Blogging Innovation

The National Advisory Council for Healthcare Research and Quality (AHRQ) held a public meeting on April 3, and with 150 people in attendance there was no shortage of opinion about how government agencies should execute comparative effectiveness research.

Some $1.1 billion of the approved economic stimulus plan is earmarked for conducting or supporting research that compares the effectiveness of various drugs, medical devices and diagnostic technologies, with $300 million allocated to AHRQ, $400 million to the National Institutes of Health, and $400 million to the secretary of Health and Human Services. Undoubtedly, the funding will support research into a wide range of treatment areas important to patients across the nation—and at the heart of InHealth’s mission.

But who will conduct these studies, and when will the research begin?

As AHRQ determines how and when studies will be funded, InHealth is currently funding research examining the impact of medical device and diagnostic technologies on patients and the economy. Thus, we’re urging the agency to make funds available now for projects already in the works via a matching grant program.

Why? AHRQ and other agencies designated to fund these studies cannot execute the bulk of comparative effectiveness research themselves. The American Recovery and Reinvestment Act limits the agency to spending no more than 1 percent of its funding on new personnel to conduct such research. Besides, government serving as the sole source of comparative effectiveness information also raises concerns about how the research findings will be used, particularly in an environment focused on lowering costs.

Additionally, since these research funds are meant to be part of the administration’s economic stimulus funding, there is value in moving quickly. While AHRQ’s national advisory committee has until 2010 to begin advancing comparative effectiveness research, why wait to get studies off the ground when there are organizations and academic institutions ‘shovel ready’ and already doing this type of work?

A matching grant program for research organizations with experience conducting comparative effectiveness studies would accelerate the delivery of economic stimulus and research outcomes, and would double the impact of the agency’s dollars.

InHealth fully supports comparative effectiveness research that takes into account the value provided by advanced health technologies. A matching grant program would encourage qualified research organizations to bring diverse thinking to current priorities, as well as projects that can be launched quickly.

Martyn Howgill
Executive Director, InHealth

Comparative effectiveness on the face of it is both needed and valuable. Why waste breath (or bandwidth) discussing whether we should know which diagnostic tool or therapy will work best for us?

But performing CE is easier said than done and it’s not going to be a panacea. For example, medical devices evolve at a much faster rate than drugs. So finding sufficient data to compare devices, or even to compare devices to drugs, is often difficult and made irrelevant through continuing innovation.

At non-profit InHealth, we look at the social and economic impact of diagnostic and therapeutic devices precisely because so little of this research is done elsewhere.  But we learn that even with data, making decisions about which technology might be better is not easy.

Our health system may be deficient in not having solid CE data. But this is a path to improving the health system not fixing our cost problems. I recommend anyone interested look at Shannon Brownlee’s Overtreated (Bloomsbury, New York, 2007) in which she writes: “the most powerful reason doctors and hospitals overtreat is that most of them are paid for how much care they deliver…. They get paid for doing more” (p. 8). Brownlee argues we currently spend $700 billion on unnecessary care (p. 11).

Get rid of that and we’d be healthier, wealthier and wiser. And the health care share of GDP would be around 11% – comparable to other industrialized nations.

FDA has an impossible task, given the breadth of its scope and its limited resources. And given the accelerating emergence of promising new diagnostic and therapeutic capabilities, the challenge isn’t shrinking.

For example, the stimulus legislation provides NIH with $10 billion for new research to be spent over the next two years – presumably because NIH is “shovel ready.” Regardless, our science and our technological inventiveness, combined with our venture-based incentives, are producing more and more breakthroughs that will only strain FDA resources further.

In assessing the risks of new technology, rarely mentioned is the opportunity cost for patients of a regulatory process that is underfunded and therefore ill-equipped to manage approvals quickly. Given the public and political expectation of perfect outcomes, we err on the side of caution. Many argue this is as it should be.

Nevertheless, technology over the past 30 years has helped produce significant improvements in life expectancy, reductions in disabilities and shifts from more to less intensive care settings. In managing the advance of technology we must strike the right balance between risks and rewards.

In the end, a healthier society is more productive. Stimulating productivity through health is central to President Obama’s prescription. If we can get the balance between opportunities and cost right, FDA will play a vital and exciting role.

The inventor of dialysis died Wednesday. Willem Kolff was 97 and known as the “father of the artificial organ.” (The Washington Post- February 13, 2009) Mr. Kolff was a Dutch-born physician in the vanguard of bioengineering.

Among the first patients whose lives Mr. Kolff extended through dialysis was a Nazi collaborator. At the time, according to Mr. Kolff, “People begged, ‘Let her die.’ But no physician has the right to decide whether a patient is a good guy or not. He must treat every patient who has need of him.”

While the ethic of Mr. Kolff’s Hippocratic oath is clear, there is no such clarity in the ethics of U.S. public policy.

Seen as a contradiction by some, the last administration restricted scientific inquiry in its defense of life. The new administration has overturned those constraints.

Included in the economic stimulus package passed by Congress this week is some $10 billion – $5 billion per year for two years, three quarters for research – for the National Institutes of Health. (ProPublica - February 13, 2009) Also included is $1.1 billion for comparative effectiveness research.

What will all this mean for patients? Will the flow of advanced technology continue to reduce disability rates and extend life expectancies? Or will cost considerations trump innovation and freedom of choice?

Absent a public consensus on a moral code for health care reform, our values will continue to conflict. We want the best that science and technology can deliver. We want health care to be a right extended equally to all. And we want it to be free or at least affordable.

The old sign in the printer’s office suggested to customers, “speed, quality or price: pick two.” Where health care is concerned, our ethics had better be ready for profound choices as a flood of new technologies – stimulated yet further by additional investments in education and science – promise us new hope.

~Martyn Howgill, InHealth Executive Director

The election is over and the health care reform debate has entered a new phase. President-elect Obama has restated his commitment to health policy reform and has made several appointments to his new team of health policy leaders. Several members of Congress are issuing new health reform plans and jockeying to be leaders in what many are saying is the best chance for health reform in decades.

If history is any guide, the road to health care reform will not be an easy one. Presidents Truman, Carter, Reagan, Clinton, and Bush (G. W.) have all proposed comprehensive reforms that have all been rejected by Congress. President Johnson succeeded in getting Medicare and Medicaid passed in 1965, but these were new public programs for the aged, poor, and the disabled, not an overall reform of the health care system.

In fact, many health policy analysts point out that Medicare and Medicaid adopted the basic payment policies of private insurance, thereby making overall reform even more difficult. As we have seen time and again, making a lot of noise about health reform does not guarantee change.

What do we want from reform, and what will it take to get us there? To answer this question and see why reform is so difficult, let us look at the three largest components of our health care system—private health insurance, Medicare, and Medicaid—and look at how they work. Each of these major sectors of our health care system creates a roadblock to reform. Each is an open-ended system of payment that encourages everyone involved—consumers and providers—to use more resources than they would in a more normal, less-insured market.

First Roadblock: Private Health Insurance

In 2007, private health insurance and direct payments by individuals accounted for 46 percent ($1.04 trillion) of total health expenditures ($2.3 trillion). The modern form of private health insurance began in the 1930s, but the industry’s major growth occurred after World War II. The percentage of those with hospital coverage increased from 10 percent (12.3 million) in 1940 to almost 90 percent (178 million) by 1975.

Modern drugs and new medical knowledge increased the demand for medical care. But since medical care was expensive to only a small number of sick people, it created an opportunity for the development of commercial health insurance. Consumers could agree for the payment of a relatively small premium in exchange for the promise of an insurance company to pay the larger costs of a medical event if such treatment became necessary. Increases in the population and higher family incomes also boosted demand for health insurance.

Furthermore, a somewhat unintended change in tax policy made it advantageous to acquire health insurance through employers rather than as individuals, as one might do with life, fire, or auto insurance. During WWII the National War Labor Board excluded the value of employer-provided health insurance from its wartime wage controls.

An unintended consequence of this policy was to induce employers to offer more health insurance as a way around the limits on wages. After the war, this tax treatment effectively lowered taxes for those American workers who could get health insurance from their employer. As a result, the exclusion of the value of employer-provided health insurance from taxable income increased the demand for employer-based health insurance relative to individual insurance. Since the tax exclusion was open-ended, it created strong incentives for employees and unions to bargain for more extensive coverage (more coverage of physician care, drugs, mental health, etc.) and less cost-sharing.

This kind of health insurance covered more people and more medical services, but did so in a way that encouraged more expenditure with little regard to the cost-effectiveness or value of the services. The tax treatment of health insurance is still open-ended, giving employers and insurers little reason to develop more cost-effective health insurance policies.

Second Roadblock: Medicare

The second major sector of our health care system is Medicare, the government program providing health care for the aged and the disabled. In 2007, Medicare expenditures accounted for 20 percent ($444.7 billion) of total health expenditures. Medicare originally adopted the payment policies used by private insurance in the 1960s, the practice of paying the cost of the claims submitted by licensed physicians and hospitals. This fee-for-service system is still in place for about 82 percent of the Medicare population. The remaining 18 percent are in the Medicare version of managed care.

Like private health insurance, Medicare’s fee-for-service payment system is open-ended. As such, it creates incentives to submit more claims as a way of receiving more payment. The more the government clamps down on payment rates, the greater the incentive to submit more claims. Thus, spending rises with little worry about either the medical or economic effectiveness of the services. The result is very high increases in the cost of the program and dire predictions of impending bankruptcy.

Third Roadblock: Medicaid

The third major sector of our health care system is Medicaid, the joint federal and state program covering the poor and the disabled, including many of those in nursing homes. In 2007, Medicaid expenditures were 15 percent ($336.5 billion) of total health expenditures. Operating under federal rules, the states still have a lot of flexibility about how they run their state programs: who they will cover, what benefits they will provide, and what payments they will make to providers. Compared to private insurance and Medicare, Medicaid programs in most states have the reputation of paying the lowest rates.

These frugal payment policies save some money but force many patients to seek care in hospital emergency rooms because they cannot find a physician that will accept Medicaid patients. The payment rules also bring about early and inappropriate admission of the aged and disabled to nursing homes when the rules do not allow them to use more cost-effective care to stay in their homes. The federal government and many of the states are trying to reduce inappropriate nursing home use through new programs.

Medicaid programs suffer from the same open-ended payment policies we have seen in the other two sectors—policies that encourage excessive use of services with little regard for their value. But this is not the only problem with Medicaid.

The program suffers from an additional open-ended payment policy that inflates the cost of the program at both the state and federal level. Medicaid is an open-ended entitlement funded by both the federal and the state governments. The federal government matches qualified state expenditures based on a formula that gives higher matching rates to states with lower levels of per capita income. In 2008, Mississippi got the highest matching rate, 76 percent, while 13 of the wealthiest states—such as New York and Connecticut—received the minimum matching rate of 50 percent. This payment policy, designed to advantage the low income states, ends up inducing the wealthier states to expand their program relative to the poorer states. This causes more federal dollars to flow to states with higher per capita incomes, not the states that have the largest populations of poor people and people without health insurance. For example, in 2006 Vermont received $7,753 in Federal Medicaid payments per poor person in poverty (state population at 125 percent or less of the federal poverty line), Rhode Island received $6,817, and New York received $6,462. At the other end of the scale, federal Medicaid dollars per poor person were $2,014 in Nevada, $2,150 in Texas, and $3,354 in Mississippi. This poor distribution of federal Medicaid dollars will continue to increase as long as the present open-ended payment policy continues.

Getting Around the Roadblocks to Real Health Care Reform

Medical and health policy journals are now full of articles, mostly written by physicians, about what is wrong with our present system and what it will take to reform it. These articles put major emphasis on the need to base medical decisions on new knowledge about medical outcomes and cost-effectiveness, on more attention to lifestyles and prevention, and the use of computers (IT) to improve efficiency.

These are obviously good ideas that would lead to improvement, but people must have an incentive to do these things before any real progress will be made. The present system of open-ended payment policies does not encourage this kind of change because it continues to reward wasteful spending rather than a careful consideration of costs and benefits. If we want to get to real reform, we have to change the open-ended payment policies of private insurance, Medicare, and Medicaid, the three principal financing sources that now funnel money to physicians, hospitals, and other providers.

There are many proposals designed to replace the existing open-ended payment policies with a fixed or limited payment. For example, to reform employer-based health insurance, the simplest proposal is to cap the amount of health insurance that a firm can provide tax free. This would create strong incentives for firms and insurance companies to redesign their health insurance policies so that their costs stay below the cap. Designing these more cost-effective policies would give everyone more reason to seriously consider the value of IT, prevention, and evidence on medical outcomes. More complicated proposals along these lines involve adding a refundable tax credit to assist low-income people to purchase health insurance.

Medicare reform proposals envision giving each eligible person a fixed voucher that could be used to purchase one of several federally approved health plans. Each plan would be required to cover a set of defined benefits and compete with other plans to provide quality service to Medicare beneficiaries.

Proposals to reform the Medicaid program also take a variety of approaches all designed to provide a fixed payment to the individual or to the state. The federal formula could be modified to allocate federal money to the states based on each state’s population of the poor and disabled. The states could also be given more incentives to use managed care plans that would have stronger incentives to effectively manage the care of the disabled and those with chronic conditions. State experiments have shown much promise for programs that allow more of these beneficiaries to receive care in their homes rather than in nursing homes.

What we all seem to want from health reform is a better system that will provide us with higher quality care and greater economic value. To achieve this kind of reform will require us to end the open-ended payment systems we now have and replace them with systems that reward quality and value. The longer we wait to start, the more difficult this kind of change will be.

~Robert B. Helms is a resident scholar at AEI.

Today’s news coverage of the infighting at the Food and Drug Administration is disturbing for all concerned – most especially for patients who are denied benefit of advanced medical technologies that as a result remain unregulated, unapproved, or unfunded. http://www.nytimes.com/2009/01/28/us/28fda.html?_r=3&ref=health

The nation’s health system is under scrutiny at an historic moment. A new and popular president faces unprecedented social, economic and global challenges. But one trend on President Obama’s side as he faces down these specters is the extraordinary wave of technological innovations flowing from our past support for science and education and from our investor-driven free market for production and distribution.

There will always be Luddites who decry such progress. But most see science and technology opening entirely new possibilities and shifting our model from fire fighting to fire prevention, and from our being fire-deterrent to fire-proof.

For this transition to occur with optimal minimization of risk to human life, our regulatory oversight needs to enable the availability of devices and diagnostics rather than to become a barrier. Given the almost impossible breadth of FDA’s responsibilities, the agency has performed extraordinarily well. Sadly, they’re too-often remembered not for planes that have landed but for the few, isolated examples where there calls are second-guessed by real outcomes.

Nevertheless, we must come to grips with the opportunities as well as the risks and overcome whatever internal issues currently hobble FDA performance. It’s imperative for the administration to clean up this dispute, to heal FDA’s wounds and to move forward aggressively with an agenda that is moving to where the medical puck is going to soon be.

Martyn Howgill, InHealth Executive Director

Comparative effectiveness in the face of severe budgetary pressure can all too easily default to “cheapest is best.”

Regardless of its deficits, among the benefits of the American health system is its continual creation of advanced medical technologies, especially the accelerating innovation rate among devices and diagnostics. At InHealth we devote our grant awards to understanding their social and economic impacts.

A meta conclusion of our work to date is that properly used, the innovative technologies introduced over the past couple of decades have significantly extended life, reduced disabilities and contributed positively to the economy through a healthier work force.

Sadly, societal trends (obesity, diabetes and population growth) combine with lower thresholds of access to high tech care (less invasive, less painful and more tolerable) to contribute to increased demand, volume and total cost.

So let’s be clear, rising costs that may result from new medical technology are a product of the USA’s success at innovation. As President Barack Obama confronts the many challenges we face, he will have to resist the temptation to blame the innovators for our systemic problems.

In fact, the president would be wise to assure that his Recovery Plan leads to increasing, not decreasing availability of and access to advanced technologies for everyone. In doing so, we’d prevent and detect disease earlier, lower treatment costs and make our population healthier despite themselves.

One way to do this would be to provide more resources to FDA for proper but speedier oversight and regulation of new technologies and quicker coverage decisions at CMS for approved procedures.

Martyn Howgill, InHealth Executive Director

President-elect Barack Obama has committed to health care reform. In part, he proposes that savings from improved use of health information technology (HIT) can be redirected to prevention that will reduce illness, disease and costs for all.

During his Senate confirmation hearings, Obama’s health czar, former Senator Tom Daschle, told his old colleagues that through HIT and electronic patient medical records, we can capture information essential for better care and earlier detection, and can track costs and results of different therapies, physicians and hospitals.

All well and good. But let’s review the challenges posed by our health system:

• Our population is rising almost as fast as our expectations of perfect outcomes and immortality.
• Our science and technology are producing new medical capabilities for both therapy and diagnosis at a stunning pace.
• Our uninsured are anticipating access to the same levels of care as our Congress.
• Our patients are all hoping taxes will be cut and that we can manage a deficit in the trillions of dollars.
• Our therapy-focused doctors and hospitals are not eager to staunch the flow of government and private insurance money.
• And our spending is roughly twice as much as the developed world’s for results that are not as good.

Fixing HIT will make our system more efficient –which is certainly not a bad thing. But if we are doing the wrong things, better HIT will just enable us to do more of them, which may not be so good.

Until we confront what each of us is going to give up, it’s hard to envision what each will get. And it’s hard to see what each should get, unless we’re clear on what we must each give up to make that possible.

Yes, we should each have skin in the game. And we may even be willing to give a pound of flesh. But without clarity on what we want from health care, it’s going to be tough to find a coalition of the willing to pay their fair share.

Martyn Howgill, InHealth, Executive Director

With the naming of Tom Daschle as his choice as secretary of HHS and director of his new White House Office of Health Reform, President-elect Barack Obama signals the importance of redesigning the U.S. health system. With the naming of Jeanne Lambrew, senior fellow at the Center for American Progress and a faculty member at the University of Texas, as Mr. Daschle’s deputy director, he signals the importance of access and cost in any reform plan.

What is less clear is how the President-elect’s new team will recognize and weigh the value that advanced medical technologies bring to the happiness and economic productivity that come from a healthier society.

Since there are more of us and we’re aging, and since we’ve invented more and better ways to diagnose and treat injuries and disease, we spend more on health care than ever before. And that may be good. Why?

Because making our society healthier with fewer disabilities makes us more productive which in turn makes our economy stronger and more stable. The evidence is clear, but not often recognized, that thanks to advances in medical technology, we’ve seen significant disability reductions and extensions in life expectancy.

In the politics of change management, we can only hope that President-elect Obama’s new reform team will embrace the concept of “value” in health care – the net result of costs and benefits – and not be derailed by fears of burgeoning expenditures alone.

There are numerous reasons for the stunted movement in the personal health record (PHR) arena, including privacy concerns, lack of awareness/understanding of these records, and discomfort with available PHR suppliers, to name a few. Though, perhaps the biggest hurdle for our nation to get past is actually one related to U.S. culture itself.

I’ve long held the belief that the low adoption of PHRs is analogous to the reluctance we see with advance directives. On the surface, consumers report high interest when it comes to use of PHRs, with Manhattan Research finding that one-third of consumers are interested in accessing PHRs (Please click blue copy to:  Cybercitizen Health ); however, following through is a separate issue entirely. I challenge you to find a person who is not interested in an advance directive, but at the same time I also challenge you to find someone who actually has one. The same misalignment follows suit with PHRs. Sure I am interested in PHRs, but will I sign-up to use one this year? It’s unlikely.

Far and away consumers are willing to prepare for their financial future – think 401Ks and IRAs. Yet when it comes to taking a logical path for the future of our health, Americans just don’t want to think about it. Consumers know they probably should have a living will or appoint a proxy, so what is this intangible disconnect at play?

Americans are culturally distinct from many other countries with regard to views of death and would much rather overlook situations until they actually become problematic – examples of this can be seen with the lack of preventive care efforts taken by consumers. We cannot discount this overarching fear that pervades our culture when it comes to the adoption of health IT. It almost seems that Americans would be legitimizing poor health conditions by storing information in a PHR. Therefore, simple benefit from PHRs will not likely get consumers to adopt this form of health IT; some sort of incentive is necessary to bypass the hurdle that is American culture.

~Erika S. Fishman, Director, Research, Manhattan Research
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