Health Insurance as Innovation Incentive

Rachel Sachs, Prizing Insurance: Prescription Drug Insurance as Innovation Incentive, 30 Harv. J. of L. and Tech. (forthcoming 2016), available at SSRN.

In Prizing Insurance: Prescription Drug Insurance as Innovation Incentive, Rachel Sachs brings together the often disparate worlds of intellectual property theory and health insurance design, to argue that prescription drug insurance could be structured to offer a better incentive for pharmaceutical companies to develop drugs that treat conditions primarily affecting low-income Americans. Typically, health insurance design is evaluated from an access and utilization perspective. Professor Sachs suggests we should broaden that view, at least when it comes to drug coverage, to evaluate the effect insurance coverage has on research and development incentives.

To make her point, Professor Sachs works through the example of the innovation incentives for drugs that would be primarily prescribed to low-income populations in the U.S., such as those that would treat various tropical diseases. While there are many factors that influence the development of drugs, one of those incentives is financial. And when it comes to diseases that affect primarily low-income individuals, the financial analysis disfavors significant innovation investment. After all, if the population to be treated is either uninsured or covered through only Medicaid, the “prize” for developing a treatment may be insufficient to support investment. Medicaid arguably contributes to this lack of incentive given its relatively low payment rates for pharmaceuticals, which are significantly below other market payers in the U.S. The novel argument Professor Sachs makes is that insurance design could be modified to help achieve socially desirable innovation that the market would not otherwise reward.

The article begins by explaining how the patent and FDA regulatory systems do not necessarily produce socially optimal innovation. For example, she argues that exclusivity periods and clinical trial limitations can distort the incentives for innovation, favoring certain types of drugs and interventions over others. In addition, while she acknowledges that market incentives do often reward the creation of socially desirable drugs and treatments, the mechanism is imperfect because of ability-to-pay concerns and a lack of consumer salience. In the end, the types of innovations that are incentivized are not necessarily the ones with the greatest social value or those that would address the most significant disease burdens.

After establishing the current distortions in innovation incentives, Professor Sachs moves on to discuss various policy levers that might be used to address such distortions. First, she explains why reforms aimed at the current intellectual property and FDA regimes are unlikely to be wholly effective. From there, she makes the case that insurance design itself could be used to create targeted incentives for socially desirable innovations in the pharmaceutical arena, and it is here that Professor Sachs introduces a novel way of evaluating insurance. She focuses on Medicaid, given that it is the primary source of coverage for low-income Americans and she wants to concentrate on populations for whom the usual market mechanisms would fail to produce socially optimal investment. Pursuant to federal statute, state Medicaid programs are entitled to specific percentage discounts on the average manufacturer price of all pharmaceuticals. While that pricing structure makes sense from an access and cost perspective, it lowers the incentive for pharmaceutical companies to develop drugs that primarily serve the Medicaid population. She argues that Medicaid drug pricing could be tweaked to function more like a prize for innovation, without necessarily undermining cost or access concerns.

Innovation incentives in the pharmaceutical industry in the United States are complicated by our disparate insurance markets. Medicaid pays comparatively low prices for pharmaceuticals, with Medicare and private insurance paying more. As a result, all other things being equal, pharmaceutical companies should favor innovation that will have higher utilization among the higher-paying populations – leaving the Medicaid market as the most unattractive in the U.S. While some commentators have argued that the solution is to “equalize down” – moving payment rates for non-Medicaid payers down to Medicaid levels, Professor Sachs argues that we should strategically “equalize up” – raising Medicaid rates to help achieve socially desirable innovation. She walks through possibilities for achieving this result at the federal level, and also discusses how enterprising states might implement such strategies on their own.

Professor Sachs’ article deftly brings together an understanding of patent and FDA regulation, along with insurance pricing mechanisms, to give a more complete picture of healthcare innovation than is standard. As someone who spends a lot of time thinking about health insurance regulation, I valued both the explanation of why the patent and FDA regulatory systems under-incentivize certain types of innovation, as well as Sachs’ position that evaluation of insurance design should go beyond cost, access, and utilization. While this article focuses specifically on the development of drugs to treat neglected diseases that affect primarily low-income populations, it could easily be applied to other areas in which insurance reimbursement structure impacts health care innovation.

Cite as: Amy Monahan, Health Insurance as Innovation Incentive, JOTWELL (June 9, 2016) (reviewing Rachel Sachs, Prizing Insurance: Prescription Drug Insurance as Innovation Incentive, 30 Harv. J. of L. and Tech. (forthcoming 2016), available at SSRN), http://health.jotwell.com/health-insurance-as-innovation-incentive/.
 
 

The Judiciary’s Role in Hard (Health Care) Cases

Neal Devins, Rethinking Judicial Minimalism: Abortion Politics, Party Polarization, and the Consequences of Returning the Constitution to Elected Government, 69 Vand. L. Rev. _ (forthcoming 2016), available at SSRN.

On March 2d, the US Supreme Court heard oral arguments in Whole Woman’s Health v. Hellerstedt, which will determine whether “TRAP laws” (targeted regulation of abortion providers) impose an unconstitutional undue burden on access to abortion, a medical or surgical procedure accessed by approximately one-third of US women of reproductive age. The Texas laws at issue require doctors who provide abortions to have admitting privileges in a hospital within 30 miles of their clinic, and abortion clinics that would otherwise operate like doctors’ offices are required to adhere to extensive ambulatory surgery center licensure requirements. The cumulative effect of these laws would be to leave 25% of Texas’s clinics operating — ten clinics for the state that is the second largest in land mass and population in the US. This opinion could decide whether the constitution protects a merely theoretical right to access abortion rather than a right that can actually be exercised by women across all parts of the nation. In Rethinking Judicial Minimalism, Professor Devins analyzes how this precipice has been reached from a judicial process and political perspective and reconsiders judicial minimalism as the superior procedural approach for contentious cases.

Planned Parenthood v. Casey and Roe v. Wade are the two key decisions interpreting the Due Process Clause to protect women seeking abortions from prohibitive state regulation. In Professor Devins’ view, Roe was a “maximalist” decision that worked legislatively by creating a formal regulatory structure, and Casey was a “minimalist” decision that correctly discarded Roe’s “trimester framework” and allowed states to follow the vaguer “undue burden” standard, which meant that states could regulate abortion if they did not place substantial obstacles in the path of a woman seeking an abortion. Professor Devins notes that the minimalist approach to judicial power that he has advocated seemed the best mechanism for allowing the deliberative democratic process to reach policy compromises on hard questions. In the wake of Roe and Casey, many notable scholars and jurists (including Justice Ginsburg) agreed that states should have reached their own conclusions without the Court crafting a decision that delineated how and when states could regulate the abortion procedure, thereby usurping states’ deliberative and political processes.

The trouble, Professor Devins writes, is that Casey’s judicial minimalist approach opened the state experimentation gates when, in hindsight, the political branches were becoming less functional. Professor Devins convincingly documents the historic moments that rendered the political parties more polarized and less able to intersect in their goals, which in turn diminished legislatures’ ability to negotiate meaningful compromises because moderate voices were removed from each party. Professor Devins claims that this polarization hinders political processes, particularly when fraught issues are at stake. Thus, Devins argues, single-issue interest groups, such as Americans United for Life (AUL), have successfully drafted legislation enacted by many states, a process that would not have been possible in a more functional political era. The political story told here is not new, but it is succinctly documented and persuasively drives the article’s conclusion that judicial minimalism may be dangerous when the political branches function sub-optimally.

The structural governmental ideas raised by Professor Devins are important for health care law and policy in the current moment. The Affordable Care Act could have acted as Professor Devins’ case study too, as it also offers an example of political polarization and backlash, having been passed with little inter-party cooperation. This arguably has contributed to the endless stream of litigation challenging everything from the law in its entirety (NFIB v. Sebelius) to seemingly minor administrative rules (Zubick v. Burwell). The challenges have forced the Court to explore what it will do with major works of “unorthodox legislation” and its role in upholding, interpreting, and otherwise exploring the constitutionality and meaning of such legislation.

Thus, Professor Devins offers a fruitful inquiry not just for the questions before the Court in Whole Women’s Health but in many other health care cases: is judicial maximalism or minimalism a better approach to hard policy questions in an era of political polarization? The article’s case study convinced me that maximalism has potential in an era of questionable democratic deliberation. But, what if the maximalist approach ultimately is not the one that Devins favors, which encompasses Professor Chemerinsky’s view that the Court should vindicate the rights of politically underrepresented minorities? I wished Professor Devins had engaged this counterfactual more deeply in Part III, as maximalism arguably has led in the modern era to decisions such as D.C. v. Heller, not just historic decisions such as Roe v. Wade, and the two are on opposite sides of ideological lines. To me, this highlights a general problem with structural arguments: they sometimes are substituted for substantive disagreement. I hope Professor Devins addresses the process over substance critique of structural theories more directly in future work.

Interestingly, striking down Texas’s TRAP laws could be deemed an act of judicial minimalism, as it would be an application of the ‘minimalist’ Casey decision that asks whether a state has legitimate reasons to regulate abortion as it regulates other medical procedures. In this instance, Texas enacted laws written by AUL to decrease access to abortion, and the briefs and oral arguments revealed that these laws will likely harm women’s health and do not address any known problem in abortion medical care (especially notable compared to riskier procedures that are significantly less regulated, such as colonoscopies). The Texas political process was allowed to proceed, and the Court need not extend itself to a maximalist approach to strike down TRAP laws. Even so, Professor Devins raises important questions about judicial process that have deeper implications for health care reform and other health care issues before the courts.

Cite as: Nicole Huberfeld, The Judiciary’s Role in Hard (Health Care) Cases, JOTWELL (April 7, 2016) (reviewing Neal Devins, Rethinking Judicial Minimalism: Abortion Politics, Party Polarization, and the Consequences of Returning the Constitution to Elected Government, 69 Vand. L. Rev. _ (forthcoming 2016), available at SSRN), http://health.jotwell.com/the-judiciarys-role-in-hard-health-care-cases/.
 
 

Physician Aid in Dying and Mental Illness

Scott Y. H. Kim, Raymond G. De Vries, & John R. Peteet, Euthanasia and Assisted Suicide of Patients With Psychiatric Disorders in the Netherlands 2011 to 2014, JAMA Psychiatry (2016).

The right to aid in dying (or physician-assisted suicide) has developed with different standards in the United States than in the Netherlands and Belgium, and a recent study suggests that the United States has gotten it right in a critical respect—on the criteria for eligibility. Patients can more easily qualify for aid in dying in the Netherlands and Belgium and that creates a potential for misuse that is not present in California, Oregon, Vermont, and the other American states that permit the practice. In particular, as a new study by Kim, De Vries, and Peteet indicates, the possibility that people with psychiatric disorders may choose aid in dying when treatment for their disorders might address their despair is a more serious problem in Europe than in the United States.

Concerns about psychiatric motivations give rise to a very important argument against a right to aid in dying. If people can choose aid in dying because of mental illness, people may opt for death when proper therapy would restore their desire to live. And anecdotal reports in both the United States and Europe reinforce this concern. In a Frontline report on underground aid in dying in the United States, filmmakers documented the death of a woman whose mental illness led her to harbor false beliefs about her health. Similarly, an article in The New Yorker described the troubling case of a Belgian woman who underwent euthanasia, which, like aid in dying, is permitted in Belgium, despite physician assessments that her psychiatric depression was not serious enough to make her eligible for assistance in dying.

Cases like this have not been described in Oregon, Washington, or the other states that have legalized aid in dying for a key reason—the right exists only for persons who are terminally ill. People exercising their right to aid in dying must have a serious and irreversible disease that will cause death within six months. As a result, in more than 75 percent of aid-in-dying deaths in Oregon, the patient had cancer, with most of the others suffering from neurologic, lung, or heart disease.

In the Netherlands and Belgium, on the other hand, the rules for aid in dying rely on a more subjective standard—people must be suffering unbearably from an incurable illness. Under this standard, psychiatric disease can provide grounds for aid in dying, and that allows for judgments that are more susceptible to error.

In the study by Kim, De Vries, and Peteet on aid in dying in the Netherlands, a number of observations are worrisome. In more than one-half of cases, social isolation or loneliness was a factor for the patients. As Paul Appelbaum observed in an editorial accompanying the study, aid in dying may have “served as a substitute for effective psychosocial intervention and support.” Indeed, in more than half of the cases in the study, patients refused treatment that might have helped, with lack of motivation a common reason for the refusals. In more than one-fourth of cases, aid in dying was provided by a physician who had not been involved previously in the treatment of the patient and might not have been able to fully understand the nature of the patient’s condition. This may help explain why in nearly one-fourth of cases, the independent physician reviewers disagreed whether the patients met the criteria for aid in dying. (In such cases, aid in dying can still take place since the treating physician has authority to decide whether to proceed.)

No study is perfect, and the authors acknowledge a number of limitations with their data. Still, the concerns raised by the findings of Kim, De Vries, and Peteet will reinforce the current reluctance to expand the right to aid in dying to patients who are not terminally ill.

Cite as: David Orentlicher, Physician Aid in Dying and Mental Illness, JOTWELL (March 10, 2016) (reviewing Scott Y. H. Kim, Raymond G. De Vries, & John R. Peteet, Euthanasia and Assisted Suicide of Patients With Psychiatric Disorders in the Netherlands 2011 to 2014, JAMA Psychiatry (2016)), http://health.jotwell.com/physician-aid-in-dying-and-mental-illness/.
 
 

Legislating Medicine

Alena Allen, Dense Women, 76 Ohio St. L.J. 847 (2015).

When anecdotes trump data, health policy can become engulfed by bad science. Alena Allen eloquently captures the pitfalls of this phenomenon in her article, Dense Women, which provides a comprehensive normative and descriptive analysis of breast density notification statutes. To my knowledge, Allen is the first legal scholar to tackle this important issue. While breast density notification statutes vary by state, they each share a common goal: ensuring that physicians provide certain information to women who have dense breast tissue and directing women (to varying degrees) to speak to their doctors about further medical tests.

Breast density notification statutes were passed in response to heart-breaking stories of women who were diagnosed with breast cancer despite initially receiving negative mammogram results. One of the leading advocates is Nancy Cappello, who was diagnosed with breast cancer despite ten years of negative mammograms, and was eventually told that only an ultrasound could detect her cancer, given her dense tissue. Following a mastectomy, chemotherapy, radiation, and hormone treatment, Cappello began advocating for legislation mandating that physicians inform women when they have dense breasts. As Allen writes: “Their message is hard to resist. They are advocating to inform and empower women. They want to standardize, improve, and promote increased doctor-patient communication. Their message is so enticing that state legislatures across the country are listening.” In 2009, Connecticut (Cappello’s home state) became the first state to pass such a law, and twenty-three states have followed. (Legislation is pending in ten states, and a bill was recently introduced in the U.S. House of Representatives.).

While acknowledging that the stories of Cappello and others are “compelling,” Allen quite firmly (and convincingly) argues that personal “narratives always militate in favor of action, without fully appreciating the downside consequences.” The data are startling; according to one recent study, for every 10,000 women with dense breasts, additional testing will result in breast cancer being prevented in four women, though 3,500 unnecessary biopsies would be performed. This represents a high false-positive rate; 99.96% of women with dense breast tissue will have undergone additional screening tests but have no cancer, and 35% of these women would have undergone a biopsy just to be sure. Biopsies are not without risks, and all the additional testing comes with financial costs and anxiety for women who are undergoing the procedures. As a recent article in the New England Journal of Medicine reports, dense breast tissue is normal and common, present in 40-50% of women. Moreover, given changes in radiological reporting systems, tissue that is deemed dense in one year may not be deemed dense in another, and there is “little evidence to support widespread supplemental screening.” In short, as Allen explains, notification laws strongly nudge physicians to order new tests not for reasons of medical necessity, but out of fear of lawsuits should their patient not be in that 99.96%.

Lurking beneath the push for breast density notification statutes is a controversial premise—that the practice of medicine can be enhanced when elected officials dictate the standard of care. As Allen illustrates, these broader questions command attention. For example, when data do not corroborate anecdotal evidence, should lawmakers tell physicians what they should, and should not, say to patients? And, should insurance companies have to foot the bill for medical treatment that is encouraged by a state but not supported by medical science?

As Allen writes, “most notification laws undermine women rather than empower them”—this is accomplished by “nudging, prodding, or pushing women to act.” Some states push women towards additional testing without requiring that insurance companies cover the costs. In fact, only two states (Connecticut and New Jersey) require that insurance companies cover the costs of additional screenings encouraged by the notification laws.

Other important contributions of Dense Women include Allen’s state-by-state analysis of breast density notification statutes. Here, Allen goes beyond merely classifying the various statutes into distinct categories; she analyzes which statutes are more likely to cause harm to women. Allen not only provides a compelling argument that questions the public health benefits of breast density notification statutes, she correctly links this debate to larger questions in health law and health policy. These include: how best to incorporate evidence-based medicine and comparative effectiveness research into health care delivery and best practices; paternalism in health care (particularly for women’s health issues); 1st Amendment issues and compelled speech on the part of the provider; and the role of medical malpractice (including doctrines such as loss of chance and negligence per se) in incentivizing sound medical care.

It’s often said that, in the realm of medicine, information is power. What Dense Women demonstrates is that this maxim ought to be qualified. This is particularly true when the evidence-based foundations of medicine are not applied to health policy. Allen’s analyses and conclusions are important, and lawmakers and health policy experts stand to gain from her thorough examination of the topic. Allen’s call for caution must be taken seriously.

Cite as: Efthimios Parasidis, Legislating Medicine, JOTWELL (February 17, 2016) (reviewing Alena Allen, Dense Women, 76 Ohio St. L.J. 847 (2015)), http://health.jotwell.com/legislating-medicine/.
 
 

Recognizing and Reinvigorating Medical Necessity

Janet L. Dolgin, Unhealthy Determinations: Controlling Medical Necessity, 22 Va. J. Soc. Pol’y & L. 435 (2015), available at SSRN.

In the fight to control health care costs, the determination of whether something is “medical necessary” is of paramount importance. A clear vision of medical necessity would allow payers, regulators, and doctors to arrive at universal and understood standards regarding clinical appropriateness and appropriate reimbursement. But, even in the midst of health care reform, its importance has been lost. In Unhealthy Determinations: Controlling Medical Necessity, Janet Dolgin makes a contribution to the scholarship that examines the perplexing topic of medical necessity by robustly arguing for its recognition and restructuring. In the piece, Dolgin focuses on the history of the doctrine, particularly on the idea that the doctrine more likely reflects the characteristics of the American health care system and the will of any given decision-maker, than it presents an actual useable clinical definition.

The quest for understanding medical necessity depends on two separate queries—one that focuses on the who:  which actor it is within the modern American health care regime that is the decision-maker, and, secondly, of course, the what:  what the standard will look like in a given clinical scenario.  Indeed, medical necessity can be characterized as a rationing tool employed by the insurance industry or as a flexible standard used by physicians to justify expensive and unnecessary medical care. Accordingly, one would have expected defining medical necessity to have been an object of attention—for insurance companies, who want to constrict it, doctors, who want to expand it, and federal administrators, who want to control it—in the effort to reform health care under the Affordable Care Act (ACA). But instead, according to Dolgin, the ACA leaves many of the rules that existed before its passage governing medical necessity in place.

Given multiple interested parties (including patients), the main thesis of Dolgin’s piece focuses on how the doctrine of medical necessity has been historically defined and dominated by the private insurance industry. Presenting obvious conflicts of interest, Dolgin argues that the industry allows cost-cutting incentives and the profit motive to trump both medical expertise of the doctors requesting the services, and the patients’ interests who would benefit from the services. Evincing a desire to vest providers with greater control over medical necessity, Dolgin pushes for more transparency and public input over a process that presently produces inconsistent and “amorphous” standards lacking in precedential power.

Dolgin’s analysis focuses on what she characterizes as the damaging effects of the Employee Retirement Income Security Act (ERISA) regime, which protects insurance companies that provide employer-sponsored health plans, arguing that these companies may make medical necessity determinations in an uneven and indefensible manner without legal consequence. She astutely highlights that, even though it could have been an effective tool, the ACA fails to define what is medically necessary, punting on an important ultimate question—and as a result, reaffirms the private insurance company as the most powerful party in American health care delivery. She does not quibble with the reliance on a so-called “medical necessity” standard or criterion, but is concerned about which party owns the ability to decide what that standard is. Finally, Dolgin’s piece is strongly supportive of the independent autonomy of doctors, arguing that “physicians’ medical decisions for their patients, assuming they do not contravene the terms of a patient’s plan, should only rarely be denied by payers.” She references other countries’ health care regimes—particularly those in Canada, Germany, and Israel—that feature additional government control and public negotiation as programs to which the U.S. should aspire.

In short, Dolgin’s piece is a strong rebuke of the private insurance industry, the ERISA regime, and in some ways, the ACA. Interestingly, she uses the story of medical necessity as an effective tool. As is the case in many health policy issues, the cost-containment problem in American health care, and the inability of the industry to agree on an understandable medical necessity standard, may have many causes. Dolgin rightly takes on the private, for-profit insurance companies as the chief concern in the medical necessity battles. However, the solution of rewarding physicians with power in determining what procedures are medically necessary may run the risk of overcompensating, bringing a new set of problems to American health care. Indeed, historically, American health care may owe its cost problems to not enough cost control by decision-makers other than physicians who are financially benefitted by increased care. Additionally, new tools imposed by the ACA—particularly the medical loss ratio (MLR) requirements that require a percentage of insurance premiums to be spent on actual care by insurance companies—are intended to blunt the private insurance companies’ incentive to limit care in order to pad profits.

Of course, Dolgin may argue that the answer to standard setting doesn’t then lie with an industry that is financially benefitted by limiting care—care that is truly needed for the health of the patient. Indeed, her piece pushes for a reexamination that features an increased public role in determining what type of health system Americans want. And with that argument, it is hard to argue.

 

 

Cite as: Zack Buck, Recognizing and Reinvigorating Medical Necessity, JOTWELL (January 11, 2016) (reviewing Janet L. Dolgin, Unhealthy Determinations: Controlling Medical Necessity, 22 Va. J. Soc. Pol’y & L. 435 (2015), available at SSRN), http://health.jotwell.com/recognizing-and-reinvigorating-medical-necessity/.
 
 

Reconceptualizing Health Law to Incorporate Justice-Based Concerns

Lindsay F. Wiley, From Patient Rights to Health Justice: Securing the Public’s Interest in Affordable, High-Quality Health Care, Cardozo L. Rev. (forthcoming), available at SSRN.

One of the challenges of teaching Health Law is that the course covers so many distinct areas of law that it can be hard for students to find an overarching theme, beyond the obvious one that all of the issues have something to do with doctors, patients, or hospitals. I was therefore very pleased to come across Lindsay Wiley’s new article, From Patient Rights to Health Justice: Securing the Public’s Interest in Affordable, High-Quality Health Care. In this article, Wiley examines analytical models previously developed by health law scholars and proposes a new model designed to place greater emphasis on collectivist concerns. The article should appeal not only to health law scholars, but also to anyone interested in how legal analytical frameworks can be used both to explain past developments and to reshape the terms of ongoing policy debates.

Wiley begins by examining four main models of health law, which she calls “professional autonomy,” “patient rights,” “market power,” and “health consumerism.” Under the professional autonomy model, which was dominant in the first half of the twentieth century, most legal and policy questions about health care were considered to be within the exclusive competence of professionals. This model eventually gave way to the patient rights approach, which sought to use the law to protect patients’ ability to make autonomous decisions, to improve quality, and to facilitate access. The market power model, which emerged in the 1970s, began to look at health care as an economic system, with a particular focus on the unique characteristics of health care markets that can distort the normal application of market forces, such as information asymmetries and the ubiquity of insurance. Finally, the health consumerism model, which Wiley describes as a “melding” of the patient rights and market power models, aims to draw on the power of markets in the service of empowering patients and improving the quality of care.

Despite the differences between each of these models, Wiley argues that they are similar in their underlying individualistic focus. By this she means that the models’ primary object of concern is the providers and patients involved in particular health care transactions, with little or no attention to the interests of the community at large. Although the market power model “represents collectivist impulses to some extent,” the model is primarily concerned with shoring up health care markets in order to increase overall social utility, rather than to address distributional inequalities or other communitarian concerns.

Wiley argues that a variety of developments in health law have challenged the continued relevance of the four primary models by promoting greater attention to the impact of decisions about health care on collective social well-being. For example, she notes that the insurance provisions in the Affordable Care Act, including the prohibition on most types of risk-based underwriting in the individual and small group insurance markets, “represent a major shift from an actuarial fairness approach to health care financing to one premised largely on mutual aid.” Likewise, growing concerns about issues such as the cost of health care, declining immunity for vaccine-preventable diseases, increasing antibiotic resistance, and mutual vulnerability in the face of public health emergencies, has led to increasing efforts to integrate public health considerations into day-to-day clinical practice.

These and other developments, Wiley argues, create conditions for “a new approach that expressly recognizes the public — alongside the patient, the provider, and the payer — as an important stakeholder and active participant in decisions about treatment, coverage, and allocation of scarce resources.” Wiley calls this new approach the “health justice” framework. Like other “justice” movements – e.g., environmental justice, reproductive justice, and food justice – health justice is concerned about the fairness of the distributional consequences of laws and policies, in addition to their impact on individual rights and welfare. Specific characteristics of the health justice framework include the prioritization of prevention, the integration of health care and public health, and an emphasis on the role of government enforcement of rights and responsibilities of individuals and institutions.

Wiley demonstrates how the health justice model can be used both to explain new developments in health law and policy and to argue for the reinterpretation of existing doctrine to incorporate greater collectivist concerns. For example, the health justice framework helps us understand the emergence of pay-for-performance measures that focus on public health outcomes such as vaccinations or the reduction of hospital-acquired infections. Examples of its use in scholarship include Wendy Parmet’s proposal to harness informed consent doctrine to establish a provider duty to inform patients about the population consequences of antibiotic resistance, and Elizabeth Weeks Leonard’s effort to justify limits on the use of experimental treatments outside of clinical trials by appealing to the public’s interest in developing reliable knowledge about the safety and efficacy of unapproved drugs.

Wiley recognizes that the health justice approach is not the first attempt to incorporate greater collective considerations into health law analytical frameworks. In fact, she justifies her model in part by noting that it is consistent with a broader scholarly move towards recognizing collective interests in health care, particularly in the fields of bioethics and public health. However, the value of the health justice formulation is that it does not simply call for greater attention to collectivist considerations, but that it emphasizes a particular kind of collectivist approach – i.e., one in which the distribution of health benefits is at least as important as their aggregate amount.

The health justice framework offers a useful tool for reframing health law issues to highlight the long-term impact of laws and policies on larger social structures. While these collectivist considerations will not always be the decisive factors in resolving particular policy dilemmas, they deserve to be factored into the analysis alongside the traditional individualistic focus. I look forward to future scholarship applying this model to new health law proposals, as well as to further analysis of mechanisms for resolving situations in which individual and collectivist interests conflict.

Cite as: Carl Coleman, Reconceptualizing Health Law to Incorporate Justice-Based Concerns, JOTWELL (December 4, 2015) (reviewing Lindsay F. Wiley, From Patient Rights to Health Justice: Securing the Public’s Interest in Affordable, High-Quality Health Care, Cardozo L. Rev. (forthcoming), available at SSRN), http://health.jotwell.com/reconceptualizing-health-law-to-incorporate-justice-based-concerns/.
 
 

Pendulums Swing

Nicholas Bagley, Medicine as a Public Calling, 114 Mich. L. Rev. 57 (2015).

Even as some in Congress continue to vote to repeal the Affordable Care Act, most observers and political participants agree that the health reform law’s central elements are here to stay. Yet broad agreement also exists that, despite the law’s progress in decreasing the number of uninsured Americans, serious problems still plague the U.S. health care system. Escalating costs figure centrally among these problems, and recent news reports have highlighted the plight of insured Americans who face burdensome premiums or out-of-pocket costs. What is the most promising “fix” for addressing the persistent problems Americans face in accessing and affording medical care?

Against this backdrop, Nicholas Bagley’s new article Medicine as a Public Calling suggests approaches in the tradition of public utility regulation as a plausible response. Bagley’s argument is that—as we try to figure out how to move forward in a post-ACA landscape—we would do well to recognize how the public utility model shaped health care regulation in the twentieth century. The article is descriptive, rather than prescriptive. Bagley does not advocate regulation of health care prices, access, or supply, but he wants to make sure readers realize that such regulation would have a long lineage. I found the article’s careful description of this lineage tremendously valuable. Keeping up with the rapid pace of changes in health law, policy, systems, and technology is a constant challenge for health law teachers and scholars. These changes make it all too easy to think that “taking a historical perspective” means looking back ten years or so, which obscures understanding of the legal historical path to today’s vantage point. Bagley’s article corrects that historical shortsightedness.

The article addresses Bagley’s concern that contemporary policy choices are often boiled down to a dichotomy: move toward a single-payer system or give market forces more sway in distributing health care. That dichotomy, though, ignores a third path—treating the health care system as akin to a public utility.  He highlights how public utility regulation traditionally strives to address “the sorts of problems in market ordering—supply imbalances, access restrictions, and abusive and discriminatory pricing—that have long afflicted the medical industry.” Bagley acknowledges that the law-and-economics movement and the recent influence of market-based approaches to health care may make advocacy for a public utility model for health care seem passé. But he emphasizes both the durability of historical measures reflecting a public utility approach and the (re)emergence of federal and state initiatives resembling public utility regulation forebears. Suggesting that the policy pendulum may have already begun to swing away from market-based approaches, his explicit aim is “to give the pendulum a gentle push” back towards a public utility regulatory model.

Bagley begins by describing troubling aspects of the health care system—“supply shortages, access restrictions, and capricious, exorbitant prices”—that manifest failures in the health care market and, thus, suggest a public utility-inspired response. In particular, he notes the danger that the ACA’s efforts to “defragment” and coordinate care may prompt anticompetitive consolidation, in some cases producing dominant hospital systems that look like natural monopolies. He suggests that public utility regulation, by retaining “the basic architecture of the private financing system while asserting state control over the medical industry’s perceived excesses,” could offer a more moderate response than socialized insurance. Then, he identifies the precedent for that moderate approach, describing how laws recognizing medicine’s public calling historically have shaped health law.

Central to Bagley’s historical account is a description of the law of public callings that emerged by the early twentieth century. According to his account, public callings shared two key attributes: a business with a public calling “met an important human need,” and “some feature of the relevant market presented the risk of oppression.” Historically, public utility regulation did not demand an actual natural monopoly; instead, the touchstone was widespread consumer disadvantage in the market. Readers familiar with the history of health care in the U.S will likely accept Bagley’s explanation of why medicine was not deemed a public calling in the early 1900s and will nod with recognition as he identifies regulatory interventions in the second half of the twentieth century that demonstrate a public utility-inspired approach. These include Hill Burton and health planning legislation, civil rights laws, the community benefit standard, EMTALA, state and federal insurance rate-setting reforms, and state hospital rate regulation schemes.

Bagley does not claim that medicine was ever viewed as a true public utility or that the past few decades of health policy (at least pre-ACA) have continued the public utility tradition. Rather, he pushes back against a dominant narrative of health care regulation that obscures a deeply embedded historical understanding of the health care industry as having a public calling. That history is important, argues Bagley, as we consider how to address the persistent problems around supply, access, and pricing that have survived the ACA’s implementation. Bagley concludes by pointing out contemporary examples of state intervention in the market that embody public utility approaches. His examples resonated, in part because they echoed what I’ve been hearing on the news. While I was reading his article and writing this review, the news has been full of stories about outrage over exorbitant pricing increases by drugmakers and how Maryland is using hospital global budgeting to control costs, to give just two examples.

Before reading Bagley’s article, I would not have seen a public utility connection between these two news stories, but now it is obvious to me.  Medicine as a Public Calling does not create a new paradigm. Instead, it reveals and establishes the contemporary relevance of an old paradigm—understanding the medical industry as being affected with a public interest that justifies intervention akin to public utility regulation. Reading the article permitted me to see the history of health care regulation—and today’s issues—differently. It’s the difference between seeing a bunch of stars up in the sky and seeing a constellation. Bagley’s article illuminates both the connection between seemingly disparate historical and contemporary regulatory points, as well as their linkage to the public utility model. I recommend the article for anyone who seeks a richer understanding of the historical context in which today’s health policy debates occur.

Cite as: Mary Crossley, Pendulums Swing, JOTWELL (November 5, 2015) (reviewing Nicholas Bagley, Medicine as a Public Calling, 114 Mich. L. Rev. 57 (2015)), http://health.jotwell.com/pendulums-swing/.
 
 

The Case for Rate Regulation of Hospital Prices

Erin C. Fuse Brown, Resurrecting Healthcare Rate Regulation, 67 Hastings L. J. (forthcoming, 2015), available at SSRN.

With health spending in the U.S. outpacing both general inflation and spending by other developed nations, policymakers have targeted their attention on a primary culprit for our excess costs – high health care prices. Economists and other experts have offered a range of policy solutions to discipline health care prices in the United States. Using hospital prices as her case study, Fuse Brown provides a comprehensive analysis of these policies. In doing so, she guides the reader to two important conclusions: first, that there is no single solution that addresses the full range of market failures that cause high hospital prices and that a combination of approaches is therefore necessary; and second, that the package of solutions must include direct rate regulation of hospital prices for the most health care markets. This article builds on Fuse Brown’s earlier article, Irrational Hospital Pricing, 14 Hous. J. Health & Pol’y 11 (2014), which explains the harms caused by the current hospital pricing system.

Fuse Brown’s new article begins with a clear and succinct discussion of the market failures that cause high hospital prices. Most importantly, she explains how the growing concentration of hospital markets has reduced competition, removing a necessary price constraint. The article also discusses the principal-agent problems that plague health care, information asymmetries that leave the patient-consumer unable to make informed purchasing choices, and moral hazard created by reliance on third-party insurance to finance health care. Fuse Brown then explains the externalities that a dysfunctional hospital pricing system imposes on the uninsured and underinsured, such as harsh debt collection practices and personal bankruptcy.

Part II then systematically evaluates the policy solutions for disciplining hospital pricing, assessing the extent to which each one addresses the various market failures identified in Part I. Specifically, Fuse Brown evaluates the merits of market solutions, antitrust enforcement, payment and delivery reforms, consumer protections, and direct rate regulation. This discussion is what sets Fuse Brown’s article apart from other scholarship on excessive health care prices. Whereas other scholars have considered only one or two policy approaches in isolation, Fuse Brown allows us to compare their relative strengths and shortcomings side-by-side. In presenting a comprehensive, side-by-side analysis of the different policies, Fuse Brown allows the reader to see the big story—that rate regulation is the only policy prescription capable of addressing the growing problem of highly concentrated markets, and that rate regulation must be paired with payment and delivery reforms (e.g., bundled payments, shared savings for accountable care organizations) that address the principal-agent problems driving overutilization.

Fuse Brown’s discussion of the shortcomings of market solutions and antitrust enforcement is particularly informative. The article explains that the market solutions popular among policymakers—pricing transparency, consumer-directed health care, reference pricing, and tiered and narrow networks—will not work in concentrated markets where there is little choice or competition among providers. In these markets, patients simply cannot shop around or substitute lower-cost or higher-value providers, even if given pricing information or financial incentives to be more cost-conscious consumers. Unfortunately, society’s weapon for addressing market concentration—antitrust enforcement—is an imperfect solution. Building on the work of Tim Greaney, Fuse Brown explains that antitrust laws tolerate extant monopolies, in particular, providers that have lawfully gained their existing market power such as “must-have” hospitals providing unique services, or as the sole hospital in geographic areas that cannot support multiple hospitals. Consequently, antitrust enforcement cannot reach many, perhaps most, of the already highly concentrated provider markets. Moreover, the antitrust agencies have been hesitant to block the current trend of provider consolidation given the potential benefits of integration (e.g., better care coordination, improved quality).

The article also provides an overview of the different models of direct rate regulation – all-payer rate setting, caps on negotiated rates, and single-payer. That discussion briefly notes the challenges of rate regulation generally, including its inherent complexity, the risk of agency capture, and bureaucratic inefficiencies. While Fuse Brown’s article does not argue for a particular form of direct rate regulation or suggest how to overcome these challenges, I anticipate that her future scholarship will do exactly that. I look forward to hearing her specific policy recommendations.

Cite as: Jessica Lind Mantel, The Case for Rate Regulation of Hospital Prices, JOTWELL (September 2, 2015) (reviewing Erin C. Fuse Brown, Resurrecting Healthcare Rate Regulation, 67 Hastings L. J. (forthcoming, 2015), available at SSRN), http://health.jotwell.com/the-case-for-rate-regulation-of-hospital-prices/.
 
 

On Health Status, Choice, and Immutability

Jessica A. Clarke, Against Immutability, 125 Yale L. J. (forthcoming, 2015), available at SSRN.

Jessica Clarke’s insightful forthcoming Yale Law Journal article, Against Immutability will be of particular interest to those of us writing and thinking about disability, obesity, equal protection, and discrimination. I found it especially helpful for ongoing work on health status discrimination—or, healthism—that Jessica Roberts and I are conducting. Professor Clarke’s thoughts are especially timely in light of the Supreme Court’s landmark decision in Obergefell v. Hodges. Although Justice Kennedy did not rely on immutability explicitly in recognizing the constitutional right to same-sex marriage, that reasoning implicitly underlies the Court’s reasoning.

Historically, discrimination law has drawn distinctions between “immutable” and “mutable” traits, recognizing the constitutional guarantee of equal protection for the “immutable” (e.g., race, gender, ethnicity, national origin) but not the “mutable”. The rationale is that individuals should not be disadvantaged on the basis of traits that they are powerless to change, or—put another way—traits that are not the individual’s choice or fault (the Court has referred to these as “accidents of birth,” see Frontiero v. Richardson, 411 U.S. 677, 686 (1973)). On the other hand, if the trait or characteristic is something within individuals’ control, it seems fair to treat them differently on that basis. In that way, the law can even serve to appropriately incentivize individuals to alter their “bad” conduct or choices and thereby gain the privileges enjoyed by others making the “right” choices.

As Clarke demonstrates, and many courts and commentators, are finding, this is a very difficult line to draw.

First, it is not always clear what conduct or traits are truly “voluntary.” Although it may be tempting to think of obesity as the result of poor self-control, overeating, and lack of exercise, in some cases it may in fact be the product of a physiological condition or body chemistry that the individual cannot control. Even more nettlesome, individuals often are limited in their choices about diet and exercise by socioeconomic conditions, including education, income, and access to healthy foods and safe recreational options—what the public health literature refers to as “social determinants of health.”

To be fair, the courts have long recognized that immutability does not encompass all anti-discrimination law. For example, the Constitution prohibits discrimination based on religious beliefs, even though religion is a trait that can be changed and may be the product of voluntary choice. The rationale for extending equal protection to that realm is that religion in such a core trait or characteristic that “it would be abhorrent for the government to penalize a person for refusing to change” (Clarke, quoting Watkins v. U.S. Army, 875 F.2d 699, 703 (9th Cir. 1989) (Norris, J., concurring)). Relying on this “new immutability” rationale, advocates have argued for constitutional equal protection for sexual orientation, and statutory protection from employment discrimination for various “mutable” traits, including pregnancy, marital status, union affiliation, and military service.

The new immutability rationale operates from the premise that some traits are so fundamental to personhood that they are not proper bases for differential treatment. So framed, however, the analysis turns immutability on its head, providing legal protection precisely because the individual has made certain choices about her identity, rather than because she is powerless to do so. Additionally, new immutability creates significant line-drawing problems, with the legal protection deriving from moral judgments about which traits the court deems fundamental or personhood-defining at any given time. For example, one person may consider sexual orientation central to her personhood while another may consider religious beliefs that reject homosexuality core to his. Moreover, by deeming certain traits, even if chosen, as “immutable” while excluding others, the analysis reinforces stigma and stereotypes of the excluded traits.

Those problems led Clarke to reject reliance on the new immutability rationale to extend legal protection for new forms of unfair differential treatment. Instead, she advocates incremental expansion of targeted antidiscrimination protection through legislative, judicial, and private industry protections for various forms of systemic bias. Clarke’s focus on systemic forms of discrimination better targets the legal response to underlying stereotypes and stigma as well as social and institutional causes of unfair unequal treatment, just as our healthism project aims to do. Moreover, her approach allows the possibility of legal protection for conditions such as obesity, pregnancy, alcoholism, AIDS, cancer resulting from tobacco use, criminal records, and other conditions that individuals may not consider core to their sense of personhood but nevertheless subject them to systemic bias. In accord, our definition of healthism similarly emphasizes the same sort of structural impediments to equal opportunity, or what Joseph Fishkin has called “bottlenecks.” In sum, Clarke offers a probing, carefully analyzed rejection of a popular conception of discrimination law, which will surely be useful to other health law projects besides my own.

Cite as: Elizabeth Weeks Leonard, On Health Status, Choice, and Immutability, JOTWELL (July 22, 2015) (reviewing Jessica A. Clarke, Against Immutability, 125 Yale L. J. (forthcoming, 2015), available at SSRN. ), http://health.jotwell.com/on-health-status-choice-and-immutability/.
 
 

Putting Employer-Provided Health Care in Context and Thinking about the Future

Brendan S. Maher, Regulating Employment-Based Anything, 99 Minn. L. Rev. (forthcoming 2015), available at SSRN.

Employer-provided health care occupies an uneasy position within health law. On the one hand, it is the primary source of health insurance coverage for non-elderly Americans and provides relatively robust coverage. On the other hand, linking health insurance availability to employment status and subsidizing such purchases through the tax code raises significant fairness concerns. The explanation for the Affordable Care Act’s continued reliance on employer-provided coverage was largely based on political expediency: health care reform had no chance of passing if it looked like the future of employer-provided health care was threatened. We were assured, after all, that if we liked our health plan we could keep our health plan.

Brendan Maher’s article, Regulating Employment-Based Anything, seeks to move our discourse away from merely relying on political expediency arguments to try to articulate the theory behind encouraging socially desirable goods to be provided through the compensation deal and, perhaps even more importantly, to articulate the theory behind employer-based interventions versus other forms of market interventions. While the article is not focused solely on health care, I found it very helpful in thinking through many of the issues involved in attempting to build a system of universal health coverage around an existing employer-based system.

One of the most important contributions the article makes is to encourage all of us who think about employer-provided health care to engage in more thorough analysis of the justifications for such market interventions, rather than simply chalking everything up to “historical accident.” As Professor Maher explains, employee benefit regulatory interventions occur because the government concludes there is a problem with the provision of Good X, and further concludes that regulating the labor deal is an attractive way to fix it. The article presents three possible advantages of regulating the labor deal as compared to other regulatory interventions to deliver Good X: (1) the use of sophisticated parties to aid employees in obtaining Good X, (2) the power of groups in purchasing Good X, and (3) use of the compensation deal as a natural decision point to promote Good X acquisition and planning.

Maher is quick to point out that there is also a case to be made against using the labor deal to provide socially desirable goods. First, he explains that the three advantages above are actually weaker than they appear, and that labor-based interventions may not be as attractive as other forms of market intervention. More subtly, he points out that regulating the labor deal leads to opacity regarding the provision of Good X (Who is paying for it? How much does it cost?). In addition, employment-based interventions may lead to the perception that the delivery of Good X is an employment issue rather than a social issue.

When we apply this framework to the provision of health care through the labor deal, we see that there is at least a plausible case to support such intervention. First, purchasing health insurance is a highly complicated decision, and employers may be more sophisticated than employees in making such decisions. There are also advantages of group insurance purchasing—lower overhead costs and natural risk pooling. Finally, there is a plausible case that tying the health insurance decision to the compensation deal makes sense. Health care is a significant expense for most individuals and encouraging individuals to think through that expense in the context of their compensation deal is arguably a natural decision point.

But as Maher explains, reality is more complicated than the above analysis provides. First, it is not universally true that employers are more sophisticated decision-makers than employees. Large employers may have this expertise, but there is little reason to believe that the same is true for small employers. And importantly, Maher points out that even in the case of large employers, a sophisticated decision-maker only benefits employees where employer-employee interests are aligned. Maher makes an important, and often overlooked, point that there is relatively little reason to believe that employers and employees preferences are similar. In explaining the lack of alignment, Maher notes, “This is not to impugn business decisions as immoral—not at all—but merely to make the uncontroversial point that humanistic warmth toward others is routinely, in commercial settings, deprioritized or set aside.” The second advantage for regulating the labor deal, the advantages of group purchasing, is likely the strongest argument in favor of employer-provided health care. These advantages are well-documented. However, as the article points out, the ACA will dramatically change the individual health insurance market in ways that make the group purchasing advantage less obvious. And finally, while there is a plausible case that health insurance should naturally be considered as part of the compensation deal, there is little compelling about it other than being a major financial purchase, not unlike a housing or car purchase.

In terms of employment-based interventions versus other forms of market intervention, Maher points out that regulating the labor deal to encourage the provision of health care has always been a fragile exercise due to the constant threat by employers to refuse to play. When contemplating employer-based health care regulations, regulators feel constrained by employer threats to cease offering health insurance at all—a particularly serious threat given the pre-ACA health insurance market which, in most states, did not offer a viable alternative to group coverage.

Maher’s article does not offer any prescription for health care reform, nor reform of any other aspect of employer-provided benefits. What it does do is to encourage those of us working in the field to be more disciplined in our thinking about employer-based regulations, rather than simply accepting and analyzing the status quo. As things begin to meaningfully shift in the health insurance arena, it is a good time to step back and consider reasons other than political and historical path dependence for our continued reliance on employer-provided health insurance.

Cite as: Amy Monahan, Putting Employer-Provided Health Care in Context and Thinking about the Future, JOTWELL (May 29, 2015) (reviewing Brendan S. Maher, Regulating Employment-Based Anything, 99 Minn. L. Rev. (forthcoming 2015), available at SSRN), http://health.jotwell.com/putting-employer-provided-health-care-in-context-and-thinking-about-the-future/.