Peter Ubel

Is a test that costs $800,000 to add one year of life worthwhile? In one survey, most physicians said yes-evidence that controlling costs will require overcoming very powerful, and irrational, psychological forces.

Imagine for a moment that you are in charge of the U.S. health care system, and must decide whether to pay for a new cervical cancer screening test, let’s call it PapFinder. For every $800,000 spent on PapFinder, health care providers will add one year of life to the population of women receiving this test. Given this information, would you choose to add PapFinder to the standard diagnostic arsenal?

About a decade ago, I presented a national sample of U.S. physicians with a question like this, and almost of them stated that PapFinder (a hypothetical test, by the way) was too expensive, bringing benefits so rarely that they would not offer this test to their own patients. The desire to prevent and treat cancer, it seems, had limits.

Or did it? I presented a random sample of these physicians with a different choice. I asked them whether they would offer annual pap smears (well-established tests in routine clinical use) if they learned that the tests cost more than $800,000 to save one year of life – a figure that came directly from the medical literature. Given this information, physicians were nearly unanimous in saying they would offer their patients this test.

Same cost, same infrequent benefit, but very different attitudes. What’s going on here? And what do the results of this decade-old study tell us about the recent hubbub around mammography screening and, indeed, about the ongoing health care reform debates?

For starters, health care economists are nearly unanimous in holding that interventions that cost more than $800,000 per life year are not a wise use of resources. (Most endorse cost-effectiveness thresholds closer to $100,000.) That means that doctors’ attitudes toward PapFinder appeared quite rational: lots of money, little benefit … not a smart idea.

Why, then, did doctors remain enthusiastic about pap smears even after learning about the $800,000 figure? As a physician working in behavioral economics, I am quite familiar with the irrational forces influencing people’s attitudes towards health care interventions. In this case, a lot of such forces were at work. 

For starters, physicians were influenced by loss aversion. People don’t like having things taken away from them. Doctors were used to providing annual pap smears to their patients, and they knew that their patients would be upset if they no longer offered such tests. We see parallels in current mammography debates, with many women in their 40s responding anxiously to the idea of no longer receiving annual mammograms.

Second was the belief that earlier detection of cancers is always better than later detection, a belief that has also influenced the mammography controversy. This idea is not supported in the medical literature.

In fact, medical science has discovered that some early cancers pose little threat to people’s lives, with the cancers growing so slowly that any intervention to thwart them would cause more harm than benefit. We’ve even learned that some cancers can regress over time. But these cold hard medical facts stand little chance against the hot passions of cancer psychology: doctors and lay people, understandably frightened by the thought of cancer, cannot believe that early detection could be anything but good.

Third was the limited human attention span. When we contemplate important decisions, it is difficult to consider all of the relevant factors, and thus we focus our attention on the most obvious ones. Deciding whether to live in Michigan or California, for instance, we think about the weather while ignoring other important differences between these two states – differences in daily commuting, for example, a factor that has been shown to have far more impact on people’s lives than climate. 

Similarly, when people make decisions about cancer screening, they focus most of their attention on cancer – if the test detects cancer, they conclude it must therefore be worthwhile. People don’t pay as much attention to other aspects of the test. If it mistakenly characterizes a benign lesion as cancer, for example, it will cause undue anxiety or even lead to unnecessarily and potentially harmful treatments. But we don’t give such factors much weight when contemplating whether to utilize the tests.

Everyone who cares about this country should care about finding ways to reduce health care costs. The recent debates over mammograms reveal just how difficult it will be to achieve this goal, for controlling costs will require us to overcome very powerful psychological forces. The biggest impediment to successful reform of our health care system, thus, is not blue dog democrats or obstinate republicans. It is human nature.

To read the original post in the Hastings Center’s Health Care Cost Monitor, click HERE.

No sooner had the Obama administration committed a billion dollars to comparative effectiveness research than the critics began laying out their concerns: such research is a prelude to rationing, they said; it threatens to thwart doctors’ and patients’ abilities to make their own decisions. It will transfer too much power to government bureaucrats and treat medical practice like a cookbook.

Now that the Institute of Medicine has issued its priorities for comparative effectiveness research (CER), I will look at a common criticism: that it acts as if medical care is a “one size fits all” enterprise, and thereby forces policy makers to make blunt decisions that will unjustifiably harm people who don’t respond to medical interventions the way an “average” person would respond. This concern is legitimate, but an intelligent use of CER should allow us to avoid this fate.

If your life, like mine, has been touched by breast cancer, then you probably share my hope that researchers will find new treatments to reduce the harms of this awful illness. But if you also share my concern for the fiscal solvency of our nation, you might also be disturbed at the high price of some new cancer treatments.

Consider a drug like Avastin: a treatment that increases life expectancy of patients with some metastatic cancers by interrupting blood flow to the tumors. Avastin can cost more than $100,000 per patient, and in some cancers leads to an increase of only two months in median survival. Two months for $100,000—a steep price to pay.

With medical costs consuming an increasing portion of government budgets, and with U.S. businesses struggling to offer employees healthcare coverage, many experts contend that we cannot afford treatments that bring such modest benefits at such a startling price.

How might comparative effectiveness research inform such issues? CER strives to provide information to guide decision making. A comparative effectiveness study might evaluate the cost effectiveness of competing breast cancer treatments. Or it might not analyze cost at all, and focus instead on estimating the relative impact that alternative treatments have on people’s quality and quantity of life.

In neither of these cases would CER, on its own, show us whether to use these treatments. Like its name suggests, CER promises to provide decision makers with information on the relative effectiveness of common medical interventions, so that government payers, insurance companies, doctors and, yes, patients can spend their health care dollars more wisely.

To understand the “one size doesn’t fit all” criticism, let’s suppose that a new drug increases median survival in patients with metastatic breast cancer by two months. That doesn’t mean that it increases everyone’s survival by two months. It might have no effect on the majority of patients, harm a small minority, and bring huge benefits to another minority.

CER, by lumping all patients into one group, would ignore these important differences. And if policymakers, unimpressed by this two-month figure, decided not to pay for this drug, some patients will lose a chance at these huge benefits.

This criticism of CER, however, overlooks more nuanced ways decision makers can potentially use CER information. With the right data, CER can improve medical decision-making by splitting patients into relevant groups, rather than lumping them into a single group.

For example, if we know in advance that patients who meet certain criteria stand to gain much more than other patients, then CER is a tool to help identify this subgroup. A treatment that costs $600,000/life year across all patients may be much more cost effective in a specific subgroup of patients.

A treatment that brings no benefit to the majority of patients but a substantial benefit to a minority of patients could very well deserve to play an important role in the treatment of that subgroup of patients. CER can potentially identify such subgroups. Indeed, if our country starts emphasizing comparative effectiveness in making treatment coverage decisions, it will give researchers in academia and in industry an incentive to find out which patients stand to benefit the most from various healthcare interventions.

On the other hand, if we do not know in advance who will benefit from a specific treatment and who will be harmed – if we can’t, for instance, figure out who will gain years rather than months of survival from the drug – then the only rational way to decide whether to use such a treatment is to assume that each patient is roughly the same and has the same chance of benefit and harm as all other patients.

If only 5 percent of patients benefit from a certain treatment, and we don’t know who those patients are upfront, then we have to assume that any given patient receiving that treatment stands a 5 percent chance of benefiting. And then we have to decide, as a society, whether that 5 percent chance of benefit is worth the costs – both medical and financial – of that treatment.

It would be unwise to use CER to lump together the unlumpable: the long-term survivors from those destined to die soon regardless of treatment. But rather than dismiss CER for treating everyone as if they are average, we should fund the kind of research that will identify who stands to benefit the most from the health care available to them.

View the original post at The Hastings Center.

American presidents have been trying to reform our health care system since at least the Nixon era, but with only limited success. Past reform efforts have failed for many reasons. For starters, the U.S. health care system is complex, with the medical industry making up almost 1/6 of our economy. But perhaps the biggest obstacle to reform is a psychological one: thoughts of health-care reform too often trigger images of putting for bogey instead of putting for par.

I am referring to the psychological power of loss aversion, a phenomenon that behavioral economists have been studying for several decades now. Most of us, you see, seek to avoid losses with greater fervor than we seek to achieve equal gains. If given a 50-50 chance of either winning or losing $100, we decline. The $100 loss looms larger than the $100 gain. For similar reasons, most people express greater interest in surgical procedures that carry 90% survival rates than in ones that carry 10% mortality rates, even though these procedures are identical. Thinking about mortality triggers loss aversion. This week we even learned that loss aversion influences putting behavior among professional golfers. When putting to avoid a bogey, golfers are more aggressive than when putting for birdie, and consequently are more likely to make their putts. Few things are more motivating than the desire to avoid losses.

Which brings us back to health care reform. When President Clinton attempted an overhaul of our health care system in the 90’s, his administration correctly recognized the need to control health care costs. Without cost containment, they knew it would be impossible to expand health care insurance to the millions of people who lacked such coverage. So the Clinton administration looked for ways to increase the number of Americans enrolled in managed care plans, which at that time had achieved some success in controlling health care expenditures.

The problem with the Clinton approach was that it made Americans feel like they were losing their traditional health care. Managed care was infamous for saying no — for denying people health care services and for limiting their choice of doctors. By taking things away from people, managed care triggered loss aversion. Consequently, the American public never supported Clinton’s reform efforts.

The Obama administration is steeped with people knowledgeable about behavioral economics, who hope to keep the public from slipping into a state of loss aversion. Not surprisingly, then, the administration has enthusiastically embraced research out of Dartmouth University, demonstrating huge regional variations in medical expenditures that have not been accompanied by any variation in health care quality. According to this research, some cities in the US spend twice as much per capita on health care as other cities without experiencing any discernible improvement in health.

Obama’s people hope that Americans will perceive health care reform as a win-win opportunity, with lower health care costs through the elimination of waste and inefficiency, accompanied by more stable and secure health care coverage. But even if the administration succeeds in assuaging the fears of the general public, they face a much stiffer challenge with the health care industry. Any success they have in controlling health care costs will, after all, create losers. If we spend less money on health care in the US, then someone in the health care industry is going to take a financial hit. One person’s waste is another person’s income.

No surprise, then, that both the insurance industry and the AMA have begun pushing back against elements of the Obama plan. These groups stand to lose money under health care reform. Hospitals are likely to lose money too, as are drug companies, medical device companies, and other powerful parts of our vast health care industry. All of these groups will be motivated to fight health care reform.

The Obama administration has made a point of distinguishing its behavioral approach to economics from the more traditional approach embraced by the Bush administration. Ironically, though, it is the Bush administration that understood how to pass health care reform without triggering loss aversion. When George W. Bush decided to push for a Medicare drug plan, he recognized that the pharmaceutical industry would wield its powerful lobbying strength against his efforts if they feared a loss of income. So he crafted a plan that benefited the drug industry. Politicians on the left criticized these concessions to industry, but it is hard to imagine the drug plan passing without such concessions.

Obama should draw a lesson from his predecessor. If he causes the health care industry to perceive his health plan as a threat to their incomes, his plan will face stiff resistance. For health care reform to succeed, people in the health care industry need to keep making exorbitant sums of money for awhile. Over time, the government can gradually ratchet down health care costs. But initially, Obama needs to reduce the number of people who perceive health care reform as a loss.

The cost will be steep. But the alternative will be more costly. We cannot afford to make reform feel like a health care bogey.

Peter Ubel is author of Free Market Madness: Why Human Nature Is at Odds with Economics — and Why It Matters (Harvard Business Press, 2009), and Director of the Center for Behavioral and Decision Sciences in Medicine at the University of Michigan.

View original post and comments at Huffington Post

With jobs disappearing faster than a major league fastball, the public is understandably irate at the damage that greed has wrought upon our economy. Financiers destroy their companies, and our retirement portfolios, and then complain when their bonuses are less than 7 figures.

The greedy behavior in recent headlines has not been limited to Wall Street. Last fall, for example, Congress uncovered the shocking details of Dr. Charles Nemeroff, Chair of psychiatry at Emory University, who had made almost $3 million in consulting fees from the same drug companies whose products he was prescribing. More disturbingly, he was responsible for evaluating these same drugs in federally funded research trials. Then in November, we learned that renowned Harvard psychiatrist, Joseph Biederman, had received hundreds of thousands of dollars from Johnson & Johnson, a company which made medications that, not by coincidence, treated the same childhood psychiatric illnesses that Biederman had become famous for publicizing to doctors.

With all of these disturbing stories, it is natural to attribute our current economic problems to excesses of greed.

Greed is indeed a prominent theme in many recent headlines, but it doesn’t explain what has been happening. Greed is a reliable constant in human affairs. Attributing the current situation to greed is like attributing someone’s headache to the fact that they have a brain. The real explanation lies not with greed, but with our failure to deal with conflicts of interest.

Conflicts of interest have played a central role in many of the disasters that have befallen our economy in recent decades. Enron and other corporate debacles a decade ago were aided and abetted by accounting firms that were providing consulting services to the same companies they were auditing, creating a situation in which the right-hand was expected to raise the alarm about financial practices being suggested or condoned by the left hand. The dot-com crisis was similarly aided by stock analysts who provided buy recommendations for companies whose stock their firms were underwriting. And now in the most recent debacle, it has emerged that credit rating agencies, entrusted to identify risky finances, were aggressively drumming up business from the same lenders whose credit they were rating.

As highlighted by publicity over the payoffs to psychiatrists, conflicts of interest have also contributed significantly to another less acute but equally serious problem plaguing our economy: the ever-intensifying problem of skyrocketing health care expenditures. Despite numerous calls for change, pharmaceutical companies continue to shower physicians with gifts, and an increasing proportion of medical school faculty obtain an increasingly large proportion of their income from industry. (Disclosure: I am an academic physician, but I have made a practice of staying independent from industry funding. That independence has come easily, given that most companies have no interest in a primary care physician who studies decision making and ethics!) As a result, the newest and most expensive interventions are enthusiastically embraced by the medical community, often before their safety and effectiveness have been firmly established.

In the face of economic turmoil, it is tempting to look for greedy villains. By the time there are villains to punish, however, it’s usually too late to fix the problem. Shooting the fox won’t restore chickens to the hen house. Instead, we need regulations to reign in the pernicious effects of conflicts of interest.

How can we do this? Beyond calls to punish perpetrators, the most common response is to call for greater disclosure of conflicts. Medical journals and medical schools, for example, have largely tried to address conflicts of interest by requiring physicians to disclose their outside income. However, disclosures are not a solution. For starters, people often don’t report their conflicts. Nemeroff famously failed to report the majority of his $3 million in consulting fees. More importantly, disclosure can cause outsiders to drop their guard - when a physician readily admits working with a drug company, other people mistakenly assume that he must therefore be being forthright about his research results.

The only way to reduce the effects of conflicts of interest is to reduce the conflicts themselves. Auditors and bond raters shouldn’t be hired by, or provide other services to, the companies they are rating. Stock analysts shouldn’t be allowed to provide buy recommendations on stocks their firm underwrite. Physicians shouldn’t be allowed to accept gifts from pharmaceutical companies.

As Obama continues to implement policies meant to avert future economic disasters, it will be essential for his administration to take a hard look at regulating the conflicts of interest that pervade our economy. Only by doing so can we get our economy back on track, and prevent another precipitous derailment.

Note: I am joined in today’s post by George Loewenstein, Herbert A. Simon Professor of Economics and Psychology at Carnegie Mellon University.

To read more of my blogs, and to learn more about my new book, Free Market Madness, check out my personal website: http://www.peterubel.com

View original post and comments at Scientocracy

Paying Doctors Less Is the Key to Better Coverage

Conservatives propose to control healthcare costs by bringing the discipline of the free market to bear upon the healthcare system. Some progressive groups advocate controlling costs with a more interventionist plan. But neither approach, as far as I have seen, adequately confronts one of the biggest barriers to controlling healthcare costs—the strong psychological desire physicians like me have to maintain our often phenomenally high incomes.

To help you understand this psychological phenomenon, I want you to imagine that you have ten years left in your career, and can choose between the following two income streams over those ten years: In the rising salary stream, you would start at salary X, and then receive a steady raise in your salary over the next ten years till you finish at salary X+Y. In the falling salary stream, you’d start right now at an salary of X+Y, and your salary would steadily decline across the ten years to end at salary X. Both choices would leave you with the exact same amount of salary over these ten years, only differing on whether your salary grows over time or declines.

What would you choose? (more…)

Despite Barack Obama’s recent surge in the polls, much could change between now and election day. While it looks like this election will be decided by the economy, unexpected events could dramatically change the campaign narrative. Terrorists could conduct an attack inside the US. Obama, despite his two years of steady poise, could say something really stupid between now and November, that would cause independent voters to flee.

But one thing is certain: this presidential campaign, like all recent campaigns, will not be decided by the candidates’ health care proposals.

The US health care system is a bigger threat to the American population than terrorism ever was. As horrific and evil as were the attacks on 9/11, and as much as we needed to mobilize our troops to depose the Taliban from Afghanistan, the more than 3000 people who died on 9/11 are dwarfed in numbers by the tens of thousands of people who die, needlessly, because they have no health insurance.

Ask people what they are worried about, and health care usually sits near the top of their list. Almost 50 million people in the US have no health insurance, people who have to decide whether that gash really requires stitches, or whether that heartburn is a mere stomach problem or sign, instead, of a potentially fatal heart attack. A similarly vast number of people have too little health insurance to cover the basic health needs. Consequently, they hover in economic peril, one serious illness away from bankruptcy.

To make matters worse, persistently rising health care costs threaten our global competitiveness, handcuffing US industries with huge expenses. This health care inflation also adds to state and federal budget problems.

Yet despite this dire situation, health care doesn’t win elections, because health care problems never feel as immediate as other threats. When the Dow Jones plummets 800 points, people understandably worry. They can see their life’s savings dwindling, and their hopes of early retirement evaporating. When a student conducts a school massacre, everyone is caught up in the terrible drama, with their view of gun control quickly rising up their list of concerns: gun control advocates will feel even more passionately than before the massacre that we need to restrict gun ownership, while gun control opponents will become even more convinced that the whole situation could have been averted if more of the teachers were packing.

There is no aspect of the health care crisis that has the immediacy of a bank foreclosure, a terrorist attack, or even a verbal gaffe from one of the candidates. Our health care crisis fails to win elections in part because it doesn’t feel like a crisis to enough people. It also fails because it is hard for candidates to come up with a simple solution to such a complicated mess, and therefore any solution a candidate puts forth is easily caricaturized and criticized.

Both candidates have proposed ways they think will improve our health care system. I feel strongly that Obama’s approach, even in its preliminary form, is far superior to McCain’s. But that probably won’t matter on election day. Ultimately this campaign will be won over other issues.

View original post and comments at Huffington Post

Seven days into the patient’s hospital stay, his doctors realized they had fought a losing battle. The patient, an overweight smoker with a touch of diabetes, had come to the emergency department with shortness of breath. After a series of tests in the emergency room, he was given a dose of antibiotics for possible pneumonia and admitted to the hospital. His condition deteriorated quickly and now, on a ventilator in intensive care, he was unconscious and a chest x-ray showed that his lungs had completely filled up with fluid. Over the next couple of days, after long discussions with his family, the doctors and nurses withdrew his ventilator and the patient passed away.

Should the hospital be paid for taking care of this patient? Traditionally, hospitals in the U.S. are paid for services rendered, regardless of whether the patient benefits from the services. Intensive care stays cost money, and many patients in such units die despite the care they receive. Hospitals can’t afford to be paid only for those patients who survive such ordeals.

More recently, however, healthcare reformers have questioned this payment mechanism, asking why healthcare providers aren’t paid more often according to the quality of their care, rather than the intensity of this care. Common business practice holds that when you buy a faulty product, you get your money back. The same doesn’t seem to hold for hospital care.

Economics has taught us a number of simple but profound truths about how markets behave. For instance, as the supply of a good increases, the price of that good should drop. When looking at the economic mess we Americans call a “health system,” then, it seems only reasonable to turn toward these simple truths when considering how to reform health care.

Hence the power of the pay-for-performance movement in medicine. The idea is simple — human beings, as economists have taught us, respond to incentives. If we reward doctors for providing high quality care, or punish them financially for providing less than optimal care, then doctors will do better at their jobs.

Unfortunately, as shown in an article in July’s issue of the prestigious Annals of Internal Medicine, simple truths often don’t work in healthcare. The authors of this study focus on the problem of pneumonia, the illness that killed the patient whose story opened up this essay.

Pneumonia is an infection of the lungs, often caused by bacteria. Pneumonia is often deadly. Therefore, if patients are going to survive this disease, they need rapid treatment with antibiotics. Indeed, when a group of pneumonia experts reviewed the medical records of several thousand pneumonia patients, they discovered that those who had received antibiotics within four hours of arriving at the emergency department were significantly more likely to survive than those who did not receive them so quickly.

It wasn’t hard for reformers to look at this evidence and conclude that those doctors who give pneumonia patients antibiotics within four hours should be paid more than those who do not. Pay for performance, not for poor performance.

Only one problem with this plan however — it creates a hoard of problems.

Pneumonia, you see, is often difficult to diagnose. When a patient comes to an emergency department with shortness of breath, doctors like me are going to wonder whether it’s from pneumonia, asthma, or congestive heart failure. We’ll also consider more urgent problems, like a potentially-fatal blood clot in the patient’s lungs, or a blockage of one of his coronary arteries, leading to a heart attack.

What should we doctors do in these situations? Well of course, we should move quickly to make the diagnosis. If the patient looks relatively stable, we should hold off on any preliminary treatment for a short time, while obtaining the kinds of tests that will point them toward the right diagnosis.

Unfortunately, the right diagnosis doesn’t necessarily announce itself in the emergency department. A good chunk of people with pneumonia come to the emergency department without fevers. They are often so dehydrated from their illness, that their pneumonia doesn’t show up on chest x-rays. It’s pretty common, in fact, for emergency department doctors to treat patients for multiple problems at the same time, because they aren’t sure of the diagnosis. I’ve taken care of many patients in the hospital who, even after a few days of treatment, leave me befuddled as to whether they were short of breath because of congestive heart failure or pneumonia.

Why this brief introduction to the difficult diagnostic life we physicians face in the hospital? To reveal the pitfalls of simple economic schemes (pay for performance, dude!) on the practice of medicine. You see, when insurance companies began rewarding doctors for administering antibiotics to pneumonia patients within four hours of arriving at the emergency department, many physicians raised a proper and justified stink. They pointed out the strange behaviors that would follow from this incentive scheme — doctors would give too many patients antibiotics, even stable ones who could have waited another hour for test results. Overuse of antibiotics leads not only to antibiotic resistance, but also creates potentially life-threatening side effects. And this payment scheme, by making doctors so concerned about treating pneumonia quickly, diverts their attention away from other possible diagnoses. In other words, the already complicated job of diagnosing sick patients gets even more complicated, thanks to these simplistic reforms.

Beware of business people and politicians who promise that a little common sense — pay for performance — will improve our healthcare system. The same kind of quality improvement processes that make companies more efficient at producing widgets, and the same kind of financial incentives that maximize the performance of door-to-door salesmen, won’t improve the way doctors like me treat patients who come to us struggling for air.

View original post and comments at Huffington Post