Yearly Archives: 2017
Jun 23, 2017 Amy Monahan
In our era of increasingly divisive politics and fiery rhetoric, particularly around Obamacare and efforts to repeal it, Nicholas Bagley’s article, Federalism and the End of Obamacare, is a rare treat. It is a thoughtful, balanced look at the arguments for the respective roles of federal and state governments should play in the financing and regulation of health care.
Professor Bagley’s article makes three key points that are highly relevant to the current debate about the future of Obamacare: First, only the federal government has the fiscal capacity to fund health care; second, states should be granted significant flexibility in regulating their health care markets, even if that means that they’ll sometimes get it wrong; and third, current reform proposals do not empower states, but rather take power away from the states by deregulating (and defunding) health care.
Professor Bagley makes a strong case for the necessity of federal funding of health care. Providing health care to low-income individuals tends to be countercyclical; the need for such care is greatest when the economy is not doing well. For state governments, which must balance their budgets, this creates significant difficulty in funding health care for the low income because costs are likely to be highest when state revenues are depressed. The federal government is not constrained by balanced budget requirements and therefore can deficit spend in times of need.
Recognizing that the structural fiscal argument may not satisfy those who strongly favor state authority, Professor Bagley considers whether states that want to provide health care to their citizens could simply tax residents in order to pay for such care, even if such needs may be countercyclical. He argues, however, that taxing individuals to pay for such health care is problematic because some of the individuals taxed already receive lower take-home pay because they are offered employer-provided health care coverage. Essentially, a worker who has employer-provided coverage would pay twice: once to cover her own health care costs, and once to cover the costs of fellow state residents who do not receive employer-provided coverage and therefore enjoy higher wages as a result. The obvious answer to this inequity is to either require employers to offer employees coverage, or at least to tax those that do not. States, however, are largely powerless to do so, because the federal Employee Retirement Income Security Act of 1974 (ERISA) broadly preempts state laws that “relate to” employee benefit plans. As a result, only the federal government is able to level the playing field by requiring employers to either offer coverage or pay a tax.
The second significant contribution this article makes is to push back against the notion that states cannot be left to determine the terms of their health care markets because they will make suboptimal choices. For example, Professor Bagley discusses the ACA’s strict rules regarding the premiums that health insurers may charge, noting that the ACA provides that older people may be charged no more than three times what younger people pay for coverage. Without this rating restriction, young people would pay less for coverage, while old people would pay more. It is in this type of normative judgment that he argues states should have more flexibility and input. He acknowledges in this discussion that states might get it wrong. They might make decisions that are harmful to some groups. But, he argues, this is the price we pay for federalism (which we should tolerate unless states’ bad ideas turn on views about the inferiority of minority groups). As he succinctly puts it, “Sometimes federalism means letting the states wave their crazy flags.” Professor Bagley does not, however, argue that the states should simply be given federal funding without limitation. He argues that the federal government can (and should) set broad conditions on the use of the federal funding but, particularly where there are so many unknowns about how best to achieve universal coverage within our existing system, and so many disagreements about what burdens should be born and by whom, there is merit in letting fifty flowers bloom.
After making this case for increased state authority, Professor Bagley turns to examine current proposals to “repeal and replace” the ACA. And it is here that Professor Bagley makes one of his most important contributions because he explains that, while reformers rely heavily on states’ rights rhetoric, current proposals actually strip authority from states. In particular, reform efforts that seek to authorize interstate sale of health insurance prevent a state from regulating the health insurance market for its own residents, because those residents can simply opt out of that regulation by purchasing in another state. The home state no longer controls health insurance markets for its own citizens. Professor Bagley argues that this is an even greater infringement on state authority than federal regulation. It is, he argues, a clear attempt to deregulate health insurance, rather than shift regulatory control back to the states. He makes similar arguments regarding Medicaid block grants, which, under current proposals, would entail shrinking Medicaid to a degree that would prevent states from exerting much meaningful control of the program.
Professor Bagley’s article deserves attention and praise for many reasons. First of all, it is legal scholarship that is directly relevant to one of the major policy debates currently underway in our country, and it is written in a format, length, and style that can actually be read and digested by all stakeholders. But I also think it is powerful precisely because it is legal in orientation and not political. Professor Bagley’s arguments are likely to cause both sides of the political spectrum to bristle. The article may cause Democrats to rethink their assumptions that tight federal regulation of all aspects of health care markets is the only way to accomplish health care reform. And it may cause Republicans to rethink their arguments that the ACA must be dismantled in order to return power to the states.
May 25, 2017 Efthimios Parasidis
The National Childhood Vaccine Injury Act of 1986 established the Vaccine Injury Compensation Program (“VICP”) as a replacement regime for vaccine-related injuries. The VICP is funded by a seventy-five cent tax on each vaccine dose. Individuals alleging vaccine-related injuries file a petition, which is adjudicated by a special master of the U.S. Court of Federal Claims. Petitioners may seek damages for, inter alia, health care and rehabilitation costs (past and anticipated), though damages for pain and suffering or death are capped at $250,000. The law provides broad legal immunities for vaccine manufacturers, including preemption of tort claims for design or warning defects. In 2011, the U.S. Supreme Court interpreted the preemption provision to include design defects where the vaccine manufacturer failed to incorporate a safer alternative design.
The VICP maintains a Vaccine Injury Table that lists compensable injuries—these are deemed “on-table” injuries, and causation is presumed. All other injuries are deemed “off-table” injuries, and petitioners have the burden of proving causation. This distinction is significant; between 1999 and 2014, six vaccines were added to the table, and none had an on-table injury. During that same time period, the percent of petitions alleging off-table injuries increased from 25% to 98%. Importantly, the statute does not mandate that the data needed to meet the causation bar be collected by manufacturers or disclosed to the public; moreover, FDA regulations have not filled this legal gap. To the contrary, as officials from the FDA and CDC explain, “no active effort is made to search for, identify and collect information [on vaccine adverse events], but rather information is passively received from those who choose to voluntarily report.” Given the challenges in demonstrating causation and the lack of data to analyze causation, the net result is a large decrease in awarded claims and a large increase in uncompensated harms.
There can be no question that vaccines are a public health triumph. At the same time, however, with statistical certainty a small number of vaccinees will suffer catastrophic injuries or death. As health policy expert Michelle Mello has argued, vaccinations involve a high stakes gamble where the overwhelming majority will benefit but no one knows (or can predict with reliable certainty) who will suffer harm. Over the past three decades the VICP has adjudicated over 14,000 petitions, and thus there is ample data from which to evaluate the VICP. Herein steps Nora Freeman Engstrom. Her article, A Dose of Reality for Specialized Courts: Lessons from the VICP, is an elegant and comprehensive investigation of the VICP, and her findings highlight several troubling trends.
As Engstrom details, “[t]he picture is bleak. The VICP has simply failed to offer compensation as consistently, as quickly, as easily, or as simply as it proponents had predicted.” (P. 1675.) For example, the average vaccine-injury petition takes longer to adjudicate that the average tort claim alleging medical malpractice. The Government Accountability Office has underscored the fact that the expectations of the VICP “have often not been met,” while patient advocacy groups have lambasted the VICP as “a betrayal of the promise that was made to parents about how the compensation program would be implemented.” (Pp. 1675-76.) Even the VICP’s Chief Special Master, who served in that role for over two decades, publicly stated that “litigating causation cases has proven the antithesis of Congress’s desire for the Program.” (P. 1676.) Moreover, due to the structure of the law (particularly, the preemption provisions), in cases where an injury resulted because a vaccine manufacturer failed to use a safer alternative design, the manufacturer “is not in any way affected if a decision is made to compensate the petitioner.” (P. 1671.) Compensation awards are derived entirely from the Vaccine Injury Trust Fund (not from the vaccine manufacturer), and special masters do not have the legal authority to require a new vaccine design.
The adversarial nature of the petitions is particularly troubling, and not just for questions of causation. This is despite the fact that Congress directed that the VICP “provide for a less-adversarial, expeditious, and informal proceeding.” (P. 1711, n.376.) As Engstrom details, government attorneys dig into the minutia of claims; in one case the government argued that $150 was too much to spend per year on wheelchair maintenance, while in another the government argued that a 14-year old girl with vaccine-related “profound mental retardation and severe spastic quadriplegia” was not entitled to $40 high-top tennis shoes. (P. 1692.) In a case where a child was crippled by the Hepatitis B vaccine, the government haggled over whether a competent nurse could be obtained for $50 or $60 per hour, and tried to limit the hours that the child could be assisted by a nurse to five hours per day (the family indicated they needed the nurse for eight hours). Meanwhile, the vaccine injury trust fund has a “bulging surplus” of over $3.6 billion, and in many years the interest on the trust fund is sufficient to pay out all awarded claims.
Replacement regimes like the VICP, Engstrom explains, “are the go-to weapon in serious tort reformers’ collective arsenals.” (Pp. 1640-41.) Such regimes—which jettison tort law in favor of some version of a “no-fault” compensation mechanism—have been proposed for dozens of scenarios, including injuries resulting from medical malpractice, motor vehicles, firearms, lead paint, and nuclear accidents. By closely examining the VICP, Engstrom sounds the alarm bells for specialized courts, particularly specialized health courts. As she highlights, “before the traditional tort system is abandoned . . . there must be substantial grounds to ensure confidence in an alternative institutional mechanism that would serve as its replacement.” (P. 1717.) Engstrom’s arguments are compelling, and must be taken seriously.
Apr 27, 2017 David Orentlicher
While the Affordable Care Act has done much to improve access to care—20 million more Americans carry health care insurance as a result of ACA—the Act’s ability to contain health care spending is less clear. Accordingly, efforts to identify effective policies for limiting health care costs are critical.
Unfortunately, the experience with many cost-containment strategies has been disappointing. What seems promising in theory may not pan out in practice. That makes a recent review by Nelson Sabatini and colleagues especially worth reading. They highlight a model in Maryland that has shown very encouraging results so far.
As observers have long noted, fee-for-service reimbursement leads physicians and hospitals to provide excessive care. When insurers base pay on the amount of care provided, lots of care will be provided, and much of it will be unnecessary. Public and private insurers have implemented quality-based measures, bundled payments, and other strategies to counter the incentives from fee-for-service reimbursement. As Sabatini et al. discuss, Maryland draws on an important approach common in other countries—global budget caps.
Three years ago, Maryland modified its already innovative policy for payment of hospital bills. For a long time, Maryland had set hospital reimbursement rates that were the same for all payers. Private insurers, Medicare, and Medicaid paid for services at the same rates. While much good came from this approach, hospitals still pushed spending higher by increasing the quantity of services provided. In response, Maryland instituted more quality-based measures for payment. More importantly, Maryland is in the midst of a five-year trial of caps on the total reimbursement each year for the state’s hospitals. With a global budget cap, hospitals are forced to become more efficient. If they run up the tab, they’ll hit or exceed their budget cap, and will have to eat any losses.
As Sabatini et al. report, hospitals have responded to their new limits in desirable ways. For example, they have worked to prevent the need for hospitalization by expanding their chronic care management programs for diabetes, heart disease, lung disease, and other conditions. They also have provided more support for patients after discharge to smooth the transition to less acute health care facilities or to home and reduce the need to return to the hospital for additional care. Though readmission rates still are higher in Maryland than the national average, the gap has narrowed considerably, to less than half of its previous size.
With the improvements in quality of care have come reductions in costs of care. Maryland’s global budget policy caps the growth in hospital revenues to no more than the long-term growth rate of the state’s economy, which is 3.58 % per year. Hospitals have come in comfortably below their target each of the three years during which the global budget caps have been in effect, with revenue growing only 0.35 % in 2016, 2.31 % in 2015, and 1.47 % in 2014. (The data for 2016 are partial-year to date, through September 2016.) Thus, while Maryland hoped to save $330 million in Medicare hospital costs over five years, it has already saved Medicare $429 million in spending for inpatient care.
Of course, reducing inpatient spending need not lead to a reduction in overall spending. Care that used to be provided in a hospital might shift to an outpatient setting. Hence, as Sabatini et al. observe, Maryland monitors overall health care spending to make sure its budget caps are truly effective. To some extent, savings in hospital-based care have been offset by increased spending on home health care, the chronic care management that the hospitals provide, and care at rehabilitation facilities. This increased spending for Medicare patients has totaled $110 million, for a net reduction in Medicare hospital spending of $319 million. To fully judge the effectiveness of Maryland’s budget caps, we would need to see data for spending on patients insured privately or by Medicaid.
Global budget caps have much to offer. They bring more predictability to budget planning, they make it harder for providers to evade efforts to contain spending, and they give providers the freedom to decide how they will lower their costs.
There also is good reason to think that budget caps can be implemented without compromising care. Not only is that the experience in Maryland to date, it also is the experience in the European countries that employ budget caps and are able to deliver good quality care at much lower cost than in the United States. It seems that physicians, hospitals and other providers can adjust their manner of practice to their fiscal environment and preserve quality of care even as they reduce the quantity of care delivered.
Since policies that promise much in theory need not pan out in practice, it is critical for policymakers to test their ideas on a trial basis and move forward only after they have been able to demonstrate effectiveness. As Sabatini et al. indicate in their important analysis, the evidence from Maryland’s use of hospital budget caps supports more trials with global budget caps in the U.S. health care system. Indeed, Maryland is planning to expand global budgeting beyond the hospital setting.
Cite as: David Orentlicher,
Cost Containment—Global Budget Caps, JOTWELL
(April 27, 2017) (reviewing Nelson Sabatini, Joseph Antos, Howard Haft & Donna Kinzer,
Maryland’s All-Payer Model—Achievements, Challenges, And Next Steps, Health Affairs Blog (Jan. 31, 2017)),
https://health.jotwell.com/cost-containment-global-budget-caps/.
Mar 28, 2017 Nicolas Terry
The intersection of healthcare information goods, resulting products, and the legal system is frequently reduced to unhelpful binary generalizations such as “regulation (particularly drug safety and data laws) impedes innovation.” Eisenberg and Price helpfully consign such caricatures to the past, substituting far more nuanced (and a lot more interesting) reflections on healthcare and innovation.
Their primary contribution is to describe a different idea of innovation; one based on the demand side rather than the supply side. This is to be contrasted with the “Innovation Law Beyond Intellectual Property (IP)” literature which has examined non-IP mechanisms such as grants, prizes, or insurance to incentivize innovation without utilizing exclusionary patent rights. Those approaches, while they may have been shaped on the demand side, are executed on the supply side (such as a government subsidy paid to a drug company to encourage production of an unprofitable drug). In contrast, Eisenberg and Price are interested in true demand-side innovation based on the data accessible to payers; providers or insurers and, optimally, vertically integrated stakeholders such as large HMOs. These payers, the authors argue, could leverage the enormous clinical and prescribing data sets they can access “to develop new information about drug toxicity, comparative effectiveness, precision medicine, and to perform other forms of innovation.” If successful, “[t]he incentives of payers to cut costs… could be a corrective counterweight to the incentives of product sellers to maximize their own patent-protected profits.”
This counterbalancing idea is a smart one given the poorly functioning marketplace that is healthcare’s fate. Currently, supply-side pharmaceutical companies can transfer their information goods into IP-protected profit centers. Thereafter, even major payers such as private insurance companies have difficulty negotiating down drug prices while federal law embarrassingly prohibits price negotiation for Medicare Part D drugs. Essentially, Eisenberg and Price are encouraging payers to undertake roles such as “new technology assessment” (NTA) that in other healthcare systems are undertaken by regulatory or independent agencies. For example, the UK’s National Institute for Health and Care Excellence and the German Institute for Quality and Efficiency in Health Care evaluate new drugs on the basis of their comparative or cost effectiveness. Their findings determine whether such drugs are included in the national formulary (UK) or subject to reference pricing (Germany). There are few regulatory analogs in the U.S. and the closest one, the Patient-Centered Outcomes Research Institute (PCORI), is expressly prohibited from using the classic NTA outcome measure, the quality-adjusted life year.
The authors recognize that the opportunity for demand-side innovation faces practical barriers. The data required is often hopelessly fragmented; payers may have the opportunity to innovate but, the vertically integrated aside, few will have the incentive; and (because no paper on innovation is complete without a criticism of dear HIPAA) they argue that data laws may hinder access to or use of clinical data. Equally, the examples the authors give of government programs that could help demand-side innovation (Meaningful Use, the FDA Sentinel System, and PCORI) are hardly shining examples of regulatory home runs. However, maybe some of the provisions of the recently enacted 21st Century Cures Act will turn those around. That legislation also raises the interesting question whether those on the supply side increasingly will be interested in demand-side data given the increasing role of patient experience and clinical data in the drug approval process.
The decline in the number of breakthrough drugs suggests supply-side innovation is slowing, and the authors also note the pharmaceutical industry’s ambivalence to a successful precision medicine initiative. Equally, we may not yet have reached the inflection point for data-driven analysis on the demand side, and we are a long way from realizing the benefits of patient access to useful information built on such data. However, although the balance of innovation power remains on the supply side, Eisenberg and Price provocatively suggest that should change. If the authors’ predictions play out it will be interesting to see whether the result will be demand-led safer and cheaper products, or whether the supply side will demand increased IP and other rewards to reassert the supply-side imbalance.
Mar 1, 2017 Zack Buck
- David Orentlicher, Controlling Health Care Spending: More Patient “Skin in the Game?", 13 Indiana Health L. Rev. 348 (2016), available at SSRN.
- Barbara A. Noah, The (Ir)rationality of (Un)informed Consent, 34 Quinnipiac L. Rev. 691 (2016), available at SSRN.
From a health law and policy perspective, the recent presidential election results have undoubtedly ushered in a new period of tremendous uncertainty. With President-elect Trump ascending to the office this year, it is likely that the health care delivery and financing system—to say nothing of the numerous health law syllabi in health care law courses across the country—will look radically different in the years to come. As I write, policymakers and prognosticators are debating which—and how many—pieces of the Affordable Care Act will survive. Nevertheless, no matter the makeup of American health care system in the future, many challenges the system currently faces will endure—and likely intensify. Chief among those concerns revolves around the strangling cost of American health care.
Examining the issue in two separate manifestations and focusing on patient decision-making in two separate contexts, David Orentlicher and Barbara Noah provide practical and succinct suggestions in well-written, recently-published essays, Controlling Health Care Spending: More Patient “Skin in the Game?” and The (Ir)rationality of (Un)informed Consent, respectively. Both tackle problems that contribute to the nagging challenge of cost—Orentlicher largely with an eye on influencing patient decision-making through coverage incentives and penalties, and Noah with an eye on improving patient clinical decision-making at the end-of-life. As overutilization and cost are a focus of much of my scholarship, I was delighted to discover both pieces and to engage with their insights as we overlook a new period of yawning uncertainty in health law and policy.
First, in his insightful essay, Professor David Orentlicher paints a dark picture of American health care cost and quality before diving into a few suggested policy changes. Orentlicher focuses on two main solutions: (1) recalibrating patient cost-sharing, and (2) using employer wellness programs to address inefficiencies and incentives. On improving patient cost-sharing, Orentlicher rightly observes the main challenge: if the insurance’s cost-sharing amount is too high, patients are deterred from seeking care (especially those of lower economic means), and if the cost-sharing is too low, patients will seek too much health care and waste resources.
After identifying this challenge, Professor Orentlicher presents targeted solutions. First, he notes that aggressive cost-sharing must be reserved for lower-value care; this way, patients are appropriately steered to the doctor when it is most efficient for them to visit. Second, Orentlicher notes the importance of reference pricing to standardize the cost of a given procedure or product, pushing patients to lower-cost providers. And third, he highlights “scaled” cost-sharing, in which he suggests that deductibles and other cost-sharing mechanisms be scaled to one’s familial income, and not a raw dollar amount. This would address the problem of those without disposable income avoiding the doctor too much, and those with more disposable income visiting the doctor too often.
Finally, Professor Orentlicher highlights the upside of employer wellness programs in cutting the cost of health care. Within this section, after describing some of the limitations and threats facing wellness programs, he encourages program designers to think about three main features for incentives: first, programs should reward short-term progress; second, programs should structure incentives indefinitely; and finally, programs must carefully consider the benefits and downsides of a system with either built-in rewards or penalties (Professor Orentlicher seems to suggest that rewards may work better).
Second, in her artfully titled essay, Professor Barbara Noah tackles the inadequacies of informed consent. She starts by highlighting the size and scope of the problems raised by dying in America—most notably that we overutilize certain care and that we underutilize other types of care—and forecasts that it is likely to worsen due to shifts in population. Referencing everyone’s different conception of, and approaches to, end-of-life decision-making, Professor Noah notes that a substantial amount of end-of-life care provides no measurable benefit. She laments the “default model” that pushes doctors to continue to provide care unless the patient undertakes a burdensome effort to opt out of often needless treatment.
Professor Noah does a masterful job of describing the difficulty facing patients at the end-of-life. After highlighting a number of other complicating factors, including cultural challenges (both of physicians’ concerns about liability and of society’s conception of death) and payment incentives, Noah attacks as impossible the idea of a “perfect” decision at the end-of-life in the face of a number of unconquerable obstacles. To explain this complication, Professor Noah effectively relies on recent work by philosophers to observe that clinical decision-making at the end-of-life is characterized by “necessary fallibility,” and is defined by unknowable and unpredictable variables. Sneakily, “unknown unknowns” may impact the real likelihood of survival, but cannot be fully understood during the clinical decision-making process. As a result, Noah argues, there is no “best” approach or treatment for a patient who may be facing the end of his or her life. This uncertainty swamps the abilities of both the provider and patient to come to a rational “best” clinical decision.
Noah finishes by pointing out a number of pressures that impact the decision-making process—from optimism bias, to a false belief that patients can achieve a perfect and rational end-of-life decision, to an inability to convey the hard edges of what can be known. She notes that we must continue to strive for informed consent, but must recognize that the doctrine is limited and imperfect. In the end, it comes down to patients being able to face the situation with as much knowledge as possible while understanding this imperfection of the decision-making process, and, above all perhaps, the fragility of life.
Both Orentlicher and Noah provide clear and focused works geared toward improving the delivery of American health care with an eye toward building a more just and efficient system. Their pieces remind all Americans—during this time of remarkable uncertainty—that some of the same old challenges will remain in need of adequate legal and policy-based solutions.
David Orentlicher, Controlling Health Care Spending: More Patient “Skin in the Game?", 13 Indiana Health L. Rev. 348 (2016); Barbara A. Noah, The (Ir)rationality of (Un)informed Consent, 34 Quinnipiac L. Rev. 691 (2016).
