Cost v value as policy focus

Ezra Klein has a nice post running over the political and policy problems of focusing on “cost reduction” in health care, and instead suggest focusing on the receipt of value for the dollars spent. He frames the decision in partisan terms–what should the guiding health policy be for the Ds as opposed to the Rs, but there are some limitations to a cost focused strategy in policy terms, even if you believe the health system is unsustainable.

Two questions are paramount here. The first is what is the appropriate out of pocket exposure that an individual should face prior to receiving care? Does it differ by age? Income? Health Status? You tell me….The problem with blunt tools like large deductibles is that they likely reduce good and bad spending (high value and low or no value). The roll out of the ACA has helped to crystallize this question, if only we could get to the policy and off of the macro political narrative.

The second question (how to get to higher value for the dollars spent?) is laid out in some of our recent work at Duke looking at the preferences of Medicare beneficiaries who have cancer. Simply put, could expanded patient and family choice in they types of care covered  by the program (that pays for the care of 8 in 10 persons who die each year) lead to a more productive expenditure of resources? And in doing so, possibly reach what sounds too good to be true–lower spending with higher benefit to patients? We are about 3 months into enrolling patients into a Center for Medicare and Medicaid Innovation Center grant (CMMI) to demonstrate, evaluate and propose potential payment changes for how Medicare reimburses palliative care. This feels like it might be the most important work I might do in my professional career. If you change the incentives in how Medicare pays for end of life care, it will filter down into the rest of the health care system.

I am at the American Academy of Hospice and Palliative Medicine Annual Assembly (follow #HPM15) in Philly for the next two days, and many parts of the questions and answers under the “value proposition” will be on display here. We as a field (hospice and palliative care) need to do a better job of translating the research evidence base into usable information for policy makers. I think the country is ready to listen, with IOM report Dying in America helping in this manner. When will the political system be ready for the next steps in health policy? (and the next, and the next?, etc)). Not sure, but we need to be ready to lead into the most difficult health policy questions when they are, and the biggest goal–focusing on maximizing value for the health care dollars we spend.

Could North Carolina circumvent King v Burwell?

Adam Linker has an op-ed this morning in the News and Observer encouraging the North Carolina General Assembly and the Governor to:

re-establish(ing) state control over our insurance marketplace. In fact, most of the pieces are already in place. Our Department of Insurance is proactive about reviewing insurance policies. Our health care and insurance communities meet regularly and could easily form an oversight board. Our outreach and enrollment efforts are national models. All we need is for the governor to work with legislators to vest these organizations with the power to form a state marketplace.

I wrote a post last summer asking what does it mean for a state to establish an exchange with respect to the looming Supreme Court case that will determine if tax credits (515,000 North Carolinians have just signed up for coverage and are getting such subsidies) can legally flow to states using the federally facilitated exchange. My post is wonky and complicated, but health policy is wonky and complicated and runs through the various ways that States could move forward on a state-specific exchange.

However, I am less certain now than I was last summer that North Carolina could do something in the short run to definitely make the tax credits flowing to our state safe regardless of what the Supreme Court rules (there isn’t enough time to set up all the functions). It is unclear if a simple statement of establishing an exchange and then pointing to healthcare.gov for people to shop for coverage would be enough, in large part because of the uncertainty of what the Supreme Court may say (I know no one who predicted the mix of what they said in 2012). The North Carolina Attorney General Roy Cooper has already signed onto an amicus brief that argues that the actions taken by the State to use the federal exchange was made under the belief that the citizens of North Carolina would be able to receive such tax credits.

Even a simple statement of the intent of the North Carolina General Assembly to have the tax credits flow to our citizens with which to purchase private health insurance could prove important, and certainly wouldn’t hurt anything, if our leaders are worried about over half a million North Carolinians losing these tax credits.

N.C. Hospitals to help finance Medicaid expansion?

North Carolina Gov. Pat McCrory says that he is still exploring options for expanding Medicaid, including having hospitals help finance the 10% of the total cost not covered by the federal government in the out years.

“They would have to have skin in the game to cover the extra 10 percent,” McCrory said.

This comment is the strongest signal I have seen that the Governor is serious about moving ahead, because he has laid down the marker of what the hospitals who so favor expansion will have to give to get it (and they will go along under terms like this).
The simplest mechanism through which the largest hospitals (that are most typically linked to University health care systems) would be via the capping of the North Carolina sales tax exemption granted to Not for Profit organizations in the state. This post from Summer, 2013 notes that around 75% of the value of this tax exemption flowed to hospitals. During the last long session of the North Carolina General Assembly, the hospitals were at odds with the N.C. Chamber over this policy, but the real issue between them was Medicaid expansion. Essentially, they were willing to give up the heretofore unlimited state and local sales tax refund, but only if they got Medicaid expansion in return.
The tax reform passed in 2013 capped the amount of state and local sales tax refund that a Not for Profit organization (hospital, University, small 501 c 3) at $45 Million dollars, which was just above the amount that Duke (combining University and Health System) received in 2014, the biggest in the state (G.S. 105-164.14(b) see page 55).
G.S. 105-164.14(b) – Cap on Refunds for Nonprofit Entities and Hospital Drugs: This subdivision is amended to add “[t]he aggregate annual refund amount allowed an entity under this subsection for a fiscal year may not exceed thirty-one million seven hundred thousand dollars ($31,700,000).” The amount applies to refunds of State tax only. A local aggregate annual cap is added in G.S. 105-467(b) in the amount of thirteen million three hundred thousand dollars ($13,300,000). (Effective July 1, 2014 and applies to purchases made on or after that date; HB 998, s. 3.4.(b), S.L. 13-316.)
So, the General Assembly set a cap in 2013 that didn’t apply to anyone yet. Over time it will start to apply, but there are very few Not for Profit organizations that have more than several hundred thousand dollars of this refund, so dropping the cap well below $45 Million annually will most hit (1) Universities; and (2) large hospitals/health care systems. The 10 or so biggest would essentially pay the way for the rest of the hospitals, and smaller 501 3 c organizations could maintain their state and local sales tax refunds.
Inside baseball for sure, but look for this to be the way that hospitals/health systems and the Universities that own the big ones to be the way they “help pay the state’s cost of Medicaid expansion.”

LTC Insurance underwriting as a civil rights issue?

Brad Flansbaum sent along this piece on the cost of private LTC insurance which is familiar territory save one detail. The piece notes:

Last year, the National Women’s Law Center filed federal sex-discrimination complaints against four insurers, challenging such gender-based pricing on the grounds that the practice violates a provision of the Affordable Care Act barring sex discrimination in health care. The action is pending with the Department of Health and Human Services’s Office for Civil Rights.

This makes no sense to me. Long Term Care as offered in private policies (denominated in dollars per day once a claim is certified) is not a part of the mandated benefits of the ACA. And while in policy terms I am sympathetic to the burden of LTC on single women (many widows), the legal reality is that LTC insurance has not been noted as a product worthy of protection even by the Genetic Information Non Discrimination Act (GINA) 2008 (some states have barred private insurance companies from using genetic markers for LTC policy underwriting; even more on this topic).

The most interesting aspect of this issue–what is allowed to determine insurability and/or to set the appropriate premium differs so much across types of private insurance markets in the U.S. There is obviously no one acceptable rule. Gender discrimination (in the sense of setting premiums to risk of loss based on gender) is allowed in car insurance. The ACA saw fit to changing underwriting and premium variation rules for major medical, but excluded LTC insurance from such regulation as did GINA 2008.

Fascinating differences in what is socially acceptable across types of insurance in issuing policies and setting premiums.

LTC Model Development in China

A quick post from the plane on the way home from a week talking about LTC policy in China, and visiting a variety of LTC/elderly service delivery institutions in and around Shenyang, which is in the North East of China. I was there via a World Bank project in conjunction with the Development Research Council (DRC) which is a Chinese governmental research and analysis unit that is a part of the State Council of China that does work supporting health and social care delivery.

  • There seems to be great interest in testing and evaluating new and divergent models in LTC delivery. I found the week to be an intellectually invigorating exercise of thinking through what I know about the U.S. LTC system and trying to learn more about China’s system, and trying to figure out what that might mean for China going forward (and for China as a model for other nations).
  • A key theme of the week was the Government’s goal of increasing private delivery (as opposed to, for example, a government run nursing home) of LTC. We visited several NGOs that have repurposed existing facilities into LTC delivery/adult day care type centers. It was especially interesting to meet two young people (30s is young for me now) who had advanced degrees from the U.S. but who returned to their country to do new things in LTC.
  • There are also very interesting moves toward Government directly paying for services that are delivered by private entities, be they NGOs that would be like non profits in the U.S. context, or for profit entities. They are in the process of getting the relevant laws and regulations lined up with goals in this area.
  • One visit really stands out. We saw a very large, modern set of facilities that are like a continuing care retirement community (CCRC; independent apartments, assisted living and a nursing home facility all in one place) that the Chinese Government had built, and that a private company was running.
  • There is a great stock of empty Nursing Home beds in and around Shenyang, especially in the more rural areas, while in certain (city center) neighborhoods there are waiting lists.
  • A key demographic reality is that China is now nearly as old as the U.S. is (in terms of percent of the population age 65 and older), but it has aged far more rapidly than did the U.S. This means that LTC is a more pressing issue even as China is just beginning to move toward broad major medical insurance coverage (the 2009 reforms now have around 1.4 Billion persons covered by health insurance, though there is a huge maldistribution of care delivery infrastructure. The point is that the U.S. has gone decades since the passage of Medicare and Medicaid without directly addressing LTC. China has a chance to build an insurance system that better integrates LTC into the overall system.

I will have more to say on this, but a great trip. And on the tourist angle, if you get the chance to visit the Chinese museum that is adjacent to Tian’anmen Square, it is very well done and I highly recommend it in addition to the sights in the square itself.

On the way to China

I am going to China Monday February 2 for a week, consulting on some LTC policy developments with the Chinese Government. I am looking forward to learning more about their system and perhaps helping them think through their options. You know, because our LTC system works so well….

I am sure I won’t be blogging, but I haven’t been blogging the past few weeks in any event. I have just been unable to get to it with so much going on, and my motivation and interest has just not been as high as it was in the past. I intend to get back to blogging more as we move into February; we will see.

Innovation

Don’t look to the states for new ideas says Ronnie Chatterji, my Duke Fuqua colleague, in large part because they have become more ideological/partisan in their politics over the last few years and are thus less receptive. Further, there are true idiosyncratic aspects of states and their problems that make scaling of state-identified solutions very difficult.

How to foster innovation, and what to expect from it in terms of scalability is a key question in health care, and in public policy, more generally.

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