Health care gluttony and grazing at the all your can eat health care buffet

Everywhere I look I see parallels between individually bad human behaviors and collective problems. Human beings have a tendency to overgraze when there is food and it is free or its cost is not really linked to the volume consumed. We know we should not consume so much but the immediate impact of overconsumption is generally inconsequential and can be dealt with by popping a few Tums or the purple pill. The long term consequences may be dire but they are ..... long term meaning not now. Without some immediate consequence, let say an electric shock or painful vomiting, we can be assured that the legions of the over consuming consumers will be well represented if provisions are plenty and cheap. We simply can't help ourselves.

Similarly, we can expect that any product if provided at steeply discounted prices as compared with its real costs, will be treated like the all you can eat buffets. Thus we have the health care economy. The health care restaurateurs have also been provided with rich incentives to induce their clients to graze, not just on cheap pasta and other fillers, but more so on caviar, foie gras, lobster tail, and truffles. Not unexpectedly the diners consume beyond their needs, the providers see no reason to withhold anything, and those who pick up the tab are going broke.

There appears to an increasing appreciation of the looming financial calamity which will not be responsive to financial gimmicks and robbing from Peter to pay Paul. The NEJM has actually published two recent commentaries which have all but declared that something fundamental has to change. The continued rate of growth in the costs of health care above and beyond the growth of the underlying economy will consume us, no matter how much waste is ferreted out and no matter how high the tax rates climb.  This is well articulated in the article:

The Specter of Financial Armageddon — Health Care and Federal Debt in the United States

Posted by NEJM • March 17th, 2010 • Printer-friendly

Michael E. Chernew, Ph.D., Katherine Baicker, Ph.D., and John Hsu, M.D., M.B.A., M.S.C.E.

http://healthcarereform.nejm.org/?p=3170&query=TOC

 However, when the authors have a chance to look at the really difficult choices we face, they include a list adapted from a WSJ piece by David Cutler:

Proposed Strategies for Reducing Health Care Spending.*

Establish insurance exchanges.

Reduce excessive Medicare payments.

Shift from a volume-based to a value-based payment system in Medicare.

Tax generous insurance plans.

Empower an independent Medicare advisory board.

Address and reduce fraud and abuse within the Medicare program.

Enact malpractice reform.

Invest in information technology and comparative-effectiveness research.

Invest in prevention.

^{*Cutler D. Health reform passes the cost test. Wall Street Journal. March 9, 2010}

There is something missing here. Where are the incentives for patients to not gorge at the all you can consume health care buffet? No matter how complex and comprehensive the regulation, enforcement has to happen in a world filled with clever and motivated providers highly incentivized not to leave money on the table and buttressed by the prize of providing the best care for their patients using someone else's money. 

Administrative pricing + third party payer involvement + further insulation of recipients from the costs of the services they demand + command and control management systems = Solution to financial Amagedon?? I don't think so. As long as the underlying structure which drives health care inflation is preserved, the Federal government will be impotent in reigning in the costs and the gluttony will continue.

Perverse payment systems as brakes on needed innovation

There is lots of low hanging fruit when it comes to creating a more effective, efficient,  and patient oriented system. In virtually any other realm of business, innovators would be constantly probing and experimenting, looking for opportunities provide better services, with innovators being rewarded for doing a better job. Why does this not happen so readily in health care?

A basic tenant of economics is that people respond to incentives. The most powerful and consistent incentives are financial and there lies the rub. What happens when you take a basically virtuous population and create financial incentives to do only a very narrow set of behaviors and create financial disincentives to do anything else? You end up with a very narrow set of behaviors which happen to be the ones which are rewarded. Seems simple.

In the realm of health care, the payment system pays physicians for a very narrow and unchanging set of behaviors. Value to the physician comes when they see patients face to face and do any number of activities in the presence of the patient. Some of these activities may have value for the patient while others appear to be of value only because they allow the physician to use specific billing codes. Not only does the administrative pricing system pervert medical decision making because it sets prices incorrectly at a quantitative level, it precludes the deployment of novel approaches to care because it locks all parties into  an archaic model of care delivery.

I look though my office visits, particularly my follow up visits, and I have to ask, what value does the face to face encounter actually bring to the patient? What decision that we make (the patient and the doctor) during an office visit actually requires the patient come to my office? What piece(s) of information are an exclusive product of the actual visit to my office and is that information actually required for relevant decision making and worth the patient time consumed? Exactly what part of the information derived from the physical exam is crucial or even consistently reliable warranting the absolute requirement for a face to face encounter for payment for services?

Obviously a face to face encounter is needed for scenarios where a procedure is required. Short of this requirement, technology affords us a wealth of options for collecting information, virtually none have which have been deployed effectively. Telemedicine has made some inroads, but it has been hamstrung by a host of mandates defining specifics of the technologies to be used. I have little doubt that without the brake of the stifling payment system countless models driven by a host of entrepreneurs would spring up to deal with every imaginable patient problem and complaint.

However, at this point it is not clear that those with vested interests in the old service model which delivers mediocre care for a high price are quite ready to move to a model of care which holds the promise for better, faster,  and cheaper. Why not? For doctors it means taking a risk and putting yourself in a position where they must rely on some mechanism other than insurance to get paid. For patients, it means that they might need to pay for their care with their own money.  However, these drawbacks may begin to appear less worrisome and the retail model of medicine may begin to look increasingly attractive, particularly in the low margin, mundane domains of care.

If there is anything that recent history teaches us it is we are dismal at predicting what the world will look like in the future, particularly relating to what people value and which tools will be deployed to best attend to those needs. That will not stop me from making a prediction. What I predict is as the administrative payment system becomes more and more divorced from rewarding innovation in attending to patient needs, it will become marginalized. Patients will begin to invest their own money to pay for care delivered under different care models. How quickly this comes about is hard to predict and what technologies and tools with prove to be dominant is anyone's guess. It will happen.

More data on the uselessness of screening

A Danish study looking at the effectiveness of screening mammography in a n asymptomatic population of women.
http://www.theglobeandmail.com/life/routine-breast-scans-dont-affect-mortality/article1510290/

Key points:

Dr. Jørgensen and his team analyzed and compared data from the regions with screening and those without and found:

In the 55-to-74 age group, breast-cancer mortality declined by 1 per cent annually in areas with screening and 2 per cent a year in areas where there was no screening;

In the 35-to-54 age group, where screening is not recommended, breast-cancer mortality fell 5 per cent a year in areas with screening and 6 per cent in those without.

In the 75-and-over age group, there was no change in mortality in any area.

Breast-cancer mortality dropped steadily in the 10 years prior to screening beginning.

I don't expect that this will alter behavior of physicians and patients quickly but I will be interested in seeing the landscape in five years. Either we will witness a gradual erosion on the number of patients who get screening mammography, or the entire literature will be forgotten. What will make a difference is if payment for the services makes their delivery a money loser. Then the enthusiasm for the activity will fall precipitously.

Backstopping our way to disaster

One of my first blogs was on the financial disasters happening in California. As it turns out the circumstances in California are not unique and that the rigor which our state and local governments have addressed their financial houses has left much to be desired. The accounting assumptions have bordered on criminal, all based upon the ability of those in political office to be able to buy the most votes from monies stolen from future generations.

How could anyone behave so badly? The answer is because we it is our national pastime to subsidize those in the public and private domains who make bad decisions. In such an environment, those decisions look pretty good since those who make them are place in a win-win situation. Game the system and come out way on top. Game the system and get burned? No worry, the federal (or state and local) government will backstop you!

Backstopping in the form of insurance allows people and entities to take risks they could not take without the insurance. However, insurance has moral hazards which prompts people to take some risks they should not take. The more people are insulated from their stupidity, the more stupidly starts to look less stupid. In such an environment the most stupid thing to do is to not take advantage of whatever backstops are available.

Up until now, state governments, unlike the federal government, have generally been required to balance their budgets. This has acted as a brake on state spending. However, this is about to come to an end. The Federal government has figured out a way to assume the debts of the states through the Build America Bonds. When states borrow money, the feds are going to pick up about one third of the interest cost. This is a boondoggle which pays off virtually everyone! Wall Street will make a fortune on fees. States see their borrowing costs plummet. And what is a few hundred billion dollars added to the national debt (chump change). 

This is a direct inducement for states to change their economic policies to take on more debt. What part of this sounds like a good idea? This is like the housing bubble on steroids and meth-amphetamines. While investors are snarfing these obligations up in the great quest for returns now that Madoff is in jail, these returns may be based upon a similar house of cards. Apparently the bond markets are beginning to be skeptical of US debt and are pricing as a higher risk than private debt such as Berkshire Hathaway. http://www.bloomberg.com/apps/news?pid=20601010&sid=aHjVRrVodt4g

I can't say that I am surprised. Our economic engine requires that it remains juiced up on the financial equivalent of steroids, narcotics, and meth-amphetamines. It has been on steroids and stimulants for more than a quarter century. Now that the financial tachyphylaxis has kicked in, we cannot derive sufficient effects by dosing the financial steroids and narcotics through a single delivery portal. We need to delivery them po, IV, IM, and into every inflamed economic joint. For those of us who desire to remain clean and sober, we are just silly economic puritans. Are we ready for our financial 12 step program?

Is Deficit spending like steroids and narcotics?

When a patient comes to me with some sort of inflammatory disorder disaster and they are acutely ill, I always have treatment with systemic steroids as my ace in the hole... at least in the short term.  I frequently see patients who have gone to that well once too often and the long term effects can be devastating. However, in the short term, it takes care of conditions which are acutely uncomfortable. I think other physicians deal with a similar phenomena when dealing with patients with chronic pain and use narcotics.  The challenge is to wean people from steroid and narcotic dependency. It virtually always requires some other type of medication which has potential side effects, many very scary. In addition, it is a long, arduous, and frequently uncomfortable process.

In watching how governments deal with economic problems, I see many parallels between how physicians use, and patients demand steroids and narcotics and how politicians and public use deficit spending. Patients placed on steroids (and I am not talking about anabolic steroids) and narcotics generally feel great, no matter what you are treating. If the problem is not self limited, these drugs do little to treat the underlying problems. Similarly, there are few economic problems which won't be made much better (at least in the short term) by an nice hefty infusion of borrowed or printed money. Everybody feels better off, at least in the short run.

There are serious discussions regarding whether whether deficit spending is really bad for the economy. My gut feeling is well summarized by Michael Kinsey in his article in the Atlanta Monthly when he discusses the implications of the massive economic stimulus and deficit spending:

But this cure has been one ice-cream sundae after another. It can’t be that easy, can it? The puritan in me says that there has to be some pain. That’s not to say that there hasn’t been plenty of economic pain. But that pain has come from the recession itself, not the cure.

The entire article can be read at http://www.theatlantic.com/magazine/archive/2010/03/my-inflation-nightmare/7995/ and the exchange between Paul Krugman and Kinsey is on Greg Mackiw's blog http://gregmankiw.blogspot.com/2010/03/inflation-debate.html.

Our politicians are behaving like physicians run a muck, operating a clinic where patients line up to get their fixes of steroids and oxycontin. As long as they can continue to dose everyone, everyone appears to be happy.  There is an element who believes that this situation can be managed without any real pain. I have my doubts. As Kinsey goes on to write in his response to Krugman and Matt Yglesias:

A final word to Matt Yglesias, who thinks my problem is "thinking too moralistically about the economy," because I express doubt that we can escape without pain from the dilemma we find ourselves in. Obviously (or perhaps not) this is a prediction and not a hope. I am not in favor of pain. I just don't see any way to avoid it. Yglesias apparently believes that we can escape our fiscal dilemma without pain. I would like to know how. And if there is such a way, why have we denied ourselves for so long? Why do we ever bother to show fiscal restraint? Why have taxes at all? Why deny ourselves anything money can buy? If $15 trillion in debt can be a freebie, why not $30 trillion or $60 trillion?

After another exchange with Krugman, who justifies his opinion by linking to his book chapter stating his opinion, Kinsey simply states " Meanwhile I (along with others of his fans) am still waiting for Paul’s inflation-free recipe for getting us out of this mess."


Like the doctor who  places a patient on steroids or narcotics, we need an exit strategy, something not well articulated by the Nobel laureate economist.  I share Kinsey's skepticism about how this will happen. It appears their approach is to give the sick patient  more and more drugs to make them feel good as opposed to treat their disorder. Sounds like hospice. 

Guest Blog: The Fallacies and Failure of Health Insurance Reform

The Federal government attempts a major overhaul of our health care system every 20 years on average. Universal health care is always the lynchpin. While universal coverage was not achieved this go-around, those advocating the European way of doing things are hoping that the newly passed legislation will ultimately lead to the Holy Grail of health care-- a single payer system. But the European wannabes won’t have to wade through the 20-year cycle before “Medicare For All” is soon back on the table. The reason is that the new laws restructuring our health insurance system will fail in relatively short order. This prophecy of doom is embedded in large part in the very principles of insurance reform. For the past half-century, every major push has been based on four flawed assumptions:

1) Insurance is the exclusive currency by which patients purchase goods and services offered by health care providers
2) Health care is only affordable if covered by insurance
3) The inability to obtain health insurance translates into a failure to access health care
4) The intrinsic value of health care is unique and therefore, cannot be entrusted to the free market

Failure to devise a health care system outside of these parameters inhibits plasticity and therefore, undermines the system's viability. Governmental and corporate entities have always struggled to contain health care costs using the combined forces of public and private insurance coupled with administratively set pricing. But constraining health care costs by exerting external pressures and price controls has never worked. Yet the new law represents a dramatic expansion of this flawed approach. Accordingly, the new reformation movement will fail by design.

Unfortunately, few are willing to throw free enterprise into the fray. Not that the free market can by itself save the day. It's not designed for the indigent, the elderly or the disabled, who passively consume the lionshare of health care. These beneficiaries are forever plugged into the government bureaucracy and happily so. But the vast majority of Americans are neither poor, old, nor disabled. They are open to more innovative means of purchasing health care-- outside of the realm of insurance, if need be. They are empowered with choice and have the financial leverage to pursue those choices. But their choices are limited to insurance policies and plans. Medicine was cut off from free enterprise long ago, and we have been paying the price ever since. When innovative consumer markets compete directly for health care services with less reliance on insurance and bureaucratic pricing, the inherent prices of those services drop. The real costs then reveal themselves and provide an opportunity for insurance to actually see what it's overpaying. Free market interventions also increase the plasticity of the health care economy and help drive down costs in a more direct fashion than the external pressures of public and private insurance. What country other than the United States is better suited to mobilize free enterprise in novel ways to combat rising health care expenditures? At the moment, we seem to be moving in the opposite direction by rejecting free market paradigms. Ergo, is passage of the health care bill one more signal that American capitalism is dying? Just the opposite. Passage will exacerbate all that is wrong with health insurance and will lead us back to the free market for solutions...single-payer be damned.

$79 per month for what?

Today in the NYT was a story:

A Health Care Plan So Cheap, They Made Him Raise the Price

By ARIEL KAMINER

Yes, for $79 for month, you get unlimited physician visits. I have to wonder, what does this mean? I checked their website and pulled up their "classic agreement". This is what is says.

I.

Membership Benefits:

(A) Included Benefits: All AMG Members in good standing shall be entitled to unlimited regular preventive checkups for adults and/or well baby checkups for $79.00 per member per month for Classic Plan and for $119.00 per member per month for Premium Plan. Preventive checkups may include all treatment, testing and care identified on Appendix I and Appendix III.

(B) Benefits at Additional Charge: AMG Members will also enjoy the benefit of up to 15 sick visits per fiscal year charged at $33.00 per visit. Such visits may include, but are not limited to, lab tests, x-rays, sonograms, office-based surgeries and physical therapy and all other treatments, testing and care identified on Appendix II and Appendix IV.

(C) Services Not Available: THIS AGREEMENT DOES NOT COVER HOSPITAL STAYS, EMERGENCY ROOM VISITS, SERVICES OF SPECIALISTS NOT EMPLOYED BY AMG, TREATMENT (INCLUDING BUT NOT LIMITED TO IMAGING) PROVIDED ANYWHERE OTHER THAN AT AMG’S FACILITIES, AND ALL LAB TESTS OTHER THAN THOSE IDENTIFIED ON APPENDIX V.

There is a list of covered services posted at http://amgmedicalgroup.com/pdf_form/Classic_Plan_Full_List[1]_5.pdf
 as well as a rather impressed list of "covered labs" http://amgmedicalgroup.com/pdf_form/LabTest_11.pdf


This amounts to a subscription service and they explicitly claim this does not represent insurance. It will serve a basically well population fine and may also be appropriate for patients with chronic conditions such as hypertension. I could see combining this with a catastrophic care program. 


I wonder how this will fare in a world where patients are mandated to buy comprehensive insurance? They might be tempted to change their business model. On the other hand, in a world where is limited access to primary care, there may be substantial patients who will pay the nominal additional fee in order to get access to a visit.