Sunday, October 20, 2013

So, how bad is it (health care)?

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As far back as August 2009, when a House committee had just passed what would end up being the Patient Protection and Affordable Care Act of 2010 (PPACA a.k.a "Obamacare), this blogger was wrestling with understanding the causes of higher health care costs in the U.S. At that time I wrote:
"This blogger has been paying attention to the debate, and is disheartened by a lot of what is going on. The disagreements start from the reasons for why our health care costs are so high, and from there flow to disagreements re what should be done to solve the overall problem. Some partisans on each side cherry-pick their reasons and arguments.

For example, depending on one's ideological viewpoint, physicians order too many tests (thereby increasing costs) either because: a) they sometimes have a vested interest in doing this as part-owners of the institutions where the tests are performed i.e. more tests = more revenue for them (also known as the
'greedy physician' theory, for which the solution is to prohibit physician ownership of hospitals, etc., and to outlaw self-referrals), or b) they are forced to do so "defensively" to protect themselves from lawsuits brought by rapacious patients aided by unscrupulous lawyers (the 'suit-happy population' theory, for which the solution is tort reform which puts caps on damage claims). For this example, this blogger sums the extremes of the argument, there are many with positions intermediate between these two extremes...

OK, it seems like it should be possible to figure out what are the causes of the higher health care costs in the U.S. It is true, as some have argued, that it is natural that a wealthier society would spend more on goods and services that it prizes. So, as countries get richer they generally do spend more on health care. However, if you graph health care spending per capita against per capita GDP you see that although this is true, the U.S. is decidedly an outlier, with a level of spend greater than "expected." The entire discussion is re the reasons for this "excess," as well as what can be done to rein in the growth of health care costs.
This blogger has yet to see a definitive listing of the factors that contribute to the high (and growing) costs of health care. It seem like this would be very useful, especially if it included estimations of the relative contributions of each factor! So, finding none, here are some possibilities. Note: this is just a compilation of some factors that this blogger has seen referenced in the news and on the 'net, there are no claims being made, either that this list is definitive, or that these factors are truly responsible for higher costs. And, unfortunately, this blogger is in no position to know the relative importance of these factors. So, in no particular order:
  • Shortages: There are manpower shortages in many health care job sectors including: primary care physicians, certain physician specialties (e.g. geriatrics), surgeons, nurses, pharmacists, laboratory technologists, physical and occupational therapists, radiology technologists, and others. Presumably this results in higher salaries, thus contributing to the costs of care.
  • Pharma: Drugs are expensive, some say too expensive. One explanation, "greedy" companies that do their best to fleece the country. This argument is supported by citing large profit margins; the companies spending more on marketing than on research; DTC marketing; a disinclination to support comparative effectiveness (head-to-head) drug trials; too generous an exclusivity for patents on drugs and on biologicals; an emphasis on "me too" drugs over breakthrough drugs; US pricing being significantly higher than for the same drugs in other parts of the world; high executive salaries; pharma companies encouraging physician off-label use; etc., etc. Another (counter) explanation, market forces - it takes hundreds of millions of dollars to develop a new drug; only a very small number of the multiple molecules developed and tested make it through the process, and end up being medically and commercially viable; a need to support and amortize these stupendous costs; other countries essentially acting as 'free riders" leeching off the. investment; etc. Then there are some factors that effect this that are not controllable by the companies, for example there is a shortage of people willing to sign up as subjects for the numerous clinical trials that a drug has to go through prior to approval (e.g. only approximately fifty percent of NCI-approved oncology trials get the required number of test subjects).
  • Consumption: Health care service use is too high and consumption is in excess. Here you can plug in the "physicians ordering too many tests" example noted above; or the public requiring either too much or too fancy services; "too much" care provided in the last few months of a patient's life (versus hospice care); the disconnect between consumption and payment responsibility (responsible only for co-pays the consumer has no motivation to look for lower costs or to lower usage); the aging of America is resulting in an increasingly large cohort that requires increased health care services; etc.
  • Lifestyle choices: The consumer is overweight, smokes, etc., and indulges in behaviors that are unhealthy and that result in higher health care needs, consumption, and thus costs (e.g. higher incidences of diabetes, heart problems, overweight, etc, that last being responsible for a whopping 10% of all health care expenditures according to a recent study!); increasingly patients have multiple co-morbidities that result in greater health care consumption and costs; etc.
  • New technology: The rate of technological change is accelerating, and most new technology tends to be more expensive, be it drugs and biologicals, supplies, equipment, etc.
  • Insurance companies: Here we have the "greedy insurance company" argument, for example they are for profit entities with a built-in incentive to increase premiums while cutting back provider reimbursements and reducing the number of services covered; need to pay a return to stockholders; have high executive salaries; result in too high administrative costs that "waste' health care dollars, etc. A significant number of uninsured (est. 45 million) cause costs for various reasons e.g. they put off care until it becomes critical (and more expensive), the use of hospital emergency departments (higher costs) for care that should be more routine, etc.
  • Government: The government imposes multiple burdens e.g. regulatory burdens, mandate burdens, etc.; government spending on health care (just under half of all health care spending) is wasteful and rife with fraud ("greedy" physicians, hospitals, other providers, etc.); government reimbursement is below provider cost (resulting in significant cost-shifting as providers get "excess" profits from customers with commercial insurance to cover this gap); etc.
  • Providers: Hospitals have lost sight of their mission; provide levels of charitable care less than the value that they derive from their non-profit status; pay too high executive salaries; engage in technology and services "arms races' with each other; have too much capacity; hospital errors kill and cause higher costs; patients get sick in hospitals; there is no strong correlation between costs and outcomes; patients are often readmitted after being discharged for follow-up complications; etc.
  • "Model": Much of the care provided is ineffective, and not evidence based; there is no real outcomes-focused way to compare different providers (beyond broad categories and/or measures); preventative care and other types of care (e.g. post-discharge contacting of patients to ensure that they have purchased and are correctly taking their prescription medications) that would result in lower costs and better health are not reimbursed and thus not done, resulting in the need for 'extra' care; there is an insufficient emphasis on disease management; access to health care is very uneven (some areas with smaller populations have insufficient access, while in some large, urban areas there is a surfeit of hospitals); there has been shown that there can be a strong correlation between outcomes and the number/volumes of procedures that a given hospital carries out (the expert effect), yet smaller providers may provide a service for which they may have an insufficient volume to gain real expertise, in order to protect their market or their bottom line; there are discontinuities and poor hand offs between various providers along the continuum of care; health care records are not standardized and "portable"; etc."
Well, several years have passed, the PPACA is the law of the land and very many of its provisions have come into being, the most recent being the federal and state health insurance exchanges which opened on the first of this month. However, a clear understanding of the causes of high U.S. health care costs continues to elude the public, as becomes immediately evident on reading most articles in the news and the comment threads they elicit online!

Thus, a quick perusal of online comment threads serves up: greedy physicians; ravenous pharmaceutical companies; dishonest medical device manufacturers; greedy hospitals and their overpaid CEOs and administrators;  rapacious lawyers and associated 'defensive' medicine; excessive government regulation; paid-for politicians; swinish insurance companies, their greedy CEOs and stockholders; the gross overuse of health care services of various kinds; the 'traditional' but unscientific and non-evidence based practice of medicine; overweight American indulging in a number of poor health habits; and on and on. This blogger has highlighted a few extreme examples of these in previous posts, see here, here, and here. The perceived rapacity of all the parties involved in the provision of health care astounding and surely not all true, safe for the small, die-hard contingent of those blaming all ills on capitalism! No wonder that it all is so expensive! And in spite of all the money spent, more than all the other industrialized nations, on many health indices the U.S. performs worse than these other nations - see here, here, and here for example. 

Regardless of the causes of the higher costs, a fundamental agreement has developed that despite higher costs in the U.S., outcomes are worse.  Though many are cited, the two primary examples offered as 'proof' appear to be U.S. life expectancy and the infant mortality rate, both areas where the U.S. does not do as well (e.g. see the charts above, where the U.S. ranks 37th in 'life expectancy at birth' and 41st in 'life expectancy at 60 years'). However, life expectancy is effected by a number of factors beyond the health care system, and in the U.S. the poorer rate can be attributed to non-health care, societal issues such as violence and homicide (see chart above); and poor diet, lack of exercise and tobacco use. In fact part of the poor U.S. life expectancy rate is due to a lack of access to health care for the poor. Thus, the state of the health care system is hardly responsible for the lower life expectancy and higher health care costs are not a cause (as is often implied) of the poor showing. And there is some criticism of the calculation methodologies used to build the comparisons, e.g. see here.

It has now become fashionable or de rigueur to criticize various aspects of hospitals and the health care system, and this by many groups - by those who seek to make changes and find it convenient to 'hang their hat' on real or perceived weaknesses of the system; by those who enjoy engaging in polemics; by intellectuals or researchers needing to publish articles who know they will find an uncritical audience who will magnify their 'findings'; and so on. While it is true that there is a lot to be critical about - from care that is done the way it is without any basis in evidence; to wide variations in costs by geography for similar procedures/care; to adverse outcomes and iatrogenic failures - there is something unhealthy (for lack of a better term) about the uncritical and "megaphone" treatment of some of the various studies that have appeared of late. Examples include:
  • In The Race for the 'Fanciest Hospital in Town,' Patient Safety Looses Out. In this article Dr. Ashish Jha juxtaposes a recent NYT article (Is This  a Hospital or a Hotel?) with a recent study that seeks to update the estimate of patient harm that occurs in America's hospitals (more about this later), to point out the sometimes perverse incentives under which most hospitals labor. However, not satisfied with this he goes on to generalize and make unsupported statements. So for example, "... Did you hear about the hospital that spent $100 million to eliminate medical errors?... You might have missed these stories because, as far as I know, they didn’t happen." And, "... So how did we end up with a system where hospitals make big investments in nail salons and flat screen TVs but little on making care safer." Now, while this may be true of some hospitals, it certainly is not true of all hospitals despite his generalization, which was picked up and amplified in tens of thousands of news and web articles.... This blogger hasn't seen any interviews of Dr. Jha, however were I to be conducting one I would ask Dr. Jha if these statements reflect the state of affairs at these hospitals and at Boston Children's Hospital. My suspicion is that he would demur! And given that Dr. Jha provides one solitary (and anonymous) example to back up his thesis, a "... recent conversation with a CEO of a large hospital system..." this blogger is content to counter with a single example. Read this article about Memorial Hermann Hospital where they are spending large sums of money to "eliminate medical errors" and making significant investments in "making care safer" (of which Dr. Jha is blissfully unaware) despite the fact that it is financially disadvantageous to their organization. ("...Another hit has been to the bottom line. In a payment system that continues to reward volume of services provided, many quality and safety initiatives reduce lengths of stay and complications — and in the process, reduce revenue. For example, care for premature babies in the neonatal intensive care unit is the highest-margin service in the health system, even from Medicaid. And yet, because the system's obstetricians and neonatologists have adopted a range of evidence-based protocols, in the past year a record percentage of the 26,000 babies delivered annually within the system came to full term. NICU admissions fell 23 percent and length of stay fell 30 percent. "That's great for the mothers and their babies. It's great for society in terms of lower health care costs and a healthier population. It's bad for hospital finances," says Dan Wolterman, Memorial Hermann's CEO. "Neonatal intensive care has gone from my most profitable service line to one on which we are losing money." Says Deborah Cannon, a longtime system board member, "Obviously, you don't want to go out of business, and we aren't by any means, but quality and patient safety are our products. Our bottom line is the babies are healthier.")

  • Another recently issued study, also by Dr. Jha, looked at hospital CEO pay and examined if  the level of pay was related to quality metrics. It concluded that they were not related and that while pay was "associated with" the number of hospital beds, whether the organization was a teaching hospital, its location (rural vs. urban), the amount of technology, and patient satisfaction, "... we found no association between CEO pay and hospitals’ margins, liquidity, capitalization, occupancy rates, process quality performance, mortality rates, readmission rates, or measures of community benefit." This reverberated like a bombshell in the news and the blogosphere, leading to thousands if not tens of thousands of articles such as 'Care, CEO pay not linked, study says.'  A closer reading of the study showed that a) they looked at the hospital quality metrics, community benefit, etc. numbers from 2008 and CEO pay from 2009, and that, b) the measures  chosen to be the proxy for 'quality' were a fairly limited subset of quality measures - "... composite measures of performance on processes of care for acute myocardial infarction, congestive heart failure, and pneumonia... from which we built patient-level hierarchical logistic regression models to calculate 30-day risk adjusted mortality and readmission rates..." It has been argued that the choice of metrics could have influenced the outcome... While this blogger certainly doesn't have the expertise to know if this is true, or to understand the effect this choice had on the outcome of the study, it is certainly clear to him that perhaps two of the three measures would seem to be less applicable to the quality efforts of, for example, children's hospitals!  True, an argument certainly can be made that Dr. Jha and his co-authors bear  no responsibility for the tsunami of articles stating that hospital  CEO salaries have no relationship at all to quality of care and medical outcomes, when in fact the evidence is more nuanced and, at best, was the case in 2008 i.e. five years ago... However, this blogger is focused (as is clearly stated above) on the "uncritical and megaphone treatment" of some studies, clearly present in this case!.

  • As mentioned earlier, a new study was published in The Journal of Patient Safety in September 2013. It revisited the 1999 IOM report that (based on data from 1984) estimated that 44,000 to 98,000 deaths annually were as a result of medical errors. A literature search identified four studies between 2008 and 2011 that used the "Global Trigger Tool" to identify instances in the medical record that an adverse event that may have harmed a patient. Based on the numbers found in these four studies (covering 4,252 records reviewed, which were associated with 38 deaths) and extrapolating them to the total 34.4 million discharges in 2007, the new study estimated a lower boundary of 210,000 as the "number of preventable adverse events per year that contribute to the death of hospitalized patients." Additionally, taking into account inaccuracies in medical records and a number of other factors (for example: the GTT may have missed identifying instances of preventable adverse events; some deaths may have occurred significant periods after the adverse event that caused them; the fact that this would not capture diagnostic errors; that not all adverse events are captured in the medical record; etc.) an upper boundary of 400,000 deaths per year was estimated. Additionally, given that serious adverse events not resulting in deaths are 10-20 times more frequent than those that do result in death, an additional 2 to 4 million serious adverse events not resulting in death were projected to occur on an annual basis!  So, this study has been reported upon thousands of times, if not more frequently. However this blogger has not seen any analysis (pro or con) or validation of this study, just reporting of its bottom-line conclusions. Surely this is something that one could/would/should expect to be of some importance, given that these estimates make adverse events in hospitals the third leading cause of death in the U.S. (behind tobacco at 435,000 deaths, and poor diet and physical inactivity at 400,000, per this study).
The bottom line? If we agree that health care costs in the U.S. are much higher than in other industrialized countries, what are the main causes and their relative importance? This blogger, and I assume the reader too, is still unsure! Please feel free to leave a comment if you have seen a compelling, and preferably validated, analysis of the subject!

To complicate matters this blogger came across another study which "explains" our high health care spending difference very differently. If you adjust for purchasing power parity while expressing costs in USD then U.S. spending is 160% of the OECD mean; if you consider that the U.S. spend more because it is wealthier then it is 60% more; and if you consider the purchasing power parity of healthcare U.S. spending is 31% more (see charts below):


This 31% is attributed almost entirely to items that result from poverty and income inequality, such as a higher incidence of chronic illness among the poor; and higher spending, hospital utilization, and hospital readmissions that correlate with the poorer segments of society.  This attribution was supported by applying the Gini coefficient (a measure of income inequality) to the health care spending numbers... Their conclusion? "Thus, while the US spends more than twice as much on health care than the mean of other OECD countries, its greater GDP and higher prices explain most of it, and income inequality offers an explanation for the rest." (Note: they also support their argument by looking at U.S. spending on social programs, which appears to mirror health care spending (i.e. on the low side compared to other OECD countries by a very similar order of magnitude).  Of course, this study as of yet has not been picked up and uncritically "megaphoned' by the usual suspects... perhaps because it does not support the current health care zeitgeist.

Finally, it has also been widely reported (for example here and here) that just 5% of the population in the U.S. accounts for around 50% of current health care spending. As a 'thought experiment' this blogger looked at U.S. per capita health care spending as illustrated by the following infographic, and recalculated it with the 5% removed, yielding the result below - at $4,478 per capita, U.S. spending was much more in line with the other industrialized countries, and at 8.93% of GDP was below the level of many countries, including Uganda and Afghanistan!! This thought experiment would at first blush seem to philosophically align reasonably well with the "income inequality" explanation given above...

Finally (and I mean it this time),  given that "Obamacare" is aimed at obtaining access to health insurance (and hopefully that translates into better health care access) for those with lower incomes, perhaps it is a good starting approach to tackling the problem of high U.S. health care costs. However, my suspicion is that even while getting subsidized access to some lower incomes (see below... Source), given that some states are not expanding their Medicaid programs and that the link between lower incomes and poorer health will not magically be improved even by access to health insurance and health care, there is still a long road remaining before a solution to this problem is achieved!

"Citizens and legal residents in families with incomes between 100% and 400% of poverty who purchase coverage through a health insurance exchange are eligible for a tax credit to reduce the cost of coverage. People eligible for public coverage are not eligible for premium assistance in exchanges. In states without expanded Medicaid coverage, people with incomes less than 100% of poverty will not be eligible for exchange subsidies, while those with incomes at or above poverty will be."

Quick update - November 16th, 2013

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