Category: Economics

Cavalcade of Risk #17

published date
January 17th, 2007 by

Welcome to the 17th Cavalcade of Risk, a roundup of the best blogging on the topic of risk.

Not (specifically) health care

Risky opinions

To get us started, Brian Kim explains how to counteract the tendency toward risk aversion as we age. Think of risk as a journey of exploration rather than a one-shot do or die deal.

Between Heaven and Earth, an advocate for Chinese human rights, savors the risks China is creating for itself in hosting the 2008 Olympics. China won’t dare restrict ticket sales based on political views, so we may see little old ladies from Falun Gong doing tai chi in the stands as a protest.

Long or Short Capital has a tongue in cheek cure for global warming: convert greenhouse gases into tasty foods. (I fear this might lead to secondary emissions during digestion.)

New York Personal Injury Law Blog wonders what the heck the Port Authority was thinking at the George Washington Bridge. They’d planned to post Geico billboards promoting safe driving. But intentionally distracting drivers seems anything but safe. (The plan’s been canceled now.)

Pick your peril. Bradley Wright speculates on the relative risk of hand gliding and paragliding. (Probably both are riskier than looking at Geico signs.)

Nice try: State Farm refused to pay a couple in Biloxi after Katrina destroyed their home, arguing the damage was caused by a storm surge (not covered) rather than a tornado that occurred during the storm (covered). A judge sided with the couple. The FRAUDfiles blog explains the case.

Securities lawsuits are falling, and not even the options backdating scandals are enough to reverse the trend, according to Specialty Insurance Blog.

Walmart has figured out how to shift the risk of customer traffic fluctuations onto its employees. However, that may open the company to additional workers comp exposure. Workers’ Comp Insider explains why.

An overzealous financial institution sent Emergent Chaos’s author two letters confirming a change of address. Somehow the institution changed the address to ALL CAPS and triggered who knows how many pages of correspondence.

Tips and tricks

InsuranceHelpHub suggests ways to cut your car insurance. (You might as well save somewhere –it won’t be on your health insurance.)

Getting Green warns against debt consolidation and elimination companies. Through the immature magic of context-specific advertising, several Google ads for just such services are displayed alongside the post!

Want to save a million dollars? Better start now, says Bryan Fleming. Financial page notes that 44 percent of households are at risk for inadequate retirement assets, based on the National Retirement Risk Index, so get cracking.

Think you’ve covered your risk by buying insurance? Think again. The Digerati Life has tips on how to collect your claims, starting with sucking up to the company’s reps.

Health care

Massachusetts eHealth Collaborative Blog adds balance to a Business Week story on medical identity theft. Not only was one of the “new” frauds tested and rejected by Tony Soprano years ago, but the BW authors neglect to mention the ways e-health records can reduce the risks faced in a paper-based world.

Managed Care Matters describes the risks inherent in so-called consumer-directed health plans. Risk #1: the physician is the consumer!

Physicians commenting on my post admit directing patients to the ER in order to reduce their own risk of being sued. It’s rational for patients to second-guess their docs in such circumstances. Would you hire a lawyer or accountant who always provided the most conservative advice with the most expensive consequences?

Medicaid is supposed to be a safety net for the poor. If so, why are so many poor people uninsured? Check out InsureBlog to learn more.

Granting temporary privileges to physicians can lead to permanent problems for hospitals, according to MSSPNexus Blog.

Anthem Blue Cross Blue Shield is making a smart move to obviate the need for universal health care coverage in Colorado, says Colorado Health Insurance Insider. Meanwhile Roth & Company thinks the Gubernator has lost his mind by proposing a tax to support universal health insurance. (Anthem, can you help?)

Catastrophic injury and traumatic brain injury are on the rise due to the wars in Iraq and Afghanistan, making it harder for the VA to fulfill its mission, reports the Sentinel Effect. (If the military keeps expanding we may end up with a single payer system as everyone becomes VA eligible.)

NitroMed obtained approval to market BiDil specifically for African American patients. Should the government be allowed to decide which races benefit from which drugs asks Healthcare Economist.

Want to reduce your chance of illness? Lose weight, Health Blog says.

Concluding thoughts

A saying I read twenty years ago in the New York Times comes to mind whenever I think of risk:

There are old mushroom hunters and there are bold mushroom hunters, but there are no old, bold mushroom hunters.

On the other hand, hosting the Cavalcade is low risk. Cav of Risk founder Hank Stern of InsureBlog supported me every step of the way, even hunting for posts to round out those that were submitted. If he asks you to host, just say yes!

Giving consumer-directed health care a bad name

published date
January 16th, 2007 by

Consumer-directed health care has the potential to hold down costs and improve quality by delivering price signals more directly to patients. The theory is that when patients consider the cost implications of their medical care choices, they will shop more intelligently, just as they do for groceries and gas. In the end, that should benefit employers by holding down premiums.

There are plenty of practical challenges to achieving these benefits, but the overall idea is worth a try. Unfortunately, according to a new report from Vimo.com it appears that many employers are using the shift to high-deductible plans as an opportunity to take their cost savings up front, at the expense of their employees and the whole concept of consumer-directed care.

A typical consumer-directed health plan includes a high-deductible PPO plan coupled with a Health Savings Account (HSA). The HSA allows consumers to use pre-tax money to pay for health care. If the employer funds the HSA it’s a good deal for the employee. But it seems the tendency is to fund the high-deductible PPO (which is much cheaper than comprehensive coverage) and pocket most or all of the savings.

According to Tom Cochrane, VP of Partner Relations at Vimo, “Unfortunately, the Vimo report shows that fewer than one out of every three consumers eligible to open an HSA has done so –a shocking statistic because the accounts are such clear winners for consumers… HSAs can even be used to save for retirement.” In addition, the report indicates that the typical HSA balance is only enough to cover about half the deductible. [I spoke to Tom just to make sure Vimo wasn’t inadvertently overstating the case by excluding employer-financed Health Reimbursement Arrangements (HRAs) from the equation. He assured me Vimo wasn’t making that mistake.]

So it’s pretty much bad news all around. Employers are using “consumer-directed health plan” as a euphemism for “benefit reduction.” To make things worse, employees whose employers aren’t funding their HSAs also haven’t been setting up their own accounts. That means they’re missing out on a major tax benefit in addition to getting a pay cut. I’ve mentioned this phenomenon before, but it’s the first time I’ve seen decent statistics.

Don’t be surprised if all this leads to a backlash against the consumer-driven movement.

Vimo is in the business of providing comparison shopping information in health care. They want to be the equivalent of Lending Tree for health care, so are hoping to see the consumer directed movement flourish.

It will be a shame if consumer directed care doesn’t get a fair shot.

The upside of dermatology delays

published date
January 15th, 2007 by

I posted last week on the delays Boston-area patients face in obtaining an appointment with a dermatologist. A superficial analysis suggests waits may be shorter in England.

A couple new points came up over the weekend:

The Globe published a response by Dr. Kathryn Bowers, President of the MA Academy of Dermatology. Her assessment wasn’t especially encouraging.

Most dermatologists train their office staff to identify patients with an urgent problem and attempt to fit them into the schedule as soon as possible. With doctors fully booked and, frequently, overbooked, this is often not feasible.

That’s a pretty sad admission. She also laments the “brain drain” of dermatologists who train in MA but then move elsewhere because of the difficult practice environment. I’m sympathetic to the challenges of practicing in MA, however the original article reported that Boston had the highest concentration of dermatologists of any city surveyed and the longest wait for an appointment. There must be other factors at work.
Meanwhile, a friend who is a dermatology resident in Boston confirmed the long waiting lists for an appointment at his institution, then told me:

It’s just as well that there’s a long wait. Someone who comes in with a rash is likely to be biopsied and end up with a scar. If they wait until an appointment is available the rash will probably have cleared up.

I told him that tolerating long waiting times was an awfully blunt approach to reducing unnecessary biopsies!

Could it happen here?

published date
January 12th, 2007 by

Eli Lilly has halted construction of a new insulin plant in Virginia to focus its resources on biotech products, it says. States have tried hard in recent years to lure pharmaceutical manufacturing facilities. After all, what could be better than having a big-spending drug company put down roots in your state? Unfortunately, things can change in a hurry.

Massachusetts politicians from both sides of the aisle have been patting themselves on the back for luring BMS to the state to build a biotech plant. A lot of public money is being committed on the assumption of a guaranteed payback. As I’ve mentioned (Let’s hope BMS can keep Hummingbird’s wings flapping!) I hope it doesn’t turn into a white elephant.

Commoditizing medicine

published date
January 11th, 2007 by

About five years ago I heard a fascinating talk by Harvard Business School Professor Clay Christensen that applied his well-know “innovator’s dilemma” reasoning to health care. In a nutshell the idea was that tertiary care centers should keep pushing the envelope on complex diagnoses and treatments and that over time diagnoses (though maybe not treatments) that had initially been considered complex and challenging should be systematized and therefore able to be carried out in less expensive settings by less expensive staff. The progression would go from academic medical center to community hospital to doctor’s office to retail clinic.

Clay was interviewed recently by the New York Times where he covered this ground again –lamenting the lack of progress- and also gave a clue as to why there is a shortage of convenient, low-cost diagnostic settings in Massachusetts.

We haven’t moved the health care profession into a world where nurses can provide diagnosis and care. Regulation is keeping the treatment in expensive hospitals when in fact much lower cost-delivery models are available…

In Massachusetts, nurses cannot write prescriptions. But in Minnesota, nurse practitioners can. So there has emerged in Minnesota a clinic called the MinuteClinic. These clinics operate in Target stores and CVS drugstores. They are staffed only by nurse practitioners. There’s a big sign on the door that says, “We treat these 16 rules-based disorders.” They include strep throat, pink eye, urinary tract infection, earaches and sinus infections.

These are things for which very unambiguous, “go, no-go” tests exist. You’re in and out in 15 minutes or it’s free, and it’s a $39 flat fee. These things are just booming because high-quality health care at that level is defined by convenience and accessibility. That’s a commoditization of the expertise. To have those same disorders treated in Massachusetts, you’ve got to go to a regular doctor, go through a long wait in their office, you go in and see the doctor for two minutes. He says, “You have an earache,” which you knew already, and then they charge you $150.

The whole interview is worth a read if you have the time.