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Economists Display What They Don’t Know About the Health Care Industry

Posted on October 7, 2015 I Written By

Andy Oram is an editor at O'Reilly Media, a highly respected book publisher and technology information provider. An employee of the company since 1992, Andy currently specializes in open source, software engineering, and health IT, but his editorial output has ranged from a legal guide covering intellectual property to a graphic novel about teenage hackers. His articles have appeared often on EMR & EHR and other blogs in the health IT space. Andy also writes often for O'Reilly's Radar site (http://oreilly.com/) and other publications on policy issues related to the Internet and on trends affecting technical innovation and its effects on society. Print publications where his work has appeared include The Economist, Communications of the ACM, Copyright World, the Journal of Information Technology & Politics, Vanguardia Dossier, and Internet Law and Business. Conferences where he has presented talks include O'Reilly's Open Source Convention, FISL (Brazil), FOSDEM, and DebConf.

Recently, I resorted to a rare economic argument in a health IT article, pointing out that it’s unfair to put the burden of high health care costs on the patients. Now 101 economists have come out publicly recommending that very injustice. Their analysis shows the deep reluctance of those who are supposed to guide our health care policy to admit how distorted the current system is, and how entrenched are the powerful forces that keep it from reforming.

My argument cited numerous studies and anecdotal reports to show the deplorable record of the US health care industry regarding costs: providers who don’t reveal prices, providers who don’t know what the patient’s out-of-pocket costs will be, wrenching differences in insurance payments for the same procedure, missing quality information that consumers would need to make fair comparisons, and more. Just as icing on the cake, the most recent Consumer Reports (November 2015) offered a five-page article on all the screw-ups that lead to medical “sticker shock.”

Probably I’m foolish to launch an economic argument with the distinguished signers of the brief letter to key members of Congress. The signers’ credentials are impeccable, placing them in an impressive list of universities and think tanks–all of which, I’m sure give generous coverage for any health care these economists need. If any of the signers should be burdened with the Cadillac tax, they could cover it with an extra consulting gig at the World Bank. (What’s the economics behind “nice work if you can get it”?)

But the economists just aren’t facing realities in the health care industry. Let’s expand their telescoped argument, full of assumptions and leaps of faith, to see what they’re saying.

First, they expect that the Cadillac tax will not be quietly absorbed by firms wooing professionals in high demand (such as health IT developers), but will drive those firms to reduce coverage. The burden will explicitly fall on the individual patient. I suspect that many firms facing staff shortages would just compensate key high-performers for the high-cost health coverage, but let’s accept the economists’ assumption and move on.

Next, the economists assume that the patient will make rational choices leading to what they call “cost-effective care.” What could such choices be?

Can the patient tell her doctor that a certain test is unnecessary, or that a certain treatment is unlikely to improve her condition? Does the patient know that the test has too many false positives, or is unlikely to add to the doctor’s knowledge? These questions lie precisely within the expertise of the provider, not the patient.

Can the patient determine whether a high-cost drug will pay for itself in reduced future health care and improved quality of life? This calls for extended longitudinal research.

Can the patient tell her provider or insurer to adopt a rigorous pay-for-value regime? If she goes looking for an ACO, will it actually gather enough data to treat her efficiently, and does it truly get rewarded for doing so? These are nation-wide policy issues outside the patient’s control.

As I pointed out in my earlier article, the patients lack the information needed to compare the costs and quality of procedures from different providers. Patients try to do so, but data is inadequate. Nor will yelling and screaming about it make any difference–we’ve all known about the problem for years and it hasn’t made much difference so far.

I don’t like dumping on economists. After all, they rarely cause the problems of the world, and are all too often tasked with solving them. The perennial occupational hazard of the economist is to be forced to make recommendations on the basis of insufficient knowledge.

But in this case, the average patient has knowledge that these economists lack. The problems are also well known to anyone in the health care industry who has the courage and clarity of vision to acknowledge what’s going on. If we want the system to change, let’s put public pressure on the people who are actually responsible for the problems–not the hapless patient.

Affordable Care Act and Employee Health

Posted on May 14, 2012 I Written By

Priya Ramachandran is a Maryland based freelance writer. In a former life, she wrote software code and managed Sarbanes Oxley related audits for IT departments. She now enjoys writing about healthcare, science and technology.

Over at healthaffairs.org, there was a super interesting brief on Affordable Care Act and its forthcoming changes regarding employee health. Starting in 2014, employers will be able to offer incentives to employees regarding their enrollment in employee wellness programs. Employers can offer incentives such as monetary rewards for positive employee behavior like enrolling in a smoking cessation program, or joining a gym at discounted rates. Or these can work like the proverbial stick, by imposing penalties on non-compliant employees, e.g. increasing the cost of participating in an employer health plan by $1000 for employees who say they have smoked in the last year.

Now all those good components of the ACA will still be applicable i.e insurance companies will not be able to refuse patients based on prior medical history. But I can’t help but notice the irony of the ACA being used to discriminate between a healthy employee and a sick one.

One of the examples cited in the brief is that it will be legal for an employer to offer a health plan to employees who fulfil certain wellness criteria such as enrolling in a gym in addition to the other health plan options available to its other employees. The cost of the other health plan options to a truly unwell employee could well be so exorbitant as to make it impossible for him/her to enroll in it. Options for such employees could be to enroll through a spouse’s plan or purchase private insurance through the health information exchanges. The brief says that there are plugs for these sorts of employer excesses, such as companies with over 50 employees will be penalized even if one employee enrolls in a subsidized state insurance program in lieu of the company sponsored one.

I’m also wondering if there will be any kind of guidelines for companies to design their incentive/penalty programs. Health and wellness are incredibly nuanced issues. For every person who can exercise a half hour a day and lose a pound a week, there are those who seemingly subsist on air and water and barely make a dent in their BMI. Genes determine plenty of factors in a person’s helath profile, including weight, propensity to develop certain conditions and so on. It makes me wonder if we’re oversimplifying things by gauging employee wellness based on criteria such as gym enrollment.

Plus what if you have lots of people like me who might enroll in a gym and never see the inside of it beyond the first few days? Simple enrollment might not be enough. But, to my mind at least, tying enrollment to outcomes has the unfortunate whiff of a mini nanny state in the making. Who wants to be the person at the company weigh-in whose BMI has come down by .1 while the muscled, rippled company health club employee looks at you quizzically? Not me.

I also worry about the unwell employee who feels pressured into signing up for risky activities (from his/her health perspective), simply in order to get the rewards offered or to avoid the penalties. S/he might have something truly tangible to lose both ways.

I would love to see how ACA transforms in the next couple of years but right now I think I have way too many unanswered questions.

Obamacare Before SCOTUS

Posted on April 2, 2012 I Written By

Priya Ramachandran is a Maryland based freelance writer. In a former life, she wrote software code and managed Sarbanes Oxley related audits for IT departments. She now enjoys writing about healthcare, science and technology.

So the Affordable Care Act got hauled up before the SCOTUS last week. From the way the questions were framed it looks like the individual mandate portion might be struck down, though it is too soon to tell.

I have mixed feelings about the Affordable Care Act. On the one hand I can see why affordable health for all must be a priority. I know people who use the ER room as their sole point if contact with the healthcare system, and sadly some of them have paid the price with their lives. There’s also a selfish reason behind my reasoning. Each time someone uninsured turns up at the ER, and gets top notch care, it is MY tax dollars that fund the treatment. Surely there are better ways to use tax dollars.

And yet a mandate makes me queasy. If the government mandates health insurance today, will it start mandating annual exams and flu shots a few years down the road. I think the most succint response on this topic was summarized thus by a Twitterer: “The problem with the mandate is the insurance is private. Make the insurance public and call it a tax. Problem solved.”

I can hear Americans collectively go This isn’t Canada at this point. But think about it: directly or indirectly, we are paying for the uninsured with our tax dollars. Public health insurance might take away some of the worries we have around bouts of non-insurance resulting from unemployment or old age.