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Are Price Controls Disguised as Bundles the Next Step in Bending the Medical Cost Curve?

Fresh from reimaging health insurance, mainstream health policy analysts have now set their sights on the way that people who provide medical care are reimbursed. Initial indications are that this will not go well for patients. Academics and government agencies seem imbued with the conviction that every medical procedure in America costs twice as much as it should due to “flat of the curve medicine,” and that vast fortunes can be saved simply by chopping reimbursements.

The table below lists Medicare’s 17 most expensive conditions. It is from a paper on reducing costs by changing Medicare payments from patient based payments to “bundled episode payments.” The authors argue that this reform could save $10 billion a year. They implicitly assume that higher average payments per patient “episode of care” in the 306 hospital referral regions that make up the upper 75th percentile of the payment distribution have no value. Given that, if one caps Medicare payments for each “episode of care” at the 25th percentile of the average cost per patient episode, one saves a great deal.

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Apr 02, 2014 | 16 comments | by

Annals of Cookbook Medicine, BMI Division

asdThe Daily Mail Online reports that this woman was told that she was overweight on a routine visit to an NHS clinic.

Her BMI of 29 classified her overweight, just one point below the obese cutoff of 30. She was advised to begin a 1,000 calorie a day diet.

Under ObamaCare rules, her employer would be perfectly within its rights in setting a target BMI of 26 and requiring her to either walk 150 minutes a week or pay more for her health insurance. It could also substitute a goal of reducing BMI by 1 point for the walking requirement.

Now that actually looking at patients is going out of style, someone like her may have to either put down those weights or pay more for health insurance.

Mar 31, 2014 | 16 comments | by

Big Arms and Wrong Size Cuff Equals High Blood Pressure

As President Obama has said, “health care is hard.”

If your upper arm circumference is larger than 13 inches and your physician has been measuring your blood pressure with a standard adult blood pressure cuff, your blood pressure might be lower than you think. You’re in good company — an estimated 68 percent of Americans have upper arms large enough to require a large blood pressure cuff for an accurate measurement.

Doctor Checking the Blood Pressure of a PatientUsing the wrong cuff can change a person from healthy to hypertensive. The Eighth Joint National Committee (JNC 8) U.S. guidelines say that people with readings over 140 should be treated for hypertension. At the Mexican National Bodybuilding and Fitness Championship, Fonseca-Ryes et al. found that using a medium cuff on 144 individuals with arm circumference larger than 13 inches resulted in systolic pressure readings at or above 140 mm for 48 of 144 individuals. When using a large cuff, only 17 of the same 144 individuals had blood pressure above 140 mm. In a mixed population, the authors found that using a standard cuff on big arms increased measured systolic blood pressure by 2-5 mm for each additional 2 inches in arm circumference.

Mar 27, 2014 | 20 comments | by

How ObamaCare Blocks Innovation in Insurance Plan Design

ObamaCare critics have warned that it will block beneficial innovations. Here’s how it is likely to block a type of coverage redesign that has recently become one of the pet projects of mainstream health reformers.

Advocates for value-based health plan design maintain that health care expenditures will fall if patients’ out-of-pocket costs are properly aligned with the value of health services. Out-of-pocket costs should be lower for so-called high value health services than for low valued services.

The problem, as reader David Napoli pointed out on the Incidental Economist blog, is that ObamaCare rules are not designed for a value-based approach. If an insurer implements a value-based design in which it pays more for a high value service, it raises the actuarial value of its policy. If it raises it enough, the plan may no longer qualify for its metal tier. The insurer must revise the plan to stay compliant. But if the insurer does this by making less valued services more expensive, it may run afoul of a state’s “Reasonable Modification guidelines.” They limit the changes that can be made to approved policies. A plan with changes that are “too large” must be canceled and refiled as a new plan in the next plan year.

In terms of brain damage, the easiest route for a carrier is to stay within the plan’s metal tier by increasing its deductible.

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Mar 26, 2014 | 15 comments | by

More Accurate Measures Suggest Declining Income Inequality

Like quality health care, income inequality is a slippery concept. In both cases, the official metrics have serious problems. They often tell a different story than measures that are more carefully constructed.

In the U.S., for example, Cebula and Feige estimate that 18 to 23 percent of U.S. income is not reported to the IRS. Under-reporting appears to increase with federal tax rates, unemployment, and general dissatisfaction with government. Hurst et al. estimate that the self-employed under-report their income in the national surveys used to produce the official statistics by 25 percent.

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Mar 14, 2014 | 18 comments | by

Waiting List Too Long? Destroy the Records

Patrick Howley of the Daily Caller reports that Department of Veterans Affairs employees destroyed medical files in a “systematic attempt to eliminate backlogged veteran medical exam requests.” Oliver Mitchell, a former patient services assistant in the VA Greater Los Angeles Medical Center said that the center got about 3,000 requests a month for exams but only had the resources to do 800. Because waiting lists counted against a hospital’s efficiency report, officials began discussing how to make their waiting list look better by destroying records.

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Mar 05, 2014 | 16 comments | by

Markets at Work: Hernia Surgery

The cash price for repairing an uncomplicated inguinal hernia at a practice in Denver was $740 for the surgeon, $928 for the anesthesiologist, $2,456.42 for the surgery center, and $140 for the surgical mesh used to strengthen the hernia repair. The total was $4,264.42. And although insurer contract prices remain a deep, dark, secret until the bill arrives, several people in Denver who were experts at pushing paper suggested that these cash prices were significantly below the usual network prices.

The total cash price at the Surgery Center of Oklahoma in Oklahoma City was $3,060, including mesh and a consultation with a surgeon who patiently answered a series of questions. The difference between the price in Denver and the price in Oklahoma City was roughly $1,200.

The cost of roundtrip airfare for two from Denver to Oklahoma City is currently around $450. Two nights at a medium priced hotel is about $200 including breakfast, a rental car for three days would run around $140. Figure another $100 for food, $200 to kennel the dogs, and $36 for airport parking. This works out to $1,126.

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Feb 24, 2014 | 19 comments | by

Medicare Reimbursement Cuts Kill

Under the Balanced Budget Amendment of 1997, different classes of hospitals received different cuts in Medicare reimbursement. The cuts reduced Medicare inpatient payment by an estimated 5 percent between 1998 and 2000. By contrast, the Affordable Care Act (ObamaCare) will reduce DRG payments by 1.1 percent per year indefinitely. A 2013 article (open preliminary version) by Yu-Chu Shen and Vivian Y. Wu examines the effect of the BBA reimbursement rate cuts on risk-adjusted mortality rates 7, 30, 90, and 365 days after hospital admission. They find that the risk of dying increases with the size of Medicare reimbursement cuts. Patients with heart attacks, congestive heart failure, stroke, pneumonia, and hip fracture were included, from 1995 to 2005.

Despite reimbursement cuts, mortality trends were similar in the first two years that the BBA took effect. After 2001, mortality rates began to diverge. For conditions with declining mortality rates, hospitals with smaller payment cuts had a sharper decline in their mortality rate than those with larger payment cuts. For stroke and hip fracture, conditions for which mortality rates increased until 2003, mortality rates increased more slowly in hospitals with smaller reimbursement cuts. Mortality a year after admission for hip fracture was apparently unaffected by reimbursement reductions. The authors note that this may reflect the fact that over 90% of hip fracture cases are discharged to postacute treatment facilities.

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Feb 21, 2014 | 10 comments | by

Woman Dies Waiting for ObamaCare Policy

According to a post on the A Line of Sight blog, this woman’s family policy was canceled by the ObamaCare regulations. She fell ill while waiting for her ObamaCare policy to take effect on February 2. In hindsight, she “should have gone to see a doctor,” but instead decided to wait so that her husband and four children wouldn’t be burdened by avoidable medical expenses.

The author of the article, her brother, concludes that the ObamaCare debate for his family ended “with the death of my sister. For us, it’s not about “policy,” anymore. It’s about the tragic consequences that can happen when the government decides to cancel the private economic decisions of individuals in favor of a huge policy experiment created in the back rooms of Washington by out-of-touch bureaucrats, statisticians and lobbyists.”

Feb 20, 2014 | 17 comments | by

Breast Cancer and Government Coverage versus Private Health Insurance

Increase-in-Breast-Reconstruction-After-Womens-Health-Law-EnactedHere are results from a 2008 paper on the relationship between breast cancer and type of health coverage in Rhode Island. Covering all breast cancer cases registered from 1996 to 2005, the data once again suggest that the uninsured fare almost as well as people on Medicaid.

The table below lists tumor size and stage at diagnosis by type of health coverage. When breast cancer victims on Medicaid are compared to those with private insurance, those on Medicaid have larger tumors at diagnosis and higher stage tumors. They also have more node positive tumors — tumors that have already spread to lymph nodes. This is cause for concern as survival rates are better for small tumors, tumors that are node negative, and those at stage 1 or below. Women on Medicaid who do have early stage tumors are also less likely to have surgery and, if they have surgery, to have surgery that removes only a part of their breast.

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Feb 18, 2014 | 15 comments | by
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