A new study in Health Affairs examines preventable death rates in the United States. Here is the study’s abstract:
We examined trends and patterns of amenable mortality… in the United States compared to those in France, Germany, and the United Kingdom between 1999 and 2007. Americans under age sixty-five during this period had elevated rates of amenable mortality compared to their peers in Europe. For Americans over age sixty-five, declines in amenable mortality slowed relative to their peers in Europe. Overall, amenable mortality rates among men from 1999 to 2007 fell by only 18.5 percent in the United States compared to 36.9 percent in the United Kingdom. Among women, the rates fell by 17.5 percent and 31.9 percent, respectively. Although US men and women had the lowest mortality from treatable cancers among the four countries, deaths from circulatory conditions—chiefly cerebrovascular disease and hypertension—were the main reason amenable death rates remained relatively high in the United States. These findings strengthen the case for reforms that will enable all Americans to receive timely and effective health care.
On the topic of preventable medical errors, research authored by Milliman consultants for the Society of Actuaries estimates that 1.5 million medical injuries in 2008 were associated with a such errors.
Here is an excerpt:
Using medical claim data for a large insured population to extrapolate to the United States population, we estimate that 6.3 million measurable medical injuries occurred in the United States in 2008. In an inpatient setting, seven percent of the admissions in the claim database resulted in some type of medical injury. Of the 6.3 million injuries, we estimate that 1.5 million were associated with a medical error… these errors resulted in over 2,500 excess deaths and over 10 million excess days missed from work due to short-term disability.
A PDF of the entire study, “The Economic Measurement of Medical Errors,” can be downloaded here.
“The Economic Measurement of Medical Errors” was authored by Jon Shreve, Jill Van Den Bos, Travis Gray, Michael Halford, Karan Rustagi, and Eva Ziemkiewicz.
Quality of Care
Risk adjustment is commonly used by health insurers to increase the accuracy of cost models by taking into account the risk characteristics of different populations, usually by providing a risk score for each individual. Milliman consultants are commonly asked to perform risk adjustment and are always looking to advance its analytical utility. In a recent paper, Milliman consultant Ksenia Draaghtel demonstrates that
…segregating risk by service category better represents the differences in utilization and cost within each component, and is an important aspect in actuarial pricing. Inpatient, outpatient, physician, and pharmaceutical services possess different characteristics with respect to the utilization frequency, cost severity, speed of claim payment, and underlying trends.
The simulations used in the paper show how these techniques can increase profitability.
Risk adjustment has become more newsworthy recently with the resurgence of interest in provider cost-sharing as a mechanism of healthcare cost control. Two recent Milliman papers discuss the issue. The first, “Risk adjustment and its applications in global payments to providers” by Rong Yi, Jon Shreve, and Bill Bluhm, is a great place to start if you are new to the topic. It starts with a rationale for using risk adjustment in this field. Take two patients, one healthy, one with chronic diseases, each patient being treated by different providers. Assume that healthcare payments are determined by patient age and gender. Without risk adjustment, the provider with the sicker patient would appear overpaid and inefficient and would miss out on efficiency-based performance bonuses. The paper goes on to discuss risk adjustment methodologies, concurrent and prospective models, data issues, and other important considerations.
The Massachusetts Medical Society has published two papers on risk adjustment:
The papers provide an overview of risk adjustment and where it fits in health reform while offering practical suggestions for using risk adjustment in Massachusetts.
We’ve talked a lot about quality since launching this blog, but most of the discussion has been specific to the healthcare industry. It’s always interesting to see a well-trodden issue through the eyes of an outsider, which is what we have with this article in Quality Digest summarizing the “Year in Quality.” Here’s an excerpt:
Other low points in human endeavor centered in the medical industry. Findings from a study commissioned by the Society of Actuaries (SOA) and completed by consultants with Milliman Inc. estimated that measurable, avoidable medical errors cost the U.S. economy $19.5 billion in 2008. Having mulled over the data for a couple of years, 87 percent of the actuaries concluded that reducing medical errors is an effective way to control health care cost trends for the commercial population; 88 percent believe this to be true for the Medicare population.
What other healthcare topics attracted the eye of a publication that devotes a lot more pages to Six Sigma than actuarial science? The Institute of Medicine’s effort to weed out waste and the emergence of new nanotechnology that can help speed diagnostic capabilities also made the cut.
Quality of Care
Health Leaders looks at a recent report on avoidable medical errors and highlights the most costly such errors. Here are the top ten.
1. Pressure ulcers—374,964 errors, $10,288 per error and $3.858 billion total.
2. Postoperative infections—252,695 errors, $14,548 per error, $3.676 billion total.
3. Mechanical complication of a device, implant or graft—60,380 errors, $18,771 per error, $1.133 billion total.
4. Postlaminectomy syndrome—113,823 errors, $9,863 per error, $1.123 billion total.
5. Hemorrhage complicating a procedure—78,216 errors, $12,272 per error, $960 million total.
6. Infection following infusion, injection, transfusion, vaccination—8,855 errors, $78,083 per error, $691 million total.
7. Pneumothorax—25,559 errors, $24,132 per error, $617 million total.
8. Infection due to central venous catheter—7,062 errors, $83,365 per error, $589 million total.
9. Other complicaitons of internal (biological) (synthetic) prosthetic device, implant and graft—26,783 errors, $17,233 per error and $462 million total.
10. Ventral hernia without mention of obstruction or gangrene—53,810 errors, $8,178 per error and $440 million total.
Read the full article here and the full report here.
Cost, Quality of Care
A new study commissioned by the Society of Actuaries looks at the cost of avoidable medical mistakes and quantifies the economic impact of such mistakes as $19.5 billion annually. Here is a description of the study from the Wall Street Journal:
Medical errors and the problems they can cause — including bed sores, post-op infections and implant or device complications — cost the U.S. economy $19.5 billion in 2008, according to a study released today. (That’s enough to buy almost 1.3 billion copies of The Checklist Manifesto, Atul Gawande’s bestseller on reducing such errors via the lowly checklist.)
The study, commissioned by the Society of Actuaries and carried out by the actuarial and consulting firm Milliman, is based on insurance claims data. The cost estimate includes medical costs, costs associated with increased mortality rate and lost productivity, and covers what the authors describe as a conservative estimate of 1.5 million measurable errors. The report estimates the errors caused more than 2,500 avoidable deaths and over 10 million lost days of work.
The Hill also picks up on this story. Here’s an excerpt:
Preventable medical errors cost the country $19.5 billion in 2008 — or roughly $13,000 for each avoidable case, according to a report published Monday by the Society of Actuaries (SOA).
And that number is likely low, according to consultants at Milliman, who crunched the data.
“We used a conservative methodology and still found 1.5 million measureable medical errors occurred in 2008,” says Jonathan Shreve, an actuary for Milliman who co-authored of the report. “This number includes only the errors that we could identify through claims data, so the total economic impact of medical errors is in fact greater than what we have reported.”
Read the study here.
What is really driving increasing healthcare costs? Several causal factors contribute to the overall cost of health insurance:
There are many specific reasons why premium rates change year to year. These reasons can be grouped generally into five major categories:
1. Premium True-up: Correction (upward or downward) needed to current premium rates in order to align new rates with actual claims and other revenue needs
2. Benefit Cost Trend: Incorporation of changes to reflect the cost of the benefits in the future
a. Unit Cost Trend (provider payment rate changes)
i. Medical Inflation (price changes for a fixed market basket of medical services)
ii. Net Impact of Provider Contracts (difference between change in provider payment rates and medical inflation)
b. Utilization Trend (change in number of services used)
c. Mix/Intensity of Services Trend (change in composition of services used by consumers)
d. Cost-sharing Leverage (change in impact over time of fixed dollar copays and deductibles on benefit costs)
3. Member Changes: Recognition of changes in the characteristics of members covered in the future period to which the new premium rates apply (e.g., age and gender mix), compared with those members covered currently (types of changes for which there is no differentiation in the premium rates themselves)
4. Plan Changes: Reflection of the impact of changes in benefit design or provisions
5. Insurer/Administrator Retention Changes: Inclusion of needed or desired adjustment to the insurer retention component of premium rates (principally health plan administrative costs, taxes, and profits)
There may be other causes or components that can be identified, but these five categories capture the primary reasons for premium rate changes. Within these five categories, the first and second (premium true-up and benefit cost trend) are typically the primary drivers of year-to-year premium rate increases. As a component of benefit cost trend, medical inflation is usually one of the most important contributors. However, it is not the only component of benefit cost trend, and benefit cost trend is but one of the five major causes of premium rate increases.
This list was excerpted from the recent paper by Jon Shreve, “The difficulty of legislating premium rate increases.”
The idea of implementing legislative controls of healthcare premium increases has been part of the reform bills for some time, but the idea has become more prominent in recent weeks. While it is tempting to look only at premium numbers when trying to control costs, there are actually a number of underlying factors: unit cost changes, medical inflation, utilization changes, member behavior, plan changes, premium “true-up,” and various leveraging.
This dynamic is discussed in a new briefing paper by Jon Shreve.
The following is excerpted from the recent paper by Jon Shreve, “Changing Expectations in Healthcare.”
Increases in medical costs in the United States have steadily outpaced inflation, and now such costs comprise more than 16% of GDP. Left unchecked, they are projected to grow to 20% in 10 years. Uneven quality, lack of integrated care, outdated information systems, and the wrong financial incentives have all contributed to the rise.
The basis for paying for healthcare must shift to one that rewards healthy outcomes and that provides financial incentives for following evidence-based medical practices. Such a shift is difficult in a system dominated by fee-for-service pricing with little or no accountability for performance. Several past and recent innovations may be useful in future reforms.
During the 1990s, physicians were often paid for the number of patients they treated rather than the volume of services they generated. The capitation approaches used often were not refined or adequately supported, which in part led to the managed-care backlash. Still, medical cost trends were at a lower level than they have been before or since. This was a far from perfect but nevertheless elementary example of beginning to pay providers at a level consistent with our expectations for them.
Another solution, risk-adjusted episodic payment, envisions payers like insurance companies paying all hospitals or medical professionals fixed amounts per episode of care, depending on the condition being treated.
Recent movements toward pay for performance or medical home head in this direction, but without a change in the underlying compensation scheme, each additional service generates an additional fee.
Whatever form it takes, restructuring the payment system can motivate healthcare providers to perform—and payers and patients to pay for—only those procedures consistent with the best medical evidence and the needs of the patient. A system driven by results allows physicians more time to focus on the treatment they deliver rather than the quantity of services they provide.
For more, see earlier posts about access and quality.
Affordability, Efficiency, Reform
This post is excerpted from the new paper by Jon Shreve, “Changing Expectations in Healthcare.”
Increasing access is not the only goal of real reform; improving overall quality and efficacy is also an important goal. Simply pumping more money–or people–into the present healthcare system does nothing to improve the underlying quality of care. Provider practices and patient demands that result in low-quality care are not only bad for the patients involved, they also force on all of us a kind of rationing driven by the inefficient use of resources.
Evidence-based Requirements, Quality of Care, Reform