Monthly Archives: August 2010

The Implementation Battle

I’ve referenced on a number of occasions that passing health reform was just the beginning–that implementing health reform was the bigger challenge. I’ve pointed you to articles describing the long days and nights of the Health and Human Services staff charged with writing the regulations and making health reform a reality. I’ve also addressed some of the political challenges that may occur during implementation and the public relations campaigns that are gearing up across the country. Well, I’ve got another resource for you, and it’s a good one. Paul Starr writes “The Next Health-Reform Campaign” in the August 2 edition of The American Prospect. It’s one of the best summaries of the current and future issues looming for health reform implementation. There is a strategy, and it is to stretch this victory out as long as possible–in hopes of wielding it during the 2010 and 2012 elections–but to win smaller substantive victories early and often. In other words, just saying, “We are the party that made health reform a reality for America” won’t earn many points in 2010 or 2012 without something more concrete to point to. Thus, it becomes important to have the least controversial, most popular, and most tangible benefits of health reform roll out early and often. Starr’s piece does an excellent job of outlining this gameplan–and it’s worth at least one thorough read. (Plus, it even comes in a Spanish version para mis amigos que hablan EspaƱol.)


Posted by on August 31, 2010 in Uncategorized



Today’s the first day of what I anticipate is my last year of school as a student. There’s still a lot of work to be done before that becomes a reality, however, and that work takes time. So does writing this blog, which I’ve been doing for more than a year now. The thing is, I’m not a professional blogger. In fact, even though it’s usually used pejoratively, I’m a professional student. I don’t get paid to blog–well, one day those Google Ads will make me $100 and I’ll get a check, but that hasn’t happened yet. On the other hand, I do get paid to be a student at this level, thanks to a fellowship. But the fellowship doesn’t go on forever. I say all this to say my time, like your time, is valuable. Which brings us back to the idea of opportunity cost.

On Friday, I posted a quick piece on opportunity cost, with a multiple choice question that I wanted readers to answer. As of 4pm on Sunday, only two people had, and both of their answers were incorrect. So, I’m extending the deadline to post a response to the question. Perhaps a week is long enough? Maybe I’ll post the answer around Labor Day–maybe I’ll never post it, because too few people commented. You see, the thing is, I’ve asked explicitly for feedback before, with the same lack of response.

As the author of this blog, that gets to be disheartening. On the one hand, I use this blog for my own benefit–as a way to get my name “out there”, as a way to journal my thoughts, and for the satisfaction of having created something that gives back some measure of what I have been given–but on the other hand, a blog is less about the author and more about the readers, especially those who leave comments, who interact with each other, who debate ideas, ask questions, and push the dialogue further along. But, for some reason, most people seem content not to comment in this space. I’m not sure why, but I thought I’d try to encourage it very directly.

To those of you who do comment regularly, thank you. Please continue to do so. I appreciate it. To the rest of you, please consider getting a bit more involved in the conversation. Tell me if you think I’m wrong. Tell me why you think you’re right. Remain anonymous if you wish. Yes, I moderate comments, but only to keep spam, vulgarity, and the like off the blog. I’ve never refused to publish someone’s comments because they disagree with my views. I’m not interested in stifling the conversation, just guiding it to make sure it remains respectful and constructive.

I want this blog to grow and thrive, and I have put a lot of work into getting it off the ground, but I can’t do it on my own forever. I need your help to make this a community. That means telling friends, family, and co-workers about it. It means posting links to the blog on your own webpages and adding a link to the footer of your emails (ask me for the code and I’ll happily send it). And it means becoming an active participant, rather than a passive recipient. Leave comments about the posts and respond to the comments of others. I hear my own thoughts in my head all the time. I (and others) want to hear yours. And, oh yeah, thanks for reading….


Posted by on August 30, 2010 in Uncategorized


A Lesson In Opportunity Cost

I just started reading Robert Frank’s book The Economic Naturalist. It came out in 2007, but I have a pretty long backlog of unread books on my shelf, and my grad student budget doesn’t support buying hardcover books when they first come out. The book aims to teach basic economic principles by exploring bizarre real-life scenarios, such as:

  • Why is there a light in your refrigerator but not in your freezer?
  • Why do 24-hour convenience stores have locks on their doors?
  • Why does a new car costing $20,000 rent for $40 a day, while a tuxedo costing only $500 rents for $90?
  • Why are newspapers, but not soft drinks, sold in vending machines that allow customers to take more units than they paid for? (That one’s obvious–the returns diminish much more quickly on the information in a newspaper–read one and there’s no need to read another–whereas you might well drink 2 or 3 Cokes.)

You get the point. Well, like I said, I’ve just started the book, but it already has me thinking, and I thought I’d share an early lesson in opportunity cost.

“Suppose you won a free ticket to see an Eric Clapton concert tonight. You can’t resell it. Bob Dylan is performing on the same night and his concert is the only other activity you are considering. A Dylan ticket costs $40 and on any given day you would be willing to pay as much as $50 to see him perform. (In other words, if Dylan tickets sold for more than $50, you would pass on the opportunity to see him even if you had nothing else to do.) There is no other cost of seeing either performer. What is your opportunity cost of attending the Clapton concert?”

Your choices are:

A. $0
B. $10
C. $40
D. $50

I’m not giving you the answer today. Feel free to post an answer in the comments–and be sure to give your rationale–anybody has a 25% chance of a correct guess. I’ll keep the comments hidden and think of a prize for the winner(s) that will be announced on Monday. (And if you happen to have read the book already, you’re disqualified from entering.)


Posted by on August 27, 2010 in Uncategorized


What’s In A Name?

A few nights ago, I made dinner for my wife and myself. The centerpiece of the meal was fish. Orange Roughy to be exact. I dredged it in panko and cornmeal with some lemon pepper seasoning and pan fried it. It was delicious. Honestly, I impressed myself. Here’s the thing: Orange Roughy belongs to a family of fish collectively known as “Slimehead.” Now, I don’t think you have to have a degree in sales and marketing to understand that people will be hesitant to eat anything called Slimehead–especially if Orange Roughy is on the same menu. That’s the same rationale for calling deep fried bull testicles “Rocky Mountain Oysters.” It’s how branding works, and there’s a psychology to all of it that I don’t have the time or the space to get into on this blog.

But with that bit of background to provide some context, I want to turn our attention to the new health reform law. People are confused by its roughly 2,000 pages and don’t even know what to call it. Officially, it’s name is the Patient Protection and Affordable Care of Act of 2010. For one, that’s a mouthful, so people don’t want to keep referring to it like that. After all, “The Official Collection of Several Divinely Inspired Books for Christians as Agreed Upon by Several Councils of Religious Leaders” is nowhere near as tidy as “The Holy Bible.” For another, it isn’t exactly clear from the name what the law does. What does “Patient Protection” mean? Protection from what? Protection from whom? And so, many people have begun to call the law the “Affordable Care Act” which is a bit clearer with its focus on affordable care, but still a bit much to say or write. As a result, it soon becomes the ACA and is forever lost in acronym land. You will know this has happened when, in a group of people, someone refers frequently to “Ack-Uh” while others follow along knowingly and others look prepared to start the Heimlich maneuver. Brevity is important, but equally so is understanding.

The irony is that the principle that made such buzzwords as “death panels” and “socialized medicine” part of the effective rhetoric of a galvanized opposition to health reform, can–and I would suggest must–be used to help Americans understand health reform in a new way that centers on solidarity and a feeling of national pride and personal security. Without the unifying nature of its name, Medicare might never have caught on with the public. William Sage argues, in a recent Health Affairs article, that we should call the new law “Americare.” Of course, I’m partial to the name I used in a piece a couple of years ago: “AmeriChoice”. Either way, Sage and I agree that branding health reform is essential.

Now, I know what some of you glass-half-empty sorts of people are thinking: “A Slimehead is a Slimehead even if you call it Orange Roughy. In other words, just changing the name doesn’t change the facts, and a Slimehead is a disgusting thing I don’t want to eat, any more than this health reform that’s being forced down my throat. I don’t care what you call it. I still don’t like it.” While I wish those of you would present the same point from an optimistic standpoint (e.g., “A rose by another name would smell as sweet…”) I understand that you’re entitled to your opinions. Still, you might be surprised how your opinions and other behavior can change with time, messaging, and a feeling of ownership. How else do you explain us going from conservative fears of “socialized medicine” during the enactment of Medicare in 1965 (yes, even then) to conservative fears that led people to “tell the government to keep its hands off my Medicare!” in 2009? I’ll tell you how. You don’t.


Posted by on August 26, 2010 in Uncategorized


The Nonsensical Private Insurance Model

Today, I’m going to try to convince you that private insurance companies should not exist. Okay, maybe that’s a bit hyperbolic, but let me explain. The basic premise of insurance is that, by pooling people together, risk can be made more manageable. Say, for instance, that historical data indicate that 1 in 10,000 people will develop a rare illness that is very expensive to treat. In fact, let’s say that the cost of treating that illness is a cool $1 million. Because most people aren’t millionaires–our group of 10,000 people might contain none at all–being the individual with the illness goes from being a health concern to being a financial concern as well. Bankruptcy is almost assuredly the outcome.

But there’s some uncertainty in the risk. None of the 10,000 people knows if they will be the one to contract the million dollar illness. At this point, they have two options: They can take their chances–after all, there’s only a 0.01% chance that they’ll get the illness–and figure out how to come up with the $1 million if they become ill, or they can pool their risk with the other 9,999 people and buy a product called health insurance. In our simple little single illness world, where probabilities always work out nicely, we might imagine a scenario where the total health care expense would be $1 million (the cost of treating the illness for the one person who contracts it). The fair thing to do, then, would be to charge everyone a premium of $100. That’s the break even point, anyway. And it’s obvious why the one person who falls ill would want to have this insurance–$100 is a lot cheaper than $1 million. In fact, because people are typically risk averse, they’d rather go ahead and pay the $100 with certainty, rather than letting a million dollar bet ride on an open ended “what if?”. Risk pooling works in theory.

Of course, the world is not so simple as our little experiment happens to be. Instead, the total health care expenditures would be far more than $1 million for the group, because people would contract other illnesses, develop other diseases, and even spend money for routine check-ups. But we have data on that amount of utilization, too, and the setup is the same. Figure out how much our population of 10,000 people is expected to cost, divide that total by 10,000 and charge everyone that same amount. Welcome to community rating.

But people don’t like that approach. After all, some people in our group of 10,000 smoke and some do not. Those who don’t smoke aren’t often excited about paying a higher premium to cover the cost of lung cancer treatment that has its origins in the bad decisions made by smokers. It’s kind of like going out to dinner with a big group that eats and drinks its fill while you have a salad and a glass of water. At the end of the night, they want to split the check evenly, and you don’t want to subsidize their wine habit. Surely there must be some system that figures out your own personal risk category and charges you accordingly. Welcome to experience rating. Obviously, this leads to stratification that is antithetical to the solidarity inherent in the concept of risk pooling, but that’s a subject for another post.

Figuring out everyone’s risk, and the costs involved requires actuaries. Sending out the bills for the premiums requires administrative staff. In other words, running the risk pool takes work and is associated with additional costs. These, too, must be added to the total health care expenses in determining the break even point for premiums. And, if the government ran health insurance, it could stop there. The calculation would simply be:

Per enrollee premium = (total health care costs + total administrative costs) / number of enrollees

When private companies get involved in the insurance business, things get more complicated, because one of the goals–even if the company is technically a non-profit–is to make money. There’s only one way for that to happen, which can be explained by the following formula:

Per enrollee premium > (total health care costs + total administrative costs) / number of enrollees

It looks almost identical to the government equation, with one difference: the equal sign has been replaced with a greater than sign. There are two primary ways that this can happen. The insurance company can charge a higher premium, or it can deny claims–essentially asserting that “total health care costs” are lower than the enrollees would claim. If they do both–increase premiums and deny claims–they stand to make even more money. Now, conventional wisdom would suggest that if the insurance companies did this, people would leave in droves. Unfortunately, imperfections in the market make this easier said than done. For starters, as I discussed last week, most people have no idea how much their health insurance premiums actually cost.

The bottom line is this: Insurance companies profit the most when you pay them and they don’t pay your claims. They have a financial interest in denying you your benefits. That makes about as much sense as McDonald’s earning 10 cents on each hamburger it sells, and 20 cents on each hamburger it doesn’t sell. There’s an inherent conflict of interest in the private insurance business. The government, by contrast, isn’t in the business of making money. I think even my conservative friends who want to slash domestic spending and lower taxes would agree that. As a result, they are perfectly content to break even, and the only claims that they would have an interest in denying would be fraudulent ones. As I see it, this moves us away from the inefficient world of private insurance towards the purest risk pooling function that only government can provide. People freak out about this (a technical term), because they distrust government and can’t envision any scenario where the profit motive doesn’t generate the ideal results. Apparently, these people prefer the idea of paying more and getting less to the idea of getting what they pay for.


Posted by on August 25, 2010 in Private Insurance


Does the Public Want Comparative Effectiveness Research?

Comparative effectiveness research. Does the public want it? I’ve danced around this topic before, but now I’m hitting it head on. Sure, some of the resistance to the idea of CER has been politically motivated. No one’s seriously talking about death panels or having the government get between you and your doctor to make medical decisions. But they are talking about finding out what works and what doesn’t. That’s information that, in many cases, we don’t have right now, although we have the tools we need to obtain it.

The problem is that there are four groups of stakeholders around this issue, and they need to get on the same page. Folks like me who do health services research are interested in finding out the answers to what works and what doesn’t. Some of us are more concerned with methodology and some of us are more concerned with translating our findings into practice, but the point is, group number one puts the research in comparative effectiveness research.

The second group consists of providers. They are one of the potential consumers of CER. The hope, after all, is that providers will start routinely using more effective treatments once the research has indicated which ones those are. Providers may also produce CER–either directly as investigators or in partnership with other researchers.

The third group consists of payers. They are another potential consumer of CER, and their focus is likely to be on paying for what works and not paying–or perhaps not paying as much–for what doesn’t work. I think there might be too much HMO-style backlash from patients if they felt their treatment options were being so overtly limited by their insurance company. That all remains to be seen.

The fourth, and final group, consists of the patients. Strangely, no one seems to talk about them in this conversation, but I believe that they are essential to the future of CER. If the public does not embrace the principles of CER, its use will remain limited. Of course, there’s no good reason for people not to want the best possible treatment–or the better of two treatment options. The thing is, right now, they’re being told that CER equals rationing, rather than smart decision making. Their toes are being stepped on by the concept, when it really should be seen as empowering them.

At the end of the day, health services researchers, providers, and payers all know the enormous potential CER has. It’s the patients who are left in the dark, misinformed, and scared that Uncle Sam will tell them that they can’t have their Lipitor anymore. We have to win over the hearts and minds of the people–show them how CER will help them rather than hurt them–before the potential of CER will ever be realized.

[The thoughts contained in this post were inspired by Dr. Kent Bottles whose post appeared on The Health Care Blog.]

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Posted by on August 24, 2010 in Uncategorized


How Would You Code It?

Several years ago, two young men were at work inspecting the installation of a new septic system for a house being built in a brand new subdivision in a rapidly developing area on the ever-expanding outskirts of the city of Atlanta. They arrived at the home, which was little more than a concrete foundation and a timber frame with no windows or doors, and headed around back where the septic system had been installed. In addition to keeping each other company, working as a team allowed them to work more efficiently: One could draw up the layout of the system and fill out the paperwork, while the other could actually inspect the system to ensure that it met state regulatory guidelines.

At this particular inspection, the installer was one of the men’s least favorite people. He was ill-tempered, a real hot-head with a mean streak and the profanities to express it. In fact, both men were surprised to see him, because the last they knew, he had actually been sentenced to an indeterminate amount of time in the county jail for one or more of a variety things he had managed to get caught doing. Had he been caught doing everything he had been doing, jail would have likely given way to prison. The installer greeted one of the young men with a nickname–“Hey Brunswick!”–that merely described where the young man was from, despite being wielded pejoratively. Ignoring the remarks, the inspection began.

Now, while both men usually wore boots, one of the young men–for reasons unknown–decided to wear a far less substantial pair of shoes with soles made out of cork. That was his first mistake. His second mistake was not looking down while he walked around the home site, sketching the layout of the system and filling out the paperwork. Both mistakes were brought to his attention when he felt a sudden sharp pain in the bottom of his right foot. Looking down, he saw that he was standing on a board, and it didn’t take him long to realize that he had just stepped on a nail securely anchored upright by a two-by-four. He wanted to cry out, but didn’t, because he didn’t want to hear any comments about how “Brunswick must not know not to step on nails!” So, with one foot providing resistance to the board, the young man raised his other foot off the nail, and hobbled back to the truck that carried both men from one site to the next.

When his partner returned, the young man explained that he had stepped on a nail and needed some medical attention. They went to the doctor, who took a look at the half-inch puncture wound, debrided it, applied an antibiotic and a bandage, and gave the young man a tetanus shot. The entire visit took 15 minutes. Then the doctor sat down to fill out his own paperwork and had to decide how to code the incident. There would be a separate charge for the tetanus shot, certainly, but then it was less clear. Was this a simple visit, an intermediate visit, or a complex visit? How is the doctor to decide that? Is it based on how long the visit took? What problem the patient presented with? How much the doctor feels like being reimbursed? (Complex visits pay better than simple ones, you know.) So, let me ask you, if you were the doctor, how would you code it? Simple, intermediate, or complex? Why? Would your answer change if you weren’t paid differently for each type?

Note: I was the young man in this story, and let me just go on the record that stepping on a nail is incredibly painful. I actually was seen at the health department for free, and given the same advice I now give you: Always wear boots around construction sites, and keep your tetanus booster up-to-date.

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Posted by on August 23, 2010 in Uncategorized

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