There are two interesting stories that concern themselves with future discount rates in health care.
The first is a straight forward study from Quest Diagnostics looking at its lab data from 2014. Quest found that states which expanded Medicaid were turning up an amazingly high number of new diabetes cases. Non-expansion states were basically flat in their rate of diabetes cases being found.
The New York Times has more:
In the new study by Quest Diagnostics, a medical testing company, researchers analyzed laboratory test results from all 50 states in the company’s large database over two six-month periods. In the states that expanded Medicaid, the number of Medicaid enrollees with newly identified diabetes rose by 23 percent, to 18,020 in the first six months of 2014, from 14,625 in the same period in 2013. The diagnoses rose by only 0.4 percent — to 11,653 from 11,612 — in the states that did not expand Medicaid….
The marginal 4,000 new diabetes cases discovered in Medicaid expansion states will result in these people getting more intensive services now than they would have received if they lived in non-expansion states. These people will get more frequent lab draws, they will get more nutritional counseling appointments, they will get more prescriptions, they will get more primary care provider visits. These people went from being ignored to being treated. Being treated costs money.
However the bet is that early treatment and monitoring at a fairly low level of intensity will be cheaper over the long run than acute crisis intervention. The bet is three lab draws, two maitenance medications, daily blood sugar monitoring and two PCP visits a year for several dozen newly found early diabetics is systemtically cheaper than amputating one foot ten years down the line.
The other story was from last week. It looks at the cost effectiveness of buying quality life years with specialty Hep-C drugs:
One analysis published on Monday in the Annals of Internal Medicine found treatment involving Sovaldi cost-effective for people with the most common type of hepatitis C, known as genotype 1, compared with older treatments.
It was funded by CVS Health, one of the largest U.S. pharmacy benefits managers, and was based on Gilead’s 2014 pricing, before it began to offer greater discounts.
The new drugs cost $12,825 for every healthy year of life patients gained over older treatments, the researchers said. That was below the usual cutoff of $50,000 per healthy year of life gained for cost-effectiveness.
Senior author Dr. Niteesh Choudhry cautioned that the analysis looks at benefits over the course of a person’s life, while the cost of treatment is paid upfront.
Spending $13,000 on a quality adjusted life year (QALY) is an amazing bargain from a system perspective. The British National Health Service would consider that price a bargain as well even at their lower spending levels compared to the US system. The 2014 study will be overstating costs for two reasons. First, Gilead has begun to offer large discounts to insurers as there is competition on the market for specialty Hep-C cures. Secondly, the competition is only due to increase over the next year or two and the specificity of the new drugs due to come on the market will increase the targeted cure rate at the same or lower cost per treatment. The $13,000 per QALY is a local maximum cost.
The difference between these two stories is one of discount rates. The diabetes story is a story of significant low level, wide spread intereventions and costs to avoid future high cost crisis claims. The Hep-C story is a story of very high cost current treatments to avoid future ongoing costs plus future ongoing crisis claims. They are the same story as they are the story of how we as a society apply discount rates to the future.
Joel Hanes
Forbes has published today a Sally Pipes article on Obamacare
According to Pipes, it has failed to live up to any of the promises made by its supporters.
You will be unsurprised that Pipes scores the promise
“Obamacare will slow the growth of health care costs”
as FALSE, because costs have not fallen in absolute terms
(the claim is about the sign of the second derivative of the price function with respect to time; her “evidence” evaluates the sign of the first derivative).
This is so transparently dishonest that I’m surprised that the Forbes editors didn’t ask her to make the trickery more obscure.
mai naem mobile
I wonder if the GOP will talk about exploding healthcare costs in expansion states vs. non expansion states being that the savings you see are over the long term. Also as far as diabetes, yeah, amputations are expensive but what’s crazy expensive is dialysis. I knew a lady a few years ago and she said each treatment (3 x weekly till you die or get a transplant) is $1K. $150K annually just on dialysis alone.
Violet
Richard, I wonder if you could clarify something. An older family member who has Medicare told me that his tax accountant said that Medicare doesn’t count as the necessary health coverage to avoid paying the tax penalty. However, Medicare supplemental insurance does count. So seniors who have supplemental insurance can avoid paying the penalty
That didn’t sound right to me, but I’m not an accountant. Do you have any insights? I did a quick Google search but got a bit confused and thought maybe you or someone might know. Would it be dependent on income levels or something?
Arclite
I wish there was something to be done about “foods” like refined sugar and HFCS that cause diseases like diabetes in the first place. Rather than subsidies, these items should be highly taxed, making the foods created with them more, not less, expensive. They should be consumed so much less often than they are.
Belafon
@Violet: I found this.
It’s from the medicare.gov site.
Brachiator
@Violet:
Bad Tax Accountant. This is totally, absolutely wrong.
This is what counts as Minimum Essential Coverage:
Medicare Part A or Part C
This kind of stuff is easily found at healthcare.gov
Going a little further, having Medicare Part B alone (hospital insurance) is not considered minimum essential coverage.
Violet
@Brachiator: I don’t think it’s a bad tax accountant. The accountant is great. I think it’s a misunderstanding by this family member.
@Belafon: Thank you for that! Didn’t think to go to Medicare.gov. I will send that info to my family member. I knew what he told me was wrong but didn’t want to get into it at that moment.
Violet
@Brachiator:
Maybe my family member just has Part B. I do not know the particulars. So it could be that the tax accountant was right in my family member’s particular situation.
Brachiator
@Violet: Your family member should talk to the tax accountant and determine exactly what kind of coverage he or she has. I have not seen very many situations where a senior only has Medicare Part B, and at this point in the tax season, tax preparers should know the ins and outs of minimum essential coverage.
On the other hand, full implementation of ACA is new for this year, and preparers had to quickly learn the law and the new related tax forms.
trollhattan
@Violet: .
If he regularly watches his teevee machine, tell him he’s getting the Kenyan Discount Double-Check and to not worry.
When my in-laws became of a certain age they magically became fixated on taxes, and the non-payment thereof. This led to them getting a vastly complicated trust that is today driving the spousal unit and various other in-laws absolutely bonkers, and I believe the trust was drawn up by a lawyer who either was a routine guest of a radio talk show or a radio show host. Whichever, I’d like to kick him in the giant brass balls.
And speaking of talk radio and the Big Grift.
A data point: Donnelly was arrested trying to take a gun onto an airplane, while a member of the California assembly.
Violet
@Brachiator: Like I said, the tax accountant is great. I have the highest confidence in the accountant’s knowledge of the tax law. I suspect this family member misunderstood something the accountant said. That wouldn’t surprise me at all.
boatboy_srq
@Joel Hanes: Forbes is squarely in the 1%er camp: anything that helps anyone else is obviously bad. Pipes’ analysis was probably expected. And with the Quest study saying:
… you can bet that there’ll be handwringing from the Teahad that Obummercare is making people spend more money to get sicker sooner, because without it they’d go along swimmingly until blindness or amputation become suddenly necessary in 10-15 years. It’s all about the next fiscal year for them.
Brachiator
@Violet:
As you note, maybe something was just misunderstood. I hope your family member gets it clarified.
I had to teach CPAs and tax accountants on ACA. Early on, there were only preliminary forms and lots of confusion that baffled even some of the most veteran tax preparers.
Violet
@Brachiator: I appreciate your insight. I will double check with my family member after the discussion in this thread, but I do have confidence in this tax accountant so I suspect it’s a misunderstanding by my family member in this particular case.
JCJ
@Joel Hanes:
While something like this is obvious to you and me I doubt many people who write articles for Forbes or any other magazine have any idea what this means.
Belafon
@JCJ: I understood it, but considering some of the headlines the past few years have been “Insurance rates keep going up under Obamacare” you are correct.
jl
Thanks for informative post and links.
My only quibble, which RM probably knows about already, is that it is questionable whether monopoly prices charged by Gilead for Sovaldi are economic costs. Given current knowledge, the revenue accounted for by difference between cost of production and price is a transfer payment from insurers and patients to the drug companies. Not a cost to society, except in terms of distortions caused by difference between cost of production and price.
If you want to argue that this part of the revenue (which is by far the largest part of the revenue) is an economic cost, then you need a different argument: that the monopoly rents going to Gilead and other companies with patents are required to spur continued drug development in the future. Whether that is true is very debatable, and involves judgments about relative value of current versus future benefits from medical treatments.
Also, the steep discounts given by the drug companies for Solvadi and related patent drugs are not out of the goodness of their hearts. If there is a lack of price transparency, and the companies face no threat of large part of market using, for example, reference pricing to force them to uniform pricing to a large segment of customers, then they will want to use price discrimination to maximize their profits.
If you are monopolist, and you can prevent resale, you will want to determine the maximum amount each customer is willing/able to pay, and charge that customer exactly that amount. The marginal customer will get the drug at just above the cost of production, though many customers will pay far more. That is the best case monopoly price scheme for equity, since poorest will have access to drugs at a lower price. My personal opinion is that this is what the huge ginnomrous well financed marketing departments of drug firms are really all about: maximizing profits through price discrimination. The inability to impose this kind of price discrimination is why medical equipment companies and drug companies and providers in general just hate loathe and despise price transparency (Edit: I remember reading an article by a drug company exec saying that in medicine price transparency was flatly immoral) .
If a company cannot determine the maximum price each customer will pay for the drug, then they may go with other forms of price discrimination, such as volume discounts, in which those with most ability to pay tend to get the best deals.
In general, economically, monopoly pricing with price discrimination sucks up most or all of the social welfare of the new drug development during the life of the patent. Net benefits go to society as a whole only after the drug goes generic. Which is why follow-on patents are a real problem for social welfare.
Those conclusions may seem to contradict the findings of the study, but they are based on the notion of threshold cost-effectiveness ratios. It’s very difficult to get to social welfare cost-benefit conclusions from that kind of threshold analysis.
low-tech cyclist
@Joel Hanes:
As JCJ said, most people don’t know what a derivative is, so the difference between the first and second derivatives is, to them, uncharted territory beyond terra incognita. If you start talking about it, their brains shut down, which is actually a rather sensible response.
WereBear
It’s not just diabetes. A study has come out with 10 people who had their early Alzheimer’s/dementia problems halted and reversed with improved diet, stress relief, and a few supplements:
Reversal of cognitive decline: A novel therapeutic program
More support for the researchers who call such mental issues Diabetes III.
Mike in NC
Hasn’t Forbes come out with a couple dozen articles denouncing the various evils of Obamacare?
pluege
they will also live longer and live a better quality of life, thereby being a more productive member of society. But we know that is never a concern to American society in general…quality of life is never on the radar, only dollars and cents.
jl
@pluege:
‘ quuality of life is never on the radar, only dollars and cents. ”
I think worse than that, more like
‘ quuality of life is never on the radar, only dollars and cents that you can stuff into your own pockets. “
Cervantes
@Mike in NC:
Yes, hence this (from earlier today).
Arclite
@WereBear: Also, sugar plays a strong role in heart attacks according to recent research.
Germy Shoemangler
@Arclite: I avoid sugary snacks, but it is still the hidden ingredient. I read the ingredients on a container of salt. It contained sugar. WTF?
And I remember when HFCS was touted as the healthy alternative to sugar: “It’s from fruit!” And now they’ve swung around again to “No HFCS! Sweetened with cane extract!” (sugar)
Amir Khalid
@Germy Shoemangler:
Once I came upon this, in the ingredient list on a box of American-made granola: “crystallized dehydrated cane juice”.
Germy Shoemangler
@Amir Khalid: They’ve got a million names for the sugar and salt they dump in everything.
I’d like to say I’m a person who eats only the most wholesome vegetables and fruit, but I am addicted to convenient snacks that are salty. The sugar pastry stuff I can do without, but I get cravings for the bad stuff all the time.
Xantar
@Arclite:
I don’t discount the harm of sugar, but that particular link you posted is from a doctor with a book to sell, and I always distrust them. It’s prejudice, I know, but it’s proven to be a pretty good rule to live by.
Germy Shoemangler
@Amir Khalid: My favorite thing is HOW TINY they list the ingredients, often in black text on a red background. It’s like they’re telling me “You want to know what’s in this crap? None of your business, you stupid fuck!”
I always forget to bring my reading glasses to the supermarket.
Doug r
Check the nutrition label and do a little bit of math. They are required to put the carbs and sugars there
boatboy_srq
@Germy Shoemangler: Don’t forget that all the fats we’ve been counseled to reduce or eliminate for the last fifty-odd years are now suddenly good for you, too…
ThresherK
The allegorist in me can think only two things: The young men who joined the CCC in the ’30s or went to fight WWII after Pearl Harbor. Many of them had never been to a dentist in their entire lives.
Waiting for the first conservative to claim that the CCC and armed forces caused cavities.
(Okay, I have the feeling it’ll be easier for them to swallow that claim about the CCC than our military.)
fuckwit
Big Biden Deal indeed.
I just came back from rescuing my uncle back from the dead. He’s 84, has tons of medical problems including an arm amuptated because of cancer a few years ago (cancer free since), congestive heart failure late last year, long term anemia, weird leg troubles the year before, and terrible eyesight including both cataracts and glaucoma. He’s a Korean War vet so gets his medical care through the VA. He also has a bit of Munchhausen Syndrome so he drives the VA doctors crazy with complaints. He has Medicare but no other insurance. Dirt poor, living off of very meager SS (was self employed for a long time and did not pay in) and did not have much savings. And a total exercise, fitness, and diet fanatic. He was in better shape than me. Was a FAUX “News” viewer and so he was anti-Obama and anti-PPACA, thought it was death panels, never signed up for it. For decades he has lived alone, and even managed to do so after losing his arm. Very independent, sharp as a tack, though a wingnut-media consumer.
But then he got hit by a car crossing the street a block from his house. He had pneumonia at the time too. Head injury, pneumonia worsened, and he got sepsis. Was out of it for a month, thought it was 1994, thought the president was Eisenhower, was totally disoriented, dreaming out loud, making crazy statements, getting violently agitated, and heading down every day, everyone thought he had permanent brain damage. Just on death’s door. Had been in rehab and not doing well, then the pneumonia took a turn for the worse and he ended up in the ER again. The doctors had all written him off, disregarded everything the family said about how sharp, fit, strong, and independent he’s been. I brought him back the same way I talked people down from a bad acid trip, and also with some salesmanship. He was hallucinating so I just brought him back among the living. Got him doing little things to show he could recover… and showed the staff so they’d believe we weren’t lying or in denial. They started seeing… and then believing. Within a week he went from the ER and headed for hospice, to walking the entire length of the hospital floor without a cane, talking in complete sentences, and discharged to rehab. Still very weak but he’s turned the corner. The VA is picking up the whole tab for the very nice hospital he got rushed to… thanks Obama! And we’re finally filling out the paperwork to sign him up for MediCal to hopefully pick up the tab for the rehab (VA won’t).
I told him he owes his life to socialized medicine. One of the nurses remarked to me privately how disgusted she was that rich media millionaires like O’Lielly and Hannity talk poor people into doing self-destructive things. I agreed. I also had some interesting discussions with my uncle about why I am a Democrat and a lefty, though I don’t expect to have changed his opinion, but at least he has some understanding of mine.
So when he was being discharged, the doctors asked if he knew who the president was– he replied “Obama”. When asked who the vice president was, he thought for a couple seconds, smiled, and said “Joe….”. He didn’t come up with the last name but the doctors laughed and said just “Joe” fit perfectly. Of course, I had to remark: “This is a big deal!” And they got the joke.
The thing I never understood about hospital staff and doctors is that they do not believe ANYTHING except their own two eyes or tests THEY do. I called one of the resident on this and she totally owned it, said it’s part of their training! If someone else does the tests they don’t care, they’ll make you take them all over again with THEIR lab. If some other doctor evaluated you then they don’t care, they’ll insist on re-evaluating you. If a speciallist they don’t know saw you then they will disregard whatever they said, and make THEIR specialist re-evaluate you. It’s big trouble if you find yourself having to move from one doctor or hospital to another. Consistency is essential, because none of these doctors trust anyone else or each other. I now understand why older people with lots of long-term and chronic conditions hate having to switch doctors: they make you start from square one every time you switch. It also seems like a terrible ineffciency.
Germy Shoemangler
@Xantar: If I see anything linked to Gary Null or Dr. Oz, I shy away.
I like to check things with the New England Skeptical Society:
http://www.theness.com
Germy Shoemangler
@boatboy_srq: At this point, I just go with what the old folks always used to say: “Everything in moderation!”
Roger Moore
@jl:
I don’t think that’s questionable at all; they’re obviously monopoly rents. That’s why they’ve dropped the price dramatically as soon as competition started to show up.
Germy Shoemangler
@fuckwit: That’s an amazing story. I’m curious though… why don’t the doctors trust the test results of other doctors? Is it some sort of reflex warding off malpractice suits?
jl
@Germy Shoemangler: I’m curious too. Might be combination of redoing tests since they are a good revenue source, and little regulation of conflict of interest for doctor or hospital conflict of interest in lab tests and diagnostics. (Edit: actually could argue that there are huge gaping loopholes that make revenue skimming from tests and labs the usual practice. California eliminated the loophole that allowed docs and hospitals to bring in out of network professionals and their fees without clear notification to patient just a few weeks ago).
Might also be partly US ‘hero doctor’ syndrome, where every doc has to have total control, or maybe malpractice and weird US medical ethics and blame-casting system. That is, the doctor in charge right now is totally responsible, period. Noe that this practice makes costs of ‘churn’ very high, and US system has very high churn through providers, including docs, compared to say Netherlands and orders of magnitude higher than Swiss.
Or, docs may be aware of sloppiness of US medical system, so feel they cannot trust anything unless they have control.
I do know that docs I have done research with from other countries, like Switzerland, Netherlands, UK, find the US testing practices wasteful, bothersome and generally insane. And also, I hear comments about extreme slop.
jl
@Roger Moore: I’m being cautious. Anyway, the drug companies will claim that they are selling below ‘costs’ whenever they cannot charge what they want. For same reason they pretend like it is a big sacrifice on their part when they give compassionate care discounts.
catclub
@Germy Shoemangler:
Motivations matter. There is no upside for them trusting the other tests. If they happen to own the testing lab that your new test is run at, then it is even worse. The insurance companies might be able to figure out that Doctor X ordered the same test on Patient Y as Doctor Z, and penalize Dr X for doing that, but it might not even matter enough to them.
If they were penalized (effectively) for repeated tests, they would change.
Violet
@fuckwit: Amazing story. Good for you for taking such good care of your uncle. Glad he’s doing so much better.
As hospitals and medical chains merge and move to electronic medical records you’ll find more doctors will “trust” other doctors’ tests because they’ll have been done within their system and/or stored on the system. Sometimes tests have to be repeated because they’re time sensitive or they’re retesting something after an illness, so that’s part of it as well.
@Germy Shoemangler: Depends on the doctor. If they know the doctor and lab they may trust them. If they don’t, then they don’t know if the tests are faulty or doctored somehow. Plus malpractice. Really, would you want your doctor making a key decision about your health on tests run by a doctor and lab that your new doctor doesn’t know anything about? Your old doctor could have been a crook and the lab could have been a mess. Doctors are better off doing their own tests, as inefficient as it may be.
RSA
@Joel Hanes:
She doesn’t seem to mention the promise that more people would have health insurance than before. Very few of her crowd do.
RSA
@jl:
A few years after my wife changed her GP (she wasn’t really comfortable with him and his manner) we were told by a friend that this physician had had his license suspended for two years, after a patient died under anesthesia during an operation he was performing. I can’t judge whether the penalty was appropriate or not, but it seemed pretty light. Maybe U.S. doctors are wary of their self-policing abilities?
piratedan
@RSA: Seems kind of funny, it was proposed that the ACA would dramatically reduce the number of uninsured people in the country and Pipes is claiming that isn’t the case? Sounds like a selective strawman construction but then again, the ACA wasn’t crafted to benefit Forbes subscribers, who are busy harumphing to themselves….
pluky
@Violet: Does this “tax accountant” have a side line selling Medicare Supplement insurance?
pluky
@fuckwit: It’s a combination of defensive medicine and poorly integrated medical record keeping systems.
Violet
@pluky: No he does not. He’s a great accountant. I think my relative misunderstood something that was said.
rikyrah
I know your post was about cost. For me, I was happy to see that these people have been diagnosed. Only after being diagnosed, can you begin to handle the disease. Having dealt for 20 years with a parent who had diabetes, detection is key. These people were walking around being undiagnosed. Isn’t that really the most important part?
pluege
@jl: agreed, greed-disease is rampant in America.
Another Holocene Human
@Joel Hanes: You’re right, that’s incredibly dumb.
Roger Moore
@Germy Shoemangler:
I wonder if some of it isn’t the Balkanization of our medical records; it may be easier for a doctor to re-order the test with a lab that will provide the results directly to his record system than to try to figure out how to get the results from a previous physician. It’s a huge drawback of having a collection of pieces rather than a purpose designed system.
Another Holocene Human
@JCJ: If they understand the difference between a positive number and a negative number, which I’m sure they do because they successfully buy a cup of coffee at Starbucks every morning, then they understand that “less big positive number” is a different claim from “negative number”.
While the explanation about derivatives might go over peoples’ heads they can definitely parse the difference between “It was going up by 10% per year, now it’s going up by 3%” versus “I’m not happy because it didn’t shrink by 10%”.
The latter is just a straw man.
Another Holocene Human
@boatboy_srq: Well, not ALL the fats…
Turns out Crisco, aka “partially hydrogenated vegetable oil”, that wonder-fat-replacement (dumping ground for industrial waste left over by the starch extraction process, don’t tell the rubes) actually causes inflammation of the arterial walls and is a serious factor in heart disease.
It shows up in some fried foods because they were fried in poly unsaturated vegetable oil (it’s cheap! it’s vegan!) and heating that shit up to high temperature causes all kinds of “interesting” chemical changes.
So even though they took it out of a lot of prepared foods you can still save a cardiologist by eating at McDonald’s.
USA! USA!
Another Holocene Human
Palm and coconut oil are now supposed to be heart healthy (but not palm kernel oil) after years of entities like CSPI telling us that tropical oils were going to kill us all.
The problem is that the way they are clearcutting and encroaching on indigenous lands to plant palms to feed US demand is an environmental and human rights DISASTER.
In 1900 the most popular fat in the US diet was beef tallow. It was valued in its own right and also appeared on shelves mixed with small amounts of butter as an affordable butter substitute, well, until the dairy purveyors threw about fifteen tantrums about it and finally earned the right to bar 50/50 and other not-100%-butter products from calling themselves butter. In some places they weren’t even allowed to premix in the orange food dye so you had to mix it at home. (Ewww.)
Another Holocene Human
@fuckwit:
True. And part of that is not believing patients. Can make going to the doctor very stressful.
One of my new docs doesn’t believe I’m on the autism spectrum because I’ve spent a decade training myself not to mumble and look at the floor. Hooookay thanks for the complement but that’s not very helpful.
Another Holocene Human
@jl:
Thank goodness. Too bad it’s not national law. There is all kinds of cadging and skimming and outrageous sticker pricing going on. It’s completely outrageous.
And don’t get me started on the medical devices scam.
Another Holocene Human
@jl: I’ve noticed they love to do expensive tests with ambiguous results.
Another Holocene Human
@Violet: I’m not as sanguine about this but you have a point with things changing. For example testing for A1C is a pretty standard test and that can change in 6 months.
eta: it should also be fairly inexpensive
a non mouse
I’m finding a lot of abnormal paps in these women who are coming in for the first time in decades because they now have insurance.
Sad.
boatboy_srq
@Roger Moore: I always thought that the monetary incentives to rediagnose and retest drove more of this activity than distrusting a colleague’s opinions. Although, any diagnosis could be suspicious either as too benign (“Doctor Clueless thinks my patient has the common cold when it’s actually blastonecrosis”) or too severe (“Doctor Clueless told you that this harmless mole is Stage 4 melanoma?!?”) so the impetus to form a second opinion – whether requested or not, just to have one – seems pretty strong.
boatboy_srq
@a non mouse: Predictable. Equally predictable: at least some wingnuts will take the rising healthcare consumption (from all those new patients coming in, getting examined and finding out how unwell they are) as proof that going to the doctor makes one sicker.