U.S. armed services are experimenting with ways to make faster — and smarter — decisions, and business should take note.
While the number of states contributing data was up from 18 to 49, challenges hindered CMS’ ability to effectively manage the program.
By Jessica Davis January 09, 2018 02:03 PM
A lack of oversight of the national repository of Medicaid data caused an estimated $36.7 billion in payment errors in 2017, according to a new Government Accountability Office report. That’s up from an estimated $14.4 billion in improper payments in Fiscal Year 2013.
Transformed Medicaid Statistical Information System (T-MSIS) is CMS’ core effort to improve Medicaid data by increasing the scope of data and quality of state-reported data.
About 49 states began reporting that data to the national repository in November, up from just 18 states the year prior. The data help federal administrators to identify potential fraud and improve the efficiency of the program, but data aren’t sufficient enough for an effective oversight of the program.
“CMS has taken an important step toward developing a reliable national repository for Medicaid data,” the GAO report authors wrote. “However, data challenges have hindered states’ and CMS’s use of the T-MSIS data for oversight.”
For example, the reported data was incomplete for all of the selected six states reporting data in August 2017 as the states said that “certain unreported elements were contingent on federal or state actions and others weren’t applicable to the state’s Medicaid program.”
Further, states failed to mention in documentation whether those elements would be reported in the future, or when they would report complete data.
Six of eight selected states actually expressed concerns about how T-MSIS data could be compared across states. While all states reported interest in information sharing across states, CMS hasn’t compiled or shared information about states’ data limitation – an act that would help states improve accuracy when comparing data between states.
Although CMS has taken those first steps to using T-MSIS data, it doesn’t yet have a plan or even a timeframe to use this data for oversight.
“As a result, important CMS goals for T-MSIS, such as reducing states’ reporting burden and enhancing program integrity activities, are not being fully realized,” the report authors wrote.
GAO officials recommend CMS improve the completeness and comparability of T-MSIS data to accelerate the program, in addition to articulating a specific oversight plan.
The U.S. Department of Health and Human Services agreed with those recommendations and said it would continue to work on obtaining complete T-MSIS data from states. Further, the agency said it will take steps to address data sharing limitations within states, along with helping states collaborate.
“Strong Medicaid data can help the federal government and the states move toward better health outcomes and improve program integrity, performance, and financial management,” HHS officials told GAO, according to the report.
For any medical procedure, from a minor checkup to major surgery, there can be significant uncertainty about a key component: the price.
But what if there was greater transparency about the exact out-of-pocket price we would pay for a given procedure and how much that price varies across hospitals or providers? Would that change the providers we choose?
The answer is of interest to policymakers, whose goal is to encourage consumers to be more price-sensitive, saving money for themselves and reducing spending in the system overall.
“There’s a decades-long debate in healthcare about whether you can actually get people to shop on price,” says Elena Prager, an assistant professor of strategy at Kellogg. “We tend to view medical services as a different kind of product where price may not matter much.”
In a new study, Prager investigates whether consumers respond to simplified price information in choosing healthcare providers.
She finds that, indeed, price shopping in healthcare is possible—but it involves presenting consumers with price information in a much more simplified way than insurers typically do.
Do Healthcare Consumers Price Shop?
Think about your own healthcare bills for a moment. Do the words “simple” or “clear” immediately come to mind? Likely not.
“Even when people get an explanation of benefits from insurers, pricing can still be pretty opaque,” Prager says.
This is a problem because policymakers and insurers are trying to motivate consumers to understand the cost–benefit trade-offs of their healthcare decisions, as well as the value they are getting for the money spent—both out of their own pockets and from the balance sheets of insurers. But in most cases people lack the information to make informed decisions.
“On one hand, we’re asking for people to pay for more and more of their care” due to, for example, increasing deductibles and the rising cost of healthcare, Prager says. “But on the other, we’re not giving them the right tools to make good decisions about those large monetary amounts. So it’s important to understand whether it’s even possible to design effective healthcare price-information systems.”
Much of the earlier research on how to encourage price shopping in healthcare often focused on high-deductible health insurance plans.
“Even for care that serious, people are willing to trade off hospital prestige or distance to their house in order to save money.”
The logic was simple: if consumers have to cover a larger amount of their care—based on deductibles that could run well into the thousands of dollars before insurance coverage kicks in—they would be more price-sensitive when choosing services or providers.
But findings showed people had little sensitivity to price even when using these high-deductible plans.
“That’s because high-deductible insurance only solves one piece of the price-sensitivity problem by giving people more skin in the game,” Prager says. “These plans still don’t give enrollees sufficient price information. So people still have to figure out what the actual price they pay will be.”
That may mean finding and adding up prices from multiple medical areas and providers, even when considering only a single procedure. There may be different bills from the hospital and from the doctors working at the hospital, and from anesthesiology, surgery, the hospital pharmacy, and more. The information is often difficult to find, if not impossible.
The Simpler, the Better
Prager’s research used unusually transparent data from an insurance system in Massachusetts.
The study examined private health insurance claims from multiple insurers from 2009 to 2012. But importantly for the research, all these insurers gave consumers very clear information on cost.
Additionally, in many of the health plans, these insurers group hospitals into “tiers” based on price. A hospital’s tier determines consumers’ out-of-pocket payment for a given procedure at that hospital.
“For any procedure, such as a knee replacement,” Prager said, “people on these plans could look at insurer-provided documentation and on a single page see the price menu for all hospitals in the state, by tier—first, second, or third—and exactly what their out-of-pocket price will be. And it’s a set dollar amount, not 10 percent or 20 percent or the total cost. Just $300 or $700 or whatever, end of story.”
In some health plans, the difference in cost from one tier to another was substantial; for others, there was little to no price differential; and others simply had the same copay for all hospitals without using tiers. This allowed Prager to compare how consumers responded to the option to price shop in a very transparent system.
The data studied included the insurance plans of over 200,000 enrollees and dependents, the out-of-pocket prices they saw while making treatment decisions, and how much they and the insurers paid for procedures. The researchers focused on inpatient services—such as major surgery or delivering a baby.
The Power of Presentation
Prager found that people in the study did indeed opt for lower-priced medical services when presented with clear, simple price information.
For example, she modeled how the same patient would behave when enrolled in different types of plans—those with large cost differences between hospitals and those with none. She found that total spending per hospital stay fell by 1.3 percent when consumers were presented with cost differences.
Prager predicts that providers in the lowest-priced tier would gain about 53 percent in patient volume over three years due to price shopping.
“People weren’t sure price shopping in healthcare was even possible,” she says. “These findings show that it is.”
Indeed, people in the study were making price-based decisions about inpatient treatment, the type of higher-stakes interventions that required overnight stays.
“Even for care that serious,” Prager says, “people are willing to trade off hospital prestige or distance to their house in order to save money. So we might expect to see even greater price-shopping behavior for less serious care.”
Still, it takes an extremely simple approach to presenting price information to help people make healthcare decisions. “We haven’t been good at providing that in the US system,” Prager says.
Greater availability of simple healthcare price information would be good news for consumers and insurers alike. Patients save out-of-pocket costs by choosing lower-priced services, and insurers can save even more.
“Hospitals can differ by thousands of dollars for a given procedure,” Prager says, “and insurer savings can be many multiples of what consumers save when choosing a lower-priced option. Though not a guarantee, that might lower insurance premiums in the long run.”
What About Providers?
What are the implications of Prager’s findings for hospitals, physicians, and other providers?
“The level of enthusiasm providers have about these results will differ by where they are currently in the price distribution,” Prager says. She breaks down providers into three broad categories similar to the tiers insurers use.
Low-priced providers should be “thrilled” about price shopping, she suggests, because they can keep prices where they are and enjoy more volume because price-sensitive consumers will pick them when presented with clear price information.
Medium-priced providers are more likely to lose patient volume to lower-priced competitors because consumers will choose price over reputation or other factors such as proximity to home. “That will siphon off some volume from providers priced in the middle,” Prager says, “but they can try to negotiate lower rates with insurers in subsequent years to get into a lower tier.”
High-priced, highly desirable providers “won’t really care about price shopping,” Prager says, “because patients are willing to pay whatever it takes to get their care there.” She points to the Harvard-affiliated academic medical centers in the study as examples. These providers have such strong reputations that fewer consumers are willing to switch away from them, even if the price difference is stark. This means less savings for consumers and, especially, insurers.
The good news for patients and insurers is that the number of tiered insurance networks that have easier access to simple price information has grown in the last decade or so.
Over 10 percent of people enrolled in the Affordable Care Act exchange plans are in plans that are structured this way, Prager says, and a growing number of large employer-sponsored plans are, too. At the same time, many other insurers remain overly reliant on complex pricing tools, typically online, through which enrollees can search for providers and prices by procedure and zip code—but prices are still presented in a complicated way.
“Those complex tools are the darling of the industry,” Prager says, “but they don’t always work as well as hoped because they leave a lot of uncertainty about pricing. Instead, providing a simple menu of tiered-network options and prices has serious advantages that should be even more highlighted going forward.”
This chart collection takes a look at how spending on healthcare in the United States compares to other OECD countries that are similarly large and wealthy (based on GDP and GDP per capita). The analysis looks at 2015 health data from the OECD Health Statistics database. These charts are based on data from the OECD, allowing for international comparisons; however, some values from OECD are reported as provisional or estimated and may not exactly match U.S. data reported in the National Health Expenditure Accounts.
As would be expected, wealthy countries like the U.S., tend to spend more per person on health care and related expenses than lower income countries. However, even as a high income country, the U.S. spends more per person on health than comparable countries. Health spending per person in the U.S. was $9,451 in 2015 – 22% higher than Luxembourg, the next highest per capita spender.
The United States Health System Falls Short
The United States spends far more on health care than other high-income countries, with spending levels that rose continuously over the past three decades (Exhibit 1). Yet the U.S. population has poorer health than other countries. 1 Life expectancy, after improving for several decades, worsened in recent years for some populations, aggravated by the opioid crisis. 2 In addition, as the baby boom population ages, more people in the U.S.—and all over the world—are living with age-related disabilities and chronic disease, placing pressure on health care systems to respond.
Timely and accessible health care could mitigate many of these challenges, but the U.S. health care system falls short, failing to deliver indicated services reliably to all who could benefit. 3 In particular, poor access to primary care has contributed to inadequate prevention and management of chronic diseases, delayed diagnoses, incomplete adherence to treatments, wasteful overuse of drugs and technologies, and coordination and safety problems.
This report uses recent data to compare health care system performance in the U.S. with that of 10 other high-income countries and considers the different approaches to health care organization and delivery that can contribute to top performance. We based our analysis on 72 indicators that measure performance in five domains important to policymakers, providers, patients, and the public: Care Process, Access, Administrative Efficiency, Equity, and Health Care Outcomes.
Our data come from a variety of sources. One is comparative survey research. Since 1998, The Commonwealth Fund, in collaboration with international partners, has supported surveys of patients and primary care physicians in advanced countries, collecting information for a standardized set of metrics on health system performance. Other comparative data are drawn from the most recent reports of the Organization for Economic Cooperation and Development (OECD), the European Observatory on Health Systems and Policies, and the World Health Organization (WHO).
An epidemic of unnecessary treatment is wasting billions of health care dollars a year. Patients and taxpayers are paying for it.
Unused medical supplies sit in storage at a Partners for World Health facility in Portland, Maine. (Tristan Spinski, special to ProPublica)
This story was co-published with The Washington Post.
Squandered Health Care Dollars
In Maine, there’s a warehouse the size of a middle school gymnasium, stuffed with brand-new medical supplies and gently used medical equipment. Several pallets are piled with boxes of surgical sutures, still in their shrink wrap, each box worth hundreds of dollars. Tubs overflow with diabetes supplies and surgical instruments that may run hundreds of dollars apiece. There are bins of bandages and gauze and saline and ostomy bags and every other medical supply you can imagine. These materials, unexpired, could easily stock any hospital or clinic. But each item has actually been thrown away by a local medical facility.
The cost of health care has been rising for decades, and Americans are paying the price. In a recent Gallup poll, people cited the high cost of care as their No. 1 financial concern. It’s an enormous problem, and trying to solve it all at once brings on panic and paralysis. But after reporting for a year on the ways the medical industry blows through our money, I have one idea: Let’s end the egregious waste that’s draining our health care system.
The National Academy of Medicine has estimated the health care system wastes around $765 billion a year — about a quarter of what we spend. Eliminating all the waste could allow us to insure 150 million Americans, the Academy of Medicine said, and saving half of it could provide groceries for every household in the country for a year. Eliminating the waste would also stop our rising health care costs from eating up our wage increases. My premiums go up 9 percent next year. Same thing happened last year. Odds are your costs are rising, too.
It’s hard to downplay what I found when I began investigating the issue. Hospitals throw out so many valuable supplies that a cottage industry of charities has sprung up to collect this stuff and ship it to the developing world — otherwise, all those goods in that Maine warehouse would be headed for a landfill.
Nobody tracks how much hospitals waste rather than donate, and I couldn’t track down where each item came from. But experts told me when hospitals change vendors for a type of supply, they often toss the old stuff. Or, if they take over a clinic or facility, they get rid of the items that come with it, even if they are unused and unexpired.
The operating room is a major source of wasted spending. One hospital tracked the value of unused items that went to waste during neurosurgery procedures in a single year. The total: $2.9 million — for one type of surgery at just one hospital. In that case, the surgeons hadn’t updated their system of telling the staff which supplies to prep for each operation. They were opening many items they didn’t need, which then had to be thrown away even though they were unused. The hospital updated its approach to make sure they aren’t setting up for operations with excess supplies.
I learned that nursing homes throw away hundreds of millions of dollars’ worth of valuable medication every year. They typically dispense drugs a month at a time for patients and often have them discontinued if the patient dies or transfers. The excess drugs get trashed, incinerated or even flushed down the toilets, contaminating our water supply. The chief executive of a pharmacy that serves nursing homes in Florida told me that his company alone throws away about $2.5 million a year in valuable medication.
In Iowa, the state government funded a program to recover these castoff nursing home meds and donate them to needy patients, for free. This year, they’re on pace to recover and redistribute $6 million in medication. My story led policymakers in Florida and New Hampshire to introduce legislation to try to replicate the Iowa program.
Drugs are a huge source of waste, partly because drug expiration dates don’t mean what we think they mean. The Food and Drug Administration makes pharmaceutical companies show their medication is safe and effective until its expiration date. It doesn’t make them find out how long they actually last.
Studies show it’s common for a drug to be safe after its expiration date. The FDA runs a program that tests and then extends expiration dates on drugs in the federal government’s stockpiles. Those same drugs get thrown away in pharmacies when they “expire,” even though many of them are in short supply. How much of our money does it waste? One midsize hospital in Boston throws away about $200,000 worth of drugs a year that hit their expiration date. If that’s true for other hospitals, the total would be about $800 million a year for hospital pharmacies alone.
Meanwhile, drug companies are making eyedrops two or three times larger than what the eye can even contain. We are paying for the wasted medicine running down our cheeks. I spoke to the former head of research for Alcon Laboratories, a global leader in the eye care industry now owned by Novartis. He told me that in the early 1990s his team created a “microdrop” that eliminated the waste. The microdrops were effective and reduced the burning caused by larger drops. But Alcon’s leaders killed the project because they were worried it could reduce sales.
Vials of cancer drugs are also made too large, which one study said wastes about $1.8 billion a year in the valuable medication. Earlier this year, one drug company switched from a multiuse vial, which could be shared by patients, to a single-use vial that could not be shared, thereby increasing the amount of wasted cancer medication. The change would make the supply chain more reliable worldwide, the company said. But one cancer center calculated that the change would cost each patient an average of $1,000 in waste per infusion. Imagine: You’re fighting cancer and then get billed an extra thousand dollars for medication they toss in the trash. Two U.S. senators responded to my story by introducing legislation to solve the problem of oversized eyedrops and cancer drug vials.
These are not isolated examples or small sums being squandered. Let’s say my reporting identified about $10 billion in wasted spending. That’s a rough estimate because no one is actually tracking how much we’re wasting. What else could we be doing with that money? The Kaiser Family Foundation says it costs an average of $6,690 to pay one person’s insurance premium in 2017. At that rate, the $10 billion saved could insure about 1.5 million people for a year. Tell those people it isn’t important to reduce our wasted health care spending.
The Academy of Medicine did something smart when it reframed our health care overspending as waste. We may be a wasteful country, but we still teach our kids to eat everything on their plates. “Waste not, want not,” is baked into our cultural DNA. It’s a powerful concept because it’s a moral one. It’s wrong to squander the hard-earned dollars Americans are paying into the health care system and then demand they pay more.
We can’t be naive and think it will be easy to fix this problem. Our wasted spending represents revenue and profit for the medical industry. But our health care spending should not be an entitlement program for the medical industrial complex. I put together a prescription for reducing the wasted spending I identified. Our policymakers should stand up to the medical industry and stamp out the waste.
Filed under: Health Care