Inkwell: Authors and Artists

    


Here's a topic to discuss the changing state of healthcare.

Helping facilitate this discussion is our own <bbear> aka Joe Flower, a 24-
year member of The WELL and the host of the Writers conference here. (g
writers.)


Joe Flower, healthcare futurist and analyst, has long forecast the enormous
changes healthcare is going through now — and has projected a strong,
positive vision for where we are headed in the Next Healthcare, and how to
get there, practically, in the system we actually have.

Flower is on the speaking faculty of the American Hospital Association, a
regular columnist for its H&HN Daily, and on the board of the Center for
Health Design. He regularly appears as keynote speaker and thought leader at
conferences throughout the healthcare industry and across the globe. He is
the author of hundreds of articles, as well as his book Healthcare Beyond
Reform: Doing It Right For Half The Cost, named by Strategy and Business
Magazine as the best healthcare business book of 2012.
  

    

Joe, thanks for joining us here in Inkwell again.

I'm looking forward to this discussion with you and other WELL members on
the subject of healthcare.

FYI, readers, you can follow Joe on twitter: @JoeFlower

and you can find his website here:

<http://www.imaginewhatif.com/>
  

    
Healthcare is in chaos right now. It's not just the ACA website at
healthcare.gov. It's not even the rolling disaster behind that with
some 30% of people who think they have signed caught in some "dirty
data" limbo that will give them no insurance as of January 1, and no
way to know why. Even beyond that, the industry itself is in the middle
of a phase change. It's like a caterpillar halfway through the process
of becoming a butterfly. Split the chrysalis and what you see is
formless goo, with no sign of the butterfly to come. 

Despite all that, I am an optimist. I believe that there are large
forces coalescing now that will actually force this outrageously
over-charging industry into a price crash and a true rationalization of
costs. It won't be easy or painless, but it will be massively
educational. Let's talk about why. 
  

    
Glad to see you here, Joe. 
  

    
I would so like that to be true.  What do you think is going to cause this
price crash?
  

    <scribbled by bbear Fri 6 Dec 13 08:50>
  

    
This takes a little study. Take a look at what I find to be a most
astonishing graph:

<img width=100%
src="http://www.imaginewhatif.com/wp-content/uploads/2013/12/HistoricalGlobalHealth
SpendingByGDP.jpg";>
  

    
The right side of the graph shows what we all know: US healthcare
costs roughly twice what it does in other medically sophisticated
economies. What's astonishing is the left side of the graph. The US
historically was one of the most expensive healthcare economies
relative to GDP: We spent a bigger portion of our economy on healthcare
than almost anyone else. But we didn't spend twice as much.

Then something changed, and in a series of steep jumps, the US
spending pattern leapt above that of other economies.

What changed? Try to locate the year of that first big leap. It's
between 1982 and 1983. What happened that year? Something very
significant: DRGs, "diagnostic-related groupings." For the first time
the US government adopted price controls for Medicare and Medicaid, and
private insurers followed along, using DRGs as a guide to their own
price setting lists.

This is a fascinating paradox: Institute price controls to try to
control the cost of the system, and the cost of the system leaps up.
Each further leap in healthcare costs marks a time when the
cost-control system was expanded further, such as to ambulatory care,
to doctor's offices, and so on.

Here's the punch line: Something about changing the way we paid for
healthcare radically pushed up its cost. And now we are changing the
way we pay for healthcare again.
  

    
This is fascinating, Joe-- say more please about what you see in the
current changes that will change that graph?
  

    

I've taken to avoiding most mainstream media reports on the health care
law implementation because I find them full of distortion, deliberate
incitement to confusion and fear in the service of profit and extremely
short-sighted. There are occasional exceptions but it seems to me to
be very few.

So I'm wondering what you think about the rollout so far?
  

    
So, following the payment change logic, did providers change focus
from cost controlled services to some other activities that made more
money or what?  Medical billing is almost incomprehensible to me at
this point.  Are docs capped for physician time but permitted an
unlimited markup on supplies like those recently discussed aspirin and
bandaids?  Tell us more!  
  

    

I just finished signing up for my insurance online in the marketplace 
about 10 minutes ago. It was easy and I had over 20 policies to choose 
from. I am retired and don't have much income, so my tax credit was pretty 
good. I could have gotten a Bronze plan for free. Or a Silver plan for $92 
a month. I went with a Gold plan that is about what I am paying now for me 
and <zenrose>...about $430 per month. But my coverage is sooooo much 
better than what I had. A zero deductable policy that covers about 70% of 
the cost. I'm happy and will go get some much needed check ups in January!
  

    
First let's notice something very interesting: medical inflation, the
actual rise in cost for the entire system, is at the lowest point they
have been 50 years. It's currently less than 4%. And it has been at
about that level throughout the entire Obama administration. In other
words, since before the ACA. So something else is going on that is
keeping medical inflation down. At first this was thought to be just an
artifact of the recession. But as it has continued over time and
medical inflation has gotten even lower, more economists are coming
around point of view that the causes are structural. They are rooted in
how we choose healthcare, and how we pay for it.
  

    
The usual way is "fee-for-service." You come in with a problem. The
providers provide you with various services, tests, procedures, and
drugs, all of which might help your problem. And then they can charge
you for each item. The more items they do the more they can charge. And
it's really up to them to decide how many and which items to do. Over
time, we have not only gotten more and more services and test and
drugs, the providers have also tended to drive up the complexity costs
of the procedures, tests, and drugs. And they have slowly and steadily
been able to drive up the price of each item, even when it is the same
item. So now we get one dollar bags of saline solution being sold to
the patient for $91.
  

    
So there are basically two types of things to watch for in the system
change we are seeing: one is any way of paying for things that is
different from "fee-for-service". The second is any way that whoever is
choosing a service or test, whether it is the patient, their family,
or for instance the employer is able to have a choice and the
information to make a choice to become a competent "shopper."

Both of these are becoming quickly much more common than they ever
have been before.
  

    
Thanks for this topic, <bbear>. 

I work at Health Care For All in MA and I meet a lot of people who
don't understand the concept of moving away from a fee-for-service
system. We recently passed a major payment and delivery system reform
law in 2012.

I give folks who do not understand what it means to move away from
fee-for-service the example of a real Boston Children's Hospital
program for kids with asthma. 
 

Under the old way of doing things, you had a lot of low-income kids
who kept coming back to the emergency room for their asthma. Each time,
they'd be treated, given their asthma medication, and sent on their
way. This is really, really expensive. Under a new system, doctors were
given a lump sum of money to keep a population of kids healthy
overall. That meant that these kids were given a community health
worker who came to their home and found out that in the summer there
were no air conditioners and that exacerbated the asthma. And they
didn't have good quality vacuum cleaners to clean up the dust. So they
fixed that. And they made sure that the kids saw a primary care
physician rather than the emergency room.

What happened? Well, emergency room use went way down. The kids health
improved dramatically. But also importantly, the number of days off of
work the kids' parents took went down something like 70% (if memory
serves) because they didn't have to shlep their kids to the emergency
room.

Under the health care system under "fee-for-service," health care
providers get paid for what they do - selling asthma inhalers,
emergency room visits, etc. They don't have the financial incentives to
make sure the patient's health is taken care of. You can't write a
prescription for a vacuum cleaner. But moving towards a system that
rewards the value of care rather than the volume of care, we can make
people healthier -- and save the health care system a lot of money. 

Anyway, that's how I explain it. How would you?
  

    
That's actually a great example, Ari. The things that are most
amenable to this shift in paying for healthcare are in fact the
poorly-treated chronic conditions such as asthma, diabetes, COPD,
cardiovascular problems and such. It's not about denying the clinicians
money. It's about finding ways to pay for what we actually want — the
asthma controlled or even prevented at the least possible costs —
rather than endless useless ER visits and tests.
  

    
> So I'm wondering what you think about the rollout so far?

Astonishing incompetence. And more to come, as it seems something like
30% of the people who believe they have signed up actually have
problems with the data files, so that the insurance companies will
actually ot be able to sign them up properly.

But really, that is a story about the ghastliness of government
procurement processes, which insure that the companies that get the
contracts are not the most competent at doing the task, but the ones
most competent at threading the maze to get the contracts. It has
nothing to do with whether the ACA is a good idea, or even whether it
will eventually work. There is political difficulty ahead still with
it, and the problems may actually cost Democrats some in the 2014
elections, but I believe that the law will survive until 2016, at which
point it will be too entrenched to be dislodged.
  

    
> So, following the payment change logic, did providers change focus
from cost controlled services to some other activities that made more
money or what? ...

Yes, basically. The first cost controls in the 1980s were on inpatient
services. So all of a sudden they figure out that they can do full
head transplants on a roll-in, roll-out outpatient basis. Drive-through
births. Ninety-second vasectomies. Then the controls were extended to
all hospital-based services, even outpatient, and boom! All these
free-standing clinics show up. And on and on. Every single fad and
shift in the healthcare market of the past 30 years can be traced not
just to new technologies and drugs, but to shifts in the cost control
systems that dictate what can be done most profitably.
  

    
And none of that is based on what is really best for the patient. And
certainly not what is cheapest, but just the opposite: What can milk
the most from the payment system.
  

    

What really pissed me off was that they hired a *Canadian* company!  Good
Lord, there aren't any *American* companies who could do this & competently?
  

    
But all that is a sideshow to the real change.

Let me give you one more graphic: 

<img width=100%
src="http://www.imaginewhatif.com/wp-content/uploads/2013/12/AnkleMRIPrices.jpg&quo
t;>
  

    
This shows ankle MRI prices at quality places in the DC area. Note
that there is a number of prices in a range between $400 and $730, kind
of like a normal price range. Then there are prices that range way
above that, up to nearly $2200, 5.5 times the bottom price. This is
normal in healthcare, and completely unknown in other businesses. It
only happens in a fee-for-service system supported by insurance that
divorces the chooser of a service from all exposure to price.

Now consider "reference pricing." An employer which funds its own
healthcare might say to employees, "Okay, here's the deal. On this item
there are a number of quality choices at $730 and below. Our reference
price is $700. Go to any one you want below that price, and we pay
full freight. Go the $730, and you pay $30 co-pay. Go to the $2200 on,
and you pay a $1500 co-pay."

Most large employers are self-funded, and reference pricing is booming
in popularity. Think what happens to those top prices when a big
fraction of the private market goes to reference pricing. They will
collapse. The California Public Employee Retirement System also funds
healthcare for present public employees in California. In a pilot
project by this one payer, it drove down the average price for knee
replacements in California from $43,000 to $28,000. This is one payer's
effect on the market in one year for one product.
  

    
wow
  

    
Last year I was told to get an ultra sound for something--I did. It
cost a pretty penny. My doctor had said there were places I could try
to get it done for less, especially outside the Bay Area, but I had NO
idea how to find such places, or any posted fees. How does one? It's
not like you can phone up every clinic in the state and ask what they'd
charge for X or Y. (This will become moot for me personally as I
switch into Kaiser, but remains an issue for others who don't have big
employers doing the research for them--and I can't even tell how the
employers find what's shown on that graph for every possible procedure
an employee might need.)
  

    
Well, one of the main drivers of that difference in pricing is the
market clout of the provider, it's not just that they are running in
fee-for-service. 

http://www.boston.com/news/local/massachusetts/articles/2010/01/29/attorney_ge
neral_says_clout_drives_up_health_costs/