U.S. Healthcare – Moving Forward

Last week I gave a presentation to the leaders of some women’s health advocacy organizations about where the U.S. healthcare system is heading, i.e., where we go from the current situation with the A.C.A. We had a great discussion, and the organizer of the event emailed me afterward to say, “Amazing is all I can say. You are the first person who could speak to [the] ACA in which people listened and engaged.”Blog-2-17-Picture

Some of the key points I made included:

  • Focus on the future. Don’t relive the past.
  • Move forward from today’s strengths and weaknesses. The slide below describes health insurance coverage for 2015 showing dramatic increases in coverage in individual insurance and Medicaid, and a decrease in the uninsured. [Note: The Census data indicates any insurance status during the year, which is why the total is more than 100%.]Blog-2-17-Slide1
  • Are we more of less broken? Some “so-called” pundits have characterized the current situation as “broken.” To move forward, it is important to consider whether or not the current system is more or less “broken” than it was in 2010 when the A.C.A. was enacted, or in 2014 when most of its provisions started.Blog-2-17-Slide2

Several of the less broken aspects of the current situation are:

  • The business model for health insurance is now based more on managing risk rather than avoiding risk, which was a major focus before the A.C.A.
  • Access to insurance – particularly for individuals – is now much more reliable and dependable. The A.C.A. created a national floor for insurance practices, with state level implementation and augmentation. This was the focus for the “Patient Protection” part of the A.C.A. i.e., the original title of the law was the Patient Protection and Affordable Care Act.
  • Descriptions of insurance plans are now more standardized and easier for consumers to understand.
  • Medicare’s Hospital Trust Fund is now projected to be solvent for 11 more years than before the A.C.A., and the Medicare Part D benefit was significantly improved, with the coverage gap (a.k.a. “donut hole”) being filled.

Several of the still broken or problem areas in the current situation are:

  • Affordability is still a major problem. This is – and was – a problem for many individuals, as well as some companies that discovered in the midst of the Great Recession (2008-2010) that their healthcare costs were eating deeply into their profits. [Note – polling has long indicated affordability as a priority issue, which is why it was called the “Affordable Care Act.” However, affordability takes much longer to achieve than access, which was the case for the A.C.A.’s model in Massachusetts, where affordability is still being addressed.] Within the A.C.A., affordability for lower income people was addressed with subsidies, but overall costs are slowly being addressed with improvements in healthcare delivery – primarily through public-private alignment in new payment models that are driving greater “value” in healthcare. It is also worth noting that this concept of value is at the core of the new Medicare physician payment framework created in the MACRA law, which had large bipartisan support in Congress.
  • State-to-state implementation has been very variable, with some states doing a good job in creating more stable insurance markets, and others facing low numbers of insurers in their individual markets.
  • Requirements for coverage of certain benefits, and how risks are segmented or shared across populations, are potential areas where changes could be made to address perceived inequities, reduce government spending, and lower costs for some people – but also increase costs for other people. For example, changing the age ratings from 3:1 to 4:1 or 5:1 would expand risk stratification with younger people paying less and older people paying more. Similarly, excluding certain types of benefits from the required “Essential Health Benefits” (which are currently set at the state level within federal guidelines), would decrease costs for people who don’t ever use those benefits (such as contraception or organ transplantation), while increasing costs for people who do use those services. However, such “insurance by body part” practices could also cause insurers (and at risk providers) to build business models around avoiding risk rather than managing it.

Conclusions: The A.C.A. fixed several problems with the U.S. health insurance markets and improved access to health insurance. However, it also accentuated or created some other problems because of its innate structure (e.g., “inartful drafting”), hyper-partisan political advantage seeking, and the normal evolution of insurance business practices. For example, those three factors combined to undermine individual insurance markets in some states because of HHS’ inability to fully make risk corridor payments: The law was not explicit about HHS’ authority, Congress specifically prohibited HHS from shifting funds to make those payments, and many insurers had business plans for the A.C.A. marketplaces with losses in early years to build market share, while expecting to recoup those losses both through the risk corridor payments and higher premiums in later years. The result has been that most of the new non-profit insurance companies created under the A.C.A. (COOPs) failed, and many existing insurers pulled out of markets where they had significant losses, leaving fewer options for consumers. It should also be noted that some insurers have done well in the marketplaces using networks and benefits more similar to Medicaid than large company group health insurance plans, while at least one insurer apparently pulled out of several markets as a positioning strategy to try and bolster their merger plans.

Thus, the A.C.A. transformed what was essentially becoming a two-tiered health insurance market (Medicaid and group health insurance plans) into a three-level system, with a more structured middle tier for individual insurance that looks like a hybrid between Medicaid and large employer health plans. One of the A.C.A.’s successes (although perhaps temporary) was this middle tier, which had been rapidly disappearing in most parts of the country as premiums escalated and people with non-trivial pre-existing conditions were excluded from buying insurance. In 2010, when layoffs were common and the “gig-economy” was expanding, the shrinking supply side of the market for individual insurance not only accentuated the problem of “job lock,” but it also undermined state and federal efforts to control health spending since so many people were “out” of the insurance system.

Are “we” better off than “we” were four years ago? That depends on who “you” are, and what you expect your situation to be in the future.

  • For individuals with health insurance through large groups (such as large companies), things are probably about the same as they would have been without the A.C.A. While premiums and deductibles are almost certainly higher, better information about quality of services is available, and there is more access to things like telemedicine – both of which would have occurred to a similar degree without the A.C.A.
  • For low income individuals, there are now subsidies to buy insurance, or access to Medicaid (in some states).
  • For middle-class people buying insurance on their own, they now have assured access to buying and keeping insurance, although in some cases their costs have increased more than what would have occurred without the A.C.A. in part because they have expanded benefits under the A.C.A.’s requirements. But without the A.C.A., costs for individuals and small groups could have been very dependent upon their age, costly illnesses, or injuries, which could have dramatically increased their premiums, or caused them to lose insurance coverage for specific body-parts or entirely.
  • For people with Medicare, things are better since the Part D donut hole is getting filled, and Medicare is driving new quality improvement initiatives, which are also benefiting people who are not on Medicare since many are being done in conjunction with Medicaid programs and private payers.

Bottom Line:

  • So, are “we” as a nation better off? Overall, we have a clearer picture of the problems and more tools to try and improve (if not totally solve) the problem areas like affordability and quality.
  • Will making productive changes be easy? No.
  • Can positive changes be made while extracting great savings from the health insurance and healthcare delivery systems? Not quickly – but possibly over the long term.
  • Can changes be made in 2017 so that no other changes will be necessary for many years? No. Like trauma surgery, the patient needs to be stabilized, and then multiple surgeries (targeted towards the problems of greatest urgency and long-term benefit) need to be done over time to improve the functioning and long-term capabilities and viability of the patient. Trying to do everything at once can lead to serious morbidity and mortality, and would be more traumatic and expensive, and waste more resources than a measured and planned approach.

Health, Healthcare, and Government Spending (and a Culture of Health)

Why governments care about health and healthcare, how they are connected to government spending and priorities, and why addressing social determinants of health is so important for making lasting improvements, were the subjects I covered in a presentation at George Mason’s graduate policy school in September. My goal was to provide the soon-to-be policy analysts and advisers with a framework for understanding those issues so they will be able to provide useful recommendations to their future decision making bosses. (See the slide below for the topics covered in the presentation.) Links to videos of the talk are below, along with short descriptions – I think that Part 6 is particularly good. (Embedded views of the videos are at the end.)

I’ve had discussions with policy makers and corporate executives about these issues since their organization’s value propositions increasingly require demonstrating individual and population outcomes with specific metrics. Those requirements are part of the broader rapid movement of the U.S. healthcare system towards more accountability. Consequently, the connections among health, healthcare delivery, spending, community organizations, and social determinants of health are becoming a top priority for healthcare and life science leaders in companies and government agencies as they seek to increase value for their organizations and the people they serve.

Any thoughts you have about this talk, the connections among health, healthcare, spending, and community health factors (a.k.a. social determinants of health), would be greatly appreciated. And if there are any aspects of these issues where I can be of help to you or your colleagues – or you know of organizations or audiences that would also benefit from a similar presentation – please just let me know as I’d be happy to discuss that with you.

GMU - 9-29-16 Overview Slide

Part 1: Introduction. Why Governments care about health and healthcare. What is health. What is healthcare. https://youtu.be/KvDVcBGOePc

Part 2: Insights into healthcare spending with a particular focus on the Medicare and Medicaid programs. https://youtu.be/6Onuae2c0Xw

Part 3: Why spending on (and budgeting for) health and healthcare programs are unlike almost all other Federal programs, and why projecting spending is so challenging. https://youtu.be/lyaAjRzD0ic

Part 4: How government and private payers are seeking greater value and better clinical outcomes from their healthcare spending, and how data and analytics are increasingly important components of developing and evaluating those initiatives. https://youtu.be/7abj14xIcMw

Part 5: Examples of value based pricing initiatives and the importance of data and analytics for managing such programs, determining “success”, and sharing savings with physicians, other providers, or patients. https://youtu.be/MeLZA5wcpG8

Part 6: How health, healthcare, and spending on government health programs (and private insurance reimbursements) connect to each other, and how social determinants of health can drive clinical and economic outcomes, i.e., how a culture of health can be so important for transforming health in a community. This Part concludes with a brief discussion of the Affordable Care Act and the future of that program and the U.S. healthcare system. https://youtu.be/66zt_Rqf9hA

Enjoy. Pass along to your colleagues and friends. And as always, constructive comments are welcome!

Challenges Estimating Future U.S. Healthcare Spending

The challenges of estimating future U.S. healthcare spending (and why projections are so often so inaccurate) is the focus of the third video segment from my guest lecture at George Mason University about Health and Budget Policy – see below. (The first two are in previous blog posts and are on the HealthPolCom YouTube Channel.)

The final two video segments on the topics of Medicaid, and the Changing U.S. Healthcare System will be posted next week. The five subjects covered in the video segments from the guest lecture are:

  1. U.S. Spending on Health and Healthcare
  2. Medicare and U.S. Healthcare Spending
  3. Challenges for Estimating Future Healthcare Spending
  4. Medicaid: Federal and State Fiscal Issues
  5. Changing U.S. Healthcare System: New Payment and Delivery Models

Enjoy. Pass along to your colleagues and friends. And as always, constructive comments are welcome!

Medicare and U.S. Healthcare Spending

The second video from my guest lecture at George Mason University about Medicare and U.S. Healthcare Spending in now available – see below. (The first was an overview of Health Spending in the United States, and is in the previous blog and also on the HealthPolCom YouTube Channel.)

The other video segments from my guest lecture that I’ll be posting over the next week or so will be on the following subjects:

  1. Challenges for Estimating Future Healthcare Spending
  2. Medicaid: Federal and State Fiscal Issues
  3. Changing U.S. Healthcare System: New Payment and Delivery Models

Enjoy. pass along to your colleagues and friends. And as always, constructive comments are welcome!

 

U.S. Spending on Health and Healthcare & Update

Sorry to have been so delinquent in publishing new posts.  For most of 2015 I was busy working with the National Governors Association and the Institute of Medicine organizing State Health Leadership Retreats for the Governors of 4 states. Those retreats were modeled on a pilot retreat we conducted in late 2013, and in late 2015 we did a culminating meeting for officials from all the states. Right after that I joined Foley Hoag as their Senior Health and Life Sciences Advisor.

All that has kept me rather busy, but in February I again guest lectured at George Mason about Health Reform and Fiscal Challenges (a.k.a “Health Policy is Budget Policy”). An edited video from the first part of the lecture about U.S. Spending on Health and Healthcare is below, and over the next couple of weeks I’ll be posting additional videos from that talk on the topics of:

  1. Medicare and U.S. Healthcare Spending
  2. Challenges for Estimating Future Healthcare Spending
  3. Medicaid: Federal and State Fiscal Issues
  4. Changing U.S. Healthcare System: New Payment and Delivery Models

Enjoy – pass along to your colleagues and friends – and as always, constructive comments are welcome!

 

Specialty Drugs: Getting What We Asked For

The cost of so-called specialty drugs has become a major health policy issue largely because of spending projections for new medicines for chronic hepatitis C infection and cancers.  Having worked on issues related to the development, approval, availability, use, and cost of medical treatments for more than 25 years, I’ve noted with concern and bemusement how cost and value issues are being discussed and presented in public debates and policy circles.

The Intense Debate About New Biopharmaceuticals Was Predictable

The introduction of significant new specialty medicines is reasonably predictable because information about biomedical research and the developmental status of new drugs and biologics is publically available from the FDA and company press releases. And while the specific list prices of new medicines can’t be precisely known before they are approved and launched, with a basic understanding of healthcare economics approximate price ranges are reasonably predictable. (Both of these are discussed below.)

So how does something that was predictable also become so contentiously inflammatory?  The intense debates and diatribes about the price and value of new biopharmaceuticals is not surprising because of the rancorous politics surrounding healthcare in the U.S., and the apparent lack of research and foresight by organizations involved with paying for medical care.  (Neither of these are discussed below.)

The overall situation seems to boil down to that, as a society, we’ve gotten what we’ve asked for in terms of new treatments based upon billions of public and private dollars invested in biomedical R&D, but we are now very upset with the result. An analogy might be someone who wins a new car on a game show, but is then very surprised and upset because they have to pay income taxes on the value of the car, pay to register the car, pay for insurance, pay for gas, pay for maintenance, etc.

To examine this situation more deeply, let’s step back and look a bit closer at what the new (so-called) specialty medicines are, how we’ve been asking for them, and why they are not generally the fiscal crisis many have been Chicken-Littleing about.

What are Specialty Medicines?

Specialty medicines are not a specifically defined category of medicine or medical therapy.  The FDA approves and regulates medicines for human uses in the general categories of pharmaceutical drugs (which are mostly small molecules), biologics (which are mostly proteins or other very large compounds produced in living cells), insulins, vaccines, and blood and tissue products. Across those categories the FDA recognizes orphan medicines as therapies for conditions that affect less than 200,000 people in the U.S. The FDA also has pathways for more rapidly approving new medicines based upon clinical need, as well as for expanding access to experimental compounds prior to FDA approval. There is no category for “specialty drugs.”  (And as an aside, there is also no category for “biotech drugs”. Biotechnology is a technology, process or method for conducting research or creating new molecules.)

Similarly, the Centers for Medicare and Medicaid Services (CMS) has extensive provisions for how medicines are covered and paid for under various parts of Medicare (Parts B, D, and C), and Medicaid, but none of those include specific requirements related to “specialty drugs” based upon their molecular structure, method of production, medical use or need, patient population, or any other clinical factor. However, many health insurance plans (including Medicaid programs and Medicare Part D plans), have tiers for expensive therapies labelled “Specialty Drugs.”  This bottom line perspective was aptly described in an article[i] in Health Affairs’ October 2014 themed issue on “Specialty Pharmaceutical Spending & Policy”:

“There is no uniform definition of specialty medications. However, there is a consensus that all of them are high cost (Medicare Part D uses a $600 per month threshold for the “specialty” designation), are relatively difficult to administer, require special handling, or require ongoing clinical assessment—or have some combination of these four characteristics. All of the characteristics are routinely used to define specialty medications. However, one recent survey indicated that cost is the dominant factor, with 85 percent of respondents at health plans rating cost as very or extremely important in their decision to assign the specialty designation to a medication.6

The medications that have received that designation are a heterogeneous group. They include small molecules that are produced on an industrial basis, such as dimethyl fumarate (Tecfidera), which is used in the treatment of multiple sclerosis; manufactured human proteins, such as growth hormone; and exquisitely designed monoclonal antibodies (such as trastuzumab) that target cancer cells or help control an inappropriately stimulated immune system (for example, infliximab).”

So the bottom line is the bottom line: Specialty drugs are expensive drugs for which health insurance plans are requiring patients to pay higher co-pay/co-insurance amounts. And those higher financial requirements may be in addition to health plans’ other utilization management requirements such as quantity limits, prior authorization programs, and step therapy (a.k.a. “fail first”) protocols.

Why Specialty Medicines are The Same as Older New Medicines, Only Different (and Potentially Better)

Specialty drugs are expensive medicines – more expensive than medicines approved 10, 20, or 30 years ago, e.g., Prozac®, Epogen®, Invirase®, Lipitor®, Gleevec®, Avastin®. But they are also more likely to be effective, and/or treat conditions that did not have very good therapies. These newer medicines are generally the result of the evolution of biomedical science that is producing more molecularly targeted therapies. This advancement has been supported by public policy to promote more basic and applied research at the National Institutes of Health, academic research organizations, and biopharma companies, which in the U.S. totaled about $120-130 billion in 2012. (Why was has there been longstanding broad political and public support for increasing the NIH’s budget if not to push forward to create new treatments?)

Below is a graphic from the late 1990s that illustrates how biomedical advances have led to newer treatments.

Process of Discovery & Development - (c) HealthPolCom Blog

We are now in that period beyond 2005 represented in the upper panel by the large red “?” and the cornucopia of capsules in the bottom panel. That is, we have gotten in the 2000s what we had been asking for and paying for in the 1990s and earlier: Better treatment options.

And to expand upon this picture, the graphic below illustrates the major types of organizations involved with biomedical research, and how they interact and influence each other through the exchange of information.

Major Biomedical Resarch Stakeholders - (c) HealthPolCom Blog

How New Medicines Fit Into Clinical Care

With the newer targeted, molecularly based medicines, there is – by design – a greater match between the pharmacology and the patient’s physiology leading to better outcomes. This means there is a greater likelihood that the treatment will produce a good clinical outcome.  More precise matching of pharmacology to physiology also often means that the number of people who should be using the particular medicine is smaller than would have been the case for untargeted medicines developed when there was less understanding of physiology and pharmacology.

Below is a simple diagram (starting in the lower left corner) depicting how clinical decisions are made, and how more effective treatments can improve clinical outcomes.

Role of Therapeutics in Healthcare - (c) HealthPolCom Blog

Overall Value of Innovative Therapies

While any individual medicine may be innovative and provide value, as the “Process of Discovery & Development” figure above illustrates, these advances often involve treating a disease through a new mechanism of action, i.e., moving from one “therapeutic revolution” to the next.

Below is a simplified picture illustrating how the value of medical innovation can increase in several ways:

  • By developing a better medicine using an already targeted mechanism of action, e.g., a medicine with reduced or fewer side effects;
  • By developing a new medicine that targets a new mechanism of action, a.k.a. a new class of medicine to treat a disease; and
  • Research that discovers how an existing medicine can be used to treat another disease, e.g., methotrexate for autoimmune diseases.

The Value of Innovation - (c) HealthPolCom Blog

Discussed below is how a new medicine’s higher success rate for treating an illness often translates into a greater value and a higher price. Also discussed is why we shouldn’t be surprised that these medicines are expensive, and how our imperfectly regulated market-based healthcare system is responding.

Why Price and Cost of Specialty Medicines are of Concern, but Not Catastrophic

How are prices of medicines determined?  In much of the ongoing public debate, basic economic principles are often ignored: Prices in the United States are almost never determined by a product’s or service’s input costs. (The exception for this would be some commodities and highly regulated utilities like water and electricity – but I suspect not cable TV.) Rather, prices – particularly for research intensive products – are determined by fallible humans who model what markets will bear and how intersecting curves and equations parse out an answer for how to maximize short and long-term profits from a new product. This is sometimes referred to as the Net Present Value (NPV), which tries to capture the value of the product taking into account the expected changes in sales and price going forward along with the expected inflation rate and costs associated with production and sales etc. Those calculations include the expected effective life of the product in the market due to replacement by better versions (e.g., computers or cell phones), patent expiration, or, in the case of something unusual like new medicines that can cure chronic hepatitis C infections, the rapid decline in the number of people with the disease.[ii]

Those calculations for biopharmaceuticals are further complicated by the reality that there is no single price for a medicine in the U.S. where legally required discounts to government programs interacts with private sector rebates and reductions.  In addition, projected global prices – which may be linked to one another in various ways – must also be considered along with the volume of sales in various countries and regions.

So how is a “price” for “what the market will bear” determined? The calculations leading to a general range for this price (a.k.a. “list price”) includes:

  • How the condition is currently being treated or cured, and the price of those treatments (both pharmaceutical and non-pharmaceutical such as surgery), not only for an individual but for successfully treating one person in a population?[iii];
  • What other treatments and complications will be avoided, reduced, or encountreed with the new treatment?;
  • How many people are expected to use the new treatment?; and
  • The seriousness of the condition and how it impacts the lives of people, i.e., is it fatal or not? Does it seriously compromising their quality of life? etc.

All those factors (and others) are included in a description of “what is the value of the new treatment?”  That is, the greater the value (particularly compared to other treatment options) the greater the price for a course of treatment because competition between different treatment options does occur – it is just a particularly challenging assessment since it likely includes many personal issues and preferences related to both biology as well as life circumstances. In addition, because of Federal laws that limit price increases after launch, the initial prices for new medicines may be pushed to the higher end of the range described above.

The Good News, Bad News, Good News – and Other Good News Looking Forward

The good news for the health system is that as more targeted medicines with higher success rates are developed for smaller populations, the total cost is probably no more than if the medicine had been priced lower but used by more people – many of whom would have found it ineffective.  The corollary good news is that those new medicines are improving and saving lives. (If that wasn’t the ultimate reason for the spending billions and billions on biomedical research, then someone please tell me what it was.) The bad news is that because of the decades of investment in biomedical research, more and more of these new medicines are being developed and approved by the FDA – and the cumulative cost of those new medicines is increasing at a rapid rate compared to overall spending on healthcare and other medicines.[iv]

The other good news is that the increase in spending on healthcare overall has slowed dramatically in recent years, as has spending on medicines in general, which is not surprising since now more than 80% of medicines dispensed are generics. And the ongoing good news is that our imperfect healthcare system is working: As new medicines are approved they compete with their innovative predecessors for market share and on price. (An example of this for chronic hepatitis C started in late 2014 with the introduction of a new multi-pill regimen.)

Similarly, other good news (sort of) is that there is now a regulatory pathway being developed for approving biosimilar medicines that will compete with innovator biologics, which represent a large portion of the so-called specialty drugs.  The reason this is only sort of good news is that biosimilar medicines will likely cost 70-80% of the price of the original biologic medicine because biologics are expensive to produce since they are grown in living cells rather than chemically synthesized.

More good news looking forward is that biomedical science is still progressing and the future will likely see better and simpler medicines that will be higher value for patients and society.  Some of that value will be in better quality lives for people, and some of that value will be in reduced spending for other healthcare and related services. For example, a medicine that halted progression of Alzheimer’s disease – or any of the other neurodegenerative diseases such as Parkinson’s, ALS, or MS – (or prevented it from occurring, or cured it) would likely be expensive on a per person basis, but it would prevent the need for many other healthcare services, e.g., other medicines with limited effectiveness, services such as physical therapy, medical devices for physical assistance, and nursing and home care. (An historical example of this was how the polio vaccine dramatically reduced expected acute and long-term care costs.)

In addition, while biosimilar medicines are expected to be only 20-30% less expensive than the original biologic medicine, scientists are working on developing small molecule pill-type medicines that are targeted like biologics. (This is already happening for some conditions, such as certain cancers and rheumatoid arthritis, and one report indicated that over 50% of the specialty drugs in the pipeline are high-cost oral medications.[v])  While those targeted pill type medicines are expensive, because they are small molecule medicines, generic forms will eventually be available, which will be 80-90+% less expensive than the original medicine, i.e., significantly less than biosimilar medicines.  And of course, oral medicines have less delivery costs compared to injections or infusions – which sometimes require visits to a doctor’s office of clinic. So even if the patient can inject the medicine themselves, a pill also makes taking the medicine easier and eliminates the cost and hassle of disposing of used needles and other materials involved with the injection.  (Reducing the hassle – and pain – associated injections may also increase patients’ adherence to the medicine and thus increase its effectiveness.)

However, with the advancement of good news also comes some bad news. For example, with the new hepatitis C treatments, there are some people and programs that are initially in a no-win situation – and this is most clearly seen with people with chronic hepatitis C who are in jails and prisons. These individuals have a right to medical care, the rate of chronic hepatitis C infection in this population is very high (15-20%), and the risk of transmission from one person to another is higher than average (as is the risk of reinfection if someone is successfully cured). All those factors make strong clinical and public health arguments for rapid and universal treatment for all infected individuals in any non-short term corrections populations – as well as treatment for new inmates with chronic hepatitis C.  However, corrections organizations have limited and generally fixed budgets making the provision of this care for all the individuals in their facilities over a short time period a fiscal tsunami.

Corrections facilities that are privately run under contract with state and local governments face a particular challenge because, unlike government owned and operated corrections facilities, they are unable to negotiate much lower prices for the new hepatitis C treatments since those discounts wouldn trigger automatic price reductions for state Medicaid (and other ) programs that have legislatively proscribed best price requirements. This means that state and local governments that have contracted out the operations of their corrections’ medical facilities may actually be facing higher costs in the future – at least for medical care for the inmates.

Generating More Good News for the Future

The general relationship between how we pay for medicines today and what treatments and cures we end up with tomorrow is also often missing from debates and analyses of biopharmaceutical costs and treatments.  Below is a simple graphic illustrating some of those relationships.

Incentives for Innovation - (c) HealthPolCom. Blog

Appreciating these factors is important as we seek to translate basic research into new treatments, and is particularly salient because of the current situation with Ebola treatments – or the lack of them. Specifically, Ebola hasn’t been an illness in a geographic region where there has been extensive access to medical care or doctors, or a way for the people affected to pay for those treatments. (Bottom two items in the top portion of the graphic). Thus, until Ebola became a global and first-world health concern, there has been very low financial incentives for anyone (government or industry) to invest in discovering or developing new/better treatments for Ebola. (Third item in the bottom portion of the graphic).

Conclusions

  1. Specialty drugs should be called what they are: expensive medicines, treatments or cures.  Giving them a group name implies that they have some unique or differentiating characteristic – aside from price or cost – particularly with a word root indicating that these medicines are somehow “special.”
  2. Healthcare is complicated. Biomedical science is complicated. Healthcare economics is complicated – particularly when many health plans have five (or more) cost-sharing tiers for medicines.
  3. Biomedical research has produced some incredibly effective new treatments. (Thank you!) However, there are still many serious, chronic, and life-threatening illnesses with few (or zero) good treatment options.
  4. Prices and value in healthcare are as complicated concepts as biomedical science. And value assessments almost always involve personal factors. For example, would Steve Jobs have paid $1 billion for a cure for his pancreatic cancer? I think so.
  5. Society has invested billions in biomedical research and development (probably close to a Trillion dollars over the past 20 years), and received significant benefits. The ongoing challenge is how to maximize those and future benefits by making difficult financial, resource, clinical, and ethical decisions within our imperfect healthcare system run by fallible biological beings.

 

 

p.s. Sorry for the long post.


[i] “Specialty Medications: Traditional and Novel Tools Can Address Rising Spending on These Costly Drugs,” Lotvin et al., Health Affairs 33, No. 10 (2014) 1736-1744.

[ii] A similar situation happened in the early 1990s with the introduction of new flexible lenses for cataract surgery.  There was a tremendous upswing in the number of operations, which cost Medicare much more than expected, due to pent up demand. And after that surge, the number of people getting cataract surgery (and the costs) dropped to a much lower steady state – although one that continued to increase at a small growth rate because of the aging demographics in the U.S.

[iii] For example, if a new treatment successfully treats 50% of people with a serous condition, and the older treatment only successfully treats 10%, the clinical value would be 5-times as great, which would also translate into an economic value that is multiple times the older treatment. Other factors that would affect the value would be the route of administration, side effects, and other services and products required or avoided with the new treatment.

[iv] Studies have estimated that per year spending growth for non-specialty medicines is now less than 4% range, while annual spending for “specialty” medicines is growing in the 10-15% range.

[v] “The Growth of Specialty Pharmacy: Current trends and future opportunities, “ UnitedHealth Center for Health Reform & Modernization, Issue Brief, April 2014, citing: Atheer Kaddis and Stephen Cichy, “Payer Tactics to Manage High-Cost Specialty Drugs in the Pipeline,” AIS Webinar – Specialty Pharmaceuticals, September 2013.

New Direction for Health Reform Book

In 2005 I started writing a book about health reform.  As I was working on it, the structure and framework of the U.S. healthcare system kept shifting. I am now returning to work on this book, with the new working title, “Pivoting the U.S. Healthcare System: A Guide to Making Health Reform Work.” Below is a brief overview of the background about the book, which can also be found on my main website.

Comments, suggestions, and general inquiries about this project are welcome.

Overview – “Pivoting the U.S. Healthcare System: A Guide to Making Health Reform Work”

In my very first class in medical school, one of the first things the Professor said was, “Half of what we’re going to teach you is wrong. We just don’t know which half.”  That admission is not something you will hear in political or policy pronouncements, even though in the rapidly evolving U.S. healthcare systems situations change, preliminary data is corrected, projections turn out to be wrong in meaningful ways, and “solutions” fix problems but also lead to new ones.

To provide people with a framework for improving the quality of care and controlling costs for themselves and their communities in this shifting world, this book will examine important ideas, issues, and trends, and the steps individuals can take to help achieve better health, access, and affordability. To do that, I will provide my synthesis of observations and information focusing on policy, political, scientific, and medical changes that are building upon one another. Thus, the book will not be an academic treatise, nor adhere to specific ideological, philosophical or political lines. Rather, it will reflect what I have learned in in more than 25 years of clinical, scientific, and health policy work, and my vision for achieving a better, stronger, more vibrant, and healthier healthcare system.

Long Look Forward

In June 2003, I was invited to address the Presidents of the State Medical Societies about “The Future of the US Healthcare System.” To help these physician leaders see the future more clearly through murky waters, I discussed how the trajectories of the major US healthcare programs (including Medicare and employment-based insurance) were leading to greater transparency and accountability for both clinical and economic outcomes.  I then described a future where clinicians and providers would be responsible for the outcomes their care was producing, how payments would be tied to those outcomes, and how documenting those outcomes would be facilitated by electronic medical records and population-based analytical systems.

The reaction of the assembled physician leaders was one of dismissive disbelief. This was 2003. The world had come through Y2K unscathed, the dot-bomb recession was over, and the stock market was rising every week.  Their primary question was ‘who will pay us to put in electronic medical records and to provide information about quality and costs?’ They didn’t believe my answer that those who wanted the information – such as health insurance companies and government agencies – would pay them to provide data and information about quality and costs. Those reactions were not unreasonable at the time, since I suspect most of this group was planning to retire within the next 10 years. (This was before the Great Recession turned their 401k accounts into 101k amounts.)  However, while 2003 was generally a time of great uncertainty for the U.S. healthcare system, the year ended with the passage of a new law – the Medicare Modernization Act (MMA) – that included the new Medicare prescription drug benefit, and it was the first of several major laws driving fundamental transformation of the US healthcare systems.

Slow Turns

The 2003 passage of the MMA, the 2008 election of President Obama, the 2009 stimulus law (ARRA) that included the HITECH Act to support the implementation of electronic health records, and the 2010 passage of the Affordable Acre Act (ACA, or ObamaCare), have all promoted significant changes in the U.S. healthcare system.  But since it is a huge and extensively connected but disjointed set of enterprises, turning the U.S. healthcare system is a slow process. Even policy focused physicians and senior health managers have been slow to accept or react to those changes.  For example, in March 2009, I gave a Grand Rounds presentation at a hospital in Boston. Like my 2003 presentation to the Medical Society Presidents, I described a future with greater transparency and accountability, and the increased use of electronic health systems – particularly since the HITECH Act had become law the month before. The responses included a “rebuttal” from the Canadian-born Department Chair arguing for a single payer system, and a Resident who felt that the Geisinger model in Danville, PA wasn’t replicatable or relevant because – unlike most of the rest of the U.S. – Geisinger dominates its geographically insulated area.

But the more things change, sometimes they don’t.  For example, I recently heard about a senior manager at a large integrated health system that refused to consider planning for the implementation of the ACA’s many provisions: First, Congress would repeal it. Then, it wouldn’t be implemented because Mitt Romney would win the 2012 election.  And lastly, the Supreme Court would overturn the entire law.  Of course, none of those things happened, so this large health system is now playing catch-up with their regional competitors.  Similarly, in early 2014 I spoke with the physician leadership from a state that has not embraced improvements in their clinical care systems or changing incentives for physicians, hospitals, or patients to improve the quality of care or control spending.  Their attitudes reflected a strong desire to maintain their status quo of autonomy, and particularly to not be held accountable (or responsible) for their patients’ clinical outcomes or the health of their communities. Basically they had healthcare delivery and insurance structures that hadn’t changed much since the 1980s, and such physician-centered care is much better for physicians than patient-centered care.

Health Reform Pivots at the Local Level

While my 2003 presentation to the Medical Society Presidents was in many ways a nexus for the work I’d been doing for more than 15 years, it also led me to start writing a book that had the working title “Fixing the US Healthcare System.” The 2008 election of President Obama (and the subsequent passage of the ACA/ObamaCare) led me to change the title to “Making Health Reform Work.”

Now in mid-2014, with many of the major components of the ACA having begun to be implemented – and their effects starting to be seen – I’ve returned to the book and the pieces I’ve been writing for almost 10 years. With the dramatic shifts that have occurred in that time, I’ve pivoted the book’s focus to explore more directly the important changes occurring at the local level and within healthcare delivery. Therefore, I’ve also changed the working title to “Pivoting the U.S. Healthcare System: A Guide to Making Health Reform Work.”

Goal of the Book

The goal of the book will be to provide readers with insights and greater understanding of how to evaluate and influence the rapidly changing healthcare world that encompasses delivery, financing, public health, and information technology – particularly at the local and personal level. The book will explore how initiatives at the local level are what will primarily improve the health of people and communities in the coming years. Specifically, while ObamaCare and governmental activities are changing the framework and the contours of the playing field, how local leaders, organizations, and communities are allocating their resources, setting their priorities, and improving their practices involving health benefits, clinical services, and public health activities are what will most dramatically effect the lives of people and communities.

The book will enable and empower people to alter and accelerate those important changes based upon their personal and local perspectives by working with different groups to make improvement more meaningful for them and their communities. This local multi-stakeholder engagement and alignment is increasingly recognized as crucial for improving healthcare quality and controlling costs: Large employers, insurance companies, and government programs now appreciate that they are not large enough to drive major changes in any market or at any provider organization. Similarly, large hospitals, health systems, payers, and public health agencies increasingly understand that their work and goals are interconnected so that their actions needs to be aligned, and at times even directly coordinated.

Physicians are also an important group to include in this process since physicians (and other clinicians) are primary guides for patients in making healthcare decisions, and greatly influence healthcare spending and quality.[1] And of course patients – and their indirect advocates in the media, government, non-profits, and foundations – need to be part of these intertwined dialogues and decision-making.  The bottom, middle, top, left, and right conclusions all indicate that in the struggle against rising healthcare costs and burdens of disease and disability brought on by aging populations and other factors, united we can succeed, but divided we shall continue down the same failing path.

p.s. To see an old version of the working summary click “Making Health Reform Work.” The latest summary and outline are on my whiteboard and computer.  Please contact me if would like more information about my progress, focus areas, and conclusions.


[1] As an old axiom states, “the most expensive piece of medical technology is the pen in the physician’s hand.”  Today, that prescribing and referring pen is being replaced with a keyboard, a mouse, and a touchscreen, but the effect is similar, even as electronic medical records and systems are raising their own concerns about costs and quality.

Medicare Trust Fund Solvency Projections (History Of)

The 2014 Medicare Trustees’ Report was released yesterday.  Amidst all the reporting was how the revised projections for the Medicare Trust Fund (for Part A) increased by 3 years from last year’s report. The Kaiser Family Foundation has a great summary of Medicare financing and projections for future spending, but below is another chart that shows the actual number of years of projected solvency for the Part A Trust Fund in the years since 1970 – in the years when the Trustees’ Report included such projections:

Medicare Trust Fund Solvency - 07-28-14-v2Two things to note about this chart: The dramatic leap up in 2010 mostly reflects a combination of the healthcare spending slowdown in the Great Recession and the legislative changes in the ACA that pared back Medicare payments. (Note – those payment reductions were included in Republican proposals for replacing/supplanting the ACA.)

Another interesting item in the Trustees’ Report that both Kaiser Family Foundation and Sarah Kliff have noted is an actual dollar decline in per Medicare beneficiary spending on hospital costs. This may be due to some combination of greater scrutiny for hospitalizations, greater efforts to avoid rehospitalizations, and medicines ability to treat more things as outpatients. However, it also might mean that Medicare enrollees are facing higher cost sharing if they are getting more treatments as outpatients, which are covered under Medicare Part B.

This all seems to confirm the old saying, “The more things change, the less they stay the same,” i.e., projections change as the underlying conditions don’t stay the same.

Medicaid and State Level Health Transformations

I recently guest lectured on Medicaid and state level health transformation at a George Mason University public policy class.

To start, I led the class through a discussion of how states differ from each other around 14-plus factors related to healthcare delivery, financing, policy, and politics. In this discussion we talked about the importance of policy makers appreciating those factors as they consider how to improve health, and the different routes states have taken for Medicaid improvements and expansion. (See picture of white board below.)