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SCOTUS Has Ruled on Obamacare. So What’s Next?

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In a 6-3 decision, the Supreme Court Thursday spared the Affordable Care Act from what would have been a death blow.

The Court’s action upholds the right of the federal government to subsidize low-income Americans who purchase health insurance through, the federal exchange. Infamous for its rocky start, now presents millions of Americans with price information for a list of insurance plans available to them where they live. is now largely glitch free, but it — and state insurance exchanges — still need major overhauls, so they no longer lead Americans to make bad insurance choices.

Consider the way the exchanges divide health plans into tiers, based on metallic labels — of bronze, silver, gold and platinum. The bronze tier features plans with relatively low monthly premiums and high out-of-pocket medical costs, while the gold and platinum tiers feature more expensive and comprehensive plans. Thanks to these metallic labels, a consumer who faces a choice among, say, 18 insurance plans can choose instead to look at only the six silver plans, or the five bronze ones, a much less daunting task.

This sounds good in theory but, in fact, consumers don’t act in ways web designers might expect. Several months ago, two colleagues and I published an article in the New England Journal of Medicine reporting on an experiment we ran among bus riders in Durham, North Carolina. We gave people brief descriptions of bronze, silver and gold health plans and asked them which type of plan they would be most likely to choose. Then, to test whether the metallic label was unduly influencing their choices, we switched around the description of bronze and gold plans for half of the riders:

We discovered that gold plans were more popular than bronze plans, no matter which type of plans we described as being “gold.” In other words, people made potentially life-changing decisions based on assumptions about the colors rather than the actual information.

With both the state and federal health exchange sites, we need to pay more attention to how the principles of decision psychology and behavioral economics affect this process. As Richard Thaler and Cass Sunstein warned in their best-selling book Nudge, poor design can cause people to make choices that act against their best interests.

Consider Colorado’s exchange site, which lists health insurance plans from lowest to highest monthly premium. Does that order cause people to pay too much attention to monthly premiums, and not enough to other out-of-pocket costs?

Or consider the Massachusetts exchange, which presents information about the various plans in columns, with monthly premiums shown on the left, followed by information on co-pays, annual deductibles and maximum out-of-pocket expenses. Should the maximum expenses be on the left side instead? What size and color font will best highlight information consumers need to make their choices?

We don’t know the answers to all these questions yet, which is why designers of the health insurance exchanges should work closely with decision-science researchers to find out what works best. But, meanwhile, we do know enough to call for several design changes. For starters, the websites should make it easier for people to figure out which healthcare providers are “in network” for any given health insurance plan. Many people care a great deal about making sure their health insurance plan pays for the health care they receive from their current providers.

The websites should also make it easier for people to estimate the total annual costs with each plan—the sum of their premiums, co-pays, deductibles and other out-of-pocket expenses. d, these websites need to be guided by research on how consumers actually make decisions. (To read the rest of this op-ed, please visit The Sun-Sentinel.)

Posted in Health Policy

What Physicians Can Learn from Veterinarians

Photo Credit: Rebecca Plevin / Marketplace

Photo Credit: Rebecca Plevin / Marketplace

A while back, I linked to a story by Rebecca Plevin, out of California Public Radio, on the challenge of discussing health care costs.  Well, she has tuned up that piece and placed it on Marketplace. Here is a print version:

When a doctor prescribes a medication, most of us don’t ask how much it’ll cost. It makes sense: for a lot of people – both doctors and patients – talking about the cost of care is a totally foreign concept.

Peter Ubel is the perfect person to explain why that is. He’s a physician who now teaches at Duke University, specializing in the overlap of ethics, behavioral economics and medicine.

“Not that long ago, if a person had insurance, they had really good insurance that covered the vast majority of the expenses,” Ubel says. “So there really wasn’t much to talk about when it came to money.”

But these days there’s a lot more to talk about. The Kaiser Family Foundation says last year, 80 percent of people who got insurance through their job still faced an annual deductible that could run as high as $3,000 or more.

That means we all have skin in the game now, Ubel says.

“When the doctor recommends one medication to us, we might have reason now to ask whether another medicine would be almost as good and a lot cheaper,” he explains.

That type of conversation is still rare, but it is happening in at least one medical field.

At Mohawk Alley Animal Hospital in Los Angeles, Dr. Diane Tang examines the mouth of a huge black and white cat named Melvin.

“Tell me a little about what’s going on with Melvin today,” Dr. Tang says to Melvin’s owner, Morgan Bradley. Bradley replies that she’s concerned about a bump on the cat’s face.

Tang lays out testing and treatment options for Melvin.

Then, Kayla Wilkinson, a technician assistant at the hospital, enters the exam room and says something rarely said in a doctor’s office for people: “We have two estimates here,” Wilkinson says, as she walks Bradley through the different options.

Regarding one treatment plan, she adds, “it is most definitely not going to ever get higher than the high point, but just to prepare you, we like to give you a pillow for what to expect.”

Bradley says she appreciates getting this information upfront.

“It always helps in knowing what to prepare for and how much money I’m going to have to scrounge for,” Bradley says.

Dr. Reshma Gupta, an internal medicine physician at UCLA, says the veterinarian model is a good one for the human health care system, but there’s a caveat.

She says doctors and patients can — and should — discuss different treatment options, just as veterinarians do.

“I think where it works is that, when you’re trying to make shared decisions with patients, you come up with all the options that are available for the patient,” Gupta says.

The problem, she says, is doctors who treat people have no way of knowing what those options will cost.

Doctors “do not have access to costs of medications, or commonly ordered labs, or radiology when they’re face to face with a patient,” Gupta says. “And so they don’t have the ability to actually offer that information to patients.”

Ubel, the Duke University professor, says it comes down to one word: insurance. (To read the rest of this article, please visit Marketplace.)

Posted in Health Policy | Tagged

Your New Liver Is Only A Learjet Away: First Of Three Parts

Photo Credit: OrganJet

Photo Credit: OrganJet

The forty million dollar Gulfstream jet landed at Memphis International airport in the early morning hours, its schedule hastily arranged earlier that day from Northern California, where the flight originated. Waiting on the tarmac was Dr. James Eason, head of transplant surgery at Methodist University Hospital, who planned on whisking the passenger to the operating room for a liver transplant. The passenger rushed to Memphis not because he lived in Memphis and happened to be out of town when an organ became available, but rather because he knew that flying from his home in Northern California to Tennessee would give him his best chance of receiving a life-saving organ.

You see, the demand for transplantable livers in Northern California far outstrips the supply, meaning there is a decent chance a patient with end-stage liver disease will die before a replacement organ becomes available. But in Tennessee, the number of people waiting for a liver transplants is significantly smaller, per capita, than California, and as a result the supply of transplanted livers is much better matched to the demand for such organs. As a result of these geographic variations in supply and demand, patients in Northern California wait more than six years, on average, for a liver transplant, whereas the majority of patients in Tennessee receive new livers in less than three months.

That’s right: six years versus three months!

The passenger on the Gulfstream that morning was Apple co-founder and CEO, Steve Jobs. After being told he needed a liver transplant, Jobs had learned about the huge disparity in waiting time between California and Tennessee, and arranged to get placed on the transplant waiting list in both locales, knowing he could fly to whichever location came up with the first available organ. So when he got a call from Memphis explaining that a 20 year old man with a compatible blood type had died in a car crash earlier that day, he summoned his flight crew and made his way to Tennessee.

Steve Jobs walked out of the plane that morning a frail shadow of his former self. Pancreatic cancer had spread to his liver and, without a transplant, he had only weeks or months to live. Thanks to that early morning flight and the talents of his surgeon, Jobs received a transplant later that day and would survive two and a half more years, a time in which he introduced the world to the iPad and to a talking phone assistant named Siri.

It was wonderful for Jobs and his loved ones that he was able to receive a transplant that day. But was it fair that Jobs could afford to charter a jet from California to Tennessee to undergo a transplant, while thousands of equally sick Californians waited at home for livers that didn’t always come in time?

Currently, less than 6% of transplant candidates are listed at multiple transplant centers. And less than 2% get listed at transplant centers a long-distance from where they live, like Jobs did. After all, there’s not much reason for Northern Californians to get waitlisted in Tennessee if they cannot afford to rent a Gulfstream on short notice to get them to the transplant center on time. This Gulfstream deficiency may end soon, however, if a start-up company called OrganJet succeeds in its goal of “democratizing Steve Jobs’ transplant experience.” According to the vision of its founder, Sridhar Tayur, OrganJet will make sure that distant transplants are no longer available to only the wealthiest of patients. In fact, if insurance companies agree to pay for OrganJet’s services, as Tayur hopes, virtually everyone with healthcare coverage (be it Medicare or BlueCross/BlueShield) will be able to afford to fly to whatever location gives them the best chance of a life-saving transplant.

Would such democratization be a good idea? The answer to that question is more complicated than it appears at first glance, and raises questions about healthcare equity and regional variation in healthcare quality that are relevant well beyond the world of solid organ transplantation. The OrganJets of the world may finally force us, as a society, to talk more explicitly about just how fair we want our healthcare system to be.

In the US, hearts, kidneys and livers are distributed in a manner that strives to give every patient fair access to these life-saving organs. When a deceased donor’s liver becomes available, the local organ procurement organization (or OPO) offers the liver to the sickest transplant candidate, as long as that person’s blood type is compatible with the donor. Sickest-first is the rule. A rich investment banker with moderate liver disease won’t jump ahead of a bricklayer with severe disease. A white person won’t get priority over an African American, nor a man over a woman, nor a Christian over a Muslim, nor even a Protestant over (God forbid?) an atheist. In short, the liver transplant allocation system in the US is an astonishingly explicit and fair way to dole out life-saving resources.

For all its ethical wonders, however, the liver transplant system is far from perfect. For starters, people without health insurance often have a difficult time accessing the transplant waiting list. Critics quip that the first test physicians order when evaluating patients for transplant is a “wallet biopsy.”
There is another major problem, as Steve Jobs’ experience made so apparent. Barring the kind of wealth that enables people to rent out private jets, a person’s chance of receiving a life-saving transplant depends very much on where that person lives.

Sridhar Tayur first learned about geographic inequities in organ transplantation when he was an invited speaker at Northwestern’s Kellogg School of Management in October 2010. Out for dinner that night with colleagues, Tayur asked one of the Northwestern faculty members what research he did for a living. The professor, Baris Ata, said he was studying fairness in kidney transplant allocation, trying to determine, for example, whether patients who have been waiting longest for their kidney should receive priority over those more likely to benefit from available organs. Such a research topic is not out of the norm for a business school professor to study. Business schools are loaded with faculty who use advanced mathematical models to solve challenging real world problems. Just a few years ago, in fact, Alvin Roth won the Nobel Prize in Economic Sciences for developing methods that have helped create kidney exchange programs that match chains of living donors to needy patients.

Tayur realized he had the perfect skill set to solve the problem of geographic inequity in organ transplant allocation, and that his solution would not require any policy changes. He had made an academic reputation for himself figuring out the mathematics of “inventory and supply chain optimization,”—in other words, for helping companies figure out how to allocate scarce resources to maintain the right amount of product on store shelves vs. warehouses. Tayur had even founded and run a software company, SmartOps Corporation, that helped companies make these decisions.

That company had left him, if not Steve-Jobs-wealthy, then at least financially secure: “When you do well in software,” he told me, “you do very well.”
Tayur realized he had an opportunity to give something back to society, as a social entrepreneur: “When I was running my software company,” he told me, “I started using private jets, because I wanted more time with my family while flying out to meet customers at difficult to reach locations. I noticed that there were lots of underutilized private jets lying around the country. I recognized this as a classic optimization problem.” Earlier in his academic career, serendipitously, he had written an academic paper on how to optimize the use of fractional jets, akin to the model used by Share-cars. “I understood private jets, and I understood optimization algorithms, so I knew I could figure out how to get people access to organ transplants, by finding them affordable flights to transplant centers that have shorter waitlists.”

OrganJet was born. (To read the rest of this article, please visit Forbes.)

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Scheduled for Surgery? How about Some Unnecessary Tests!

Surgery can be risky. People with major cardiovascular or respiratory illnesses undergoing major surgeries, for example, are at risk for major surgical complications, even death. But healthy people receiving less intense interventions typically fly through with nary a concern. Nevertheless, perhaps worried about those few patients who suffer major complications, many physicians order a gaggle of tests on patients, even ones facing routine procedures.

Not convinced they order lots of tests? Look at this picture, from a New England Journal article, showing a spike in diagnostic testing in the month prior to surgery:

Scheduled for Surgery

Not a bad place to target for healthcare savings that will also promote the best interests of most patients.

Posted in Uncategorized

Creative Undergraduate Education at Duke

Photo Credit: Rita Lo / The Chronicle

I love teaching at Duke. I can’t believe, actually, that I’m able to do that for a living. One of the great things about teaching is interacting with smart, ambitious students. And today, Duke’s The Chronicle just wrote about one such student, Elle Wilson who took a class from me last fall, and now designed her own major to more thoroughly explore the topics we covered.

Although most students choose traditional majors like economics, public policy or biology, there is a lesser-known option for those who desire a more personalized area of study—Program II.

Program II is essentially Duke’s design-your-own major and has been in place since 1968. The 12 to 18 undergraduates per year who follow this path must submit an extensive application outlining an independent, theme-based course of study, including a senior capstone project. Instead of being based in a single discipline—as most Program I majors are—Program II uses themes to focus study, said Norman Keul, associate dean and director of Program II.

“Once you have a clearly defined theme you want to explore as an undergraduate, you cherry-pick courses that allow you to get at and explore that theme most effectively,” Keul said.

Students generally participate in Program II when they cannot study what they want to study under the standard Program I majors, explained Keul.

“The most fundamental question asked by the Program II committee when reviewing an application to Program II is whether a student can do an effective study of what he or she is interested in under Program I,” Keul said. “If the answer is yes, then we will turn the application down.

”Elle Wilson, a junior in Program II who is studying consumer markets and behavioral decision theory, initially did not anticipate pursuing a Program II major.

“I was confident that after taking a few introductory classes in a broad range, one area of study was bound to stand out from the rest,” Wilson said. “Interestingly, the opposite happened.”

A tiny portion of undergraduates participate in the program each year—about one to two percent of students. Last year, 21 students graduated from Program II majors, one of the largest groups in a long time, Keul said. But the number fluctuates from year to year depending on various trends.

“The big trend that just ended is global health,” Keul said.

Although the growth of interest in global health brought a large group of students to Program II, it also influenced the creation of a new major—the global health co-major that began Fall 2013.

“One of the features that is very interesting about Program II is that it is a crucible, a place where new trends and ideas are explored,” Keul said. “If they prove to be of sustained interest, then the faculty departments will recognize this and decide if they want to incorporate it into their regular offerings and make it a major.”

Previous examples of common Program II areas of study include neuroscience and architecture. Like global health, both of these were turned into something students could study more easily under Program I: a major in the case of neuroscience and a concentration under the art history major in the case of architecture.

Due to the personal nature of the program, close relationships with faculty are inevitable for students who complete Program II.

“There’s a kind of intimacy with faculty,” Keul said. “There’s no way you could put together a Program II without having interaction and conversation with faculty, and that’s a great thing.”

Wilson works closely with her Program II advisor Dr. Peter Ubel, a professor with appointments in business, public policy and medicine. She said she hopes to participate in research alongside Ph.D. students under his supervision. (To read the rest of this article, please visit The Chronicle.)

Posted in Uncategorized

An Eye for an Eye, a Cataract for…$4000?!

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California is in the middle of an historic drought, with the government setting limits on how long people can sing in the shower. Farmers in the state may soon need to cut back on planting or production, as ground water dries up. But California is still fruitful ground for testing promising ways to improve how healthcare consumers, otherwise known as patients, shop for healthcare services. Specifically, California has shown that healthcare markets can be whipped into shape through the power of reference pricing.

In reference pricing, patients are given a maximum number of dollars from insurance to cover a given healthcare procedure with the understanding that if they choose to receive care from a more expensive provider, they will be responsible for any charges exceeding that limit. As I wrote in a previous post, California already used reference pricing to address high costs for knee and hip replacement. While many healthcare providers were charging $25,000 or $30,000 for the procedure, some were charging $60,000, $70,000, even $100,000.

The state of California realized it couldn’t continue to pay these exorbitant prices. It could have decided to force people to receive care from affordable providers. It could have regulated the price of these procedures. But instead the state took a different approach. It set a $30,000 limit on what it would reimburse patients. Overnight, state employees became discerning shoppers, avoiding high cost providers. Almost as quickly, providers began lowering their prices.

The wonders of efficient marketplaces. (To read the rest of this article, please visit Forbes.)

Posted in Health Policy | Tagged , , ,

The Outlier Problem of Healthcare Spending

We have an outlier problem when it comes to healthcare spending. Sure, there are some services we provide far too often for far too many people. And in the United States, at least, most of the healthcare services we provide for patients are far too expensive. But a closer look at healthcare spending data reveal that a huge part of our healthcare spending problem comes from a tiny portion of patients. Take for example this picture, courtesy of Charles Ornstein, illustrating how we spend money for Medicaid patients. Medicaid is a state/federal program to offer health insurance primarily to low income people. As this picture shows, almost half of Medicaid spending is concentrated on just 5% of the Medicaid population. You heard me right – 5%!

Outlier Problem in Healthcare Spending

To control healthcare expenditures, we need to pay close attention to the small sliver of patients that account for a huge chunk of our healthcare spending.

Posted in Health Policy | Tagged , ,

When It Comes to Controlling Healthcare Costs, the Government Outperforms Private Industry

When I think of the federal government, “efficiency” is rarely the first thing on my mind. But when it comes to controlling healthcare costs, we need to consider the possibility that the federal government is better at this job than anyone else. Consider the fact that the United States dwarfs other countries in healthcare spending, despite having a more robust private insurance market than most of our peer countries. Consider this picture, from a recent Kaiser Family Foundation study. It shows a significant rise in private health spending over recent years, especially compared to growth in Medicare and Medicaid:

When It Comes to Controlling Healthcare Costs

There’s a lot behind these numbers, much more than I’m going to cover in this short post. But I thought many of you would find these figures interesting.

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Old Practices Die Hard

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Below is a recent article in U.S. News and World Report, written by Niam Yaraghi  of the Brookings Institution, on why doctors continue to perform expensive and unnecessary tests like prostate cancer screening.

Unnecessary and harmful medical procures are a major source of waste in the U.S. health care system. Prostate-specific antigen-based screening (or PSA-based screening) for prostate cancer is an example of such procedures. According to the independent U.S. Preventive Services Task Force, “there is moderate certainty that the benefits of this procedure do not outweigh the harms.” Despite the task force’s discouragements, we spent $132.6 million to perform PSA-based prostate cancer screening on patients covered by Medicare in 2012.

If physicians are recommended not to perform this test, then why do they continue to do so? One can think of two obvious reasons. First, the scientific evidence on the benefits and harms of such tests is not yet exactly clear and thus clinicians have to rely on their own medical hunch rather than solid and irrefutable medical guidelines to make decisions. The second is the usual suspect: Physicians make money from doing these unnecessary tests. As long as physicians are compensated for volume rather than the value of their services, they will be financially inclined to perform as many tests as they can.

In a recent paper, Peter Ubel and David Asch offered additional psychological explanations for why it is difficult for clinicians to “‘de-innovate,’ or give up old practices, even when new evidence reveals that those practices offer little value.” They argued that physicians’ preconceptions lead them to scrutinize the studies that provide evidence against their initial beliefs and instead have a bias toward the studies that confirm their stand. For example, if you enjoy steak, then it is much easier for you to accept the studies which conclude eating cholesterol and saturated fat do not raise cholesterol levels in the blood. On the other hand, if you are a vegetarian, then you may look for the methodological shortcomings in such studies that can be used to discount their conclusions.

Moreover, physicians just like anyone else, are more likely to remember rare events. Many of us know someone who has won the lottery or hit the jackpot on their last trip to Vegas. Likewise, “a practicing breast surgeon might more easily recall a single heartrending example of a young patient who died of advanced breast cancer and who had failed to receive a screening mammogram, compared to hundreds of patients who did fine without mammography,” Ubel and Asch wrote.

Physicians may also incorrectly infer causality from correlated events. The authors of the study pointed to former New York Mayor Rudy Giuliani as a prime example of this; Giuliani credited a PSA-based screening with discovering a tumor and saving his life, “even though it is impossible to know whether Giuliani would have died of cancer if the tumor had not been discovered so early or might even have been better off without the test,” they noted.

The last reason for the reluctance of physicians and patients to give up the unnecessary tests, they argued, arises from the so-called “endowment effect.” In other words, “when things are taken away,” wrote Ubel and Asch, “people tend to place an even greater value on them than they would have otherwise.” The authors argued that patients gradually develop a sense of ownership over the medical tests and procedures that they received and thus “are largely convinced that screening tests have saved more lives, and at less harm, than a cautious view of the science would justify.”

To overcome the resistance to de-innovation, the authors first have recommended the task force’s guideline development committees be made up of medical experts from a wide variety of domains with different clinical expertise so that they can cancel out each other’s conformation bias.

(To read the rest of this article, please visit U.S. News and World Report.)


Posted in Health Policy | Tagged

Hookup or Hookah?

I have two teenage boys. So of course I’m worried about them skipping the dating scene and engaging in “hookups.” That seems to be what kids do these days. But now, do I also have to worry about them engaging in hookah?

Dave Chokshi (@davechokshi) recently tweeted an image of trends in tobacco use among students. It shows a significant increase in the use of the e-cigarettes and hookahs. Here’s that picture:

Hookup or Hookah

I showed it to my sons, and they laughed. “No one uses E cigarettes or hookahs,” they told me. “They just smoke pot.”


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