Stories by Stanley Goldfarb

Stanley Goldfarb, MD is a Professor of Medicine and Associate Dean of Curriculum at the University of Pennsylvania School of Medicine.

The Wrong Way to Attack Gingrich

November 30th, 2011 at 5:11 pm 21 Comments

The American Spectator has decided to attack Newt Gingrich’s position on healthcare because he once praised the work of Dr. Donald Berwick’s Institute for Healthcare Improvement. I must say, capsule as someone who has pretty consistently thought that Obamacare was a terrible way to go about reforming our healthcare system, pharm that the criticism by David Catron is ridiculous.

It would be like criticizing Stephen Chu’s Nobel Prize in Physics for laser cooling and trapping of atoms because he is a terrible venture capitalist in energy companies. True and unrelated!


Obamacare is Unraveling

October 18th, 2011 at 1:10 pm 35 Comments

Writing in The New Republic, Jonathon Cohn argues that the demise of the CLASS act in no way undermines the validity of the Affordable Care Act (surely a misnomer now). Unfortunately, his argument falls under the rubric of sophistry rather than analysis. CLASS, or the long term care component of Obamacare (even the President likes the name now), was an important part of the Act because it was an important mechanism to assure the apparent financial viability of Obamacare.


Worry About Costs, Not Mandates

October 11th, 2011 at 6:05 pm 29 Comments

Revelatory Headline: “White House used Mitt Romney health-care law as blueprint for federal law.”

I am no fan of Obamacare. The notion that a top down system will control costs flies in the face of the fact that virtually every advanced country on earth that has a top-down scheme to manage its health care system has a rate of growth in costs that matches ours. The only difference is that we start at a much higher baseline, shop the result of high prices and high availability of services and technology.


What’s to Blame for Healthcare Costs? Doing Nothing.

September 28th, 2011 at 8:00 am 46 Comments

The Associated Press reports that a survey by the Kaiser Family Foundation shows that health insurance premiums rose last year by 9%. Let’s try to affix blame by looking at some of the common arguments that try to explain this.


Medicare Fix Must Include Means-Testing

May 25th, 2011 at 12:56 am 32 Comments

The Democrats may have picked up a seat in New York by running against Paul Ryan’s Medicare reform proposals. Anyone who is honestly contemplating Medicare’s future though must admit that controlling the program’s costs must include some level of means-testing.

Up to now, Democratic leadership has been adamant about denying the necessity for means-testing, clearly for reasons of partisanship and ideology. Can anyone deny the absurdity of the millionaires and billionaires the president is so fond of targeting receiving the same health insurance subsidies as the retired domestic worker? Now however, some Democratic leaders have come to see the foolishness of their pose: Minority Whip Steny Hoyer has even acknowledged the need for a new approach at his last weekly briefing.

This new reality raises the question about how one would go about operationalizing means-testing of Medicare. This is not easy. Medicare now pays 80% of an established physician fee schedule which is based on valuing the work and overhead costs associated with thousands of physician-delivered services. Physicians submit codes and Medicare sends them a check. How could this system be converted into a means-tested process?  Each individual could have a different co-pay level, but who would monitor that variable? Would physicians have to go to some central database to identify each patient’s co-pay?  Suppose a patient’s economic status changed. How would a new level of individual co-pay be known to the physician? Clearly this solution would be unworkable.

Another approach would be a tax refund based on medical expenses for the preceding year. But that approach would depend on the IRS tracking a patient’s net worth each year and also tracking the legitimacy of any medical claims. It would destroy any notion of the privacy of medical data and create a huge new level of data assessment for the IRS. In essence, the IRS would become a health insurance claims company.

Finally, the approach could be to simply raise the premium that affluent seniors must pay monthly for Medicare Part B  (the physician component of Medicare). Currently, the premium is about $120 per month. While it may be necessary to pursue this solution, it would require a very large premium (really a tax increase) of, say, $500 to $1000 per month. This approach will not do anything to constrain health care costs in Medicare and will be enormously controversial. Many would rather shop for a high deductible insurance plan than pay such expensive premiums.

The only simple approach to this problem is actually the Paul Ryan proposal for utilizing the insurance industry to handle Medicare claims through its current infrastructure. This way, individuals would purchase their insurance using vouchers whose value would be based on a yearly assessment of an individual’s net worth or income.  Ryan has emphasized the means-testing of his approach but this point has been overshadowed by demagoguery about the overall proposal.

The administrative advantage of utilizing a voucher system to allow an efficient approach to means-testing is still a relatively minor benefit of managing Medicare through health insurance companies.  These companies now have the infrastructure to implement many of the reforms that Obamacare hopes to only study in the years beyond 2014. Take, for example, the Accountable Quality Contract (AQC) implemented by Blue Cross/ Blue Shield in the home of Romneycare. The AQC is a modified global payment model, designed to encourage cost-effective and patient-centered care by paying participating physicians and hospitals for the quality, not the quantity of the care they deliver. This model delivered impressive improvements in care as reported by BlueCross BlueShield of Massachusetts:

For preventative care measures like cancer screenings and well-child visits, the rate of improvement in AQC groups’ performance was three times that of non-AQC groups, and more than double the AQC group’s own improvement before joining the AQC.

For chronic disease care measures such as management of diabetes and cardiovascular disease, among the most costly and prevalent chronic care conditions, the AQC groups’ rate of improvement on screening and monitoring measures far exceeded those of physicians not in an AQC contract. In year one of the contract, AQC organizations made gains on these measures at a rate more than four times what they had been accomplishing before the contract.

On clinical outcome measures, many AQC group’s performance measures are approaching or have reached the highest levels of quality believed to be attainable for a patient population. Outcome measures indicate results of patient care, such as control of blood pressure, blood sugar, or cholesterol, which signify that a patient’s chronic condition like diabetes or cardiovascular disease is well-managed.

This kind of quality improvement can only be achieved when information systems have the ability to track medication use, patients seeking care at multiple institutions, and other important demographic and outcome data. The nation’s health insurance companies are the only regional enterprises that possess this capability for a large population.

So, an honest look at a plan that means-tests Medicare and allows implementation of new payment models must acknowledge the central role that the health insurance industry must play in healthcare reform. If Medicare costs continue to spiral upwards, Ryan’s plan or some iteration of it should be enacted.

More Businesses Opting Out of Obamacare

May 18th, 2011 at 11:06 am 33 Comments

Last week, pills the Obama administration approved over 200 new waivers for the Democrats’ health reform bill, more proof that businesses realize the plan is fundamentally flawed.

To say that Obamacare is fundamentally flawed is like saying Donald Trump would probably not be welcome at the Harvard Faculty Club (then again if he gave them an endowed chair, they might make him a lifetime member).

That companies and unions need to  request waivers of the requirements for a $750,000 level of coverage and comprehensive services including vision, dental, and other services when they currently provide much lower levels of health insurance for their employees illuminates the central problem with the law. To paraphrase Jimmy McMillan: the cost is too damn high.

Most small companies can’t afford to provide comprehensive fee for service, unmanaged health insurance to their employees. If business can’t provide it now, the unaffordability of comprehensive insurance will be transferred to the taxpayers. Subsidies will be provided to the new insurance exchanges and we’ll have to borrow trillions of dollars more in the coming years to pay for it.

If Obamacare succeeds in its essential goal of providing comprehensive health insurance to another 30 million people, companies will be foolish not to put their employees into the newly created plans. Certainly all the companies and organizations that have requested waivers will be doing exactly that. They can’t afford comprehensive insurance now and won’t be able to afford it in 2014.

The political debate over Medicare’s future is focused on the cost of care yet the Obama administration has been silent about controlling costs for the currently uninsured under-65 cohort. The whole focus of Obamacare is on finding money to insure that group and not on controlling the costs of the care they will receive.  These costs are another burden soon to be shouldered by a nation deep in debt.

GOP Cost-Cutting Takes Aim at Medicaid

May 10th, 2011 at 7:00 am 54 Comments

According to reports, the House GOP is considering plans to reduce spending on Medicaid rather than the more politically intractable Medicare or Social Security. While the GOP has taken a lot of heat for the Ryan plan’s Medicare proposals, switching their focus to Medicaid isn’t the right response.

The Hill notes that:

The leaders of two leading advocacy organizations [said] that they expect the House Energy and Commerce Committee to move quickly on a bill that would let states set new Medicaid eligibility rules. The bill, introduced last week, would repeal ‘maintenance of effort’ requirements (MOE) in the healthcare reform law, which block states from cutting their Medicaid rolls ahead of the program’s expansion in 2014.

Medicaid is shared between the states and the federal government with the latter paying about two-thirds of the cost of the program. The federal government sets criteria for Medicaid eligibility. Governors would like a block grant program which would allow them the greatest flexibility for program implementation.

Medicaid is the insurer of last resort. To cut the rolls could put too much pressure on the social safety net. It’s well known that Medicaid is the insurer of the very poor but it’s also a key insurer for children, the disabled, and even the elderly poor who also are eligible for Medicare. Furthermore, it’s the only public insurance that pays for long-term care.

Furthermore, is there the same potential for savings as with Medicare reform?  Can Medicaid be made amenable to substantial cuts from the federal government? True, there’s some room for such cuts: Since the formula for Medicaid spending by the federal government is based on the level of state spending, it is attractive for many states to spend as much as possible to attract the highest contribution from the federal level.

On the other hand, most of the tumult seen in Wisconsin, Ohio, and other states is as much the result of Medicaid’s effect on state budgets as any other issue. Governors have had strong incentives to control Medicaid spending: Medicaid payments to physicians and hospitals are typically substantially below the costs of the services provided, somewhere less than 85% of cost. Beside underpayments, over 70% of individuals in Medicaid are in managed care plans, another major cost saving effort.

But let’s grant that there’s an opportunity to approach Medicaid in an innovative method that puts responsibility on recipients to be more responsible and accountable and that focuses on preventive care. Let’s even throw in a form of health savings account so that individual patients have “skin in the game”. Wouldn’t such approaches save real money and allow lower federal payments for Medicaid? Well no.

All of these components have been incorporated into a plan called HIP or the Healthy Indiana Plan and while it is successful in accomplishing its goal of patient responsibility and incentives for patients to be concerned about the cost of care, it has not led to reductions in costs at the state or federal level.

It’s a very fine Medicaid program with 99% patient satisfaction ratings but it’s also been a very expensive plan, requiring a cigarette tax to help defray its costs. Gov. Mitch Daniels has taken heat from conservatives over the costs of the program, to the delight of some commentators.

Medicaid pays 15% less than the cost of care, highly utilizes managed care, and even when utilizing innovative approaches still requires at least current payment levels. Cutting Medicaid further is unlikely to be feasible. Cut the rolls now and this goes beyond cutting fat from the system, it gets into muscle and bone.  In the end: Improving the economy and reducing poverty is the best approach to reducing Medicaid.

Contrast all this with Medicare: Minimal managed care, supporting affluent, middle class, and poor, predominantly fee for service, lacking health savings accounts, and (while only paying at a rate equal to the costs of care) still substantially higher than the Medicaid payment schedule.

Medicare is where savings can be found — particularly with a prospective payment methodology – and should be the initial target for reformers, not Medicaid. The Ryan plan has been demagogued in an astonishing fashion, even leading to an extraordinarily ignorant statement from Secretary Sibelius that patients would “die sooner.” But for the GOP to redirect their efforts from Medicare reform to further chopping at Medicaid isn’t the right response.

A Health Care Race the U.S. Shouldn’t Win

April 30th, 2011 at 11:20 am 12 Comments

A new study by the Kaiser Family Foundation comparing U.S. healthcare costs with the rest of the world is providing ammunition to both sides in the health reform debate.

The headline from The Hill’s report highlights how the study is being reported in the press:

Report: U.S. healthcare costs growing faster than elsewhere

The initial reaction by many is likely to be that the blame lies with the insurance companies and their outrageous profits. Wrong. The major rate of growth in costs is in those in the Medicare system over the age of 75 with an increase 8 to 12 times greater than those aged 50-64 as found in earlier studies by the National Bureau of Economic Research.

It’s true that private health insurance premiums have risen at essentially the same rate as the growth in total national health care expenditures.  The problem though is not exclusively in private or employer sponsored insurance but is attributable to all elements of the U.S. healthcare system, generic and particularly to Medicare. This point is emphasized by the fact that public spending on healthcare in the U.S. rose faster as a percent of GDP than in any other developed country according to OECD data.

One of the key talking points for the left on Obamacare is that is preserves Medicare, sovaldi supposedly unlike the Ryan plan.  These data points though are really bad news, as preserving “Medicare as we know it” is unsustainable.

To make matters worse for the single payer gang, the percent rate of growth in healthcare costs in Spain, Belgium, Sweden, The Netherlands, and Great Britain were all greater than in the U.S. Of course, we start from a dramatically higher baseline, mostly attributable to much higher prices in the U.S. Nonetheless, simply adopting a government-run health care system didn’t solve the problem in those five nations.

Certainly, the published assessment of the data is always open to further analysis. The Hill’s headline that the growth of costs in the U.S. is greater than any other country is totally predictable given our much higher baseline costs. This is the power of compound interest: If you have a higher baseline, equal per cent increases compared to other nations will lead to ever higher absolute dollar cost increases. Moreover, these data require complex adjustments for currency exchange issues as well as the underlying growth rate of the entire economy in each nation.

However, regardless of how one approaches health care reform the study makes one thing clear: cost control has to be addressed.

What Medicare’s Boss Can Learn from Ryan

April 26th, 2011 at 12:23 pm 11 Comments

You have to give the administration and congressional Democrats credit for talking point consistency. They’ve hammered away at one message: “Paul Ryan will kill seniors and the poor with a defined Medicare and Medicaid benefit plan.”

Don Berwick, Administrator for the Centers for Medicare and Medicaid Services jumped into the fray yesterday as well.  As Politico reported:

The man Republicans have derided as the “rationer-in-chief” charges that Republicans’ own budget proposals would end up rationing care to millions of Americans on Medicare and Medicaid.

‘It is paradoxical really that with all this talk of rationing, the proposal we hear about how to fix American health care is to take it away from people. That’s from the very people who are crying rationing,’ Don Berwick, the administrator of CMS, said in a wide-ranging interview with Politico. ‘If you look at the proposed withdrawals of support to Medicare beneficiaries and Medicaid, it’s withholding care from the people who need the care. You tell me what that is?’

But let’s compare the two approaches in a bit more detail. As reported in Politico, “Obama’s budget proposal calls for $480 billion in savings from Medicare and Medicaid through 2023 and an additional $1 trillion in savings in the following decade.” How this occurs is unclear but Dr. Berwick points to eliminating waste, fraud, and abuse to do the job. Right

Ryan’s plan has been pretty well demagogued, including by Dr. Berwick above, but actually calls for growth in Medicare and Medicaid spending to be capped at average costs in 2012 and then allowed to grow at the rate of the consumer price index. To claim that Ryan calls for withdrawal of support for Medicare and Medicaid is just plain wrong and quite surprising coming from such an eminent individual as Dr. Berwick. I guess this is the face of partisanship.

Medicare is bankrupting the country. It doesn’t matter whether the polls show the public not wanting any changes in Medicare. It doesn’t matter whether Republicans or Democrats win or lose the next election. Medicare’s bankruptcy is coming and the only way to avoid it is to spend less — a lot less. The demagogues may win this round but in the end, the system will either radically change or completely collapse.

The reason Ryan’s plan calls for the lower percent of GDP spent on healthcare in 2050 is that he proposes slowing the growth of Medicare from a 6-7% increase each year to an increase that tracks CPI while at the same time projecting quicker economic growth.

Moreover, Ryan counts on health insurance companies to manage the system and control utilization. The current government plan calls for a central Independent Payment Advisory Board (IPAB) that will decide payments for healthcare and approve use of various programs. The proof that this approach will work simply doesn’t exist. Moreover, even Democrats in Congress are very uncomfortable with the idea.

Many have been outraged that health insurance companies would even have a role in the new system much less actually administer the whole thing. The typical meme here is that the insurance companies bleed the system, make too much profit, are too inefficient and too intrusive.

You can try to figure out how to reduce costs in a central office in Washington or you can simply give individuals a fixed amount of support, allow them to seek out the best deals for how to spend that money, and shop around for arrangements to maximize the value they receive. Ryan understands that the health insurance companies are actually the best means of implementing this market based approach. Take for example United Healthcare Group’s, recent study: Federal Health Care Cost Containment –How in Practice Can it be Done? Options with a real world track record of success.

This company, the largest health care insurer has actually achieved on a broad scale involving many patients and hundreds of thousands of physicians many of the hoped for reforms Dr. Berwick’s previous project, The Institute for Healthcare Improvement, sought to accomplish on a much smaller scale. United Healthcare makes a convincing case that they could actually accomplish the $540 billion dollars in savings of federal health care expenditures over the next decade if the programs they already have in place could be implemented widely in Medicare.

Dr. Berwick advocates an incremental approach to Medicare reform:

He pointed to health systems that are making improvements in readmission rates or prenatal care, such as Denver Health and Parkland Health and Hospital in Dallas. The challenge for CMS, he said, is to learn from successful programs and expand them nationally.

His approach, to have the federal agency enforce a nationwide approach to care, is a fantasy. Interestingly, he points to industry to model the proper approach to healthcare:

We afford to do it the way every other industry has done it, doing things right in the first place and by removing waste from products and services and reinvesting the harvest of smart waste reduction.

Here he’s correct. Industry can manage this sort of thing. Not the government. Just compare the Postal Service with FedEx.

The Health Cost Fix Obama Won’t Accept

April 21st, 2011 at 7:31 am 20 Comments

The Patient Protection and Affordable Care Act (PPACA) — Obamacare–  is coming under new attacks as the constitutionality of the individual mandate nears the Supreme Court. In particular, there are new questions about the president’s preferred cost control mechanisms. Yet, the one possible solution for the president’s health cost worries is still off the table.

The new criticism has focused on two particular mechanisms from the PPACA: the Independent Payment Advisory Board (IPAB) — the group affectionately known as the “death panel” — and the Accountable Care Organizations (ACO). (It’s imperative that any complex government program has an array of acronyms, preferably three letter ones, or TLA’s.)

The President has recently proposed that the IPPB be expanded and empowered to determine the payment for and nature of medical care provided to Medicare recipients. This board would have incredible and essentially unregulated power and require a supermajority of Congress to overturn its mandates.

Democrats in Congress have objected to its independence and lack of accountability to the electorate. Republicans have objected to the overwhelming likelihood that this group will be the implementers of rationing and would look to control the costs of healthcare through price controls (which never work). Moreover, the claim that this unelected group would be immune to political pressure is another example of the triumph of hope over reality.

ACOs, the other cost control proposal, are described in the health care bill as “groups of providers of services and suppliers meeting criteria specified by the Secretary [of Health and Human Services who] work together to manage and coordinate care for Medicare fee-for-service beneficiaries.”  The bill’s language goes on to describe the financial hope that “ACOs that meet quality performance standards established by the Secretary are eligible to receive payments for shared savings.” Previously, the ACOs were pretty much universally praised but lately important deficiencies have become more widely noted.

First, as I recently pointed out, demonstration projects conducted as preludes to ACOs were praised by Dr. Donald Berwick head of CMS (Centers for Medicare and Medicaid Services) as proof of cost-saving success.  In fact, analysis from Robert Berenson of the Urban Institute shows that there were no real savings in the entire demonstration project, merely more clever data  and diagnostic coding manipulation.

Furthermore, as pointed out by Michael Millenson writing in the Kaiser Health News, the new rules CMS is imposing on the ACOs make it almost impossible that the program will succeed. Participants will be forced to report on 65 various quality measures, get approval for any marketing materials, follow highly complex risk adjustment schemes (to prove that the sick patients are really sick), and have payment plans that may require the Madoff backroom to keep track of it all.  The organizational complexities imposed by the governmental bureaucracy will overwhelm the model, a problem which still undercuts many aspects of Obamacare.

ACOs have also come under attack from the right. Rita E. Numerof of the Heritage Foundation draws attention to more deficiencies: First, there’s no component that empowers consumers to be stakeholders in their own care. In fact, patients may not even know they’ve been assigned to an ACO for their care and that they may go to whichever physician or hospital they like. They certainly won’t have an economic stake in choosing one delivery group over another. It’s the lack of market discipline applied to healthcare that increases complexity and reduces the likelihood of efficiency.

Second, the current ACO model doesn’t really encourage provider accountability since it maintains the fee for service payment system. The impetus to be efficient is the possibility of a bonus later, rather than a true financial risk although risk may be incorporated into the payment system at a later date.

Finally, ACOs will require a highly sophisticated organization with costly infrastructure (for example, electronic health records). This feature will favor very large groups.  Numerof fears that ACOs could actually create an unfair competitive advantage for large organizations which could lead to a consolidation of market power in these groups and hence further drive up health care costs.

In case these three observers aren’t sufficiently intellectually or politically pure, John Kastor, a professor of Medicine at the University of Maryland writing in the New England Journal of Medicine also has doubts that academic medical centers — the dominant health care systems in many if not most urban centers — will succeed as ACOs because of many of the issues cited above and the long-standing culture of independence that characterizes the American medical workforce. There aren’t enough economic incentives in the ACO model as envisioned by Secretary Sibelius to overcome these cultural barriers.

The secret that dare not be discussed by the administration is that current large, managed care organizations are really the enterprises that could monitor and administer ACO-like models. In fact, the staff-model HMOs like the Kaiser Permanente system have already shown that they can provide less costly, high-quality care with high patient satisfaction. Such enterprises have the systems and organizational structures to manage risk.

Rather than acknowledge this reality and anger the physicians and hospitals systems that see such organizations as the “enemy”, Obama continues to vilify the insurance companies and to demean Paul Ryan’s proposal for considering the possibility that such a managed care model could work.

The president’s demagoguery of the health insurance industry may be good election year politics but it may also result in him failing to successful implement his signature program.