Overall Healthcare Spending Only Slated to Rise 7.5%

---Anna Shepherd, Health & Personal Finance Professional - Cambria Health Advisory Professionals


The following is an interesting press release of a recent research effort by the Health Research Institute of Price Waterhouse Cooper. It predicts 2013 healthcare spending based on recent trends and finds interestingly enough that overall spending is only slated to rise 7.5%. (Still above the posted rate for inflation, but not as bad as some had predicted.)  http://www.marketwatch.com/story/historically-low-growth-in-healthcare-spending-expected-in-2013-projects-pwc-health-research-institute-2012-05-31

The reasons for this slowed growth are quite heartening for the cause of business like Cambria Health Advisory Professionals, which holds as its mission the right of the individual to make his own health care decisions.  PWC’s article cites that in recent years, employers and industry professionals have made sincere efforts to reduce their own cost burdens; examples include such strategies as employees shouldering more of their medical costs, blockbuster drugs coming off patent, cost transparency, and employee participation in employer-sponsored wellness programs. Combined, this means that lowered costs could potentially be sustainable.

We continue to experience upward cost pressures stemming from the need for increased hiring and more sophisticated technology. With the baby-boom generation seeking retirement and getting ever-older, the healthcare industry is going to necessarily experience continued growth in costs due to greater utilization; the key will be assuring that resources are properly allocated (“not wasted”) to avoid negative impacts on the overall economy.

Certainly, Americans are demonstrating their interest in taking control over these decisions. For example, average enrollment in high deductible plans coupled with a Health Reimbursement Account has increased to 43.2 percent in 2012 from 34.2 percent in 2010.

The information showcased in this article represents, in my opinion, a great success for the free-market and individual decision-making. It legitimates a RAND study from the 1980’s that I frequently reference; the study demonstrated that people consume less health care when forced to pay higher co-pays. Numerous studies involving health savings accounts have corroborated what economists have always known: the more insulated people are from having to pay for something, the more of that thing they are willing to consume.

It seems to follow simple logic: if something is coming out of your pocket, you tend to pay attention. Obvious, right?

But allow me to make 2 additional points that this article brings to mind.

1. All of this progress can be undone if the Affordable Care Act is upheld as Constitutional. In our discussions on this blog, we try not to be too political in our commentary, but the fact remains that this piece of legislation is likely to fundamentally transform a sector of the economy that accounts for 17% of GDP. As employers unload employees onto government plans (which appears probable if recent polling is to be believed), the efficiency that we’ve seen when patients are accountable is likely to be erased. This was, and continues to be, my biggest objection to the legislation.
2. On a lighter note, if recent cost-controls keep pace, we’re on a better road. I believe that in addition to having consumption tied to the patient’s own wallet, the patient needs to be knowledgeable about their options and treatment courses. This will allow them to make more effective decisions, not simply financial ones. Instead of foregoing their yearly check-up just to save money, they may decide to forego an expensive drug and consider a generic instead. These types of informed trade-offs will add up for the industry as a whole as well as the individual patient.

The key may be helping the market find ways to create and attract more informed consumers who make more rational purchasing and health care usage decisions.

Can Solving Health Care Be As Simple as Just Doing What We’re Told?

----Terri Bernacchi, PharmD, MBA, Cambria Health Advisory Professionals

I don’t really think it’s this simple, of course, but since New York Mayor Bloomberg believes in the soundness of his recent decision to outlaw large soft drinks within the walls of his kingdom for the benefit of those (like me) without prudence or self-control, I thought it would be interesting to at least pose the question. Patient compliance with medications is frequently only around 50%; this is a well-documented fact. And the reasons for the non-compliance or non-adherence are as varied as the subjects of the study.


Do we forfeit our liberty to be willful and uncooperative (either by drinking Big Gulps or not getting our prescriptions filled) when others must contribute to the actual costs of our own health care? 
 
The article linked to this discussion recognizes the truth that people often don’t get their prescriptions filled. http://articles.sun-sentinel.com/2012-04-08/health/fl-hk-skipping-medicines-20120406_1_drug-costs-cvs-caremark-drugs-for-chronic-conditions  

There are a number of reasons that people do this---and it’s not just because they are obstinate rascals. They don’t get the prescription filled because a) they know it won’t work, b) don’t like the side effects c) don’t want to spend the money, d) they don’t have the money (different than option c), e) they already have a whole stock of that drug at home in the medicine cabinet that they didn’t take last time either, f) they don’t believe that the drug was necessary because their problem is going to resolve quickly and g) other reasons.

However, the system costs of medication non-compliance are well documented. The non-compliant patient is more likely to have costly medical complications. In addition to the obvious higher costs, there are some additional questions that this story raises:  

1. Buried in the story is this sentence: “Employers and insurers have grown so concerned about the costs of drug skipping that the credit-rating service FICO now offers a service to estimate the likelihood an employee or patient will take medicine correctly.” I think about whether I would want someone to rate my compliance in the same manner as my credit score. That seems a bit too “judgmental” and invasive. I wonder what others think about that. Here’s a link to that offering: http://www.fico.com/en/Products/Scoring/Pages/FICO-Medication-Adherence-Score.aspx
2. I wonder how the effects of “electronic-prescribing” “ERX” will change the dynamic of physicians sending a prescription which the patient will never have filled. If the doctor KNOWS that the patient does not get the prescription filled, will it change the patient’s behavior? How will the doctor react when he/she finds out the patient never picked it up or rejected it? One of the benefits of ERX in the professional literature is the fact that if it is electronically sent, it is much more likely to be dispensed. According to Surescripts, “Research shows that 20% of prescriptions never even make it to the pharmacy. A study conducted by Walgreens and Surescripts showed that once a practice starts e-prescribing, 11 percent more of their prescriptions get dispensed.” http://www.surescripts.com/about-e-prescribing/benefits-of-e-prescribing_for-pharmacies.aspx  
3. The FDA is looking (again) at designating some drugs as a third category, potentially available without a prescription. How will such a new category be impacted by this compliance concern/trend? What will their health coverage be? See well-written analysis here: http://www.fdalawblog.net/fda_law_blog_hyman_phelps/2012/02/on-again-off-again-third-category-of-drugs-is-on-again-at-fda-simultaneous-rx-and-otc-marketing-also.html  

Of course, I am just scribbling my thoughts and opinions on this matter in a blog posting. The questions are provocative and the answers are not necessarily clear-----it is my hope that we don’t let the discussion go by the wayside. The way in which we attack the problem of therapy compliance may have unintended consequences in terms of our freedoms and on care quality. We need to embark on the next steps with eyes wide open.

Terri is the founder of Cambria Health Advisory Professionals. Among her current clients: a large health sciences firm serving payers, pharmaceutical and device manufacturers and other stakeholders, a small special needs health plan as a 5 Star Consultant, and several other health related clients. The thoughts put forth on these postings are not necessarily reflective of the views of her employers or clients nor other Health Advisory Professional colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years experience as founder and primary servant of a health technology company which was sold to her current employer three years ago. She has both a BS and a PharmD in Pharmacy and an MBA.

A Perspective on Waste in Healthcare: A Tale of Two Articles

---------By Anna Shepherd, Health and Personal Finance Professional

Two recent headlines tell a tale of two stories but offer me an opportunity to comment on a couple of interesting challenges we face in our health care system, across the country.

1. The first article lauds a $1.1 million federal grant awarded to a Berkeley clinic as part of the Affordable Care Act (http://www.mercurynews.com/breaking-news/ci_20713200/berkeley-clinic-lands-1-million-grant-educate-abouthttp://www.bellinghamherald.com/2012/05/23/2535431/feds-struggle-with-getting-elderly.html)  The funds were from a pool of $122 million in Health Care Innovation Awards given out recently to 26 recipients. The "Over 60 Health Clinic" of LifeLong Medical Care will hire 60 new employees as part of the grant. The goal? Educate patients and reduce costs associated with urgent care, while improving outcomes through the use of “Peer Educators”.
2. The second article (by Kaiser Health News) details the disappointing results of another federally funded program started in 2007: “Money Follows The Person” which anticipated saving significant Medicaid and assistance dollars, by moving elderly people out of nursing homes and back into community.  See (http://www.bellinghamherald.com/2012/05/23/2535431/feds-struggle-with-getting-elderly.html) 

The Berkeley clinic article seems to be an appropriate start to patient-based cost control. It cites that educating 750,000 patients about compliance and the nature of their disease could save the system $250 million. The cost of the program itself: $122 million. My immediate concerns have to do with the information available in the article and the nature of the problem itself.

This article doesn’t go into depth about what type of backgrounds the peer-educators have, which to me is really what the whole program hinges on. If these people are former clinicians, nurses, or medical psychologists, I could foresee a high success rate (though costly).  

However, if they are case workers, which is likely, I could see an outcome similar to the second article about the Money Follows the Person program; it has been promised $4 billion, received $1 billion, and performed it’s duties for 36% fewer people than promised.  

In California alone, the health agency responsible for implementation has to work with two dozen other local placement agencies and is finding the barriers significant. This is the type of waste endemic in trying to fix problems whose origins are misunderstood or even unattainable.  

I want to explore why these types of programs are ineffective. Is it just government bureaucracy run amok? Is the populace in question more at-risk than average, leading to skewed results? Are the advocates being employed the ones best-suited to help?  

The fact that much of the US population needs advice concerning their health is not in question; but who is providing it certainly is. Suggesting that former healthcare professionals need to be central to patient counseling is not intended to demean the role of social workers; they are a necessary resource to many who have limited options and means. However, I think that the people advising patients on issues of compliance and decision-making need to be steeped in the industry; someone who’s seen and treated it all can be an invaluable advocate.  

However, let it be clear that they must also be entirely uninvolved when it

comes to diagnosing or treating the patient once they turn the page on being a provider and become an advisor. Current payment schemes’ create inherent conflicts of interest for the provider and are certainly a contributor to waste and fraud. In my opinion, patients would also be much likelier to heed the words of an impartial professional, leading to increased success rates.

In regards to efficacy and cost of the counseling, the biggest obstacle remains patient involvement. Those who have self-selected to be involved in the Berkeley clinic have a higher likelihood of success and will make the program worthwhile (again, given appropriate counsel).  

The point of this whole website and subsequent venture (see Cambria Health Advisory Professionals at http://www.sharedhealthdecisions.com/ ) is about empowerment of the individual and illness prevention for patients within the private sector. In speaking with outsiders, I have been criticized for not understanding the plight of a poor or disabled patient and the needs they have when they are sick and on their own.  

I respond by saying that I do understand because I work personally with elderly patients on Medicaid. But empathy is not an effective solution, nor is more money or programs.  

What we believe is effective is to catch the individual well before they have entered the Medicare system. If someone is frequenting a health advisor in their 40’s, they can learn about all of their options before the hard decisions must be made and, more importantly, they can plan. Removing these proactive patients from the pool of those in need not only saves vast sums of money but also allows focus to be directed on the patients with a high likelihood of noncompliance or medical neediness, creating a win-win for all.

For Fear of Being “Difficult”, Will I Forego My Needs?

----Terri Bernacchi, PharmD, MBA, Cambria Health Advisory Professionals
A study by the Palo Alto (Calif.) Medical Foundation Research Institute published by Health Affairs this May describes what many of the “meek” already know. You don’t want to irritate your doctor with too many off-putting questions; you’d rather suck it up and trust that he/she will do the right thing. http://newsroom.pamf.org/2012/05/patients-fear-being-labeled-difficult/

Though not a random, large scale trial, the researchers confirmed something many of us who have taken care of patients already know: There is often something broken in the dialogue between physician and patient as it relates to “give and take”.  The patient often withholds information, lies, or deliberately remains quiet when the golden opportunity to ask questions, challenge, or probe for options comes up.  Think how hard it is to ask for a second opinion! 

 In December 2009, PAMF researchers interviewed 48 people broken into six distinct focus groups. The participants were randomly selected from the electronic health records of five primary-care physicians in the San Francisco area.  Maybe not suprisingly, most were white, well-educated and more than 50 years old, and 19 reported annual incomes of $100,000 or more, although the investigators believe the results apply across all demographics.


And I would tend to agree with them from my own anectdotal experience.
The researchers found that focus group participants feared to question a physician’s advice or recommendations, concerned that they would be perceived as a challenge to the doctor’s authority. Most of them wanted to avoid “displeasing” or “disappointing” their physician.

Patient-Doctor Relationships represent a fundamental imbalance in power;  some felt that their physicians perpetuated this authoritarian stereotype. To manage their care, then, many described “doing their own research about treatment options and bringing social support to medical consultations to make the best use of the limited time available.”

“Shared decision-making is a collaborative process that allows patients and their healthcare providers to make health care treatment decisions together, taking into account the best scientific evidence available, as well as the patient’s values and preferences”: This requires two way exchange of information and implies accountability on both parties to actually be direct with regard to needs, wants and concerns.

It may mean that we should start early (perhaps in grade school) to encourage more effective means to encourage two-way dialogue with health care providers so that the charade of what is actually going on with a patient does not involve the patient withholding important factors or feelings (embarrassment, shame, unworthiness) that could impact care.

Terri is the founder of Cambria Health Advisory Professionals. Among her current clients: a large health sciences firm serving payers, pharmaceutical and device manufacturers and other stakeholders. a small special needs health plan as a 5 Star Consultant, and several other health related clients. The thoughts put forth on these postings are not necessarily reflective of the views of her employers or clients nor other Health Advisory Professional colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years experience as founder and primary servant of a health technology company which was sold to her current employer three years ago. She has both a BS and a PharmD in Pharmacy and an MBA.

Waste Avoidance vs. Rationing: In the Eye of the Beholder

--By Anna Shepherd, Health & Personal Finance Professional

After musing over this must-read article written by Dr. Howard Brody, a few things come to mind. I absolutely agree that the type of waste the author describes is the elephant in the room that needs to be addressed before any realistic measures can be taken to rein in healthcare spending in the United States. 

See: Brody, Howard. “From an Ethics of Rationing to an Ethics of Waste Avoidance” NEJM 2012; 366:1949-1951. May 24, 2012. Taken from the URL: www.nejm.org/doi/full/10.1056/NEJMp1203365#t=article

But I also have a few points of contention that are not directly addressed with the article.

1. It’s obvious that in this environment, trimming the health care industry from 17% of GDP to a more manageable number, say 9%, is going to be unpopular from a policy standpoint due to the sheer size of the health care industry itself (read jobs). However, this would not be disastrous as the more efficient allocation of resources in a free market would be a net benefit in the long term. However, the political will can only exist if the electorate is also willing, a political rant I will forego right now.
2. It does bring me to my next point however; I think the author asks too much of the average physician without bringing in the most important component of the equation: the patient. Patient education is the only way to really solve the waste problem, in my opinion. Unfortunately, the path to an informed and enlightened patient takes time and effort. Physicians are already inundated with large numbers of patients, ever lower reimbursement rates, malpractice threats and the cost of practicing defensive medicine, not to mention the stresses of simply running a practice. I’m not a physician, nor an expert in these matters, but it seems naïve to me to expect physicians to take on this extra task. So, there must be a better way to get the patient to make better decisions and reduce wasted resources.
3. The final issue I have with the physician-driven nature of this article is a moral one. The decision to ‘ration’ cannot come from “without”. Because the rationing we are talking about is often going to involve foregoing costly procedures, we arrive at a very gray area in which the care-taking physician must try to be an objective advisor. They are far too financially involved, as the author mentions, in the outcomes of the patient’s decisions to truly be the trusted source for advice.

Posing questions about the ethics of rationing is a great place to start the conversation. And physicians are a crucial gate-keeping mechanism to avoid waste. But I think the author may be trying to solve a problem by creating a more complex system instead of the solution I see as painfully obvious throughout the health care system. It goes to a fundamental component of economic efficiency: a system is efficient if each actor is allowed to maximize their individual utility.

Simply put: the answers need to come from the patients themselves. We need to create an environment in which patients can seek the answers and information that allow them to make efficient decisions without feeling that care has been rationed away from them. They need to own the decision.

Shifting the Power (and Burden) of Decisions to the Patient

 by Terri Bernacchi, PharmD, MBA,  Health Advisory Professionals

Sometimes people are most comfortable when someone else makes the difficult decisions in their life (and then takes the associated blame for when things turn out poorly). Others (like me) need to know all the options, odds and consequences for each, receiving counsel from trusted sources, and then making an educated decision. This is true for life decisions and for medical decisions, alike. In essence, it is for all decisions, great or small, regardless if there are just two alternative options or many.

One must weigh the options, rate the implications, and make a decision. And making no decision is still making a decision.

The link listed below contains an excellent posting about how complex medical decisions made on behalf of patients by physicians are often (when reviewed with the perfect clarity of hindsight) found to have been “unnecessary”. Key examples offered include such daily concerns as when to order a CT scan or implant a defibrillator, but these kinds of decisions are made all the time----some with little cost and consequence, some with profound cost and consequence.

Certainly, there is a theory that by applying more stringent governmental regulations on clinicians, only those patients that fit the narrow criteria for a treatment will receive it, saving vast amounts of otherwise wasted resources. As most of us who have “been there” know, it’s not quite that simple.

A recent JAMA article concluded for the 111 internal defibrillator patients reviewed,”Among patients with ICD implants in this registry, 22.5% did not meet evidence-based criteria for implantation.”

Shannon Brownlee, the author of this linked post about “Sharing Decision Making” notes one of the most challenging conundrums, using the defibrillator example, of modern medicine in the United States: physicians and patients do not make decisions in the same ways; and they don’t necessarily realize the gap between what each considers most important. http://health.newamerica.net/blogposts/2011/sharing_medical_decisions-42668#

She cites rightfully, that the implantation of defibrillators is a lucrative procedure for physicians and hospitals alike. She also makes a solid case that the decision to implant one of these devices is not always a black-and-white circumstance. Evidence-based clinical guidelines are in place to help surgeons select which patients are most likely to derive the greatest benefit. But doctors are routinely faced with patients who fall into the gray----who don’t exactly fit narrow criteria, but might receive some benefit from the device anyway and so they receive it. She also makes that case that some physicians may be unaware of the guidelines or evidence, thus not putting them into practice.
The line of distinction that I would like to draw is this one: the physician does not generate the same fees from NOT doing a procedure as he or she receives from DOING one. Thus, there is a frequently financial interest that weighs----whether recognized or not---as a potential medical conflict of interest between the objective needs of the patient (in the eyes of his provider) and that provider’s financial arrangements related to the options under consideration.

Ms. Brownlee notes that “...when patients are given a chance to be fully informed, and to share the decision about an elective treatment with their doctors, they often make choices that are very different from those their physicians would have made for them.”

In order to actively advise (as in “Shared Decision Making”) a patient on the medical alternatives without that bias weighing in by fact or appearance, a clinician must be able to divorce him or herself from the financial consequences of the “next steps” and truly sit on the same side of the table as the patient. This may not be possible in today’s medical construct and may be best remedied by a new kind of practitioner------one with experience and knowledge about how to objectively log and rank the medical alternatives, one with great listening and empathy built into their personality, but one who is not conflicted by the active practice of medicine and its payment schema. This clinician can guide and help the patient to a new kind of informed decision making----one which may reduce pain and suffering but also yield financial savings for the patient and the system alike.


Terri currently works for a large health sciences firm serving payers, pharmaceutical and device manufacturers and other stakeholders in health care as a Senior Principal in Managed Markets. The thoughts put forth on these postings are not necessarily reflective of the views of her employer nor other Health Thought Leader colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years experience as founder and primary servant of a health technology company which was sold to her current employer three years ago. She has both a BS and a PharmD in Pharmacy and an MBA.


[1] JAMA. 2011;305(1):43-49.

The Squeeze on State Budgets Means Health Care Reform (As Is) Is Infeasible

By Anna Shepherd, Health & Personal Finance Professional

The impetus for this post was the news of a small community in Washington losing state funding for health clinics due to budget problems. I think it typifies conditions throughout the country. States are already facing crippling budget crises that force them to seek federal monies to help pay for programs like Medicaid. When we consider the fact that health care spending is going to keep increasing (now at 17% of GDP—see WSJ article below) we can safely assume that states are not going to suddenly be able to pay more into Medicaid and related programs. So, the burden will fall to the Feds. However, at a time where we will inevitably (amidst much pandering to the contrary) have to raise the debt ceiling again, it only stands to reason that the money is simply not going to be there for a costly overhaul—on the state or Federal side.

Further recognition that the ACA legislation is not entirely feasible came today, as the Obama administration repealed an aspect of the bill due to start this year that includes end-of-life discussions in a regular physician appointment. When push came to shove, it wasn’t sensible and was repealed. Somehow, I think we’re going to be seeing a lot of that in the next few years. Unfortunately, it comes at a time when governmental action is a precious commodity. A gridlocked Congress already has too much on its plate just considering the budget; unraveling the labyrinth health care law seems like a Herculean effort. Nonetheless, I think we’re beginning to see a reality that was somehow not present last March.

So what’s the solution? Though it is my personal opinion that health care was passed without due diligence and if it had been proposed in segments over a longer term the sensible parts would have passed and the nonsense would have been left behind, we cannot turn back time. However, there are still actions to be taken. The first of them is a serious look at the Rivlin/Ryan proposal: people born after 1956 get a needs-based (adjusted for health risk and age as well) voucher to spend on private health insurance instead of Medicare eligibility (For more on this: http://www.ncpa.org/pub/ba736 ).

This is a start! Furthermore, as in the Forbes article linked below, companies need to take a long, hard, look at what their employees’ health means to the overall health of the company. Creating a scheme similar to 401k contributions, increasing participation in wellness-reward programs, allowing higher contributions to HSAs while funding high-deductible plans, personalized insurance products—all of these are feasible ways to make health care a more manageable part of corporate life. I firmly believe it will fall heavily on the private sector and the actions of individuals to make a difference in the state of health care in this country.

Source articles

• Washington community sees funding for health clinics cut due to budget crisis:    http://www.whidbeyexaminer.com/main.asp?SectionID=1&SubSectionID=1&ArticleID=5055
• Stimulus to states set to end with new Congress:  http://www.google.com/hostednews/ap/article/ALeqM5iSQbSnGouFW-eyk3ElbhWLELr-cA?docId=b9252430d82441d980d86e945f7af254
• Health spending at 17% of GDP http://online.wsj.com/article/SB10001424052748703675904576064173290792358.html
• Solutions for employers http://www.forbes.com/2010/11/29/health-care-reform-employee-retention-leadership-managing-costs.html?boxes=businesschannelsections