What Influenced a Paean to Karen Ignagne?

As the discussion here in the US about health care reform gathers steam, the Washington Post published a rather uncritical profile of one of the prominent participants, Ms Karen Ignagni, CEO of America's Health Insurance Plans (AHIP), the trade group for the health insurance/ managed care industry. It included some compliments from Princeton Professor and prominent health care economist Uwe Reinhardt:

'Whatever AHIP pays her, it's not enough. She's unbelievably effective,' said Princeton economist Uwe Reinhardt. 'It's just amazing what she's achieved for them against all odds.'

Ignagni's total compensation, according to AHIP's most recent filing from 2007, was $1.58 million, which includes $700,000 in base salary, $370,000 in deferred compensation and a bonus. Ignagni won't say how many hours a week she works. The number's so high it's embarrassing, she said.

Among successes cited by Reinhardt and others is helping persuade the Bush administration to develop private insurance plans within Medicare that are producing unexpectedly high payments for private insurers.

What the Washington Post article did not bother to mention was that in addition to being on the Princeton faculty, Professor Reinhardt is a member of the board of directors of Amerigroup, a health insurance company specializing in providing Medicaid and Medicare managed care (see this previous post), and a member of AHIP. Former Amerigroup CEO Jeffrey McWalters was on the board of AHIP. According to Amerigroup's 2009 proxy statement, Professor Reinhardt controls (via ownership or options) 144,558 shares of Amerigroup stock, and received $226,531 in compensation from Amerigroup in 2008.

Perhaps Professor Reinhardt's enthusiasm for Karen Ignagne's performance as CEO of AHIP derived more from his leadership of Amerigroup than a scholarly analysis.

Note also that Professor Reinhardt is a member of the board of directors of Boston Scientific, a medical device company. Furthermore, per proxy statements from the above companies, Professor Reinhardt is on the board of two funds from H&Q Healthcare Investors, and is a Trustee of Duke University and the Duke University Health System.

Professor Reinhardt's leadership roles in US publicly traded corporations are public, but not easily found unless one knows where to look. We had first discussed these relationships on Health Care Renewal in 2006. However, many of the more academically tinged biographies of him publicly available omit his leadership roles in the for-profit world. At the moment, biographies of Professor Reinhardt on the Princeton web-site, and furnished by the Princeton Bioethics Forum, the Commonwealth Fund, and the Henry J Kaiser Foundation did not note these relationships.

This illustrates once more participation in the current health policy debate may be driven by vested interests, rather than ideology, much less dispassionate analysis. Were the participants yo disclose, at least, their financial interests, the debate would become that much clearer. Meanwhile, when listening to the debate, always ask, "cui bono?" (Who benefits?)

Hat tip to the Health Care Blog.

BLOGSCAN - Whose Interests Does Health Care Advocacy Serve?

Merrill Goozner, on the GoozNews Blog, dissected recent pronouncements on health care reform by economist Uwe Reinhardt. Reinhardt compared our US "system" of financing health care with those of some other countries. He noted some advantages of the latter systems, but wondered whether US citizens would accept the trade-offs they implied. In particular, he wondered whether the US would accept the tight regulation of private insurance companies found in Germany. But he conveniently failed to note that the German plan's success may depend on its exclusive use of only not-for-profit health insurers. Mr Goozner wondered whether if this omission had to do with Mr Reinhardt's position on the board of a for-profit US health insurance company, a relationship not disclosed in Mr Reinhardt's New York Times blog post. (We have posted before about how Mr Reinhardt's authoritative writings on health policy have not been accompanied by disclosure of his positions on the boards of several major health care corporations.) Once again, it is hard to tell whose interests prominent health care advocacy serves.

What, The RUC? - A Prominent Health Care Policy Blog Leaves Some Important Things Out

A new US President, health care costs that continue to rise despite declining access and questionable quality, even during an unprecedented global economic crisis all have made health care reform a hot topic once again in the US. This has even lead to discussion of some topics that formerly rarely merited polite discussion, sort of.

Last week, writing in the New York Times Economix blog, Professor Uwe Reinhardt, a noted health care economist at Princeton University, took on the topic of payments to physicians. His main point was:

America’s health care spending issues might have something to do with our fee-for-service payment system.

Studies have shown that physicians are not impervious to the financial incentives inherent in fee-for-service payments. For example, on average, physicians who have a direct financial interest in the use of imaging services, like CAT scans or M.R.I. scans, recommend far more such services for their patients than do physicians without such financial interest....

He noted some possible solutions:

In recognition of the conflict of interest inherent in fee-for-service payment, there is now a worldwide movement to replace the system with so-called 'evidence-based case reimbursement'. Under this approach, one single payment would cover all of the supplies and services that are needed, under best, evidence-based clinical practices, to respond adequately to well-defined medical conditions.

Not all health care, of course, can be categorized into neat, episodic bundles for this purpose. For chronic conditions, for example, payment may shift from fee-for-service to annual or monthly fees per patient, and care for such patients might be organized by clinically integrated health systems or by managed care companies procuring health care from different systems on an integrated basis. And for some patients with very complicated conditions, fee-for-service would still persist. One would think, however, that a move toward these alternative payment systems would not only reduce the geographic variations in per-capita health spending, but help control the annual growth of health spending over all.

What is missing from this picture?

Positive Incentives for Procedures, Negative Incentives for "Cognitive" Services, Especially Primary Care

First, Reinhardt suggested that the major problem with the current way the US pays for physicians is that it gives excess incentives for physicians to order diagnostic tests provided by facilities in which they have financial interests. This is, in my humble opinion, a real problem. But it is hardly the biggest problem with our current system of physician payments.

I submit that the biggest problem with our current system is that it provides big and increasing incentives to do procedures. This may lead to the over-use of some procedures in some instances. Moreover, it promotes high prices for the devices, drugs and support services required by the physicians to do these services. Thus, the current system pays many people well, and makes some people very rich. However, its enormous costs come out of other peoples' wallets, decreasing access and quality. Furthermore, the current system has provided disincentives to provide "cognitive care," especially primary care. Payments to physicians who do primary care do not cover all that they do on behalf of patients. Payments have not even kept up with inflation, nor with the increasing overhead costs of providing primary care, most of which are produced by the demands of government and insurance company bureaucracies. Thus, primary care in the US is dying. It is increasingly difficult for patients to find physicians who will take care them as whole patients, not as a set of different organs.

The Shadowy RUC

These biased incentives that lead to so much mischief are not the product of divine intervention or the laws of physics. They are the result of the actions of people, a few people operating in the shadows.

As we have discussed, the US Medicare system determines what it pays physicians using the Resource Based Relative Value System (RBRVS). This system determines the pay for every kind of medical encounter according to a complex formula that is supposed to account for physicians' time and effort, physicians' practice expense, and the cost of malpractice insurance. The components of physicians' effort assessed are, in turn, technical skill and physical effort; the required mental effort and judgment; and stress due to the potential risk to the patient.

To keep the system, which was started in 1990, current, requires addition of new kinds of encounters, which means encounters involving new kinds of procedures, and updating of the estimates of various components, including physicians' time and effort. To do so, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee (RUC). The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are secret, as are the proceedings of the group.

This opaque and unaccountable process has resulted in increases outstripping inflation in fees paid for procedures, while fees paid for "cognitive"medicine, i.e., for primary care, and for services that involve diagnosis, management of acute and chronic disease, counseling, coordination of care, etc, but not procedures, have lagged inflation. The effects of the RUC have been amplified by the unexplained tendency of commercial managed care and health insurance to track the RBRVS system when making their own payments to physicians.For further details about the RUC, see these posts on Health Care Renewal (here, here, here, here, and here) and important articles by Bodenheimer et al,(1) and Goodson.(2)

By the way, why the US Center for Medicare and Medicaid Services (CMS) relies de facto exclusively on the RUC to control the RBRVS system, and why the AMA made the RUC into a secret organization apparently beholden only to the organization's proceduralist members are unanswered questions.

What Reinhardt Left Out, and Why?

Professor Reinhardt, one of our most distinguished health care economists, barely touched on the biggest problems with how the US fee-for-service payment system works, and why these problems occurred. Thus, it is not surprising that the few solutions he recommended seem irrelevant to these problems.

As an aside, his discussion is not atypical of what is seen in most writings about health care policy that have to do with costs. It appears that it is politically incorrect to say that incentives are skewed, that this skewing appears to have resulted from the acts of a few individuals, and that these acts occurred with little outside attention or accountability. Why do health care policy experts follow these dictates of political correctness?

I don't know, but one possible explanation is that they are themselves biased by their own incentives. So let us further consider the case of Professor Reinhardt.

Professor Reinhardt's Conflicts of Interest

Not listed in the NY Times official bio of Professor Reinhardt are the following relationships:

- Professor Reinhardt is a member of the board of directors of Amerigroup, a health insurance company specializing in providing Medicaid and Medicare managed care. The company's 2008 proxy statement said that Professor Reinhardt owns the equivalent of 134,482 shares of stock, current value, $3,859,633 (at its current price, $28.70 per Google Financial), and got $221,422 total compensation in 2007.

- Professor Reinhardt is a member of the board of directors of Boston Scientific, a medical device company. The company's 2008 proxy statement said that Professor Reinhardt owns the equivalent of 51, 533 shares of stock, current value, $396,288 (at its current price, $7.69 per Google Financial) and got $118,885 total compensation in 2007.

In addition, per the above proxy statements, Professor Reinhardt is on the board of two funds from H&Q Healthcare Investors, and is a Trustee of Duke University and the Duke University Health System.

Boston Scientific, a device manufacturer, benefits from increased demand for its products due to physicians' pay incentives that favor the procedures for which they are used. As a director of the company, Professor Reinhardt has a duty to advance the financial interests of the company and its shareholders. Amerigroup may benefit from the current status quo in how physicians are paid. As a director the company, again Professor Reinhardt has a duty to advance the financial interests of the company and its shareholders. Thus, it seems that Professor Reinhardt's legal responsibilities to these companies might tend to bias him against actively questioning how physicians are currently paid, or proposing solutions that might upset the status quo.

Professor Reinhardt's leadership roles in US publicly traded corporations are public, but not easily found unless one knows where to look. (A previous post on Health Care Renewal did discuss Professor Reinhardt's previous failure to review relationships relevant at the time to a riposte Reinhardt wrote in response to an op-ed in the New York Times by a physician who decried the increasing commercialization of health care.)

However, the New York Times did not choose to make public these conflicts of interest. I should note that biographies of Professor Reinhardt on the Princeton web-site, and furnished by the Princeton Bioethics Forum, the Commonwealth Fund, and the Henry J Kaiser Foundation did not note these relationships. A transcript of an interview on the Public Broadcasting System Frontline show also did not reveal these relationships.

Without the knowledge of these financial relationships, one might suppose Professor Reinhardt's opinions are only based on his disinterested expertise as a well-known economic scholar. Without knowledge of these financial relationships, one might think that a secretive, opaque process skewing physicians' payments toward procedures is not an important problem for our health care system.

We have come to a critical time in the history of attempts to reform the US health care system. Whether reform occurs, and whether it does any good will depend on the quality of the debate that precedes it. Such a debate should be robust, but those involved ought to make clear where their biases and interests may lie.

Unfortunately, it may be that some of the most prominent voices in the debate are those of people with strong personal financial interests in having health care reform go in certain directions, not others. Furthermore, people with particular interests may not want certain issues to be even brought up. If these interests are not revealed, the debate becomes deceptive.

I fear that much of the debate up to now has been deceptive, and will not lead to good outcomes.

References

1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.

Amerigroup Settles

Another addition to the cavalcade of settlements, from the Virginian-Pilot,

Amerigroup Corp., which faced $334 million of damage awards and court-imposed penalties from a Medicaid fraud suit in Chicago, said Tuesday that it will pay the U.S. government and state of Illinois $225 million to settle the civil case.

As part of an agreement struck with federal and state agencies, the Virginia Beach-based health insurer said it also will pay $9 million in legal fees, but it will not admit any wrongdoing.

However, Amerigroup said it also will enter into a corporate-integrity agreement with the inspector general of the Department of Health and Human Services, the federal agency that provides part of the funding for state Medicaid programs.

The suit's plaintiffs - a former Amerigroup employee, the state of Illinois and the federal government - said in federal court in Chicago that Amerigroup and its Chicago-area health care plan defrauded state and federal agencies by discouraging pregnant women and individuals with special needs from enrolling.

During a trial in October 2006, the jury found in favor of the plaintiffs and awarded damages of $48 million. That was tripled to $144 million because the suit had been filed under state and federal 'whistle blower' statutes, which required that any damages be trebled. The judge also imposed $190 million of fraud-related penalties on the company.

We first posted about the jury's finding against Amerigroup here. At that time it was reported that "jurors saw a videotape in which one executive said he always sought out 'the healthies' when signing up patients for the HMO. Jurors also saw a number of e-mails in which company officials spoke positively about limiting the number of pregnant women enrolled."

A health insurer who tried to only insure "the healthies" defeats the purpose, doesn't it?

This case adds to the impression that many leaders of health care organizations put short-term financial gains ahead of honesty and patient welfare. Furthermore, what negative incentives for such practices currently exist do not seem to deter them. After all, a fine or settlement paid years later can just be written off as a cost of doing business. Furthermore, although such a payment may have a (minimal) effect on the company's bottom line, it has no real effect on the people whose decisions and actions lead to the problem.

A physician who does something unethical can lose his or her license and practice. An executive of a health care company who does something unethical usually suffers no penalty. In my humble opinion, one solution would be to require state licenses for executives of insurance companies and managed care organizations, as well as other health care organizations whose actions affect the public health and safety (e.g., pharmaceutical, biotechnology and device companies; hospitals, hospital systems, and academic medical centers; medical schools; etc). Such licenses could be challenged, and could be lost, given due process, for findings of unethical conduct. That might provide sufficient negative incentives to reduce the epidemic of unethical behavior by health care organizational leaders.