The Uninsured

Many Specialists Won’t See Kids With Medicaid

Bisgaier J, Rhodes KV. N Engl J Med 2011;364:2324-2333

Financial Suffering Among the INSURED

High Deductible Insurance:Except for the Healthy and

Wealthy, It’s Unwise

Rising Economic Inequality

Persistent Racial Inequalities

Racial Disparity in Access to Kidney Transplants

Rationing Amidst a Surplus of Care

Unnecessary Procedures

Fewer CABGs, But More Hospitals are Competing to Perform this Lucrative Surgery

Lucas F L et al. Health Aff 2011;30:1569-1574

Variation in Medicare Spending:Some Regions Already Spend at Canadian Level

Half of Americans Live Where Population Is Too Low for Competition

Source: NEJM 1993;328:148

A town’s only hospital will not compete with itself

ACOs:A Rerun of the HMO Experience?

Why the ACO/HMO Concept Resonates

• Lots of redundant high tech facilities and useless, even harmful interventions

• Neglect of primary care, public health, prevention, mental health

• Lack of teamwork• Quality problems that need system solutions• Inadequate public accountability

HMO-ACO Logic• FFS is the problem; capitation (shifting

insurance risk) the solution.

• But . . . small clinics and hospitals can’t bear risk, so consolidation is necessary.

• Shifting risk creates incentive to deny care, so report cards and risk adjustment are necessary.

Profit-Driven ACO’s:Medicare HMOs Provide a

Cautionary Tale

Despite Medicare’s Lower Overhead, Enrollment of Medicare

Patients in Private Plans Has Grown

Private Medicare Plans Have Prospered by Cherry Picking

Up-coding: the Achilles Heel of Risk Adjustment, and hence

ACO’s (and P4P) • By maximizing the number of coded

diagnoses and comorbidities, hospitals, doctors and HMOs/ACOs can make their outcomes look better, and (when payment is risk adjusted) make more $$

Upcoding: The Science of Making Patients Look Sicker on Paper

No Extra Severity/Payment• Acute kidney insufficiency

• Mg. = 1.6• Delirium• Anemia 20 GI bleed• Malnourished• COPD exacerbation

• Polysubstance abuse

Equivalent but Extra Credit• Acute renal failure• Hypo-magnesemia• Encephalopathy• Anemia 20 acute blood loss• Moderately malnourished• Acute respiratory

decompensation• Continuing polysubstance

abuse

Medicare’s Attempt to Improve Risk-Adjustment of HMO Payment

• Pre-2004 - HMOs were “cherry-picking” when payment adjusted only for age, sex, location, employment status, disability, institutionalization, Medicaid eligibility

• 2004 – Risk adjustment formula added 70 diagnoses

Risk Adjustment Increased Medicare HMO Over-Payments$30 billion Wasted Annually

“We show that . . . risk-adjustment . . . . can actually increase differential payments relative to pre-risk-adjustment levels and thus . . . raise the total cost to the government. . . . The differential payments . . . totaled $30 billion in 2006, or nearly 8 percent of total Medicare spending. . . . recalibration [of the risk adjustment formula] will likely exacerbate mispricing.”

Source: NBER #16977

Failure of Medicare HMO Risk Adjustment: Implications for ACOs

• More risk adjustment leads to MORE, not less cherry picking – ie. Selecting healthier patients within each risk stratum

• Intensive coding makes patients appear sicker on paper, ups risk-adjusted capitation fee and factitiously raises quality scores

• ACOs that fail to cherry pick or intensify coding will get low payments, and factitiously poor quality scores

• Implications: No net savings, probable increased costs Resources transferred from sick to healthy Biggest cheaters are biggest winners, undermines ethical behavior ACOs that embrace problem patients driven from the market

Profit-Driven Upcoding Makes Accurate Risk Adjustment Impossible:

High Cost Providers Inflate Both Reimbursement and Quality Scores by Making

Patients Look Sicker on Paper

Predicting the Impact of ACOs• Track record of HMOs• Results of Medicare’s Physician Group

Practice Demonstration, 2005-2010• Evidence on tools ACOs likely to use:

prevention and disease management “care coordination” report cards and P4P schemes electronic medical records

Prospect of ACOs is AlreadyCausing Consolidation

“When Congress passed the health care law, it envisioned doctors and hospitals joining forces, coordinating care and holding down costs…. Now, eight months into the new law there is a growing frenzy of mergers involving hospitals, clinics and doctor groups....If ACOs end up stifling rather than unleashing competition,’ said Jon Leibowitz, the chairman of the [FTC], ‘we will have let one of the great opportunities for health care reform slip away.’”New York Times, November 21, 2010, A1.

Medicare’s PGP/ACO Demo. Project : Gaming, But No Savings

“The model for the ACO program . . . has been tested in the PGP Demonstration Project . . . diagnosis coding changes the PGP sites initiated . . . produced apparent savings that resulted in shared savings payments to some of the demonstration sites, but not actually fewer dollars spent”Berenson RA. Am J. Managed Care, 2010; 16:721-726.

ACO Cost Cutting Armamentarium

• Prevention• Disease management• “Care Coordination” (consolidation, gate-

keeping, utilization review)• Electronic medical records• Report cards and P-4-P

Prevention Saves Lives,But Not Money

“Although some preventive services do save money, the vast majority reviewed in the health economics literature do not.”

Cohen JT et al., New England Journal of Medicine 2008;358:661-663.

“It’s a nice thing to think, and it seems like it should be true, but I don’t know of any evidence that preventive care actually saves money.”

 Gruber J,quoted in “Free lunch on health? Think again,” NY Times, August 8, 2007: C 2.

Medical Homes and Enhanced Primary Care Don’t Require ACOs

• “Medical Homes” that integrate more nurses, social workers etc. into primary care and cut physicians’ panel size may improve care and reduce ED and inpatient utilization, possibly enough to offset the additional personnel costs

• But this intervention does not require recycling the HMO experiment.

Assumptions Implicit in P-4-P1. Performance can be accurately ascertained2. Individual variation is caused by variation in

motivation3. Financial incentives will add to intrinsic

motivation 4. Current payment system is too simple5. Hospitals/MDs delivering poor quality care

should get fewer resources

Assumptions Implicit in P-4-P

1. Performance can be accurately ascertained - i.e. that the variance attributable to an individual doctor can be clearly identified (as opposed to her patients and the circumstances surrounding the work), and will cannot be gamed.

Assumptions Implicit in P-4-P

2. Individual variation is caused by variation in motivation - i.e. that poor performance is a matter of intention, and that change in motivation is therefore likely to improve performance. If poor performance is not “willed” then incentives can’t change it.

Assumptions Implicit in P-4-P

3. Financial incentives will add to intrinsic motivation. If financial incentives undermine intrinsic motivation they may actually worsen performance.

Pay for Performance“I do not think its true that the way to get better doctoring and better nursing is to put money on the table in front of doctors and nurses. I think that's a fundamental misunderstanding of human motivation. I think people respond to joy and work and love and achievement and learning and appreciation and gratitude - and a sense of a job well done. I think that it feels good to be a doctor and better to be a better doctor. When we begin to attach dollar amounts to throughputs and to individual pay we are playing with fire. The first and most important effect of that may be to begin to dissociate people from their work.”

Don Berwick, M.D,Source: Health Affairs 1/12/2005

P-4-P Didn’t Improve Quality Scores5 Year Results of the CMS/Premier Hospitals Project

Source: Werner R M et al. Health Aff 2011;30:690-698

Baseline

P4P Among UK Primary Care Doctors

• Multiple quality parameters were documented using a computerized medical record and summed in a point system

• Virtually all practices achieved most of the quality points within a year of implementation

• Generated a much welcomed 25% increase in GP incomes

P4P – Scores on Whatever You Pay for Improves, But . . .

“The [British P4P] scheme accelerated improvements in quality for 2 of 3 chronic conditions in the short term. However, once targets were reached, the improvement . . . slowed, and the quality of care declined for 2 conditions that had not been linked to incentives.”

Source: NEJM 7/23/2009:368

High P-4-P Scores, But No Improvement in Hypertension Outcomes in UK

Source: Serumaga. BMJ 2011;342:d108

“We found no evidence that financial incentives can

improve patient outcomes.”

Flodgren et al. “An overview of reviews evaluating the effectiveness of financial incentives in changing healthcare professional behaviors and patient outcomes. Cochrane Collaboration, July 6, 2011

A $75 Million RCT of P-4-P inNew York City Schools

• 200 high-needs New York City schools employing more than 20,000 teachers.

• Incentives of up to $3,000 per teacher

• Based on students’ test scores, graduation and attendance rates, and learning environment surveys.

Source: Fryer RG. Teacher incentives and student achievement: evidence from New York City public schools. NBER Working Paper No 16850. Cambridge, MA: National Bureau of Economic Research, March, 2011.

An RCT of P-4-P for Math Teachers in Nashville Schools

• 296 middle school math teachers randomized to bonuses/no bonuses. Study ran for 3 years.

• Incentives of up to $15,000 per teacher per year

• Based on students’ test scores

• “Overall we find no effect of teacher incentives on student achievement.” Source: Springer et al. Teacher Pay for Performance: Experimental Evidence from the

Project on Incentives in Teaching. Rand Corp. 9/21/2010

ACOs and HMOs:Faith-Based Solutions

• Capitation as magic bullet• Consolidation among providers cuts costs• Prevention, care management & EMR/

computers save money• P-4-P encourages global quality• Risk adjustment can overcome gaming

(upcoding of diagnoses)

Investor-Owned Care:Inflated Costs, Inferior Quality

For-Profit Hospitals’ Death Rates are 2% HigherSource: CMAJ 2002;166:1399

For-Profit Hospitals Cost 19% MoreSource: CMAJ 2004;170:1817

For-Profit Dialysis Clinics’ Death Rates are 9% Higher

Source: JAMA 2002;288:2449

Profit Undermines Science:The Case of Myriad Genetics and BRCA

• Myriad’s patents on BRCA genes (and original test) expire in 2018

• Myriad BRCA test = $3,340• Other, cheaper testing methods now possible –

could undercut Myriad in 2018 • In response, Myriad stopped sharing data on

cancer risk of specific mutations

Source: New York Times 8/25/11:B1

Drug Companies’ Cost Structure

“In April [2010], AstraZeneca became the fourth major drug company in three years to settle a government investigation with a hefty payment -- in its case, $520 million for what federal officials described as an array of illegal promotions of antipsychotics for children, the elderly, veterans and prisoners. Still, the payment amounted to just 2.4 percent of the $21.6 billion AstraZeneca made on Seroquel sales from 1997 to 2009.”

New York Times – 10/3/10

Drug Firms’ Fraud: Pay the Ticket and Keep on Speeding

Mandate Model Reform:Keeping Private Insurers

In Charge

“Mandate” Model for Reform

• Proposed by Richard Nixon in 1971 to block Edward Kennedy’s NHI proposal

“Mandate” Model for Reform

• Government uses its coercive power to make people buy private insurance.

“Mandate” Model for Reform

1. Expanded Medicaid-like program Free for poor Subsidies for low income Buy-in without subsidy for others

2. Individual and Employer Mandates3. Managed Care / Care Management

“Mandate” Model - Problems

• Absent cost controls, expanded coverage unaffordable

• ACOs/care management, computers, prevention not shown to cut costs

• Adds administrative complexity and cost; retains, even strengthens private insurers

• Impeccable political logic, economic nonsense

Massachusetts’ Model Reform: Massive Federal Subsidies,

Skimpy Coverage, Persistent Access Problems

Massachusetts Health Massachusetts Health ReformReformNew CoverageNew Coverage < 150% Poverty - < 150% Poverty - Medicaid Medicaid

HMOHMO 150% - 300% poverty - 150% - 300% poverty - Partial Partial

subsidysubsidy > 300% poverty – > 300% poverty – Buy Your OwnBuy Your Own

Massachusetts: Required Massachusetts: Required CoverageCoverage

(Income > 300% of Poverty)(Income > 300% of Poverty) Premium: $5,600 Annually (56 Premium: $5,600 Annually (56

year old, individual coverage)year old, individual coverage)

$2000 deductible$2000 deductible

20% co-insurance AFTER 20% co-insurance AFTER deductible is reacheddeductible is reached

Crimes and Punishments in Crimes and Punishments in MassachusettsMassachusettsThe CrimeThe Crime The The

FineFineViolation of Child Labor LawsViolation of Child Labor Laws $50$50Employers Failing to Partially Employers Failing to Partially Subsidize a Poor Health Plan for Subsidize a Poor Health Plan for WorkersWorkers

$295$295

Illegal Sale of Firearms, First OffenseIllegal Sale of Firearms, First Offense $500 max.$500 max.Driving Under the Influence, First Driving Under the Influence, First OffenseOffense

$500 min.$500 min.

Domestic AssaultDomestic Assault $1000 $1000 max.max.

Cruelty to or Malicious Killing of Cruelty to or Malicious Killing of AnimalsAnimals

$1000 $1000 max.max.

Communication of a Terrorist ThreatCommunication of a Terrorist Threat $1000 $1000 min.min.

Being Uninsured In MassachusettsBeing Uninsured In Massachusetts $1212$1212

Public Money, Private Control

U.S. Health Costs Rising More Steeply, 1970-2008

The U.S. Trails Other Nations

Canada’s National Health Insurance Program

Quality of Care Slightly Better in Canada Than U.S.A Meta-Analysis of Patients Treated for Same Illnesses

(U.S. Studies Included Mostly Insured Patients)

Source: Guyatt et al, Open Medicine, April 19, 2007

A National Health Program for the U.S.

Phony vs. Real Reform

Phony

• Choice of HMO/insurer

• Coverage = Copays, exclusions etc.

• Security = Lose it if you can’t work or can’t pay

• Savings = Less care

Real

• Choice of doctor and hospital

• Coverage = First $, Comprehensive

• Security = For everyone, forever

• Savings >$400 bil on bureaucracy

Public Opinion Favors Single Payer National Health Insurance