novel concept

Rather than allow hospitals and providers to form smaller, perhaps fragmented ACO systems, they are proposing a state-wide ACO, with adoption, and implementation of the concept throughout the state.

Very interesting take on the ACO concept, and perhaps a great idea. More at the link.

CEO of Aetna speaks out...

This was a great interview with the CEO of Aetna health insurance.

Sounds like Mr. Bertolini has been on both sides of the issue.

Great read.

Wednesday, April 6, 2011

Regional Disparities in Health Spending...

Jason Shafrin, over at the Healthcare Economist, brings up an interesting paper examining the data from the Dartmouth Atlas.

For those that are unfamiliar, the Dartmouth Atlas is a compendium of data examining Medicare spending per beneficiary, and then comparing that spending by geographic region.

The differences are stark. I know. I use the Dartmouth Atlas data in my health policy talks all the time. The data was highlighted in an Atul Gawande article in 2009 on McAllen, Texas.

Jason points us to an article from the New England Journal by Zuckerman...

“Unadjusted Medicare spending per beneficiary was 52% higher in geographic regions in the highest spending quintile than in regions in the lowest quintile. After adjustment for demographic and baseline health characteristics and changes in health status, the difference in spending between the highest and lowest quintiles was reduced to 33%. Health status accounted for 29% of the unadjusted geographic difference in per-beneficiary spending; additional adjustment for area-level dif ferences in the supply of medical resources did not further reduce the observed differences between the top and bottom quintiles.”

Now, sure, health status may reduce the difference in spending, but it doesn't completely eliminate it. In fact, I would argue that 33% is still a large difference, and one that still needs to be addressed. Comparing the spending in Florida to Minnesota PER beneficiary is quite startling indeed.

Minnesota getting money back...

This has been an interesting story that I have been following lately.

Essentially, health care insurance HMO's that contracted with Minnesota for coverage of subsidized patients (500,000), netted profits of 3.8% in 2010, which was up from 2.6% in 2009.

This resulted in millions in addtional profit. UCare already gave back 30 million last month to the state. It is estimated that if profit caps were in place, the state could have netted 85 million last month alone.

Facing a 5 billion dollar deficit, this comes as good news to the State. Insurers are worried, as profits have varied considerably over the years, although, after being confronted, they finally admitted that perhaps they were making too much in the way of profits, and agreed to a 1% limit on profits for 2011.

Public relations being what it is........LOL.

Tuesday, April 5, 2011

Antitrust and the Department of Justice...

Color me a little surprised, the DOJ is getting serious about addressing some of the gross misconduct by some health organizations.

In this article, there is some discussion about the various efforts of the DOJ to address bad, or anti competitive business practices in the medical arena. One such example is the Texas case listed below.

The Texas case revolved around contracts United Regional offered to insurers starting in 1998, according to the complaint and settlement agreement filed in U.S. District Court on Feb. 25 by the Justice Department and Texas attorney general’s office. The contracts offered insurers steep discounts, but only if they agreed not to contract with other hospitals or outpatient facilities in the area.

At the time, 369-bed United Regional was the only hospital in Wichita Falls, population 100,000. But a group of doctors was working to build a far smaller rival facility, said surgeon Jerry Myers, who led the effort and is now chief executive of the 41-bed Kell West Regional Hospital.

If insurers signed with a rival medical center, the discounts would be dropped and they would have to pay close to full charges.

Such pricing practices aren’t “just about charging higher prices generally, it’s strategically charging prices in a way specifically designed to keep out competition,” said Tim L. Greaney, an antitrust expert and director of the Center for Health Law Studies at St. Louis University.

Within three months of Kell’s opening, United Regional had signed the now-disputed contracts with five health insurers and by 2010 had eight insurers, according to the federal lawsuit. The only insurer in the region that didn’t sign was the largest, Blue Cross Blue Shield of Texas.

Even with the discounts offered to insurers, United Regional became expensive, the complaint alleges. An analysis by a major insurer cited in court documents concluded that payments from insurers for hospital care at United Regional were at least 50 percent higher than average amounts paid in seven other comparable Texas cities. For services offered at both United and Kell, the big hospital’s average per-day rate for care was 70 percent higher.

The hospital disagrees with the way the Justice Department applied the law. “We believe then and now that these contracts were appropriate and legal,” United Regional chief executive Phyllis Cowling said.

Cowling also disputes the department’s cost findings. “We are paid a little bit more by insurers, but I know it’s not 70 percent,” she said. “It’s probably some 10 percent or 15 percent more, based on our numbers.”

The hospital is under orders to remove the exclusionary contract provisions. It will continue to honor the deeper discounts offered to its insurers, even if they sign deals with Kell, Cowling said.

Now, what will be really interesting is to see how the DOJ adapts when the newer ACO constructs begin to become operational. One quite serious concern among many healthcare executives centers around the joining of practices into giant ACO organizations, and whether or not this will be considered anti-competitive practice. The DOJ is apparently under instructions to be more lenient with ACO's, but how lenient may remain a mystery at the moment.

GOP went and did it...

Yep, they did. As Kash is reporting over at Angry Bear..The GOP did it

6.2 trillion in cuts....and none of it addresses health care spending. Not one shred. As I noted yesterday in my rebuke of Michael Cannon's column, this is not cost savings. This does not "save" money at all. This is cost shifting.

Also, what is even more baffling, as Kash notes, is that competition DOES NOT lower premiums in healthcare. I know, I know....this is sometimes hard for our hard core free market types to fathom, but the evidence, as I suggested in my note on Interstate Health Insurance sales, decreased leverage results in higher charges among providers and hospitals.

I will expanding more on this in the coming days. I am currently writing a post for Angry Bear that will be cross posted here that essentially will break down WHY free market mechanisms fail in healthcare. Stay tuned.