How much does it cost to have an appendectomy?

A few years ago, a good friend of mine who holds bachelor's and law degrees from Ivy League schools lost his job and became one of the estimated 50 million medically uninsured persons in the U.S. Over the course of several days, he developed increasingly severe abdominal pain, fever, and vomiting. Though reluctant to seek medical attention, he finally was persuaded to visit his local hospital's emergency department, where he was diagnosed with acute appendicitis. Despite his critical condition and the need for immediate surgery, he refused treatment until the hospital's billing department gave him an estimate of how much an emergency appendectomy would cost. Then, as he was being prepared for the operating room, he somehow managed to bargain with the surgeon to reduce his customary fees.

Sharing this harrowing story weeks later, my friend, until then a strong believer in the power of the market to control rising health care costs, was justifiably proud that his negotiating skills had prevented the hospital bill from completely depleting his savings. On the other hand, he recognized the insanity inherent in trying to practice "consumer driven health care" during a medical emergency, especially given the lack of information about the pricing of health care services. I've written before about how difficult it was for my wife and I to estimate how much it would cost to have a baby (our son, incidentally, is now two months old and doing well). It turns out that variations in pricing for the diagnosis and treatment of acute appendicitis are even larger and less explicable.

A study published yesterday in the Archives of Internal Medicine reported that the hospital charges for patients hospitalized in California for acute uncomplicated appendicitis ranged from $1529 to $182,955, with a median charge of $33,611. Patient age, insurance type, and geographical location explained only about 2/3rds of the observed variations. My friend's experience in a different state confirmed what the authors of this study observed:

A patient with severe abdominal pain is in a poor position to determine whether his or her physician is ordering the appropriate blood work, imaging, or surgical procedure. Price shopping is improbable, if not impossible, because the services are complex, urgently needed, and no definitive diagnosis has yet been made. In our study, even if patients did have the luxury of time and clinical knowledge to "shop around," we found that California hospitals charge patients inconsistently for what should be similar services as defined by our relatively strict definition of uncomplicated appendicitis.

Given better transparency about pricing, perhaps there is a role for comparison shopping for predictable health care expenses, such as elective surgery or labor and delivery. But huge variations in pricing for emergency care illustrate how badly the consumer health care model fails. There are many flaws in the Affordable Care Act that Congress passed in 2010, but extending insurance to millions of currently uninsured Americans is not one of them. As this example shows, it is our country's broken health system, not the health law, that requires urgent repeal and replacement.

Counterintuitive findings on quality incentives and patient satisfaction

They've been repeated so often that many health care quality gurus take them for granted: 1) paying physicians for performance will improve quality of care; 2) increasing patient satisfaction will reduce care costs and improve outcomes.

Not necessarily, two recent studies suggest.

A Cochrane for Clinicians piece on financial incentives for improving the quality of care in the April 1st issue of American Family Physician concludes that despite their increasing popularity, there is actually "limited evidence" that pay-for-performance models are successful in primary care practice. When positive effects were seen in the studies examined in the Cochrane review, they were disappointingly modest. Further, writes commentator Elizabeth Salisbury-Afshar, MD, MPH, "In addition to costs, potential harms must be considered. For example, if financial incentives are provided only for certain health indicators, physicians may spend more time focusing on meeting those indicators while paying less attention to other important components of care." This commentary elicited several online comments from readers, ranging from a defense of the "tried and true" fee-for-service model to requests for better tools and systems to allow physicians to improve care quality without making unsustainable demands on their time.

In a similar vein, a study published in the Archives of Internal Medicine found that although higher patient satisfaction was associated with lower rates of emergency department use, it also was linked to several less desirable outcomes, including higher odds of any inpatient admission, greater total and prescription drug costs, and higher mortality. Is it possible, questions Dr. Brenda Sirovich an accompanying editorial, that patient satisfaction is driven by receiving more care, but not better care? She goes on to observe:

Practicing physicians have learned ... that they will be rewarded for excess and penalized if they risk not doing enough. More aggressive practice, therefore, improves not only patients' perceived outcomes, but also those of physicians (reimbursement, performance ratings, protection against lawsuits), and the positive feedback loop of health care utilization is fueled at two ends. ... A positive feedback system is not in fact positive (ie, favorable)—it represents an unstable system, one that cannot control its own growth, or demise. We, as a profession and as a society, can take responsibility for controlling this unrestrained system only if we commit to overcoming the widespread misconception that more care is necessarily better care, and to realigning the incentives that help nurture this belief.

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The above post was first published on the AFP Community Blog.

My take on state health insurance exchanges - Part 3

Regardless of whether or not the Supreme Court strikes down the individual mandate or the entire 2010 health reform law in June, state-based health insurance exchanges are a good idea and, if established, should benefit many working Americans who are too well-off to qualify for Medicaid but unable to otherwise afford health insurance coverage on their own. This is the last of three posts excerpted from an unpublished paper that I recently authored on this topic. You can read Parts 1 and 2 here and here.

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Exchanges will need to establish procedures for determining 1) citizenship or legal resident status; 2) income eligibility for premium tax credits and cost-sharing reductions; and 3) eligibility for the public insurance programs Medicaid and CHIP. Since the ACA also expands Medicaid eligibility, fluctuations in income over time will force millions of people to repeatedly transition from public insurance coverage to a subsidized exchange plan and vice versa, changing health provider networks and potentially disrupting continuity of care. Exchanges may help to facilitate these transitions by minimizing paper documentation, guaranteeing minimum eligibility periods regardless of interim income changes, and making it possible for at least some insurance plans to be offered under Medicaid and within the exchange (“dual certification”). As one expert advised, since the intent of the ACA was to expand insurance coverage, “Exchanges should see it as their responsibility to ensure the continued enrollment of eligible individuals and families for tax credits and public programs, rather than holding individuals responsible for continually having to work at maintaining their own eligibility.”

The Massachusetts Connector’s experience illustrates the challenges of managing transitions between private and public insurance plans, which often lead to gaps in coverage: “In particular, the dates for enrollment and disenrollment between public and private coverage are not aligned, so that individuals losing Medicaid eligibility early in a month must wait until the first of the following month to enroll in CommCare [exchange for individuals below 300% of the federal poverty line].” Consequently, California anticipated the problem of coordination with public insurance programs in the legislative language enabling its exchange, which requires that the governing board “ensure consistent eligibility and enrollment processes and seamless transitions between coverage.” However, the information technology needed to achieve this goal is still being developed. In December 2011, the Maryland Health Benefit Exchange Board set a goal of ensuring continuity of care between public and private programs by recommending: “The Exchange should require transition of care language in contracts as part of qualified health plan certification and work with Medicaid to promote reciprocal care transition provisions in the managed care organization contracts.”

In drafting the blueprints for their state health insurance exchanges, Maryland and California have largely followed the successful model of the Massachusetts Connector. Other states that are planning to set up their own exchanges will also need to grapple with the questions regarding governance; reducing adverse selection; making plan information available and accessible to consumers; determining eligibility; facilitating transitions between public insurance and subsidized private plans within the exchanges; and a host of other design issues.

Despite the similarities in the structures and functions of the three health insurance exchanges discussed here, characteristics of other state populations, local insurance markets, and existing regulatory institutions will likely lead to a diversity of other approaches. For example, Rhode Island, Utah and Vermont have located their exchanges entirely within state governments, while Hawaii has structured its exchange as an independent nonprofit. Reassuringly, a recent simulation study suggested that state-to-state variations in several critical exchange design elements (e.g., separating versus merging the individual and small-group markets) would have only small effects on overall coverage and cost outcomes nationwide. By establishing some basic requirements but granting states substantial leeway to operate (or not operate) their exchanges in accordance with local resources and preferences, the ACA will hopefully achieve its goal of providing access to affordable health coverage to millions of currently uninsured Americans.

My take on state health insurance exchanges - Part 2

Regardless of whether or not the Supreme Court strikes down the individual mandate or the entire 2010 health reform law in June, state-based health insurance exchanges are a good idea and, if established, should benefit many working Americans who are too well-off to qualify for Medicaid but unable to otherwise afford health insurance coverage on their own. This is the second of three posts excerpted from an unpublished paper that I recently authored on this topic. You can find my first post here.

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Adverse selection is a phenomenon in which higher-risk (and higher-cost) individuals become more likely to purchase insurance inside the exchanges, leading to premium increases within the exchanges, driving healthier (and lower-cost) individuals to purchase cheaper insurance outside the exchanges, leading to further exchange premium increases, and so on, until the exchange essentially becomes a high-risk pool. Thus, adverse selection is a serious threat to the viability of exchanges. One potential solution is to simply eliminate the market outside of the exchanges, but this option may not be feasible for most states. To reduce the risk of adverse selection, states should have identical rating rules for the markets inside and outside of the exchanges, and require all insurance plans of a certain size to participate in the exchanges. Massachusetts, for example, requires that all insurers with more than 5000 non-group enrollees submit bids to the Connector, and that prices for insurance products be the same inside and outside of it.

California will require insurers inside and outside of its exchange to offer all four tiers of benefit coverage, and in addition, will only permit insurers to offer catastrophic plans if they participate in the exchange. In Maryland, insurers who currently collect more than $10 million in premium revenue from the individual market or more than $20 million in premium revenue from the group market must participate in the exchange, and insurers offering catastrophic plans outside of the exchange must also offer them within the exchange. Maryland’s exchange governing board is empowered to re-examine the participation revenue threshold and adjust it as needed over time to ensure that large insurers remain in the exchange.

In addition to offering subsidized and/or competitive coverage, the exchanges should offer consumers tools to make informed choices between different insurance plans and coverage tiers. To facilitate comparisons, all participating insurers could be required to disclose standard types of benefit information through a common Internet portal, including patient satisfaction scores, if available. Exchanges must strike a balance between ensuring transparency and overwhelming consumers with information, as Jon Kingsdale observes: “Given the (understandable) lack of excitement in the general populace for mastering the details of insurance, the danger of information overload is almost as great as that of knowing too little. Exchanges must learn what information consumers want and need and how best to package and present it – a challenge not unlike that confronted by retailers."

The Massachusetts Connector web site (http://www.mahealthconnector.org) allows consumers to easily compare up to three plans side-by-side on the basis of monthly cost, annual deductible, out of pocket maximum, and other cost variables. Although neither California’s nor Maryland’s benefits exchange portals are yet operational at the time of this writing, California’s current exchange home page (http://www.healthexchange.ca.gov/Pages/Default.aspx) promises that it will “support consumer choice” through a web-based eligibility portal, website that provides standardized plan comparison information, a cost-comparison calculator, and a toll-free assistance hotline.

My take on state health insurance exchanges - Part 1

Regardless of whether or not the Supreme Court strikes down the individual mandate or the entire 2010 health reform law in June, state-based health insurance exchanges are a good idea and, if established, should benefit many working Americans who are too well-off to qualify for Medicaid but unable to otherwise afford health insurance coverage on their own. This post and two to follow over the next week are excerpts from an unpublished paper that I recently authored on this topic.

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One of the key elements of the insurance coverage expansion contained in the Affordable Care Act (ACA) is the establishment of health benefits exchanges operated by individual states, groups of states, or the federal government, by January 1, 2014. These exchanges will offer competitive and/or subsidized insurance options for individuals whose employers do not provide insurance, as well as offer plans to small businesses (up to 100 employees) at reasonable rates. Prior to the ACA, Massachusetts and Utah had both operated state insurance exchanges with varying degrees of success. By outlining only basic requirements for the functions of the exchanges, the ACA left many important questions regarding their design unanswered. Some states appear to be pursuing a “wait and see” strategy, hoping that the U.S. Supreme Court will strike down the ACA prior to the January 2013 deadline for showing sufficient progress toward establishing an exchange or ceding control to the federal government. Others are at various stages of the planning process; as of January 2012, 13 states had formally established their exchanges through legislation or executive orders. Maryland and California are at the vanguard of this group.

The ACA mandated the creation of state-based exchanges for individuals (American Health Benefit Exchanges) and businesses with up to 100 employees (Small Business Health Options Program [SHOP] Exchanges), which may be separate markets or merged into a single exchange. Beginning in 2017, states may allow businesses with more than 100 employees to purchase coverage through the exchanges. Only U.S. citizens and legal immigrants will be permitted access to coverage through the exchanges. Individual and small group plans will include four tiers of coverage: bronze (60% of benefit costs), silver (70% of benefit costs), gold (80% of benefit costs), and platinum (90% of benefit costs). A catastrophic plan will be available for individuals up to age 30 and other persons who are financially exempt from the insurance purchase mandate. Carriers must guarantee insurance issue and only vary ratings based on age, premium rating area, family
composition, and tobacco use. Exchanges will be responsible for establishing enrollment procedures and determining eligibility for tax credits.

States may decide to locate exchanges within a government agency, in a quasi-governmental body, or an independent nonprofit organization. Although greater government control probably makes it easier for the exchanges to respond to the policy needs of their states (especially in exchanges that are designed as “active purchasers” of insurance rather than simple clearinghouses for any insurer that wants to participate), it also increases the risk of political interference favoring particular insurers. To date, most states have chosen the quasi-governmental model. For example, although it is governed by an 11-member Board of Directors that includes several state health officials, the Massachusetts Connector is by statute outside of the control of the executive branch of government.

California established a 5-member independent governing board for its exchange, consisting of its Secretary of Health and Human Services and four members appointed by the Governor and the state legislature. To avoid conflicts of interest, board members may not be health care providers or employees of health care facilities or insurance companies. To improve its responsiveness to the market, the exchange is exempted from most state administrative regulations on personnel and contracting. Similarly, Maryland’s quasi-governmental exchange is supervised by a 9-member board, including 3 state health officials and 6 appointed members. Conflict-of-interest provisions are similar to California’s.

The FDA fails to stop deceptive dementia drug advertising

In the March 15, 2011 issue of American Family Physician, Drs. Mark Graber, Robert Dachs, and Andrea Darby-Stewart analyzed an industry-funded trial that compared the effects of two daily doses of the Alzheimer's disease drug donepezil (Aricept): a new 23 mg version and the existing 10 mg version that would soon lose its patent protection. Despite the trial authors' finding that the higher dose of donepezil slightly improved cognitive outcomes, AFP Journal Club commentators determined that this difference was clinically unimportant, and was greatly outweighed by the higher frequency of adverse effects in patients using the higher dose:

First, the authors did four comparisons. Three were negative and only one was positive. And the one that was positive was only two points different on a 100-point scale. So, although this is statistically significant, it is clinically meaningless. There is no discernible benefit for the patient or caregivers. ... Also, the drop-out rate in this study was an astounding 30 percent in the higher-dose group and 18 percent in the lower-dose group.

Adverse effects of donepezil include bradycardia, falls, nausea, diarrhea, and anorexia. In fact, a recent study demonstrated that community-dwelling older persons with dementia who are taking currently available cholinesterase inhibitors have higher rates of hospitalization for syncope, bradycardia, pacemaker insertion, and hip fractures compared with similar patients with Alzheimer disease who are not taking these medications. So, the idea of increasing the dose to 23 mg, potentially resulting in more serious adverse events while achieving no clinical gain, is ill-conceived at best.

Nonetheless, based on this study, the U.S. Food and Drug Administration eventually approved the 23 mg dose of donepezil against the advice of its own medical reviewers. One year later, though, the Journal Club on donepezil has proved to be prescient. Last month, in a scathing editorial published in BMJ, noted physician-researchers Lisa Schwartz and Steven Woloshin echoed AFP's earlier critique. They also rebuked the FDA for allowing Eisai, the manufacturer of donepezil, to include a false statement on the drug label and physician advertisements that touted "important clinical benefits" on measures of cognition (which, as noted, were clinically meaningless) and global function (which were not even statistically significant). Schwartz and Woloshin concluded by calling on the FDA to exercise greater oversight of such ethically questionable practices:

Alzheimer's is an awful disease. Sadly, the available drugs don't work well. But that is no excuse for emotionally manipulating vulnerable patients, desperate family members, and their doctors to use a product that is more likely to add harm than benefit. Nowhere - not in the direct to consumer or the physician advertisements, nor even in the FDA approved label - are the great uncertainties about this drug explained. ... That it is so easy to send doctors and patients incomplete and distorted messages about drugs is depressing. To make good decisions about drugs, doctors and patients need the evidence. The FDA should not forget to give it to them.

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The above post originally appeared in the AFP Community Blog.