A Promising Idea to Cut Health-Care Costs Fizzles

A Promising Idea to Cut Health-Care Costs Fizzles

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Plus, a defense of the wealth tax
Thursday, January 9, 2020

Promising Idea to Cut Health-Care Costs Fizzles in Major Study

Just 5% of the U.S. population accounts for 50% of all health spending. So the idea of addressing the medical and social needs of the sickest and most expensive patients among us to keep them from making repeated visits to the hospital holds some obvious appeal as a way to bring down overall health care spending.

The promising concept, known as hot-spotting, was widely touted. Dr. Jeffrey Brenner, a New Jersey physician who helped pioneer the model and popularized it by founding the Camden Coalition of Healthcare Providers in 2002, was profiled in a 2011 New Yorker piece and won a MacArthur Foundation “genius” grant.

“Many hospital and insurance executives have pinned their hopes on this work because it promised to solve a common problem: when patients lives are so complicated by social factors like poverty and addiction that their manageable medical conditions, like diabetes and asthma, lead to expensive, recurring hospital stays,” Dan Gorenstein and Leslie Walker explain at Kaiser Health News.

But a new study published by MIT researchers in the New England Journal of Medicine found the approach to be a disappointing failure in cutting hospital readmissions and total health care spending.

The Associated Press’s Marilynn Marchione reports:

“Researchers thought they had a way to keep hard-to-treat patients from constantly returning to the hospital and racking up big medical bills. Health workers visited homes, went along to doctor appointments, made sure medicines were available and tackled social problems including homelessness, addiction and mental health issues.
“Readmissions seemed to drop. … But a more robust study released Wednesday revealed it was a stunning failure on its main goal: Readmission rates did decline, but by the same amount as for a comparison group of similar patients not in the costly program.”

Why it matters: “The surprising lack of results offers a cautionary tale about how difficult it is to improve patients’ care and reduce costs,” writes New York Times reporter Reed Abelson. The researchers behind the new study say it’s important that we keep looking for answers — and rigorously test new ideas. “Of course it's disappointing to learn that a relatively cheap and short-term intervention wasn't the magic bullet for solving an incredibly complex, costly and important problem,” MIT economist Amy Finkelstein, an author of the new study, told Politico. "But that's how science makes progress."

The safety net may not be strong enough for these patients: “The study’s researchers offered several possible reasons for the program’s lack of success, including a lack of follow-up home visits or doctor’s appointments or insufficient resources,” Abelson says. Marchione notes, for example, that the program was able to meet two of its main goals —making a home visit and a trip to a health provider within a week of leaving the hospital — for just 28% of study participants.

Brenner says that the resources available to help the neediest patients were more limited than the Camden Coalition had estimated, and that the care coordination he pioneered was necessary — but insufficient without a stronger safety net.

“When we started this 10 years ago, the dominant belief was this was a coordination problem. As we got deeper into the work it became clear that even if you did a great job of navigating and coordinating services, there was a fundamental failure of these services to deliver what these patients need,” he told Reuters. And he provided this devastating summation to Kaiser Health News: “The bottom line is, we built a brilliant intervention to navigate people to nowhere.”

Brenner says that housing may play a more important role in breaking the cycle of hospitalizations for these patients. At UnitedHealthcare, where he is now an executive, he is leading an experiment to providing housing to high-cost patients.

Or a different approach might be more effective: The study’s result may indicate that a patient-centered approach might not be the answer to reducing waste, Boston University economist Austin Frakt writes at The New York Times:

“The other approach to fighting wasteful medical spending starts with looking at health care as a system of goods and services: medications and surgical procedures, administrative processes and physical infrastructure. Some of these enhance health and others don’t, while some of it costs more than its benefits warrant. If you can identify wasteful goods and services and deliver effective care at lower prices, you can make the system more efficient for everyone.”

But a systemic approach faces significant challenges that make it hard to implement, at least without harming the quality of care. “Directly and systematically reducing wasteful care is hard because the most successful strategies threaten the revenue of dominant health care providers,” Michael McWilliams, a professor at Harvard Medical School and a general internist with Brigham and Women’s Hospital, told Frakt. “One person’s waste is another’s income.”

Frakt’s conclusion: “The answer isn’t necessarily to pick a patient- or system-focused approach to reforming health care, but to do both effectively.”

Grassley Takes Aim at Fellow Republicans in Drug-Pricing Fight

Dan Diamond of Politico’s Pulse newsletter reports that Sen. Chuck Grassley, the GOP Senate Finance Committee Chair who last month said Senate Majority Leader Mitch McConnell is the reason more Republicans haven’t supported his bipartisan drug-pricing legislation, said that competing House legislation doesn’t go far enough:

“Grassley on Wednesday dismissed House Energy and Commerce Republicans' competing drug legislation as too soft on pharma, and little more than an effort to deflect attacks over the party's failure to slash prices. ‘They have felt necessary to get a Republican bill out there that gives some Republicans that are up for election cover,’ he told reporters, adding that the House bill's failure to impose major restrictions on companies shows the ‘strength of big pharma.’”

Poll of the Day: The GOP Divide on Health Care

Wealthy Republicans are much less concerned about universal health care coverage than less wealthy Republicans, according to a new survey from NPR, the Robert Wood Johnson Foundation and the Harvard T.H. Chan School of Public Health.

“Republican voters vary substantially by income on the question of whether the government should make it a priority to make sure everyone has health coverage,” the survey found. “Fifteen percent of Republicans in the top 1% say that this should be a very important priority. Three times as many — 48% — of the lowest-income Republicans agree with that statement.”

Democrats are far more united on the issue, with about 90% across all income groups agreeing that universal health coverage should be a top priority.

Quote of the Day

“Defense spending has accounted for more than 3% of U.S. economic activity in every year since World War II. Think of it as a consistent and predictable fiscal stimulus.”

– Felix Salmon, Axios

Is a Wealth Tax a ‘Very American Idea’? 

The wealth tax proposed by Democratic presidential candidates Elizabeth Warren and Bernie Sanders has broad support among the American public. A Hill-HarrisX survey last year found that 74% of respondents supported the imposition of a 2% tax on household assets over $50 million and a 3% tax on assets over $1 billion, while just 26% of respondents were opposed.

Not surprisingly, the idea has markedly less support among the ranks of America’s super wealthy. A number of billionaires have expressed their opposition to the idea, including Democratic candidate Michael Bloomberg, who said the idea is “probably unconstitutional.” (Warren wondered earlier this week if worries about her wealth tax inspired Bloomberg to run. “I guess he figured it was cheaper than paying a $0.02 wealth tax,” she quipped.)

Other billionaires have spoken out against the proposed tax, focusing on questions of legality, practicality and fairness. In an interview released Thursday, billionaire sports merchandiser Michael Rubin framed the wealth tax as a job and business killer. “I think the effect of having a net worth tax would take people that are starting companies and say, I'm not going to start them in America, but go somewhere else, because it's such a negative impact,” Rubin told Yahoo Finance.

In their new book, The Triumph of Injustice, liberal economists Emmanuel Saez and Gabriel Zucman, who advised both Warren and Sanders on their tax plans, lay out their argument for a wealth tax. In a newly published interview with Clio Chang of The Nation, Zucman says that a wealth tax was necessary because many rich people report little taxable income:

“Take the case of Warren Buffett. He’s worth $80 billion today, and his true economic income is something like 6 percent of his wealth, so around $5 billion, but because he instructs his company Berkshire Hathaway not to pay dividends, his taxable income is very low. Basically, what Buffet[t] and other people in his position do is he sells a few shares every year, realizes gains on those shares, $10 million or $20 million, and then pays a little bit of taxes on that. And you see that even if you increased the top marginal income tax to 90 percent in the case of Buffett, it would not make any significant difference to his tax bill. That’s the reason we need a wealth tax.”

Zucman also argues for a wealth tax on political grounds, saying that it would reduce inequality and serve as a check on the political power of the wealthy. “It’s a very American idea,” Zucman says, citing Franklin D. Roosevelt’s proposed 100% tax on incomes over $25,000, or roughly $1 million in current dollars. Congress eventually settled on a 94% top marginal rate — “not very far from 100 percent,” Zucman says — and kept the top rate at around 90% for decades.

Zucman says the rates stayed high because lawmakers understood that they were designed to limit the concentration of wealth. “This idea that excessive income and wealth inequality is a bad thing in and of itself is deeply rooted in the US, which was created in part in reaction against the highly unequal and aristocratic European societies of the 18th century,” Zucman says. “One powerful way to regulate that inequality is with sharply progressive income taxation on very high incomes. What we’re trying to do in the book is to help the American public reconnect with this tradition. What we’re saying is, ‘Look, that’s your history.’”

Read the full Zucman interview.


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