Happy 2021! My first blog posting in....way too long
Today’s Managing Health Care Costs Number is 83
Maybe this is how blogs die.
It’s been 83 days since I wrote a blog post here, and I haven’t focused on writing posts on managing health care costs since Spring. This is the longest I have not posted since I began the blog in 2008 -and that includes vacations, hospitalization, and even a bike trip from Vietnam to Laos (during which time, in all fairness, the Affordable Care Act reconciliation passed Congress.)
The COVID-19 pandemic has taken over my professional world, as it has many others - and addressing concerns about a pandemic that as of now has killed over 1.8 million globally and over 350,000 in the US has crowded out, well, just about everything else.
It’s been a productive time for me (I’ll list publications below) - and the years that I’ve spent writing the blog have certainly helped me frame data - and frame my opinion. I’ll be teaching my 17th year of Managing Health Care Costs at the Harvard TH Chan School of Public Health starting later this month - so it’s a good time to step back and think about what’s been going on with health care costs over the last year - and what we can expect going forward.
The cost of health care has gone down during the pandemic, because we’ve stopped delivering a lot of the care that we are accustomed to.
Elective surgery was halted this spring in much of the country for the first wave of the pandemic, and elective procedures simply haven’t come back in much of the country. I still practice (a little) urgent care, and the demand has simply cratered. People stay home with self-limited illnesses - which get better without medical intervention. There’s worry, though, too. People are not getting their preventive care. This will lead to more preventable cancer deaths, and could lead to secondary epidemics of preventable childhood illness.
Virtual care has finally hit its stride
Over 90% of employers offered telemedicine for the last 4 years, but the uptake was usually tiny. The pandemic has changed all of that. Psychologists and social workers and psychiatrists who insisted on in-person visits during business hours have seen the light, and some of my clients saw an increase in mental health visits during the spring - even when most other visits were way down. Virtual care could help control medical costs in the future, as it’s hard to order ancillary tests for patients who are at a distance, and virtual visits will likely eventually be paid at a lower rate than in-person visits. Of course, if virtual visits are simply incremental to in-person visits post-pandemic, they will not help us lower costs.Congress passed the Surprise Billing legislation
Surprise bills have been a thorn in the side of health care payers and patients for decades, and recent private equity purchase of various specialty physician groups and air and ground ambulances have increased the problem of enormous out-of-plan bills. Researchers recently found that these surprise bills increase medical care costs for everyone - since they give some providers leverage to demand higher allowable prices for participating in networks. In fact, effective elimination of surprise bills could decrease health care premiums by 1-5%. (This might seem small -but remember, we are talking about health care spending of over $1 trillion in employer sponsored health insurance alone).
The bill that passed Congress is imperfect. It requires arbitration, which can be burdensome and probably advantages sophisticated providers. The arbitrators cannot consider Medicare or other public payer rates, although at least they also cannot consider the billed charges. It seems likely that it will be better to have this bill than not -and over time we will see how the arbitrators are ruling.The pharmaceutical companies have delivered COVID-19 vaccines in record time
Rising pharmaceutical prices continue to be a challenge for all health plan sponsors - whether private or governmental. The Pharmas have been very effective at accelerating vaccine development and manufacture, and we’ll have to see how much good will they have accrued to ward off meaningful attempts to lower US pharmaceutical costs. A closely divided Congress will help prevent meaningful constraints on pharmaceutical prices, but the financial crisis we’ll face coming out of the COVID-induced recession will make it more difficult to avoid real action here.
The pharmas have been quite reasonable in their pricing of vaccines and even the (marginally effective) anti-COVID therapies. They have not chosen to charge a “value based price for vaccines, for instance. If the economic cost of the pandemic is $16 trillion, then the “value” of a vaccine to address this could be $50,000 per US resident! But the actual acquisition costs per vaccine are just dozens of dollars, not hundreds or thousands. We should be aggressively questioning the declaration that we should pay for value for pharmaceuticals. We rarely pay for the “real” value of things we purchase. If we paid for the value of vegetables based on the productivity of my home garden, I would starve! We should be grateful to the pharmaceutical companies for their excellent pandemic work, but we need to be sure we aren’t paying twice or more what the rest of the world is paying.Transparency is (maybe) here!
The Trump Administration enacted broad regulations requiring transparency from hospitals (which must list how much each insurer is paying them for 300 procedures as of 1/1/21, and more in subsequent years) and from insurers (which must provide members with information about allowable prices and out of pocket costs beginning 1/1/22). The Biden Administration is not likely to roll these back. Who’s against transparency after all?
I’m happy to see this sort of transparency, and especially happy that this requires hospitals and insurers to provide machine readable data - so third parties can commercialize products that incorporate this data. I’m not as worried as some that this will lead lower-priced providers to raise their prices. The transparency initiative doesn’t give those lower priced providers a whole lot of additional leverage, and I don’t believe they were leaving “money on the table” all along.
Transparency alone, though, won’t address our rising health care unit costs. Most medical expenses are concentrated on people with very high total costs, where prices shouldn’t drive their behavior because they are (1) too sick to be thinking about the prices and (2) way over their out of pocket maximums. Further, medical care continues to be a very complex purchase, and there are few bundles. I purchase a car, and don’t have to purchase an engine and a battery separately, so it’s not so hard to go to Consumer Reports and research this. It’s a lot tougher to purchase a gallbladder removal - hard to know what components will end up being billed.
I’m not likely to return to two or three posts each week - but I’ll periodically do updates, and will link to new posts on twitter (please follow me).
My best wishes for a healthy, happy and safe New Year.
Here’s the 2020 bibliography:
Levin-Scherz, J and Allen, D "8 Questions Employers Should Ask About Coronavirus" Harvard Business Review digital publication March 2, 2020 https://hbr.org/2020/03/8-questions-employers-should-ask-about-coronavirus
Levin-Scherz, J "Federal action can limit impact of COVID-19 costs on American businesses and workers" The Hill, April 13, 2020 https://thehill.com/opinion/healthcare/492551-federal-action-can-limit-impact-of-covid-19-costs-on-american-businesses
McCann, R and Levin-Scherz, J “Employers can address the racial disparities exposed by COVID-19” Willis Towers Watson, April, 2020
Bremen, J, Jesuthasan, R, Levin-Scherz, J "Five Ways COVID-19 Will Forever Change Work" World at Work, May 15, 2020 https://worldatwork.org/workspan/articles/five-ways-covid-19-will-forever-change-work
Levin-Scherz, J and Allen, D "8 Questions Employers Should Ask About Reopening" Harvard Business Review digital publication May 28, 2020 https://hbr.org/2020/05/8-questions-employers-should-ask-about-reopening
Levin-Scherz, J, Noblick, J and Jones, JH, "How behavioral economics can help employers respond to COVID-19" Human Resources Executive, May, 2020 https://hrexecutive.com/how-behavioral-economics-can-help-employers-respond-to-covid-19/
Levin-Scherz, J, Jesuthasan, R, Bremen, J “Should CEOs be in the Office Now?” Chief Executive Magazine, June 18, 2020 https://chiefexecutive.net/should-ceos-be-in-the-office-now/
Levin-Scherz, J and Parson, T "The Paradox of Medical Costs During the Pandemic" Econofact.org, June 30, 2020 https://econofact.org/the-paradox-of-medical-costs-during-the-pandemic
Levin-Scherz, J "The federal government must pay for distribution of the COVID vaccine" The Hill, July 20, 2020 https://thehill.com/opinion/healthcare/508118-the-federal-government-must-pay-for-distribution-of-the-covid-vaccine
Levin-Scherz, J, Blumenfield, S, Stone, J "7 Ways COVID-19 Will Transform Health Care" CFO.com October 14, 2020 https://www.cfo.com/health-benefits/2020/10/7-ways-covid-19-will-transform-health-care/
Levin-Scherz, J and Stone, J "Charting a New Course: Implications of the Pandemic for Health Plan Sponsors" Benefits Magazine, November 2020 LINK WTW LINK
Levin-Scherz, J and Lupin, B "Seven Questions Human Resources is Asking about COVID-19 Vaccinations" HR Executive, December 1, 2020 https://hrexecutive.com/seven-questions-hr-is-asking-about-covid-19-vaccinations/
Blumenfield, S and Levin-Scherz, J "Digital Tools Are Revolutionizing Mental Health Care in the U.S" Harvard Business Review December 3, 2020 https://hbr.org/2020/12/digital-tools-are-revolutionizing-mental-health-care-in-the-u-s
Levin-Scherz, J "As U.S. Vaccinations Begin, Hope Mixes With Worry"[Letter to the Editor] New York Times, December 16, 2020 https://www.nytimes.com/2020/12/15/opinion/letters/covid-vaccination.html
Levin-Scherz, J "Strategies to Encourage Employees to Get COVID Vaccines" HR Executive, December 21, 2020 https://hrexecutive.com/3-strategies-for-right-now-to-encourage-employees-to-get-covid-vaccines/