Pricing in health care

this is a bit of a stream of consciousness post - so apologies in advance -

I came across this article on GE's change in their health care plan:

Health Care: GE Gets Radical - BusinessWeek

They are essentially changing from a traditional high up front premium, predictable co-pay model to one where there is greater price transparency given that there is a higher deductible, lower premium.

Interestingly, my own employer recently changed health benefits from what was a "cadillac" plan (insurance plans that shield consumers from the true price of health care - the types of plans that are given to high priced executives or union employees) to something more reasonable, with slightly more price transparency - tiered co-pays that gives the consumer at least a modicum of insight that some drugs and services are more expensive than others.

As pricing becomes more transparent in health care (btw we've been talking about price for years now - health savings accounts were supposed to transform health care as we all became more price sensitive - but instead most of us use it to buy eyeglasses and get dental work) it's important to understand how pricing works in health care.

A bit more on pricing:

As you prob know from an earlier post, I'm a big fan of the baseline scenario blog - an extremely well written blog about finance. The folks at the baseline scenario also produce the Planet Money podcast for NPR.

They have recently been looking into pricing in the US health system. they had two very well produced segments on pricing for MRIs.
The first is at this link - and worth a listen - gives a fantastic historic overview of how we developed a fee-for-service system in health care, and how price has become so perverse in health care. Jeff and I had an argument about why partners health care takes such big price hikes in boston - and this podcast explains a bit why institutions like partners can justify taking those price hikes in services.

Then there's a follow up on pricing for MRIs in other countries - the podcast is at this link . what they find is that pricing for MRIs in japan are substantially lower. However, what's fascinating about the japanese health care system is that their approach to controlling health care costs is to reduce price. Since 1990, the government has implemented a strict policy that has capped increases in both medical - treatment fees and the price of drugs to around 2 percent annually since 1995 (muc lower than any other OECD country). Theoretically this makes sense, if you pay less then health care costs should go down. Right? Wrong. What happened in japan is there has been an expansion of health care providers - supply has gone up, japan's population is ageing very fast, technology is growing faster than price decreases, japan's wealth has triggered more visits to the doctor, - and physicians, the finely tuned economic beings that they are, have compensated with declining price with increasing volume. Remember basic microeconomics? Price times quantity equals revenue. If price goes down, a rational economic being increases quantity. Therefore, japan is the most medicalized society in the world - On average, the Japanese see physicians almost 14 times a year, three times the number of visits in other developed countries!

Alright - I'll stop here - take a listen to the podcasts, and I'll try to write more about consumer directed health plans in my next post.

When Less Isn't More

The United States Preventative Services Task Force just recently changed the recommendations for breast and cervical cancer screening prompting an outcry from rationing sensationalists that government is again trying to kill its citizens. In summary, they basically said that for average risk women, you don't have to do mammograms until age 50, and even then, only every two years. They've also said to do away with self breast exams, which have been proven to not reduce mortality since the huge trial that came out of China in 2004. The same is likely to come out for cervical screening - biennial screening starting at 21. These recommendations are made by very smart people who have looked at the data and found that the previous screening remmendations were not only overkill, they were probably causing more harm than good. Yes, a rare occurence when evidence appears to outweigh emotion. Yet the crazies are still going to get upset that this is really a way to reduce costs - some have even called this a subversive attempt at "female population control."
I, for one, applaud the USPSTF's courage in trying to shift the way American's consume healthcare. Part of the reason why costs in this country countinue to skyrocket is our complete addiction and over consumption of medications, imaging, and procedures. The funny thing is, I think our national anxiety level is such that people don't think it's a relief to hear it's OK to test less. Let's say, for example you ask 100 women: would you rather be told you have a suspicious lesion and find out it's benign or not be told at all? I bet 75% would prefer to go through the testing, the trauma, and the worry even though in the end, the outcome is the same, and all you did was waste time, money, and peace of mind. It's the fear of the very rare occurrence and the media frenzy that surrounds the missed diagnosis of breast cancer in a 38 year old that breeds this level of anxiety - no one ever hears about the woman who gets staph mastitis from the unnecessary biopsy...

Hilarious

This picture says alot -

Letters Lost, Meaning Found - City Room Blog - NYTimes.com

Is Brent James the savior of American health care?

If you read this week's Sunday New York Times Magazine, you saw this article about Brent James, the chief quality officer at Intermountain Health in Utah. The premise of the article, and Dr. James' philosophy is that data, systems thinking, and process improvement are the absolute best ways to improve patient outcomes.

For a while now, I've rejected the prevailing wisdom that individualized patient care is the best care. The US prides itself on the doctor's ability to decide what the right treatment is for any given condition, allowing him/her to tailor the panoply of available therapeutic options to make it just right for the patient. Of course, these choices are influenced by reimbursements, what's easiest for the doctor, and what restaurant the pharmaceutical rep lured you to last week. Naturally, if you ask doctors why they do what they do, they claim their actions are evidenced-based, yet the data overwhelmingly suggests enormous variation in physician practice.

In contrast, Intermountain has developed hundreds of protocols for routine care, which essentially automate decision making down to the level of what dose of beta blocker to prescribe for heart failure. The outcomes under this system beat the rest of the nation, and interestingly, doctors are not upset about the computerization of medicine. In fact, many docs feel that these protocols help them a) understand the evidence base, and b) relieve them of the myriad complex decisions that have to be made for every patient and are often overlooked during the course of a busy day.

While I think that the "Intermountain Way" isn't perfect, I think it's a great example of an organization who is really thinking about how to streamline and "hardwire" best practice into usual clinical routines. Add in Geisinger, Mayo, Kaiser Permanente, and the Cleveland Clinic, and you have the avant-garde of health systems thinking in America.