Decoupling dental hygiene from dentistry and letting hygienist travel to low-income neighborhoods to do cleanings and educate children? Super dope. Breaking out of restrictive models, delivering primary care in the community, focusing on people who typically don’t get focused on. All incredibly important things that I would love to see more of.
Take 5 minutes and read this.
Harvard University has announced a new set of benefits to it’s employees to cycle to work. These benefits include reimbursements for bike maintenance and emergency cab rides home in the event that an employee needs to leave quickly. The subsidies are likely around the same cost as those for MBTA riders, but help reduce pollution and (far more importantly) make for a healthier employee base. And when you’re a large, self-insured group with an employee base that tends to stick around for several years, those health savings can be huge over time.
For those of you, the intellectually curious readers you are, that want to read more, this article highlights some interesting work in Cambridge’s Kendall Square. Despite a growth of 40% in the neighborhood’s business space since 2000, traffic flows have reduced by 14%. While I would prefer to see more of the push coming from companies themselves and less from the government side of things, it’s cool to see good public policy at work. Especially given that any pollution reductions benefit the relatively low-resource neighborhood of East Cambridge (census tracts 3523, 35266, 3527).
It’s not often I say this (it actually kind of hurts me) but – Way to go Harvard?
Dear Reader,
As everyone should know by now, we have a little bit of a problem with the cost of health care in the U.S. Eliminating waste, fraud, abuse from our current system is frequently cited as an easy way to greatly reduce the cost of health care. I mean, who likes wasting their money, everyone can get behind that, right? Unfortunately, the definitions of these three elements are rather poorly understood/explained in the public sphere. I hope to clear that up for at least you, intelligent and dedicated reader, if not for the commenters on like 95% of blog posts and newspaper articles I read.
Yeah, just a little problem. (I don’t necessarily like this graph. I took it from Paul Ryan’s 2012 budget proposal and while it does illustrate the growth of entitlements, it leaves out defense spending and tax cuts for some reason…)
There are a few aspects of the U.S. health care system that are the usual suspects when it come to placing blame for our high (and growing) expenditures:
Each of these have their own remedies and potential impact. I will go through each of these below and attempt to give you an unbiased view on each. (Notice the inclusion of the word “attempt” in that prior sentence. If you read/feel/know something to the contrary of what I state below, by all means make it known in the comments section.)
The logic behind medical malpractice/tort reform is that by capping the damages awarded to any patient/plaintiff not only will malpractice insurance premiums be reduced, but the pressure for physicians to practice defensive medicine will also be reduced. The theory goes on to suggest that these savings would flow back to the pockets of employers and patients as opposed to staying with the physicians themselves (which is a questionable assumption. I am always skeptical when someone suggests that a cost reduction on the part of the provider will reduce cost in the system overall, but more on that in a later post).
Per the Congressional Budget Office, this logic holds, but only to a very limited extent. In 2009, the CBO estimated that large scale tort reform would result in $54B in savings accruing from 2010-2019, primarily from a decrease in defensive medicine, not from malpractice insurance premiums. While $54B is in fact $54B, it is not much at all when we are talking about spending $2.6 trillion in health care each year. So, a good move in theory but not nearly large enough to solve our problems
The next 4 items are a bit more complicated to parse out. Luckily, a recent Health Affairs policy briefing does a good job of defining them, so I will quote directly:
“Fraud” refers to illegal activities in which someone gets something of value without having to pay for it or earn it, such as kickbacks or billing for services that were not provided. “Abuse” occurs when a provider or supplier bends rules or doesn’t follow good medical practices, resulting in unnecessary costs or improper payments. Examples include the over-use of services or the providing of unnecessary tests… “Waste,” refers to health care that is not effective.
Fraud is best characterized by providers who bill Medicare, but who aren’t providers at all and are just abandoned warehouses in Florida. Abuse is when a provider up-codes charges to say they did things that they didn’t really do in an attempt to make $25 more per visit. Waste occurs when patients receive care that does not create a benefit large enough to offset the costs of care.
A 2012 JAMA article by Donald Berwick and Andrew Hackbarth does a great job of quantifying the yearly costs of fraud, abuse, waste and prices. (Reader beware: Berwick and Hackbarth consider fraud and abuse to be a type of waste. These two categories are lumped together while other forms of waste are specifically labelled as such on the chart.)
While fraud and abuse eclipse overtreatment in the high estimate, overtreatment is clearly a consistently high source of misused dollars in Medicare and Medicaid.
So, what can we do to address fraud, abuse, and overtreatment/waste? Well, Health and Human Services already has efforts underway to predict, prevent, capture, and return funds that have been stolen from the government; in 2011 these efforts amounted to $4.1B returned to federal coffers. Since 4.1< 30 (or 64 or 98, depending on which estimate you favor) clearly more can be done along these lines, but at least some effort is underway.
Unfortunately, the same cannot be said about addressing waste/overtreatment. There have been suggestions on ways to reduce “care…that cannot possibly help [patients]” but they are much more complicated and much more political inflammatory. Why? Because patients tend to be okay with receiving care that cannot realistically help them, and doctors tend to be okay with providing care for patients that cannot realistically help them.
The ACA attempts to address this type of waste by providing funding for cost-effectiveness research and creating the Independent Payment Advisory Board, but these have both been met with huge resistance. Turns out, everyone ever hates the IPAB. Everyone hates death panels and everyone hates being told that they can’t receive care. Friendly reminder for you, reader: you can always receive care if you pay for it out of your own pocket. Free market advocates would say that a truly competitive market would reduce waste in the system, but current market inefficiencies such as information asymmetry and third-party insurance hamper the ability of the market to perform in a proper fashion. Solution forthcoming.
To make things that much more complicated, even if all of these areas are meaningfully addressed and corrected, we will still have a problem on our hands. The difficulty with an out of control rate of health care inflation is that expenditures keep going up. So even if we do manage to remove $200-400 billion in defensive medicine, fraud, abuse, and waste per year, that savings will eventually be devoured our 4-9% growth rate in health costs on a base of $2.6 trillion per year.
In the end, “It’s the prices, stupid.” (I’m not calling you stupid, decidedly not stupid reader. It’s the title of an article that discusses prices as the major issue in our system.)
So, next time you hear someone say “We should start by cutting fraud, abuse and waste from the system,” realize not only the definition but the scale of what they are suggesting. Maybe they are referencing types of waste but not including overtreatment (33% of yearly waste per Berwick’s and Hackbarth’s calculations) in that statement. Maybe they are including overtreatment but are downplaying what actually comprises overtreatment. Maybe they don’t know what they are talking about at all. But at least you will. And knowing is half the battle.
I left off the previous MANDATORY READING hinting at the awesomeness of Ries’s main thesis in The Lean Startup: a startup, and the entrepreneurs involved, should be judged by how much it is learning as opposed to how much revenue or press it is generating. As long as “validated learning” occurs the revenue will follow. I agree pretty strongly on this one.
Instead of trying to nail the product on it’s first release, Ries recommends developing a minimally viable product (one that functions just enough to get customers to pay attention to it) and introducing it to your potential customer base as soon as possible. From there you should develop tests to empirically discern your customer’s needs, run and analyze the outcome of these tests, and develop your product accordingly. Ries has worked with software companies that would release slightly tweaked versions of their product to customers, measure their reactions, and make changes several times A DAY. How frequently do you hear of health care providers or schools doing this? (To be fair, a Freakonomics podcast had a pretty cool example of this happening in an after school program in New York.)
I think the real beauty of Ries’s hypothesis is that it can be applied in any number of industries, companies, or settings. One of my major managerial interests is determining how best to design and promote an entrepreneurial spirit among employees, especially within the context of a larger organization. Ries’s tactics are encouraging because they don’t require every employee to develop and launch a new product or service, instead they simply ask employees to be inquisitive and engaged with their work.
And in the end, don’t we all want to be inquisitive and engaged with our work? The most fun I’ve had at work was on the project that happened to be the most challenging I’ve had at work as well. The key to this project was that everyone on our team was dedicated to learning as much as we could about the challenges our clients faced, the best way to design our product, and how we functioned as a team. The end result of this effort was the launch of a product that was the first of its kind and one that we were all proud to be associated with. I think we managed to be successful because everyone had adopted an entrepreneurial attitude. To be sure the learning did not occur in a smooth fashion, I wish we had made use of Ries’s suggestions, but we improved our process and learned how to learn as part of the project. I am not certain as to how this attitude developed in the team, but I am certain that without it we would have failed to be successful in our endeavor.
And it is this attitude that I hope to instill in employees I will eventually manage. I really do believe that if everyone within a company had this mindset then errors would be spotted earlier, time and energy would be saved, customers would be happier, employees would be happier, and ultimately more value would be created.
Of course, saying it is easier than doing it. Developing an entrepreneurial spirit within a 23,000-person organization is going to be hard, but not impossible (get it?). One of the tactics I have decided on, though, is to give each of my new hires a copy of The Lean Startup and encourage/enable him or her to try some of Ries’s tactics. And in that sense, they will have some MANDATORY READING.
A recent fantastic opinion piece by Joel Klein (the former chancellor of schools in NYC) in The Atlantic discusses the use of private-public partnerships to solve pressing issues in public education and many people’s reluctance to do so. My suggestion: read the article once. Read it again and replace “public education” and “schools” with “health care” and “hospitals.” The argument still holds with amazing accuracy and poses a lot of difficult questions for those clamoring for reform, either with or without the influence of private industry. And because it makes us question our assumptions and biases, it is MANDATORY READING.
One of my roommates recently completed her master’s degree at the Graduate School of Education at Harvard. We had numerous conversations over the past year discussing the similarities between health care policy and education policy, focusing mainly on the moral/ethical similarities and the difficulties in proving causality due to any policy intervention.
The two policy areas share several important traits – foremost among these is the amount of risk involved in failure. If you mess up someone dies. Literally. Because of this risk politicians are hesitant to try anything without a solid evidence base. Unfortunately, another side effect of this risk is the difficulty developing a solid evidence base. A successful pilot project in a defined population is one thing, but reproducing it to confirm the result in a variety of settings is a much more difficult proposition. Yet without this large scale reproduction politicians are unwilling to okay a new policy for fear of creating more problems than solutions. See the conundrum?
Another key similarity is the presence of disparities along racial and socioeconomic lines. Some reformers champion the closure of these disparities while some seek to improve the system as a whole, thereby improving the base but keeping these disparities in place to at least some degree. These competing priorities can make it difficult to pass otherwise supported policies due to the risk of not closing the disparity gap or, worse yet (maybe), widening it. See concerns about performance based funding hurting hospitals and schools that serve low SES populations harder than their high SES serving counterparts.
A third key characteristic is the extended timelines on which these social services operate. Both education and health care do not reveal their failures or successes for some time after the services are initially rendered. This not only makes it difficult to evaluate an intervention but also reduces the net present value of the investment. In a political system where education has to fight defense and health care and infrastructure and tax cuts for dollars, having costs occur now and benefits accrue decades in the future is not a desirable trait.
Lastly, health care and education have both had their definitions expanded in recent years. Health care has traditionally been defined as services received while visiting a doctor. Education has typically been defined as services received while going to school. Both of the conversations around reform seek to expand these definitions to include the wider range of influences on the outcomes that education and health care target. Factors such as nutrition, clothing, and mental health are working their way into the purview of these larger institutions. And, as my degree in public health requires me to state, it’s about damn time.
All of these characteristics combine to create the ethical dilemma that we find ourselves in. As a nation, we have decided that both health care and education should be provided as a condition of being a resident of the U.S. (of course, the “But to what extent?” debate is currently raging), but how then do we go about improving these systems that function on a massive scale?
Joel Klein argues that we should let private industry answer at least some of these problems for us. But can we trust companies with a profit motive to allocate resources in a way that maximizes the benefit to society as a whole? Klein argues that we can and should, and in doing so makes a keen observation.
(NB: Klein is not advocating for the whole sale handing over of public goods to private companies. He acknowledges that government oversight to “regulate capitalism’s excesses and protect the public interest“ will always be necessary, just in case you started to freak out, concerned reader.)
I’ll quote Klein here: “The timeframes governing education research are completely out of sync with the pace of technological change. If we don’t find sensible ways to square this R & D circle, schools will inevitably lag behind.” Harkening back to similarity #1 above, the time required to develop a sound evidence base can/should literally take decades. Yet while conducting randomized, controlled trials is definitely a noble and needed effort, we really don’t have time for multiple trials to be conducted, peer reviewed and reproduced. Instead of pursuing the traditional research route on these topics, we should be conducting scientifically rigorous analyses on a much shorter timeline while testing much smaller changes. Without developing a shorter timeline for designing, testing and implementing new policies we’ll remain in this middling state where progress is made in some locations while others are left far behind. To echo Klein’s point, private industry is much more accustom to moving at a quick pace and the public sector would be wise to leverage some of this knowledge, sooner rather than later.
Eric Ries has actually written a pretty fantastic book on just this topic. The book is called The Lean Startup and is the subject of the next MANDATORY READING.
(NB: This post discusses Ryan’s 2013 budget proposal vs Obama’s ACA in terms of how they affect Medicare for future generations. It is important to note that Ryan’s 2013 budget is different than Ryan’s 2012 budget, which is different than the Ryan-Rivlin plan, which is different than the Wyden-Ryan plan, all of which are different than Romney’s plan. There’s a lot of stuff out there but I will try to keep it all straight for you, dear reader.
UPDATE: I failed to keep it all straight for you, reader. I unintentionally inserted Ryan’s method to determine the defined contribution from his 2012 budget into his 2013 budget. The strikeouts indicate where changes have been made. My apologies.)
Real talk: Medicare is going to have to change no matter what. End of story. Any politician who says that they are continuing the program is lying to you to some degree. If the program continues unchanged it will become insolvent and you will not have Medicare. So anyone saying that they will not change Medicare is straight up lying. If they are acting to preserve Medicare (as both Ryan and Obama are) they are changing the program in some significant fashion and likely in a way that will make the Medicare experience of 2025 significantly different than the Medicare experience of 2000. So when a politician says they are acting to “preserve Medicare,” they are lying to you somewhat. In this post I hope to separate the two views of Medicare as clearly as possible in hopes that we can focus on these key differences and not the hyperbolic talking points that have been flung around with reckless abandon in the past few days.
The real issue here centers on the fundamental purpose of Medicare and how this informs any adjustments to the program in the future. This distinction is where Obama and Ryan diverge and where the discussion should really take place. Obama’s view is that Medicare should provide a set basket of benefits (defined benefit) and that it should be paid for by the government regardless of the cost. Ryan’s view is that Medicare should provide a set dollar value equal to the current slate of benefits the second lowest-cost insurance plan in a given area (a defined contribution) and that beneficiaries should be able to use this dollar amount to purchase a plan of their choice. One views this program as providing a service to our seniors, one views it as the government handing out dollars to seniors with which they can purchase a service as they see fit. This differentiation plays itself out in both plans for reform and the consequences of failure for both.
Both plans have measures to reduce the cost of their respective baskets over time (a secondary, at least in my mind, consideration for each plan is how any cost savings should be used. Ryan says use them to reduce the deficit. Obama says use them to reduce the financial burden of health care on low-income individuals). The Obama plan presupposes that government oversight, coupled with government incentives to explore new mechanisms of delivery, will spur private industry into developing cost-saving innovations. The Ryan plan instead insists that market-based competition will be all the incentive that private industry needs to develop these innovations, and that by enabling consumers to more easily allocate their Medicare dollars as they see fit, the marketplace will become much more competitive than it is in the current state.
Both plans have the risk of failing as well; I tend to separate these risks into the categories of financial risk and political risk. If the ACA were to fail in its endeavor to reduce the growth of health care spending in our country, the financial risk accrues to the government and health care spending continues at or near its current trajectory (hitting 20%+ of GDP, driving a massive debt and hamstringing our ability to do just about everything). The political risk is that the government plays a stronger role in all our lives, is more involved in what was previously a less regulated industry, and delays the possibility of a market-based solution. If Ryan’s plan were to fail the financial risk accrues to the individual and this is where the HUGE difference between the plans lies. No matter what in Ryan’s plan the federal government reduces its health care burden. If increased competition fails to reduce costs and health inflation continues to grow faster than GDP +0.5%, the individual citizen has to make up the difference out of pocket (again, defined contribution). The political downside here is that the safety net for the elderly is weakened, health care spending still increases, and the Medicare program is fundamentally changed.
So the big difference (at least by my read) boils down to this:
The Health Care/Government and Debt/Business squares are “duh” zones. The interesting conversations take place in those question marks. THAT is where discussions lead us to novel ideas that might actually get us somewhere. Bouncing back and forth between duh zones whenever we have an election will not actually move us forward, but real discussion might/will/reallybetterorelsewe’reallinabunchoftrouble.
Unfortunately, these points are only made few and far between. Rather than discuss the real philosophies underpinning each plan we get meaningless snippets that pull numbers out of the larger context and avoid the pertinent realities that we are facing. I don’t mean to belabor the “politicians don’t talk about real issues” mantra of so many people these days, but the introduction of Paul Ryan into the Presidential race made me hope that we could actually take a step back and discuss the more philosophical aspects of our differences. Rather than run campaigns on gaffes and choices made 15 years ago we could discuss the dueling visions for the future of our country, why each is meaningful (because they both/all are) and let each voter decide for themselves what vision resonates with him or her.
In my idea world, which I realize is probably a good deal different from yours, each voter would FIRST have a developed notion of what they believe in and what they desire and THEN they would use this notion to develop their opinion on a policy or proposal. My sense is that far too often voters are told what to think as opposed to educated to the extent that they can make their own decisions. Politicians should do more to educate the voting population on what they actually mean when they say they will drop federal spending to below 20% by 2016 of GDP. And, dear reader, it is up to us to demand such an education.
My hope is that outlets other than the politicians themselves can stimulate such a discourse and it is my hope that this blog can be one of them, albeit on a pretty small scale.. I’ve got a few pieces in the works and hope to be posting them in the next week or so, be on the lookout. Please comment freely, ask questions, challenge assumptions, and maybe even have a little fun. Thanks for listening, dear reader.
(For those of you that are more nerdy on this stuff. Aaron Carroll of The Incidental Economist, Ezra Klein at the Washington Post, and Avik S. Roy at Forbes (also one of Romney’s advisors on health care) have been discussing the same topic with a bit more wonkery. I highly recommend you read into it.)
Physician compensation and education debt load has popped up in several of my conversations over the past month. I’ve also read some (in my mind) rather misleading calculations of education debt for physicians as a justification for their high median salaries. I disagree. I am currently in the process of putting together a quantitative justification for why that is. For now, dear reader, just read the statement below.
From Jay Parkinson’s tumblr via Sarah Kliff at The Washington Post:
“Over a lifetime, a medical student who specializes can expect to earn $3.5 million more [than a medical student who practices in primary care].”
The median salary for a primary care physician in the U.S. is somewhere north of $175,000 per year. $3.5 million MORE than someone who is already on pace to make $5.25 million over a 30 year career is saying something. On average, primary care doctors and specialists have the same debt post medical school. Doctors get paid a lot and it has nothing to do with their cost of education.
