Bundles of money

I have not been Raptured, just busy.

Two seemingly unrelated but potentially related items that I saw recently:

Reuters on a bundled payment experiment by United Health:

An experiment changing how U.S. cancer doctors are compensated cut healthcare costs by a third, with no discernible decline in patient health, according to a three-year study by insurer UnitedHealth Group Inc and five medical oncology groups….

In the latest experiment, UnitedHealth, the largest U.S. health insurer, gave participating doctors an upfront payment to cover a patient’s full course of treatment, rather than reimburse them for each individual medical service such as chemotherapy. Findings from the study, which ran from 2009 to 2012, were published online on Tuesday in the Journal of Oncology Practice.

At the five oncology groups in the study, medical costs for 810 patients with lung, breast and colon cancer were $65 million, versus $98 million for similar patients whose doctors received standard payments. That represented a decline of three times what the study had targeted.

Chemo drug costs went up dramatically, but the low hanging fruit of reduced hospitalizations and less imaging services more than compensated for the drug costs. 

Kaiser Family Foundation on Medicare spending per capita projections:

Based on our comparison of CBO’s August 2010 and April 2014 baselines, Medicare spending this year will be about $1,000 lower per person than was expected in 2010, soon after passage of the Affordable Care Act (ACA), which included reductions in Medicare payments to plans and providers and introduced delivery system reforms that aimed to improve efficiency and reduce costs.  By 2019, Medicare spending per person is projected to be nearly $2,400 lower per person than was expected following passage of the ACA. 

These changes are changes of post-PPACA passage to post-PPACA passage, so it is a pure apples to apples touch.  I think a significant factor going on here is the show-me first assumptions of the Congressional Budget Office in how they score experimental programs.  During the run-up to passage, the CBO would only count as offsets either definative revenue increases (sun tan tax, Cadillac tax, mandate penalty etc) or clearly defined program cuts (Medicare Advantage subsidies).  Due to the lack of evidence, the system reform elements that most wonks thought would have significant cost savings (ACOs, bundled payments, global budgets, readmission penalties) were scored as producing no savings.  That was the assumption in 2010.  We have four years of added data that readmission incentives are working well, ACOs are promising, and bundled payments are getting wider deployment. 

PPACA delivery and payment reforms are not the entire story, but they are a significant element of the story.

35 replies
  1. 1
    GHayduke (formerly lojasmo) says:

    DEATH PANELS!

  2. 2
    Richard Mayhew says:

    @GHayduke (formerly lojasmo): That too

  3. 3
    feebog says:

    Richard, I read the second story earlier today and wondered if the non-expansion of Medicaid in Republican held states was a factor in the reduced costs. Your thoughts?

  4. 4
    Richard Mayhew says:

    @feebog: Probably not as people who are not covered by the sadists in the Republican Party primping for their primary electorates aren’t covered by private employer sponsored insurance nor Medicare, so they are left out of the equation entirely.

  5. 5
    RaflW says:

    It cannot be true that PPACA is working. Those statistics are no doubt compiled by the same people, in thrall to Obama, who fabricate the claims that unemployment is down and that inflation is not surging out of control.
    All government projects by Democrats are failures! This is known and incontrovertible. Please get with the program, stat.

  6. 6
    RobertDSC-iPhone 4 says:

    Kill The Bill!
    Kill The Bill!
    Kill The Bill!

    /Firebagger

  7. 7
    catclub says:

    @RaflW:

    All government projects by Democrats are failures!

    The Manhattan project ended in cataclysmic explosions.

  8. 8
    Another Holocene Human says:

    It’s refreshing to see good government (and good, functioning bureaucracy) at work. It’s been too long.

    I think some other agencies would be doing better but GOP has been defunding them for years. Although Boardman has done good work at Amtrak. He was lucky that high gas prices and changes in attitudes/settlement patterns have had Amtrak enjoying extended increased revenues from paying customers. Most federal agencies can’t get a lot of fee/user income, and OSHA’s fines are set way the fuck too low (not sure it doesn’t go into gen fund, either … whereas USPS and NRPC are set up as semi-independent units moneywise, USPS would be in better shape if Congress hadn’t initiated a bust-out of the joint).

  9. 9
    Another Holocene Human says:

    @RaflW: I’m surprised Hoverround hasn’t been exposed as a major funder of GOP SuperPACs given everything The Kenyan Usurper has done to fuck up their Medicare&granny-stealing-from shit.

  10. 10
    mainsailset says:

    So much to learn as we transition from a whack a mole health care system to a preventative model. The bundling is intriguing, but I didn’t see much insight into how it impacted the quality of life or survival of, say, cancer patients. It’s also a boatload of money to trust in the hands of for-profit clinics. Would it be worth considering an ACA’ish guideline that the bundling has to be kept secure and accounted for while its waiting to be spent? Thanks Richard.

  11. 11
    Another Holocene Human says:

    Omg, could it be that the “moral hazard” theory of human behavior/economics has just been debunked?!?!

    Also, too, why is it that finance/elite types who constantly lecture us about moral hazards like to build beach homes on privatized coastline and then expect us, that is, the federal government, to rebuild the thing when the hurricane comes?

    Before insurance, the poor lived at the water’s edge and the rich built their homes on hills and rocky outcrops. Just sayin’.

  12. 12
    Another Holocene Human says:

    @mainsailset: Since it’s an insurance company making the payment they have a pretty big incentive to make sure the clinic isn’t profit-taking at their expense. The old method was born out of the fear that the clinic would take them for a ride. But this study shows that the old way had run into the law of diminishing returns and then some. More than they even imagined.

    It’s hard to realize that your cherished verities are nought but dust.

  13. 13

    @mainsailset: Thankfully, I have not experienced chemo nor have I had long term hospital stays, but from those who have had either or both, they both suck. Minimizing hospital stays for preventable reasons, minimizing that just in case for a 1 in 10,000 chance of change in decision making scan, increasing follow-up and follow-on care, those are significant winners. The big difference with bundle payments is that providers are seeing financial reasons to do these things while the old fee for service system did not pay providers to be smart about what they ordered.

  14. 14
    japa21 says:

    @Richard Mayhew: Plus, insurance companies still get an accounting of the treatennt and I am pretty sure that any providers taking the lump sum and then being skimpy on the care would be out of the program fairly quickly.
    Also,when I first read of this a couple years ago, I believe the providers had to submit a fairly comprehensive treatment plan, always allowing for some flexibility.

  15. 15
    WereBear says:

    @Richard Mayhew: the old fee for service system did not pay providers to be smart about what they ordered

    In fact, it encouraged unnecessary diagnostic items which are not without risk themselves. At least, in my experience :(

  16. 16
    Rob in CT says:

    This sounds like… good news for John McCain! ;)

    Seriously, it’s really nice to hear about actual improvement in this area. The status quo ante was terrible.

  17. 17
    Another Holocene Human says:

    @WereBear: Until the hospital resembles the Sickbay on the Enterprise D, those diagnostic tests are definitely not without risk, you said it.

    I mean, come on, forget De Cartes’ stupidity (he was Catholic, just forgive him): we live in a materialistic universe. You can’t observe without interaction. Thus, any good image you get comes with, ouch, a lot of interaction. And that interaction could have negative consequences for the cells in your body and hence, your health.

    But I mean they are getting smarter and more clever about stuff, lots of really smart mechanical engineers getting into medical technology over last few decades. Special (filtered) light sources, non-toxic markers, etc, etc.

  18. 18
    Roger Moore says:

    @WereBear:

    In fact, it encouraged unnecessary diagnostic items which are not without risk themselves.

    Especially when the doctors owned the facilities where the diagnostic items were performed. The idea of doctors as entrepreneurs is one of the worst aspects of our current medical system.

  19. 19
    WereBear says:

    @Another Holocene Human: But I mean they are getting smarter and more clever about stuff, lots of really smart mechanical engineers getting into medical technology over last few decades. Special (filtered) light sources, non-toxic markers, etc, etc.

    There is a lot of room for improvement, too. One thing that blipped by without much exposure was a ground-breaking study on cancer over-diagnosis a few years ago.

    That’s not like treating viral pneumonia with antibiotics which will do no good. While antibiotic overuse is a problem, it’s unlikely to cause much individual harm. But getting treated for cancer when you don’t really have it… that is what I would call a disaster.

  20. 20
    Kropadope says:

    @Roger Moore The fee-for-service system does cause some perverse incentives which should be clear to anyone really thinking it through. Then all these extra diagnostics get blamed on fear of liability.by the tort-reform-as-panacea crowd (Not that I support frivolous lawsuits, but denying access to court is not the right solution).

    Even just the minor tinkering that the ACA accomplished has shown significant savings that are slowing inflation of healthcare costs and helping shrink everyone’s favorite bugaboo, the deficit. Republican politicians have shown themselves to be not only indifferent to the costs imposed on individuals and society by lack of access to healthcare, but they’ve been the main impediment to getting our fiscal house in order, one of their main issues to browbeat Obama on. Democrats should be in real good shape this year if we had a reasonable political discourse in this country.

  21. 21
    Tissue Thin Pseudonym (JMN) says:

    @Another Holocene Human:

    Omg, could it be that the “moral hazard” theory of human behavior/economics has just been debunked?!?!

    It’s important to remember that moral hazard is a real thing and that it can cause serious problems. It’s just that it’s not the only factor in economic decisions. Sometimes it gets swamped by other factors and sometimes the costs of moral hazard are less than the costs of not allowing it to happen.

    Like everything, it’s complicated and it would be just as foolish to disregard moral hazard entirely is it is to make it the focus of everything.

  22. 22
    gar says:

    Until these last few years I had never had a need to use much of the American Healthcare system. I have been lucky. But when my Mom got colon cancer that all changed. Now she was fully covered by Medicare and another insurance policy, so again not a problem. Both Mom and Dad are in their late 70’s. So my sisters and I agreed that one of us would always go to every appointment with them, look up treatments, check out Doctors, and keep track of the bills. I got stuck with the bills. Some of the charges were crazy. Doctors charging 435.00 for a visit lasting no more than two minutes. One Doctor charged my Mom 475.00 for a three minute check-up in the hospital then charged another 475.00 to fill out the discharge paperwork. It is insane. My Dad, sisters and I could barely keep track off all the new Doctors that were assigned. Then she had a bad reaction to one chemo drug and started a whole new set of problems. She died in April. But what I’ve learned is there needs to be a better system. Also if you get ill get all of the outside help you can because it is overwhelming….

  23. 23
    catperson says:

    @Richard Mayhew: I think there’s some number shuffling involved with these stats. A decline in the number of inpatient hospital days is not the same as a decline in the number of days a patient is in the hospital because of the CMS audits on “Observation” admissions. Basically a provider does the exact same amount of work but gets paid significantly less. In addition the patient ends up paying more out of pocket. Eventually there’s going to be a revolt against this.

  24. 24
    askew says:

    @gar:

    Sorry for your loss.

    We are going through this with my father right now. He’s got stage 4 cancer and is in rehab doing chemo right now. The bills and doctors appointments have been crazy.

  25. 25
    Roger Moore says:

    @Kropadope:

    they’ve been the main impediment to getting our fiscal house in order, one of their main issues to browbeat Obama on.

    Which is exactly why they’ve been so poor at addressing it in practice. They only care about the deficit as an excuse for cutting programs they don’t like. The last thing they actually want is a balanced budget, which would undermine their justification for cutting holes in the security net.

  26. 26
    Kropadope says:

    @Roger Moore:

    They only care about the deficit as an excuse for cutting programs they don’t like.

    Hmm…

    They only care about the deficit anything as an excuse for cutting programs anything they don’t like.

    There, that’s better.

  27. 27
    cwolf says:

    @RaflW: @RaflW: Hay, just fess up that your argument is BS and admit that you don’t like anything sporting Obama’s name because he is black and you hate blacks but you hate Obama more cuz he is the Black President of the United States.

  28. 28
    Belafon says:

    @catclub: The total (vector) distance anyone traveled on the space missions was 0.

  29. 29
    Roger Moore says:

    @Kropadope:
    You left out grift, which they obviously care a great deal about.

  30. 30
    Roger Moore says:

    @Belafon:

    The total (vector) distance anyone traveled on the space missions was 0.

    Not, strictly speaking, true, even if you choose to use a geocentric coordinate system. They didn’t all land at the same place they were launched from, so they traveled some non-zero distance as part of the space program.

  31. 31

    @cwolf: recalibrate your snark meter please :)

  32. 32
    Kropadope says:

    @Roger Moore: If they cared so much at grift, they’d put more effort into it. Sarah Palin is pathetic.

  33. 33
    Barbara says:

    @gar: Condolences to you.

    There’s an old joke that goes, “There are two places you need a friend on the outside: the joint and the hospital.”

  34. 34
    Chris T. says:

    Don’t you mean “you haven’t been raptured this week, you were last week but you got better”?

  35. 35
    LongHairedWeirdo says:

    I am glad to hear of the huge cost savings but – is there a control in place where, if a patient needs special treatment, there are funds for it?

    Or are these up front payments so incredibly generous that they can be expected to cover even the worst cases (unless you’re really unlucky and get stuck with the worst, most expensive patients)?

Comments are closed.