Our Purple Prada Haze

Brad Wright, Our Dear Leader, wrote a wonderful piece yesterday discussing the price of health care, using designer brands as examples.  This caught my eye, of course, because I am as much a sucker for a $250 wallet that says “Burberry” on it as the next guy. ( Or a $1000 pair of shoes by Manolo, or a $100 T shirt by James Perse, or…  What was I saying?)  In the course of research I’m doing for a project on the career choice between nursing and medicine I have done some reading on how we make choices in general.  One of these books, Predictably Irrational, by Dan Ariely, has a chapter titled “The Power of Price” which discusses some of the same issues Dr. Wright wrote about.  So, with Brad’s permission, I’d like to examine the psychological impact of price a little further.

Let’s start with placebos, as Mr. Ariely does.  When I was a new nurse I had an elderly patient who refused to go to sleep without pharmaceutical assistance.  After indulging him with chloral hydrate for a couple of weeks (this was the 1990s), the deleterious side effects of giving this medication to elderly patients became apparent and his team decided to discontinue the sleeping pills.  We nurses bore the brunt of this decision, as usually happens.  One night, after the 16th call for sleeping pills from this gentleman, I got fed up and brought him a Tylenol.  The patient took the pill and slept all night.  It wasn’t the action of a specific medication that helped him sleep, but the act of taking a pill he expected to make him sleep.

Many of the financial decisions we make are based on this placebo effect, which runs on advertising, essentially.  Instead of feeling better because we expect to, we pay more because we expect the more expensive option to be better.  As Brad said, we expect an expensive wallet to be of better quality than a cheap one, because we equate price and quality.  That this relationship does not necessarily exist has little bearing on our choices.  I bought a shirt for a couple hundred bucks from The Row, and another shirt almost exactly the same from Ann Taylor Loft.  Both shirts got holes in them.  In the case of the expensive shirt I assumed this was what it was supposed to do – the “distressed” look, maybe.  The other, cheaper shirt I assumed was just poor quality.  We do the same thing with healthcare spending.  If it costs a lot and has a brand name, it must be better.  If the pharmacy gives a patient the generic and the medication doesn’t work, it’s because the pills themselves are no good.  If the patient then gets the brand-name version of the exact same drug, there’s a good chance it will work better because she expects it to work better.

Mr. Ariely and some colleagues actually ran an experiment very much like my little attempt to help a man sleep.  They gave a bunch of people a painful sensation, then gave them a drug with a fancy name that the subjects were told was an innovative new painkiller, then gave the subjects the painful stimulus again.  The subjects felt less pain the second time, even though the drug was really just a vitamin C tablet.  But here’s the interesting thing.  When the subjects were told the painkiller was expensive, they were twice a likely to experience pain relief than if they were told the drug was cheap.  As Mr Ariely says, “Price can change the experience”.

Now, in healthcare most of the time the consumer, i.e the patient, doesn’t know the price of the pill or treatment or test he’s getting.  Nor does he necessarily care because he’s not paying for it.  So patients use surrogate markers of price.  Say I’m presented with two wallets and asked to choose one.  I’m told I can get either wallet for free.  One is soft brown leather with lots of pockets.  The other has a lower quality leather and no pockets but has “Dior” emblazoned on it.  According to Ariely’s research, and personal experience, most people will choose the Dior wallet, assuming it is of better quality.  Patients do this with healthcare resources all the time.  They go to Brigham and Women’s instead of Milton Hospital because Brigham is famous and has an Harvard affiliation.  A patient wants an MD anesthesiologist instead of a CRNA because the person with the more expensive education must be better.  Another has back pain and gets both a CT and an MRI, which makes her feel good that she’s getting such high quality care, two imaging tests being better than one.  The actual quality of the care might be exactly the same, and the outcomes may be the same, but the expectations change the experience.  This is why it’s so hard to cut wasteful spending.

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Posted by on July 25, 2014 in Health Care Costs


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The Problem With Thinking We Get What We Pay For In Health Care

Luxury goods are items that people purchase in disproportionately greater amounts as their income increases. That’s how economists think of them anyway. But for the average American, a luxury good means something else. We tend to think of luxury goods being things like designer clothing, luxury cars, and high-end restaurants. Our minds fill with images of Gucci, Burberry, and Luis Vuitton, or Mercedes-Benz, Porsche, and Ferrari. One thing is clear to us: items made by these manufacturers are expensive. That’s an objective fact. Another thing may seem clear to us, but it involves more of a cognitive leap: we assume that these items are of a higher quality than their non-luxury counterparts. In effect, what we are doing is making a strong association between the price and the quality of a good or service. Granted, there are good reasons to make that association to a point, because price does correlate with the materials, labor, and so forth that go into making an item. But at a certain point, high prices tend to be used as signals or markers of exclusivity rather than indications of the true worth of an item. For instance, on a recent trip to England, I contemplated purchasing a Burberry wallet as a gift for my wife. But, given the exclusive luxury pricing of the item, combined with the weak exchange rate, the wallet would have cost roughly $250. Was the wallet nicer than one I might pick up at Wal-Mart for $15? Without question. But was it nicer than one I might pick up at Dillard’s department store for $50? Highly questionable. In the final analysis, then, I’d be better off to give her the $50 wallet filled with $200 in cash. But plenty of people do buy that $250 wallet, and the question is why. The answer is that they assume that it is a higher quality item, that it is an exclusive brand, and that it will signal prestige to others, and that–through some sort of mental math–is somehow worth forking over the extra money.

Cut to health care. Does the same mentality apply? Is higher cost health care perceived as being higher quality? Is something better simply because it is more expensive? Based on the above analogy, you could answer yes, but only to a point. Beyond that, at some point, more health care spending is simply wasteful. But, how does it play out in practice? Obviously, Americans spend a lot on health care, and it really comes down to two factors: prices and utilization. We’re looking at prices here. There are a variety of reasons why prices are a tad bit wonky in the U.S., including things like third-party payers and information asymmetry, but might patient perception also be a factor? The answer, according to a study funded by the Robert Wood Johnson Foundation, is yes. Asked whether higher quality care comes at a higher cost, 48% said yes, while 37% said there was no relationship, and the other 15% didn’t know or said “it depends.” Framing the question in the negative, though, changed things. Asked whether lower quality care comes at a lower cost, only 29% said yes, while 46% said there was no relationship, and the other 25% didn’t know or said “it depends.” So, we appear to have succumbed to the idea that if you want high quality care, it’s going to cost you more, while we also seem to recognize that you can pay a lot and still receive low quality care. What this should point out to us, is that the relationship between prices and quality in health care is limited, much like it is with other goods and services. Clearly, at lower levels, incremental increases in price are likely to reflect differences in quality, just like our wallet analogy. The real question is: At what point does the additional cost simply become a meaningless signal, unrelated to additional gains in quality, and representing excessively wasteful health care spending? And, more importantly, how do we ever convince people of this?


Posted by on July 22, 2014 in Uncategorized


Wing of Zock Hosts Health Wonk Review

As always, the Health Wonk Review is the best of the best in health policy blogging, all in one convenient location. This edition is hosted by Wing of Zock. Check it out here.

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Posted by on July 21, 2014 in Uncategorized


Wrong Target, Wrong Weapon

The hospital is a dangerous place. Sick people go there.  In fact, its likely the largest concentration of sick people in your town.  I mean sick sick, not seasonal viral cold sick.  So it should come as no surprise that there’s always a risk, when you go into a hospital, that you’ll get sicker.  Post-hospital syndrome is one of those illnesses.  Another is infections.  The CDC estimates that 648,000 patients acquired an infection while in the hospital in 2012.  CMS and the Affordable Care Act, in their infinite wisdom, have decided to target those infections.  Or rather, the government has decided to monetarily penalize hospitals whose patients get a lot of infections.  According to Kaiser Health News, ( 761 hospitals stand to lose 1% of every medicare billing because their infection rates are higher than benchmark.

So which are these disease-laden dens of hygienic iniquity?  Large, city, teaching hospitals with a lot of poor people.  Are there a lot of mean, dirty people working in these hospitals who have no respect for poor people and are careless about cleanliness?  Are residents not washing their hands, or sneezing on patients’ open wounds?  Of course not.  Let’s look at the measures CMS is looking at.

1. Catheter-related infections, both blood and urinary.  So that means intravenous lines into large central veins or arteries, as well as catheters inserted into bladders to drain urine.  Who gets these catheters?  Sick people.  In the case of central lines, the sickest people in the hospital.  Where are the sickest patients?  Large, city, teaching hospitals.

2. Clostridium Difficile (that’s C-Diff to you).  This is an acquired infection in the bowels.  Who gets C-Diff?  People who have been in the hospital for a long time.  Who stays in the hospital for a long time?  Sick people, vulnerable to infections.

3. Methcillin-resistant staphylococcus aureus (MRSA).  If I had a nickel for every “MRSA” infected person in any hospital, I wouldn’t be writing for money.  Geeze, I’ve been in the hospital a lot.  I work there.  Maybe I have MRSA too.  Some places swab everyone’s nose regularly to check for MRSA.  If a patient has a “history of MRSA”, even if its vague, or we’re not sure, or it was 30 years ago, everybody gowns and gloves around that person and waves red alert flags wave everywhere.  Thousands of infection control nurses’ careers have been made off questionable MRSA histories.  I’m not saying real MRSA infections are serious.  They are.  It’s just not a good metric.

Of course there’s the fact that a New England Journal of Medicine study in 2012 found that docking medicare payments doesn’t improve “performance” on things like this (  But even if it did, infection rates are a lot more complicated than four data points.  Certain patient populations are more likely to get hospital-acquired infections.  Patients with diabetes, lung disease, or vascular disease are more susceptible.  The old and/or debilitated are more susceptible.  The poor and those without social supports are more vulnerable.  People getting complicated surgical procedures, especially bowel, are more vulnerable.  All of these conditions are more prevalent in large, city, teaching hospitals, even with the most draconian infection-control policies imaginable.  Once again, CMS is going after the wrong suspect and the largest target.


Posted by on June 26, 2014 in Uncategorized


Latest Health Wonk Review

Hosted by Julie Ferguson at the Workers’ Comp Insider, this is a Health Wonk Review worth reading. Check it out here.

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Posted by on June 19, 2014 in Uncategorized


The Geographic Divide: How Federalism Has Formalized Health Disparities

Jimmy Carter once said that America is not a melting pot, but a beautiful mosaic. We have all sorts of people here, but we want them to maintain their unique identities, not assimilate into some generic unity. However, this very characteristic that makes our nation so wonderful also provides the context for stigma, segregation, and hate crimes. We’ve come a long way in the past two centuries: from slavery to emancipation, segregation to civil rights. But de facto segregation still exists, and while it’s often about race, it’s also about poverty–and both race and poverty are often connected to health disparities.

On the one hand, groups self-segregate for a variety of reasons, and it’s not entirely clear whether this is good or bad. Self-segregation may be about the joys and comforts of sharing a common culture or language, or it may be about banding together to survive oppression. The best thing I’ve come across on this topic is Beverly Daniel Tatum’s book Why Are All the Black Kids Sitting Together in the Cafeteria?

On the other hand, we segregate in other important ways that seem not quite right. We have affluent neighborhoods and low-income neighborhoods and there are a host of institutional factors and personal behaviors that reinforce these divides. For example, although illegal, realtors often steer potential homebuyers away from certain “undesirable” neighborhoods. Banks follow questionable lending practices. Local governments zone industrial plants near housing projects. You get the idea.

Capitalizing on these patterns of residence, the political parties gerrymander districts that will help them win elections. Have you seen a map of North Carolina’s Congressional districts? Those long skinny districts and the highly irregular borders are not drawn for convenience; they demarcate the racial composition of the population across the state.

All of these are primarily local issues. They occur because of people’s inherent biases and, with the exception of gerrymandering, they are not established by laws or regulations. They are just the way society seems to work. But, knowingly or not, the Supreme Court’s decision to make the Affordable Care Act’s Medicaid expansion optional for states has created the opportunity for health disparities to be formalized into law, thanks to federalism and our country’s deep partisan divide.

It’s old news that only 26 of our 50 states have decided to expand the Medicaid program to all U.S. citizens residing in their state with incomes below 138% of the federal poverty level, but the expansion has only been a reality for 6 months. Now we are seeing how it is playing out on a personal level. One of the concerns among policymakers was that low-income people would emigrate from non-expansion states and flood into expansion states. A consensus is emerging that, while this may happen to some extent, it is unlikely to be a major issue–mostly because low-income people don’t have the resources to relocate.

What is particularly striking to look at are towns on either side of a state border. In some cases, single towns actually span state lines. And, if one state has expanded Medicaid, while the neighboring state hasn’t, whether or not a low-income person has health insurance may depend on what part of town they live in. Texarkana is one such town, and Annie Lowrey writes about this issue in the New York Times. Her point–and the one I am echoing here–is that we have formalized the unequal treatment of similarly situated persons based on nothing more than where they happen to hang their hat.

Somehow we tend to be okay with this unequal treatment when there’s enough of a buffer in place. For example, if the low-income in California are treated differently than the low-income in Indiana, we’re able to come up with reasons–real or imagined–that allow us to reconcile that to ourselves. But reduce the geographic distance, and focus on the unequal treatment that exists between residents of Chicago, Illinois and Gary, Indiana, and suddenly it gets much harder to ignore. We may all be different, and our differences may be part of what makes us beautiful as a nation, but we are all Americans. As such, it doesn’t seem right to deny some of us health insurance just because we don’t live in the right part of town.


Posted by on June 16, 2014 in Uncategorized


UnitedHealthCare in Massachusetts

We all want the advantage.  We put our kids in special pre-schools so they have the advantage.  We work 100 hours a week so our kids can do 8 activities and get the advantage. Tall people have an advantage, we’re told.  Poor people are “dis-advantaged”.  Well folks, there are a whole bunch of senior citizens in Massachusetts who are about to get dis-advantaged starting September 1.

Yesterday the Boston Globe told me that UnitedHealthcare will be cutting 700 doctors, or 2-4% of it’s providers (it has 18,600in MA), from it’s Medicare Advantage plans. UnitedHealthCare is a mammoth national insurance company, and one of the main things it does is provide Medicare Advantage programs.  In fact, it’s the largest provider of such private Medicare plans in the country.  UHC has done this in 11 other states as well, and in some cases has dropped whole hospitals from it’s roster.  Why?  Company spokespeople say “they hope that streamlining the pool of doctors will not just save money but ultimately improve the quality of patient care…”.  They do not specify how quality of patient care will be improved by abruptly removing peoples’ doctors from their insurance plans.  But it will definitely save money.  And why does UHC feel it has to save money?  Because there has been a gradual reduction in the federal reimbursements to private Medicare contractors.

Why, you may ask, is the government using private, for-profit companies to provide Medicare services, and paying up to 14% more for the identical services provided by government-administered Medicare?  Excellent question.  Medicare Advantage, so called because these plans generally cover more services, like eyeglasses and prescriptions, was created after private insurers insisted that not only could they meet the medical needs of senior citizens and the disabled more cost effectively than the government, they could do so and still make a profit. (Thank you to Wendell Potter for that explanation.)  It became part of the Balanced Budget Act of 1997, but such plans have been available since the 1970s.  Well, it turned out that the claims were not true, and many of the private companies that participated dropped out when they lost money.  So the government essentially paid the companies to stay. Hence the 14% overpayment.

So.  Lot’s of money to be made.  15 million people are in Medicare Advantage plans, with payments from the government of $156 billion dollars, or 30% of all Medicare spending.  But you make more money for your shareholders if your patients don’t go to the doctor.  UHC cleared $1.1 billion dollars last year and increased it’s shareholder dividends by 30%.  So last week UHC informed a bunch of doctors in Massachusetts that they’ve been booted from the plan.  They’ll tell the patients this week. Oh, and the changes go into effect Sept 1 but you can’t change your plan until the next open enrollment period, which isn’t until October.

When UHC tried this in Connecticut, county Medical Associations filed a lawsuit and got a temporary injunction from a judge to stop UHC from dropping 2,200 doctors.  Here’s what UHC had to say about this ruling, according to Arielle Becker in the CT Mirror:

“In its statement, UnitedHealthcare said the ruling would ‘create unnecessary and harmful confusion and disruption to Medicare beneficiaries in Connecticut.  We continue to have a broad network of doctors that is designed to encourage higher quality, affordable health care coverage,’ the statement said. ‘We know that these changes can be concerning for some doctors and customers, and supporting our customers is our highest priority.'”

Right.  Because there’s no unnecessary and harmful confusion or disruption when you eliminate peoples’ doctors.



Posted by on June 12, 2014 in Medicare


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