Interfacing is a PITA

Josh Marshall at TPM has been having a series of very interesting outside experts write in on what they see as problems.  I think a few recent posts are hitting a highly probable failure point and an explanation as to why the state built and run exchanges are running better on average than the Federal exchange.

On Federal interagency interfacing efforts:

All the heavy lifting takes place on the back end, when the website passes your data to an extremely complex array of systems that span multiple agencies (like so many cooks in a kitchen). A central processing hub needs to get data from each of these systems to successfully serve a user and sign up for insurance. And if one of these systems — several of which are very old in IT terms– has a glitch and can’t complete the task, the entire operation fails for that user. Only if everything works perfectly, and the data gets passed back to the website, does the user have a good experience with

On Federal Exchange to Insurer interfacing:

 Given that 25 states (or more) refused to create their own exchanges, the federal government became responsible for creating all of them, in one application. That’s 25 exchanges each with multiple insurance providers, all of which likely have their own unique interface requirements, meaning that they need to receive information from in a format they can use, or can at least re-format, to work in their own enterprise architecture.

The first set of problems involve making the IRS computers talk to HHS computers which then talk to CMS computers which then talk to however many other entities that all have kludged systems working.  This is a common problem set no matter who built the Exchange front and intermediate layers.

The second comment has some useful insight.  Almost all insurers who process claims electronically use common (federally mandated) file formats and record keeping systems (for the geeks these are the 5010s, 834,  835, 836m 837, 838 etc) but there is definate variation between firms as to exactly how they define discretionary elements. 

State built exchanges have three significant advantages over the Federal Exchange.  The first is that there was political will to make things work so active problem solving has been an ongoing process.  Secondly,the number of unique data interfaces at the state level is far lower than the number of data interfaces that the Feds must manage.  Finally, most states that are building their own Exchanges are working with insurers where there was a pre-exisiting working relationship.  I know that we interface data daily with multiple state agencies.  They know how we send data, we know what they expect to see and vice versa.  Yes, there are new entrants to the market (co-ops etc) but most interfaces are building off of previous relationships.

Spectrum of consolidation

There are numerous ways to organize a health insurance comapny.  One of the easier ways to classify how an insurance company operates is to map out how much an insurance company acts like a a mini-National Health Service. Each organizational model has its own value proposition and comparative advantage, but this country is moving from one end of the organizational spectrum to a more highly integrated organizational spectrum. 

The National Committee on Quality Assurance is the gold standard of public facing certification and credentialing of a variety of health care entities including insurance plans.  Their 2013-2014 Top-20 Health Plans in the County list have providers all along the business organizational spectrum, so organizational structure does not prohibit very high quality plans.  However there is a disproportionate number of plans that are mini-NHS or soft NHS, so these organizational models seem to provide very high quality insurance at reasonable prices. 

On one end of this spectrum are pure insurance companies like Aetna and Cigna.  These companies write policies, analyze risk and collect premiums.  Their business advantage is that they are damn good at being insurance companies.  At the other end of the spectrum is Kaiser of Northern California where their members are effectively buying into a single payer system as Kaiser owns both the facilities and the physician groups.  A similar example would be the Veteran’s Administration health care system where the VA owns the buildings and employs the docs and only its members can use its facilities and docs. Read more

No is Nice

The big problem in American health care besides not producing good results is that everything costs too damn much because no one is able or willing to say no. Evidence based medicine, pay for performance, reference pricing, narrow and multi-tiered networks are all attempts at introducing soft “No’s” into the equation but there are extraordinarily few hard no’s built into the system as someone is always willing to say yes and spread costs over everyone else.

A fascinating article in New York Magazine on why drugs cost so much in the US. It has a critical point about the power to say “No” on costs.

a committee already exists in England. Its technical name is the National Institute for Health and Clinical Excellence, or NICE, and it considers not only the benefit but also the cost in deciding what drugs will be covered by the U.K.’s National Health Service. Its decisions allow an implicit form of government negotiating over the price of drugs, because when NICE has turned down a drug as having too little clinical bang for the buck, companies have often come back to the panel with a lower price.

As a result, a British cancer patient usually pays substantially less than American patients. Gleevec costs about $33,500 a year in England, according to NICE; the U.S. price ranges up to $92,000 (according to the Blood editorial). Tasigna, a newer CML drug, costs about $51,000 in England, while the U.S. price ranges up to $115,000. Sprycel, another new CML drug, costs nearly $49,000 a year in England, while the U.S. price ranges up to $123,000.

More to the point, NICE has recently said no where Medicare has been forced to say yes. In January 2012, NICE declined to approve Avastin for both colon and breast cancer, and last June, NICE reached the same conclusion about Zaltrap as Sloan-Kettering’s physicians?it declined to cover the use of the drug, considering it too expensive.

The US even in the Obamacare world does not have a wide-scale entity that can directly say “No”.

IPAB has the ability to say that pricing is out of whack and it can change pricing models but it can not say no. The Patient Centered Outcomes Research Institute is forbidden by law from establishing cost effectiveness thresholds. It can generate cost and effectiveness tables but it is not allowed to do long division between these two tables. Medicare can not say nyet.   The only entity with significant market power and the ability to say “No” is the Veteran’s Administration, and shockingly their drug prices for the drugs that they cover are amazingly low in the American context.

Whats in a number

President Obama’s press conference this afternoon threw out a series of numbers concerning interest in subsidized health insurance on the Exchanges.  What do these numbers actually mean from an insurer’s perspective?

So far, the national website,, has been visited nearly 20 million times.  Twenty million times.

This means very little.  For comparison’s sake, Balloon Juice has had slightly less than 10% of that traffic in the same time span.  These hits are not particularly informative as they could be the curious bloggers, they could be people who are looking and then walking away, and they could be people who are interested.

We know that nearly one-third of the people applying in Connecticut and Maryland, for example, are under 35 years old.

If these numbers hold up and can be nationalized at scale, then the financing of the Exchanges works out very easily.  I am slightly curious as to why these two states are examples as the demographic/actuarial concerns are national lack of interest in young people in these products.  I would love to see what the age profiles look like in California (as it is the biggest), Texas, and Kentucky look like.

  And all told, more than half a million consumers across the country have successfully submitted applications through federal and state marketplaces.

The actual number is 476,000 or more applications have been submitted for eligibility verification.  This is an important number.  These are the subscribers who have created an account, filled out the first round of applications with family size, birth dates, and income information and sent it in for verification.  A very high percentage of these applications will result in added medical coverage.  The question is what is the average number of people on an application and what is the conversion rate to Medicaid versus Exchange.  As an insurance geek, 476,000 applications indicates 476,000 potential contracts, and probably 800,000 or more actual covered lives.  Initial numbers out of states indicate a 40% to 50% Medicaid eligibility rate, so assuming a fairly high buy rate for Exchange eligible applicants, we’re looking at 5% to 7% of the Exchange goal population has already applied.

Trained representative, it usually takes about 25 minutes for an individual to apply for coverage, about 45 minutes for a family.  Once you apply for coverage, you will be contacted by email or postal mail about your coverage status.

That actually is really impressive for initial intake and application.

Right now, the enrollment numbers are low as insurers don’t consider someone enrolled until either the check has been received or the credit card swiped for the first month’s premium.  January 1st is the first day of coverage, and payment is not due until Dec. 15th, so quite a few people are making choices and getting in line to get on a plan but have not written the check or authorized the automatic charge against the credit card.

The Cost Control trilemna

From Brad Delong:

My healthcare costs are already going to skyrocket, but being responsible for 100% of the premiums just isn’t realistic on my salary. I know I’m not the only staffer looking for a job off the Hill, because I knew this was a possibility…

From the Journal of the American Medical Association via Incidental Economist:

Most of the overall study population opposed a government CER [cost effectiveness research] agency. About 56% of respondents would oppose such an agency []. Democrats and Independents were about evenly split on the issue, while a significantly smaller percentage of Republicans would support such an agency (26.9%). Younger respondents, aged 18 to 29 years, were significantly more likely to support an agency (64.7%) than respondents 65 years or older (31.2%). […]

Also from the Incidental Economist and JAMA:

First, we observed a significant increase in the frequency of treatments that are considered discordant with current guidelines, including use of advanced imaging (ie, CT or MRI), referrals to other physicians (presumably for procedures or surgery), and use of narcotics. Second, we also observed a decrease in use of first-line medications, such as NSAIDs or acetaminophen, but no change in referrals to physical therapy. […]

Recent meta-analyses and research of lumbar fusion surgery have not revealed improvement in patient outcomes and demonstrate that these procedures lead to significant adverse consequences, including 5.6% with life-threatening complications and 0.4% mortality….

Our findings also confirm an inappropriate increase in advanced diagnostic imaging that has been seen previously, with use of CT or MRI increasing by 56.9% in our study sample. Six randomized controlled trials have found that imaging in the acute care setting provides neither clinical nor psychological benefit to patients with routine back pain, and multiple prospective studies have found the lack of serious disease in the absence of red-flag symptoms….

This is a trilemna of cost control.  Our health care costs too much, no wants wants an outside entity to say no, and systemically, we do too  many expensive things that don’t actually help people.

Benefit design of insurance plans is an attempt to say no or at least to say “really, really, think about this some more….” for procedures of minimal medical value.  For instance, my health plan does not cover leeching of blood.  My personal benefit package also has a variable co-pay for imaging services.  Basic services such as X-Ray and ultrasound have a $25 co-pay while MRI, PET, DEXA, CT and other advanced scanning systems have co-pays of $150 for the first five and then $25 after that as the actuaries figure that MRI #6 is probably medically useful by then.  But this is a rough and crude steering method as an MRI is perfectly appropriate when initial physical manipulation indicates a high probability of an ACL tear but inappropriate for non-specific back pain complaints. 

Finer steering methods of moving people to more cost effective treatments as the first course of action could theoretically work.  If an insurance company said that it would only pay for back surgery after fifteen PT visits and anti-inflamatory drugs have been used, that would reduce back surgery.  However, since it is saying no, consumers would bitch about faceless bureaucrats wearing Mickey Mouse ties getting between them and their doctors who are effectively practicing folk ways at this time.  And the company would lose members to another firm that charges a little more but does not say no. 

System reform changes like the Accountable Care Organizations and capitation models where the doctors are strongly encouraged by profit motives to refer patients to higher effectiveness and efficiency treatments may be the only way to get a politically viable means of saying no in place in the United States.