Tagged: Cost

On the Tragedy of the Commons: the Toxic Effects of Drug Co-Pay Coupons

Last week I was driving through Phoenix when I saw this sign at an intersection:


It struck me that this was a perfect example of what happens when clever business folks figure out a way to short circuit the normal laws of consumer behavior.    How’s it work?  Bring your car in and the glass shop bills your insurance company directly and either rewards you with cash, or at least pays your deductible.  Presumably folks who have insurance that will pay a lot get the $100 and folks with lower-end insurance only get $50… It’s a perverse incentive which disrupts the usual laws of consumer economics.

Driving, I was immediately reminded of a similar situation in healthcare:  pharmaceutical copay coupons.  A couple of weeks ago HBS professor Leemore S. Dafny and colleagues published a compelling perspective piece in the New England Journal discussing the corrosive effect of “copayment coupons” offered by manufacturers directly to consumers.

Like the auto glass example , these pharmacy coupons given to patients and are used at the point of sale to offset the patient copays.  For example, using a copay coupon, a patient can purchase a $1000 drug at less out-of-pocket cost (to him) than a comparable $20 generic which might have a $5 copay.  The net effect: aggregate pharmacy costs past on the the insurer are far higher because there is no patient incentive to use less expensive but comparable generics.

savings-card-newpageMy favorite example of this is the contemptible drug Nexium, which for all purposes interchangeable with the generic Prilosec (Omeprazole).  (In fact, before it was non-generic, Prilosec was the “purple pill” [™ I’m sure] and Nexium inherited the title once omeprazole was generic at pennies a pill).

According to GoodRx, today 30 tablets of Nexium cost $300 cash price at most national pharmacies, whereas 30 tablets of generic Prilosec cost just $24.  For the user using the Nexium Savings Card, Nexium costs $15 as compared to a generic co-pay that might be $20.

The problem with the coupons is that they dramatically undermine the insurance company’s/ PBM’s abilities to “tier” medication, which is the primary leverage they have over pharmaceutical manufacturers. Dafny writes:

By severing the link between cost sharing and the value generated by a drug, copayment coupons can undo the beneficial effects of tiering. With such coupons, consumers’ cost sharing may actually be lower for higher-tier brand-name drugs than for lower-tier therapeutic substitutes or generic bioequivalents. Since insurers typically cover about 80% of the total price of a prescription, however, the combined amount that the insurer and the consumer spend for higher-tier drugs remains substantially greater.

According to the authors, over half of all non-generics now have coupons available.  It’s come at a terrible cost to the system:

We estimate that coupons increase the percentage of prescriptions filled with brand-name formulations by more than 60%. Back-of-the-envelope calculations suggest that, on average, each copayment coupon increased national spending on all drugs by $30 million to $120 million over the 5-year period following generic entry. In our sample, consisting of 85 drugs facing generic competition for the first time between 2007 and 2010, we estimate that spending on the 23 drugs with coupons was $700 million to $2.7 billion higher than it would have been if the coupons had not been issued or had been banned.

At the end of the day, this Jiu-Jitsu at the point of sale only drives up the aggregate cost of medication, which is then necessarily passed onto consumers in the form of higher premiums.  As an old colleague was fond of saying, and which I repeat often, healthcare is a balloon: squeeze one area and another bulges.  This spigot of money flowing to the drug companies needs to be offset by reduced spending elsewhere, or by higher annual premiums.  It’s a perfect example of the tragedy of the commons, where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting resources through their collective actions.

If you think that these increased premiums don’t matter, consider Ms. Rosa Ines Rivera, a cafeteria worker at Harvard’s School of Public Health who, with colleagues, is on strike, primarily to protest proposed increases in health insurance costs that Harvard wants to pass to employees.  I was struck by an opinion piece she submitted to the New York Times yesterday:

Why is the administration asking dining hall workers to pay even more for our health care even though some of us pay as much as $4,000 a year in premiums alone? I serve the people who created Obamacare, people who treat epidemics and devise ways to make the world healthier and more humane. But I can’t afford the health care plan Harvard wants us to accept……the cost of premiums alone could eat up almost 10 percent of my income.

It’s the same conversation that many employers and employees are having, as they realize that drug company revenue “optimization” has come at a steep cost to the average American.

On the “Bay State Boondoggle”

5822024293_6059e9d1ff_zThe Boston Globe recently ran an article discussing layoffs at Baystate Health, a large health system in Western Massachusetts.  The system is planing to lay off 300 employees to try to close a $75M deficit.  According to the Globe, the deficits are mainly driven by declining Medicaid reimbursement, but, more interestingly, by a $23M hit to Medicare revenue driven by a mistake made by Partners Healthcare, a health system on the other side of the state.

Here’s the fascinating backstory.

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Cost is Ruining the Patient/ Healthsystem Social Contract

It’s Summer in Boston and the annual migration of Bostonians leaving town (replaced by carloads of tourists headed in) is underway.


I’ve been keenly observing the influx of out-of-state license plates because it brings a wider sample of cars  to support my theory that the number of people applying collegiate stickers to their car windows has fallen dramatically.  Today, based on poor sampling science (my counting cars at a downtown garage) fewer than 5% of cars proudly display a college sticker.  This number seemed far higher a decade ago.

It turns out that my anecdotal observation actually tracks with data in the academic literature.  “Advancement” offices recognize that engaged alumni (presumably those that would put a sticker on their car) are declining.

According to the Council for Aid to Education, in 1990, 18 percent of college and university alumni gave to their colleges.  By 2013, that number was less than 9 percent— a record low and a trend that has persisted for more than two decades.

What’s interesting is that a very small number of donors contribute the bulk of the dollars: The University of Waterloo analyzed their alumni donations and found that <1% of alumni gave 78% of the over $150M dollars raised.  Here is their breakdown:


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The data suggest that a handful of donors are stuffing the coffers while the bulk of alumni have tuned out.  The Waterloo authors noted:

[It’s] a classic example of the 80/20 rule, except in our case it’s more like an 80/1 rule.

What’s behind this disengagement?

In a 2014 article, author Dan Allenbee argues that the rising cost of college has alienated many alumni.

Back when the cost of [the college] experience was relatively low, alumni felt like they had gotten a deal and were more willing to give back after they graduated… In the last decade, the price index for U.S. college tuition rates grew by nearly 80 percent—almost twice as fast as growth in medical care and more than twice as fast as the overall consumer price index, according to U.S. Labor Department statistics. Although tuition increases have slowed recently, data from the College Board suggests that federal aid has not kept up with rising costs, resulting in students and families pay- ing more out-of-pocket expenses. 

How we expect alumni to give back when they haven’t fished paying the original bill?

A 2016 piece in The Yale News argues that changing social norms seem to be a cause:

Alumni participation rates in giving hit an all-time low of 33.7 percent this year after dropping 25.61 percent in the last decade — the biggest fall in the Ivy League. And this decrease has primarily been concentrated among the younger classes: In the past 10 years, there has been an 11 percent increase in the number of alumni solicited, but a 26 percent decrease in participation.

“There [used to be] a supposition that there were things that you did,” Acting AYA Executive Director Jenny Chavira ’89 said. “And you did them because you did them.”

At a minimum, this trend in higher education serves as a harbinger for healthcare.  With the colleges, what we’re witnessing is the breakdown of a long-standing social contract between organizations designed to serve the community, and the people that they serve.  There is a silent majority who used to proudly display their allegiance to organizations and who now feel less affiliated.

If we believe that the weakening of the bond between social mission organizations and individuals is due to citizen’s perceptions that they aren’t getting value for money, then healthcare has a brewing problem.

This won’t be an issue of declining philanthropy: A few massive donations from a handful of benefactors will make up the gap.  The bigger long term issue for healthcare systems is declining consumer loyalty.  The erosion of the organization/ patient social contract can only lead to a future with fewer brand-name consumers and more buyers shopping for deals while “interlining” between systems (a trend that I wrote about last year).  Cost (or the ability to save a couple of bucks in a high-deductible plan) drives point-of-care decisions, for sure.  More important (and more insidious ) is the way that high cost/low value care impacts how patients feel about the patient/healthsystem relationship.




Administrative Bloat in Healthcare is a Land of Opportunity: On Direct to Consumer Price Transparency

7566188570_5c754bd19d_zI was recently connect with two smart entrepreneurs (James Millaway and Stan Schwartz, MD) who run a company called The Zero Card.  Their business is a platform where consumers and employers have access to transparent “cash” prices for a range of medical services.  Providers display their best non-insurance rates and offer a fixed price for an episode of care. Individuals (or ideally self-insured employers) pay these prices directly at the time of service.

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The Trajectory of Disliked Companies in Disrupted Businesses: A Visual Guide

I was recently impressed by the full page ad placed by Time Warner Cable in the Sunday New York Times. They write:

We get it.  We know how you feel about cable companies…. We hear you loud and clear…. So we’ve made some changes for the better.  Changes that we hope add up to more respect for your time, better value for your money and the kind of experience you expect from a leading entertainment and technology company…

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On Getting Burned by Population Health Thinking: (Why has a Decade of Aggressive Intervention not Prevented More Deaths From Brain Aneurysms?)

In our house we take a lot of fizzy vitamin C to prevent colds in the winter. As doctors, my wife and I both know that science doesn’t support our decision… We take it anyway.


We shouldn’t. After all, the well respected Cochrane group (which grades and distills multiple studies into a single “meta-analysis”) clearly finds that vitamin C supplementation has no effect on preventing colds. We also know about the very modest side effects of too much vitamin C: how you can get kidney stones and diarrhea and how one woman lost her (albeit transplanted) kidneys from taking too much of the stuff. So in the absence of an upside, and in the presence of information to suggest potential harm, we take the tablets anyway. Daily. In bulk. From Whole Foods.

Why? I think that, honestly, we’d feel stupid if we didn’t take it and then came down with a runny nose and cough. As much as the science discounts benefit to the population, we have a personal belief that the stuff works. We don’t want to be one of those outliers who might have benefitted from the drug but didn’t take it.

We’re not the only ones:

A neurosurgeon friend recently sent me a great study recently published in the respected journal, “Stroke”. The paper, written by authors from Columbia, looked at nationwide Medicare data to describe trends in the use of aneurysm surgery in the elderly. What they revealed was fascinating, both from a population health perspective, but also because it tells us a lot about how we make medical decisions, both as consumers and as physicians.

Here’s the background:

A certain fraction of the population (about 3%) has a cerebral aneurysm, or a “bulging” of the blood vessels in the brain. These are usually asymptomatic and are picked up on CT or MRI scans of the brain done for other reasons. A certain fraction of these aneurysms go on to burst, leading to a dangerous and sometimes fatal hemorrhagic stroke (subarachnoid hemorrhage). The risk of rupture varies, but is estimated to be around 0.5% to 1% per year depending on the size of the aneurysm.

Over the years, neurosurgeons have intervened on these asymptomatic lesions by performing one of two procedures: either they surgically insert a clip at the neck of the aneurysm, or else they increasingly use minimally invasive techniques to route a coil of metal from an artery in the groin into the aneurysmal pouch in the brain, occluding it. The surgeries are both performed with the goal of preventing downstream rupture of the aneurysm.

The decision to intervene on the lesion like this one is hard to do without considering population level numbers and outcomes. The older that a patient is when an aneurysm is discovered, the lower the likelihood that the patient will die from this aneurysm (given the risk of rupture is cumulative and < 1% annually).

Surgeons also have to balance the real risk of causing significant harm to the patient: the most current data show that 30-day mortality in the clipping population was 1.6% (25% of patients had complications and 44% were sent to long-term care facilities after discharge). In the coiling population, mortality was also 1.5% (13.5% of patients had in-hospital complications but unlike coiling 81% of patients were discharged home after the coil).

Clearly, neither clipping or coiling are benign procedures. But coiling is easier to sell: it doesn’t require open-skull surgery and seems less dangerous then clipping. Coiling can also be done by a variety of medical specialists (interventional radiologists, interventional neurologists and the like) which means that the number of doctors willing and able to intervene increased through the early 2000’s.

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What the country saw over the year 2000’s was a dramatic increase in the number of aneurysm interventions. Coiling led the growth in interventions from 1.4/1000 patients in 2000 to above 6.0/1000 patients by 2010.

It also turns out that the >75 years age cohort was responsible for the largest increase in coiling volume. Older patients increasingly got aggressive interventions designed to prevent aneurysmal hemorrhage even though their liklihood of rupturing before they died of other causes was low.

Part of this increase was due to the growth in the number of doctors able to treat these aneurysms. Part was the fact that coiling proved to be safer then clipping, and easier to sell to both patients and doctors. Perhaps most important, intervention seemed common-sense and as the procedures grew safer, the 1% rate of annual catastrophe began to look comparatively more sinister.

Now here’s the kicker: Over a decade when interventions increased four-fold, the rate of subarachnoid hemorrhage didn’t actually go down.

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The Stroke data suggests something worse than the obvious issue of whether the morbidity/cost of intervening on an aneurysm outweighs a <1% annual benefit (particularly in the elderly).

In a chart that accompanies the Stroke article, authors showed that while the amount of clipping and coiling going on in America increased dramatically from 2000 to 2010, the number of hemorrhages didn’t actually fall at all. In fact, they inexplicably rose by the end of the decade.

The authors of this brilliant study concluded:


[I]n spite of the dramatic increase in the rates of procedures, particularly coiling, performed on Medicare beneficiaries with UIAs, [unruptured inter cranial aneurysms] the overall rate of SAH [subarachnoid hemorrhage] among Medicare beneficiaries did not decrease. This is the opposite of what would be expected if procedural treatment of UIAs was preventing aneurysm ruptures that would have occurred without treatment.

Their takeaway:

“…it is reasonable to suspect that for some patients in this age group, the value of clipping or coiling their [unruptured aneurysms] is either modest or nonexistent… particularly in light of procedural complications and the effect of procedure-associated morbidity and hospitalizations on quality of life.

It’s easy to challenge a study like the one in Stroke, and undoubedly the issue has yet to be definitively resolved. Observational studies are interesting, but not definitive and a proper head-to-head trial of intervention versus watchful waiting seems in order.

Medicine, at the end of the day, is all about balancing potential good and potential harm. The problem is often that it’s impossible to get a sense for either extreme until you can study a large population of people. The nuance to this otherwise simple calculus is that every doctor will tell you that it seems far easier to rationalize a complication resulting from action intended to prevent a greater harm, than it is to than it is to justify passivity and watch as someone dies of something preventable. 

I know this first-hand: a few years ago I diagnosed metastatic breast cancer in “Maria”, a 29-year-old immigrant woman. She had arrived at the emergency room of the university hospital where I worked short of breath and we soon found a large mass in her swollen, red breast and spots in her lungs on x-ray.

As we were making plans to admit her, Maria told me that her primary care physician– quite appropriately– had previously told her that she was too young to benefit from screening mammograms according to national guidelines. The guidelines, published by the US Preventive Service Task Force, and others, generally recommend that young women not receive a mammogram because the harms from working up incidental findings outweigh the low liklihood of finding real cancer.

For these kinds of population-level tradeoffs to work — for thousands of people to benefit from the avoidance of unnecessary care — there needs to be some small number of unlucky souls who would have benefitted from the treatment or workup but didn’t get it. Statistically, it has to work that way.

Nobody wants to be that unlucky soul, that Maria. And, for our part, physicians are hardwired to over-value the impact of missing a rare case of cancer while under-valuing the cummulative benefits of avoided testing. It’s primal.

This is why recent campaigns to deemphasize prostate screening antigen testing, and routine mammography in young women have been such hard sells. In both of these cases, population health studies are conclusive: on a aggregate basis, the side effects of testing outweigh the benefits of catching the rare cancer. But, tell that to the patient whose cancer you missed. It feels better to do something, particularly when the “doing” gets safer. 

Even though I trained as an epidemiologist and have spent my career trying to rationalize healthcare, I can tell you that if push came to shove and I had an aneurysm, coiling would probably seem pretty attractive. Nobody wants to find themselves in Maria’s shoes. The population health specialist in me would consider it a wasteful and illogical decision. The vitamin taker in me would certainly understand.


Images: Apotek Hjartat via Flikr cc search.  Charts from Dartmouth Atlas and Stroke

Squeeze the Consumer or Squeeze the Prescriber? Conflicting Ideologies and the Rise of High Deductible Health Plans

ObamaIf you were designing a program to lower healthcare costs, would you direct your efforts at the medical consumer, or the medical prescriber?  Do you create a system where an informed and empowered consumer drives the market, or one which regulates providers and holds them accountable for the services they deliver? The answer, I think, would depend on your economic philosophy: your understanding of medicine as a free market, and particularly whether you believe consumers can make rational, best-evidence decisions about their own healthcare consumption.

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