Aaron E. Carroll's Blog, page 135
May 16, 2017
Post-acute care: Medicare Advantage vs. traditional Medicare
From a public spending point of view, post-acute care is particularly problematic. Most of Medicare’s geographic spending variation is due to this type of care. Part of the story is that Medicare pays for post-acute care in several different ways, with different implications for efficiency.
For example, traditional Medicare (TM) — which spends ten percent of its total on post-acute care — pays skilled nursing facilities per diem rates but inpatient rehabilitation facilities a single payment per discharge. Post-acute care is also available through Medicare Advantage (MA), which operates under a global, per-enrollee, payment. Unlike TM, MA plans establish networks, may require prior authorization for post-acute care, and can charge more in cost-sharing for post-acute care than TM does.
These different payment models offer different incentives that may affect who receives care, in what setting, and for how long. In Health Affairs, Peter Huckfeldt, José Escarce, Brendan Rabideau, Pinar Karaca-Mandic, and Neeraj Sood assessed some of the consequences of those incentives. Focusing on hospital discharges for lower extremity joint replacement, stroke, and heart failure patients between January 2011 and June 2013, they examined subsequent admissions to skilled nursing and inpatient rehabilitation facilities, comparing admission rates, lengths of stays, hospital readmission rates, time spent in the community, and mortality for MA and TM enrollees. To do so, they used CMS data on post-acute patient assessments for patients with discharges from hospitals that received disproportionate share or medical education payments from Medicare.
You might be wondering how the investigators could possibly study MA patients with CMS data. First of all, post-acute facilities are required to file patient assessments for all patients, MA and TM alike. Second, in order to pay disproportionate share and medical education payments to hospitals, CMS collects “information only” (i.e., zero charge) claims for MA patients from hospitals entitled to those payments. Such hospitals account for 92 percent of Medicare discharges. (As far as I know, validation analyses of information only claims has not been published.)
Their analytic file included almost one million lower extremity joint replacement episodes, almost a half-million stroke episodes, and just over three-quarters of a million heart failure episodes. About a quarter of these were for MA patients. Their analyses adjusted for patient characteristics and used hospital fixed effects.
Lower extremity joint replacement MA patents were two percentage points more likely to be admitted to a skilled nursing facility than TM patients, but an MA patient stayed 3.2 fewer days, on average. On the other hand, lower extremity joint replacement MA patients were far less likely to be admitted to an inpatient rehabilitation facility than TM patients — an adjusted difference of 6.4 percentage points. Lengths of stay were about the same.
Findings for stroke patients were similar. TM heart failure patients were slightly more likely to be admitted to a skilled nursing facility than MA patients, and stayed 1.7 days longer than MA patients. The trend is similar for heart failure patient admissions and stays at inpatient rehabilitation facilities, but the overall rates of admission to them is very low for these patients.
MA patients of all types were less likely to be readmitted to the hospital and more likely to be living in the community than TM patients. There were no statistically significant mortality differences. These results suggest that MA patients are not adversely affected by their lower volume of post-acute care utilization.
If TM patients were to somehow adopt the same level of utilization of post-acute care as MA patients, the program would save money. Results of the authors’ savings calculations, by condition, are shown in the following chart. Overall, they represent about a 16 percent reduction in spending.
One way TM is progressing toward more efficient post-acute spending is through accountable care organizations (ACOs). That’s according to a recent paper by J. Michael McWilliams and colleagues. They found, for example, that ACOs that entered the Medicare Shared Savings Program in 2012 reduced post-acute spending by 9% without reductions in quality of care (as measured by mortality, readmissions, and use of highly rated skilled nursing facilities), relative to non-ACO providers.
Naturally, there are some limitations to the Huckfeldt et al. analysis. First, though the authors did not detect any favorable selection into MA, it is possible that MA patients differ systematically from TM patients such that the results are not completely driven by MA care management. Second, the study did not examine every type of post-acute care — home health care, long-term hospital care, or other outpatient care were omitted from the analysis. Home health care is less costly than the types of care examined. Long-term hospital care is relatively rare. And, outpatient care is unobservable for MA. Third, there are other, possible measures of quality of care besides those examined (readmissions, time in the community, and mortality).
All told, the results suggest that MA manages post-acute care more tightly than TM and with no observed, negative consequences for patients.
May 15, 2017
Healthcare Triage: Healthcare and Customer Satisfaction – Not ALWAYS Mutually Exclusive
You’ve all experienced it: There’s a problem with your health care bill, or you have difficulty getting coverage for the care you need. Your doctor or hospital tells you to talk to your insurer. Your insurer tells you to talk to your doctor or hospital. You’re stuck in an endless runaround.
A small patient advocacy industry has sprung up to help, but that help can cost several hundred dollars an hour. Is there a way to get the customer service we deserve? That’s the topic of this week’s Healthcare Triage.
Special thanks to Austin, from whose Upshot column this episode was adapted. Links to further reading and sources can be found there.
Risk adjustment cannot solve all selection issues—network contracting edition
In our Hamilton Project paper, Nicholas Bagley, Amitabh Chandra, and I explain why a health insurance market in which plans compete on cost effectiveness won’t work. (Click through, download the PDF, and read Box 2 on page 9, titled “Why Health Plans Cannot Differentiate on Coverage.”)
The recent NBER paper by Mark Shepard makes the same argument we made, but to illustrate problems in hospital markets with heterogeneous preferences for costly, star hospitals. Some key quotes from Mark’s paper:
But even excellent risk adjustment is unlikely to offset costs arising from preferences for using star (or other expensive) providers. These preferences create residual cost variation that can lead to a breakdown of risk adjustment (Glazer and McGuire 2000). Second, the two channels may have different cost and welfare implications. While sickness makes individuals costly in any plan, preferences for a star hospital only make enrollees costly if a plan covers that star hospital. Stated differently, preferences affect how much an individual’s costs increase when their plan adds coverage of the star hospital. […]
My results suggest that consumer preferences for high-cost treatment options – star hospitals in my study, but the same idea could apply to any expensive provider, drug, or treatment – can naturally lead to adverse selection, and specifically selection on moral hazard. […]
In the current system, consumers get access to star hospitals based on their plan choice, after which use of these providers is highly subsidized by the insurer. This setup leads to higher costs (moral hazard) and selection on moral hazard. Policies that reduce this moral hazard – e.g., higher “tiered” copays for expensive hospitals or incentives for doctors to refer patients more efficiently – may also mitigate the adverse selection. Differential plan prices for different groups may also improve the efficiency of consumer sorting across plans.
Mark’s paper is also noteworthy because it is one of the few to address consequences of network contracting. This is a hard area to study because plans’ hospitals and physician networks are not easily observed. Other good work in this area has been done by my colleagues at the Leonard Davis Institute.
Another day, another cost shifting claim
Via blog post, David Anderson drew my attention to a Health Affairs post by Billy Wynne, the Managing Partner of TRP Health Policy, in which Mr. Wynne wrote, “[C]ommercial rates are hiked, often stratospherically, to compensate for typically insufficient Medicaid reimbursement.”
Normally, I’d have to remind the world that many recent studies find no evidence for this kind of cost shifting. But, David did the work for me (and by citing me), so go read his post if you still don’t know the truth of the matter.
Oh, and spread the word. It’s very hard to keep up with assertions of cost shifting and push back against every one, even with David’s help.
May 11, 2017
Why were there no ‘Harry and Louise’ ads against the AHCA?
The American Health Care Act (AHCA) passed the House in the face of opposition from physicians, hospitals, and insurers. But that opposition was muted and it failed to defeat the bill. This is mysterious because amid other provisions the bill cut more than $800 billion from Medicaid funding. That money would make a real difference for many doctors, hospitals, and Medicaid Managed Care plans (to say nothing of disabled people or poor people currently receiving Medicaid). There’s an explanation for this meek opposition in Robert Pear’s article in the New York Times.
First, let’s revisit how fiercely some of these groups resisted previous health care legislation. It’s often thought that the Health Insurance Association of America’s ‘Harry and Louise’ ad helped defeat the Clinton health care plan of 1993.
So why aren’t these interest groups on the barricades this time? One reason, as Pear explains, is that no one in the Senate takes the House bill seriously.
Reince Priebus, the White House chief of staff, has said he expects the Senate to make improvements in the repeal bill that the House passed last week… But senators have gone much further: The Senate is starting from scratch.
“Let’s face it,” Senator Orrin G. Hatch of Utah, chairman of the Finance Committee, said Monday. “The House bill isn’t going to pass over here.’’
Hospital executives, among the most outspoken critics of the House bill, are in town for the annual meeting of the American Hospital Association and will lobby the Senate this week. Thomas P. Nickels, an executive vice president of the association, predicted that the Senate would produce an “utterly different version” of the legislation.
So that’s why the resistance was muted: the relevant interest groups were told not to worry about what was in the AHCA. The House vote was just for… what? To save the President and Speaker Ryan from the humiliation of being unable to pass anything?
Of course, if the Senate is starting from scratch, it means that the Republicans still have no idea what their design for replacing the ACA is. Moreover, if the Senate does draft new legislation, what is the magic that will make the Senate bill the real bill? Suppose the Senate drafts and passes a significantly more moderate bill. Then that bill, or a House-Senate compromise bill, will have to be passed by the House. What happens to the delicate compromise between conservative members and radically-conservative members that was required to pass the AHCA through the House? Will the Senate bill be dead on arrival at the House?
Healthcare Triage: Patients Don’t Shop Around, Even When They Can
You probably know where to pump the cheapest gas and how to get price comparisons online in seconds for headphones and cars. But how would you find the best deal on an M.R.I. or a knee replacement? No idea, right?
And if we could, it would be the magic fix for health care, right? Yeah… not so much. That’s the topic of this week’s Healthcare Triage.
Special thanks to Austin, who wrote the Upshot column from which this episode was adapted.
May 10, 2017
Some Medicare prescription drug plans cost more than we think
The following originally appeared on The Upshot (copyright 2017, The New York Times Company).
Many studies have demonstrated what economics theory tells us must be true: When consumers have to pay more for their prescriptions, they take fewer drugs. That can be a big problem.
For some conditions — diabetes and asthma, to name a few — certain drugs are necessary to avoid more costly care, like hospitalizations. This simple principle gives rise to a little-recognized problem with Medicare’s prescription drug benefit.
For sicker Medicare beneficiaries, the Harvard economist Amitabh Chandra and colleagues found, increased Medicare hospital spending exceeded any savings from reduced drug prescriptions and doctor’s visits. Consider patients who need a drug but skip it because they feel the co-payment is too high. This could increase hospitalizations and their costs, which would make them worse off than if they’d selected a higher-premium plan with a lower co-payment.
Though just a simplified example, this is analogous to what Medicare stand-alone prescription drug plans do. They achieve lower premiums by raising co-payments. This acts to discourage the use of drugs that would help protect against other, more disruptive and serious health care use, like hospitalization.
Studies show that insurers, many of which are for-profit companies after all, are using such incentives to dissuade high-cost patients from enrolling or using the benefit. There’s evidence this occurs for Medicare’s drug benefit, as well as in the Affordable Care Act’s marketplaces.
The most popular type of Medicare drug coverage is through a stand-alone prescription drug plan. A stand-alone plan never has to pay for hospital or physician visits — those are covered by traditional Medicare. Another way to get drug benefits from Medicare is through a Medicare Advantage plan that also covers those other forms of health care and is subsidized by the government to do so.
Because of this difference, stand-alone drug plans are less invested than Medicare Advantage plans in keeping people healthy enough to avoid some hospital visits.
A study by the economists Kurt Lavetti, of Ohio State University, and Kosali Simon, of Indiana University, quantifies the cost. Compared with Medicare Advantage plans, stand-alone drug plans charge enrollees about 13 percent more in cost sharing for drugs that are highly likely to help patients avoid an adverse health event within two months. They charge up to 6 percent more for drugs that help avoid adverse health events within a year.
It’s not as if stingier insurers are more likely to offer stand-alone plans than Medicare Advantage plans. Even among plans owned by the same insurer, Medicare Advantage plans are more generous in covering these kinds of drugs than stand-alone drug plans. (These differences are apparent only on average. In some instances, stand-alone drug plans offer better deals.)
Of course, people have choices about plans. Those who have selected a stand-alone drug plan, as opposed to a Medicare Advantage plan, have done so voluntarily. Why do some make this choice?
One answer is that some people are not comfortable with the more narrow networks Medicare Advantage plans offer, with their fewer choices of doctors and hospitals. By choosing a stand-alone drug plan, they can remain in traditional Medicare, which has an open network.
In addition, consumers are generally more attracted to lower-premium plans than higher ones, even if the difference is exactly made up in co-payments. This may be because premiums are easier to understand than cost sharing. Moreover, premiums reflect a sure loss — you must pay the premium to remain in the plan. A higher co-payment, on the other hand, won’t necessarily lead to a loss because you may not use a service.
The appeal of lower premiums is an incentive for stand-alone drug plans to reduce them and increase co-payments. But that can dissuade those who need medications from filling prescriptions and taking them.
Part of the purpose of Medicare’s drug benefit is to encourage enrollees to take prescription drugs that can keep them out of the hospital. In July 2003, promoting the legislation that created Medicare’s drug benefit, President George W. Bush articulated this point. “Drug coverage under Medicare will allow seniors to replace more expensive surgeries and hospitalizations with less expensive prescription medicine,” he said.
But the design of Medicare’s drug benefit includes stand-alone plans that aren’t liable for hospital costs, so they don’t work as hard to avoid them. Encouraging more beneficiaries into comprehensive plans — through Medicare Advantage — or offering a drug plan as part of traditional Medicare itself would address this limitation.
Postscript: A CMMI initiative that started this year in five regions is designed to create incentives for stand alone PDPs to reduce non-drug Medicare expenditures.
May 9, 2017
Amgen’s Money-Back Guarantee: Simply Too Good To Be True
The following is a guest post by Rodney Hayward, Director of the Robert Wood Johnson Foundation Clinical Scholars, and the National Clinician Scholars at IHPI. He’s a Professor of Medicine and Public Health at the University of Michigan. Follow him on Twitter at @ProfHayward.
Multiple small clinical trials suggested that PCSK9is (a new class of cholesterol-lowering medications) might be the next super drug-class. These early trials suggested that PCSK9is dramatically decreased cardiovascular disease (CVD) events (strokes and heart attacks) in those who had very high CVD risk and could not take statins (the current standard for treating cholesterol).
But most people with very high CVD risk tolerate statins just fine, greatly limiting the market for PCSK9is. A potential solution was to prove that the drugs worked better even for those on statins already. Unfortunately for the main PCSK9i manufacturer (Amgen), the first large randomized trial examining PCKS9-abs benefits in those on statins was highly disappointing. In the much larger market of high CVD risk people on statins, the relative reduction in non-fatal CVD events was much less than expected (25%) with no effect on mortality.
Although no one wants to have a heart attack or stroke, the lack of a mortality benefit – and the ~$14,500/yr price tag – led most to conclude that the expense was not worth the gain. Some pundits called for a price cut, but last week Amgen came up with a better idea – a full Money-Back Guarantee!
What A Deal!
In response to their falling stock price, Amgen announced last week that they would refund the cost of the drug in full if an individual taking it regularly has a major CVD event. This was portrayed by some media sources as an advance for pay-for-performance, and it certainly makes great intuitive sense. Yes, it may be a small consolation if the PCSK9i didn’t prevent your stroke, but “you get your money back if the medication doesn’t work for you.”
The problem is that the italicized sales pitch above is completely untrue.
What A Scam!
Modern psychology has demonstrated that we humans are terrible intuitive statisticians and that it’s quite easy to fool us with statistical illusions. So let’s briefly go through the math to understand why Amgen’s sales pitch is untrue.
A Best-case Scenario: A sizable group (though a small proportion of all adults) continues to be at very high CVD risk (~5% 5-year risk) after taking a statin, a daily aspirin, and blood pressure medications as indicated (cost ≈ $30-$150/yr). If you give a PCSK9i to 1000 such individuals, current evidence suggests that you would prevent, on average, 12 to 13 non-fatal CVD events over a five year period (0.05 [5-year risk] * 0.25 [PCKS9i’s relative risk reduction] = 0.0125 = 12.5 in 1000) at a cost of ~$72.5 million. We know that more than 30% of these events will be quite minor, but let’s ignore that so as to not be accused of nitpicking. Over 5 years, Amgen would need to return ~$1.4 million to ~37.5 of the 1000 people (2.5yrs [average years to CVD event in the 5-year period] * $14,500/yr * 37.5 [number of people who had a CVD event) ≈ $1.4 million).
But if only 12 to 13 people in 1000 benefited and only 37 to 38 people received refunds, who are the remaining 950 people who did not benefit? They are the 95% of people who were not destined to have a heart attack or stroke regardless.
So the claim, “If the PCSK9i doesn’t work for you, you get your money back!” is a complete scam. Over 98% (950 of ~962.5) of those who did not have a stroke or heart attack over 5-years received no benefit from the PCSK9i because they were not destined to have a CVD event regardless of treatment.
Ironically, the less likely a person is to benefit from the PCSK9i (ie, the lower their CVD risk), the less likely Amgen will need to refund their money.
So let’s restate Amgen’s Money-Back guarantee more accurately.
Individual Perspective: If you are a very high CVD risk person on a statin and you take a PCSK9i for five years, you have about a 1.25% chance of avoiding a non-fatal heart attack or stroke at a cost of ~$70,000, about a 3.75% chance of having a stroke or heart attack and getting your money back, and about a 95% chance of paying ~$70,000 and receiving no benefit.
Payer’s Perspective: For every 1000 high CVD risk beneficiaries on statins, paying for a PCSK9i for 5 years will prevent 12-13 non-fatal heart attacks or strokes, on average, and Amgen has generously offered to reduce the price to you by ~ 3.75%, from ~$72.5 million to ~$70 million.
May 8, 2017
Death and Disability: a theatre review
Last Friday we saw Kill me now by Brad Fraser at the National Arts Centre in Ottawa. It’s a play about disability and despair. It’s intermittently funny, but it’s not a comedy.
The play focuses on Hank, a widower, and his son Joey, an adolescent with what appears to be cerebral palsy. Joey has a severe speech impediment and limited motor control. He’s played — brilliantly — by Myles Taylor, an actor with similar disabilities. The play is unsparing about what Joey can’t do and the problems this causes. Being a teenager is hard enough; imagine having to endure having your father help clean you after defecation.

Joey and his aunt Twyla in the National Arts Centre of Canada production of Kill Me Now.
Hank was once a successful novelist and he teaches at a college, but mostly now he cares for Joey. He’s trying to cope with the death of his wife, the loss of his career as a novelist, his obesity, his low income, and his likely future as an unpaid home health care worker. If only Hank’s future were that hopeful.
Hank discovers that he has an aggressive case of spinal stenosis, which undermines his motor control and, as he becomes dependent on pain medications, the clarity of his speech. He loses his mobility, his job, his ability to care for Joey, and finally control over his bowels. In return for this suffering, he receives the real but austere redemption of his family’s love, above all Joey’s. The conclusion of the play is about assisted suicide, hence the title. Go see it if you want to look over the abyss.*
A few thoughts. First, it remains the case that many in the able-bodied community have little understanding of the experience of those with disabilities. Not to mention the continued prevalence of crude bigotry.
One of the characters makes the familiar error of assuming that because Joey has trouble speaking, she needs to SPEAK LOUDLY AND SLOWLY to him. It’s easy to laugh, but Myles Taylor’s performance made me aware that I too held hidden false assumptions. On the one hand, I unconsciously infer that a person who is struggling to speak may be struggling to think. (Even after Stephen Hawking!) Similarly, some people with neurological disorders have limited fine motor control over their facial muscles. This limits their ability to display affect. It’s a mistake, however, to infer that blunted facial affect implies that the person lacks a complex emotional life.
Second, Kill Me Now is graphic about the physical challenges of disability: eating, dressing, walking, and bathing. Providing this care requires many hours of physically demanding labour. Most families cannot afford extensive in-home help. There is no question that many people receiving disability support are much less impaired than Hank or Joey. Nevertheless, advocates for policies that would reduce Medicaid or Social Security disability benefits need to be mindful that they may be putting families like Hank’s in great peril.
Finally, part of what makes fiction and live theatre so powerful is that they draw me into the inner life of a character. The characters in Kill Me Now are greatly burdened by their identification as disabled. They understand themselves that way because meaning is social, and that is how we understand them. This is an unintended cruelty. We also have to understand disabled people in terms of their strengths and our common humanity. It’s not that you can change the facts of disability by simply using different words, but you can sometimes help people to live lives that are defined by their strengths.
It’s not, by the way, just disabled people who are pre-occupied by their social labelling. I have spent far too much time polishing the insignia of my credentials and (what I imagine are) my strengths and accomplishments. Perhaps you have too. We’d all do better if we could lay those burdens down.
*Gerard Manley Hopkins (from No worst, there is none):
O the mind, mind has mountains; cliffs of fall
Frightful, sheer, no-man-fathomed. Hold them cheap
May who ne’er hung there. Nor does long our small
Durance deal with that steep or deep. Here! creep,
Wretch, under a comfort serves in a whirlwind: all
Life death does end and each day dies with sleep.
Upshot extra: A little-known limitation of Medicare’s drug benefit
Many studies have demonstrated what economics theory tells us must be true: when consumers have to pay more for their prescriptions, they take fewer drugs. For some conditions — diabetes, asthma, or C.O.P.D., to name a few — certain drugs are necessary to avoid more costly care, like hospitalizations.
My Upshot post today is based on this principle. It is about a little-known limitation of Medicare’s drug benefit. In particular, stand alone drug plans cost the Medicare program hundreds of millions of dollars per year because they have no financial incentive to avoid hospitalizations.
A study by economists Amanda Starc, of Northwestern’s Kellogg School of Management, and Robert Town of the University of Texas, asked how much more stand alone plans would spend on drugs if they accounted for the offsets from savings on non-drug health care. The answer: 13 percent. In covering drugs less generously, they end up costing traditional Medicare $475 million per year. This does not account for other social costs, like the inconvenience and suffering of beneficiaries who land in the hospital.
Click through to my Upshot post for more.
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