Friday, April 18, 2014

Fwd: qotd: U.S.’s unique approach to health care pricing

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-------- Original Message --------
Subject: qotd: U.S.'s unique approach to health care pricing
Date: Fri, 18 Apr 2014 13:59:39 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

International Federation of Health Plans
Accessed April 18, 2014
IFHP publishes 2013 Price Report

The International Federation of Health Plans (IFHP) today released its
2013 Comparative Price Report, detailing its annual survey of medical
prices per unit. Designed to showcase the variation in healthcare prices
around the world, the report examines the price of medical procedures,
tests, scans and treatments in nine countries. This year the survey also
shows pricing for five specialty prescription drugs. As in prior years,
the survey data shows that the United States continues to have the
highest fees of those countries surveyed for drugs and various medical

IFHP's Chief Executive Tom Sackville explained why he believed to the
data to be important.

"First, it gives the lie to the idea that some countries spend more on
health as a result of higher utilization. It is all about unit price,"
he said. "Second, we have looked here at a number of procedures and
products which are identical across the markets surveyed. The price
variations bear no relation to health outcomes: they merely demonstrate
the relative ability of providers to profiteer at the expense of
patients, and in some cases reflect a damaging degree of market failure."

Prices examined in the study included those from Argentina, Australia,
Canada, England, Netherlands, New Zealand, Spain, Switzerland and the
United States. The data for the report was gathered from participating
IFHP member organizations in each country. Prices in the U.S. were
based on prices negotiated between private health plans and health care

2013 Comparative Price Report


April 17, 2014
These 15 charts show our health care prices are totally insane
By Sarah Kliff

(The International Federation of Health Plans) published Thursday its
annual look at international variation in health care prices. For all
but one item they studied, from Nexium to MRI scans to bypass surgery,
the United States is always the most expensive.

Americans spend more for health care largely because of the prices.

Most other countries have some central body that negotiates prices with
hospitals and drug manufacturers. Tom Sackville (chief executive of the
International Federation of Health Plans) who used to work for Britain's
health care system, recalls that it would have a unit of 14 people whose
whole job was getting drug manufacturers to give the country a better
deal on prescription medications.

That unit of 14 is essentially buying in bulk for a country of 63
million people – and can successfully ask for steep discounts in return.

The United States doesn't have that type of agency. Every insurance plan
negotiates individually with hospitals, doctors and pharmaceutical
company to set their own prices. Insurers in the United States don't, as
these charts show, get a bulk discount. Instead, our fragmented system
means that Americans pay more for every type of health care that IFHP

"You could say that American health care providers and pharmaceuticals
are essentially taking advantage of the American public because they
have such a fragmented system," said Sackville. "The system is so
divided, it's easy to conquer."


The New York Times
April 17, 2014
Cost of Treatment May Influence Doctors
By Andrew Pollack

Saying they can no longer ignore the rising prices of health care, some
of the most influential medical groups in the nation are recommending
that doctors weigh the costs, not just the effectiveness of treatments,
as they make decisions about patient care.

The shift, little noticed outside the medical establishment but already
controversial inside it, suggests that doctors are starting to redefine
their roles, from being concerned exclusively about individual patients
to exerting influence on how health care dollars are spent.

In practical terms, new guidelines being developed by the medical groups
could result in doctors choosing one drug over another for cost reasons
or even deciding that a particular treatment — at the end of life, for
example — is too expensive. In the extreme, some critics have said that
making treatment decisions based on cost is a form of rationing.

Traditionally, guidelines have heavily influenced the practice of
medicine, and the latest ones are expected to make doctors more
conscious of the economic consequences of their decisions — even though
there is no obligation to follow them. Medical society guidelines are
also used by insurance companies to help determine reimbursement policies.

Generally, Medicare is not supposed to consider cost effectiveness in
coverage decisions, and other government attempts to do so are
susceptible to criticism as rationing. Insurers do perform cost
analyses, but they also risk ire from patients and doctors.

Dr. Steven D. Pearson, a visiting scientist in the ethics department at
the National Institutes of Health, said the move by some societies to
incorporate economic analysis "heralds an important shift in the way
doctors in America are talking about cost and value."

He said that having societies do such evaluations was better than having
a doctor make such trade-offs while treating an individual patient,
which is sometimes called bedside rationing.

Still, it is unclear if medical societies are the best ones to make cost
assessments. Doctors can have financial conflicts of interest and lack
economic expertise.

The cardiology societies, for instance, plan for now to rely on
published literature, not commission their own cost-effectiveness
studies, said Dr. Paul A. Heidenreich, a professor at Stanford and
co-chairman of the committee that wrote the new policy.

They plan to rate the value of treatments based on the cost per
quality-adjusted life-year, or QALY — a method used in Britain and by
many health economists.

The societies say that treatments costing less than about $50,000 a QALY
would be rated as high value, while those costing more than $150,000 a
QALY would be low value.

"We couldn't go on just ignoring costs," Dr. Heidenreich said.


Comment by Don McCanne

The International Federation of Health Plans represents private health
insurers in 25 nations. Its members include several U.S. health insurers
plus AHIP - the powerful insurance lobby in the United States. Although
many would argue that it is this industry that is tasked with the
responsibility of negotiating fair prices for health care services and
products, in this release they contend that the very high prices in the
United States "merely demonstrate the relative ability of providers to
profiteer at the expense of patients, and in some cases reflect a
damaging degree of market failure."

What a remarkable statement. We are paying the insurers massive sums for
their very expensive administrative services while they inflict
tremendous administrative burdens on the health care delivery system,
plus they take away from patients their choices in health care,
especially choices of their health care professionals. They concede that
they cannot control the "ability of providers to profiteer," nor can
they correct this market failure. They have become a profoundly
expensive but useless appendage to the health care system - an appendage
that should be severed.

Nevertheless, prices are still too high in the United States, so what
can be done? Consolidation of hospitals and physicians has been
anti-competitive, but prices were already high before the recent wave of
consolidations began. Some providers offer services that make them "must
have" participants in the insurer networks. They have a greater ability
to stand firm on high prices, thus it is unlikely that antitrust
enforcement could have more than a negligible impact on reducing prices.

Physicians seem to be more sensitive to cost barriers for their patients
than do the hospitals and pharmaceutical firms, though both of the
latter do have programs for selected indigent patients. The New York
Times article describes how physician organizations are beginning to
address the issue of high prices, though much of the effort seems to
target the pharmaceutical firms rather than the physicians themselves.
What is really remarkable though is that some physicians are now willing
to look at assigning a monetary value to a quality-adjusted life-year

Do physicians really want to assume the role of telling their patients
that they will deny care that may be of some benefit but exceeds an
arbitrary cost threshold assigned to a QALY? Physicians traditionally
have not been the payers for their own patients' health care. That is
usually an insurer, the government, or the patient paying in cash.
Shouldn't the payer be making the spending decisions instead of the

The insurers have a terrible track record - often paying too much, but
also creating access barriers to care. The government has done a better
job with Medicare, but with Medicaid they have often underfunded care
which also creates financial barriers to care. With today's very high
health care costs, most patients are unable to pay cash if they face
major medical expenses, so a third party payer is required.

Some models today would place the physician at least partially in the
role of insurer. What is surprising is the relative silence on the
ethical violation that such a role entails. The physician should never
be placed in a position in which he profits by withholding beneficial
health care. The MBAs in health care do not seem to understand the
fundamental ethical compromise of such an arrangement.

The IFHP report on international health care prices does show that other
nations are much more effective in controlling prices. They all have in
common the fact that the government plays a major role in administering
or tightly regulating prices. In general, governments seem to get it
right. If we had a single payer system, we would get it right as well.
In doing so we would also eliminate the profound waste caused by the
private insurers, and we would ensure that financial barriers to care
are removed for everyone.

What about defining the value of a QALY as ranging from $50,000 to
$150,000? That should not be the role of the physician who should always
be in a position to advocate for what is right for the patient. That
should be the role of the public administrator who negotiates health
care prices. A better term than negotiation would be price
administration, implying that the government should have an "unfair" or
unbalanced clout when it comes to getting prices right. Right prices
means legitimate costs plus fair margins. No other country will be
paying $84,000 for a twelve week course of Sovaldi to treat hepatitis C.
We wouldn't either if we had a single payer system.

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