Wednesday, October 25, 2006

Skin in the game

As I have alluded to already, the concept of moral hazard, or more properly the need to make sure that individuals have an incentive to minimize unnecessary use of health services is a strong driver of US health policy – and a key distinction from British health policy.

It is, of course, reasonable to seek to apply limits to healthcare expenditure, given its capacity to skyrocket. It is hard to think of a sector more prone to supplier-induced demand. And this, particularly in the field of pharmaceuticals, is a fair description of where medicine is at, in all industrial and post-industrial economies. Seeking to limit direct patient demand, or make that demand more focused and efficient is one strategy to achieving a limit to healthcare expenditure.

Broadly put, the theory of moral hazard states that if you make a good or service free to the consumer they will use more of it, and use it frivolously without having a genuine need that requires satisfying By putting some of the cost onto the consumer (making sure that they have “skin in the game”) this frivolity of consumption is reduced. A masterly review by Malcolm Gladwell in the New Yorker has identified the history and limitations of this thesis in American health policy.

Since first discussed seriously in the context of healthcare in the late 1960s, the fear of moral hazard has had a profound influence on how the American system seeks to limit healthcare expenditure. This is increasingly important given the increase in expenditure since 2000 as the HMO model of managed care has been increasingly rejected. Understanding the importance of this requires a little history and context. In most instances, historically, reimbursement for healthcare providers has been on a fee for service basis. Reasonable enough, except that this creates a situation where the incentive for providers is to do more where the health benefit is marginal. This, inevitably will lead to increased cost. A good example of this is the enthusiasm for diagnostic testing, or a lot of treatments that would be seen as on the cusp between lifestyle and clinical in the UK. This is one major cause (there are others) of a very high expenditure on healthcare in the US without necessarily having better results to show for it – see the Commonwealth Fund report referred to below.

An obvious economic response is that there is a need to discourage demand for services, but the question then is "demand from whom". One approach is to diminish the demand for services made by doctors' choices. Simplifying somewhat, most HMOs sought to do this by providing a capitation funding for each patient, thereby providing an incentive not to use services which were likely to have only a marginal benefit.

The other approach (and, given the rejection of the HMO model, explicit "socialized" rationing, or a single payer system, about the only one left) is to reduce the demand for services from patients themselves, through putting an upfront charge for the use of services. The logic is that consumers (and in this case this would be an appropriate word) will only use services that they need if they have to pay for them. As the HMO experiment has been increasingly rejected (at least in its pure, captitation-based form) this has become an increasing focus for cost-reduction (or more accurately cost-shifting) policies. This may be done through creating co-pays for basic services such as prescriptions and doctors' office visits, it may be done through a high annual deductible (i.e you pay for the first $500 dollars of healthcare per year) or it may be done through limiting coverage (i.e you have to pay for certain services yourself). This is reaching its apotheosis in policy terms with the creation of high-deductible or “consumer-directed” policies which are specifically designed to encourage consumers taking a risk on having to pay a lot should they be ill on the likelihood that they won't have to.

The trouble with the concept of moral hazard is that it applies imperfectly (if at all) to health services. These services cannot be sensibly considered as “goods and services” in the usual way. Hospitals are not hotels. People tend not to go there for fun, but rather because this is a required for their health. An important study by the RAND institute, nearly 30 years ago, showed that while there was a reduction in health service use once patient charges were introduced, this reduction applied to necessary and unnecessary healthcare equally - patients had insufficient skills and knowledge to work out for themselves when they should take two Tylenol and go to bed and when they really did need to see the doc. Even with the advent of the expert patient, and the mushrooming of health information via the web, there is little reason to suppose that this situation has changed.

In other words, “skin in the game” is too blunt an instrument to increase the efficiency (properly understood) of healthcare. Indeed, there is even an argument that by reducing the incentive to seek effective (and relatively cheaper) healthcare early, it may increase emergency (expensive) access to healthcare later, and may not even be, in the long run, effective in reducing expenditure overall. These arguments, of course, do not even address the issues around equity of access for deprived and marginalised groups.

So is there any form of financial commitment by patients which could be successful? Well, the track record of prescription charges in the UK could be an example of an approach which has, if not clearly limiting demand, at least represented a form of income, and has not had negative effects of people not getting prescriptions for reasons of cost, presumably because the safeguards built in for the old, sick and poor have been effective. I must also confess a certain sympathy with the idea of charging a nominal fee for non-attendees.

However, moral hazard as currently being applied in the US seems little more than intellectual figleaf for a major programme of cost shifting from major corporations as purchasers of care to individual patients. The desire of the corporate purchasers to do this is understandable - the "big three" automotive manufacturers for example are becoming increasingly uncompetitive because of their healthcare costs, and then there is the apocryphal(?) story that Starbucks spends more on health insurance than coffee (which explains a lot - not least why I go to Zoka's). Nonetheless at some point this must lead to a consumer revolt. Eventually, the right will run out of plausible "values issues" to distract low to middle income earners in the heartlands from noticing that they are being shafted. At which point what? Clinton 2? (under Clinton 2?)

Friday, October 20, 2006

Stop Press - someone talks about health policy shock

First sighting of health policy issues in the mid-term. Barak Obama (Dem senator from Illinois), twice, on tonight's Countdown.

Thursday, October 19, 2006

The policy/politics disconnect

When I talk to Americans about what I am doing there is a lot of interest. When Louise talks to other parents at school, health insurance (and specifically dissatisfaction and concern with it) is almost as much of a polite middle class conversational default setting as house prices in specific school catchment areas are in the south east of England. When I turn on the cable news channels to get my fix of politics and policy, health care and related health policy is right up there with potential corruption amongst Brazilian local government officials and the latest musings of Jose Mourinho. Yep, it’s nowhere to be seen.

This is baffling. There is near-universal agreement amongst everyone we meet that healthcare in the US isn’t working. Everyone really worries about it, and I mean really worries about it. It’s at the level of “will my insurance cover me if I fall sick?”, or “Oh no, my child needs to go to ER and I haven’t finished paying the bill from last time”. It makes the worries that people have in the UK about the number of NHS managers seem rather abstract. And yet, while in the UK, the state of the NHS is always near the top of the political agenda, in the US, it never appears. Politics is limited to Iraq, terrorism and the game of politics itself. Even more surprisingly, no-one we talk to seems to consider that their real worries about access to healthcare are the fault of government (and this in a distinctly “blue” area). In contrast you only have to read the BBC’s Have Your Say (albeit that it is deliberately moderated to be anti-government – I’ve now undertaken a controlled experiment to prove this) to see that there are large groups of people in the UK who still blame Tony Blair personally for a GP’s receptionist being rude to them.

Why is this? Three hypotheses:
1 American individualism, meaning that your health care is your own business and no-one elses’, versus British notions of social solidarity.
2 The belief of at least some of American society that social problems have simple causal links to individual (moral) choices. Therefore the role of government is to encourage (or force) individuals to make the right choice and then social problems are solved. Hence government has no role in fixing social problems directly. Hence policy and politics should not be concerned about something like healthcare.
3 Nye’s ridiculous comment about bedpans reverberating round Westminster still holds in the British psyche.

The individualism argument is an interesting one and leads onto issues about moral hazard and “skin in the game” which is probably worthy of at least two additional posts. The individual freedom and responsibility is one of the things I’m really admiring about America and Americans, although it has downsides where issues of social justice become ones of charity.

The theory of individuals bearing moral responsibility for social problems is, of course, an extension of this mindset, and strikes me as nonsense on stilts. The complexity of the psychological and sociological incentives of even comparatively simple systems – such as described in the last post – and the complexity that flows from the interactions of many individuals making complex moral decisions is so great that to imagine that if everyone behaved a bit better we would inhabit some pre-lapsarian paradise is ridiculous. I exaggerate, but only slightly. This is essentially the thinking of the authoritarian right who are certainly represented in the current US administration.

The final point is, of course, redolent of micro-management. What is clear is that we have had a period of micro-management of the NHS which both Gordon Brown and David Cameron are signaling a departure from. This seems all well and good, although it is worth any Conservatives reading this to consider that, as Simon Jenkins helpfully recalled, it was a period of laissez-faire “professional” control of the NHS in the late 70s and early 80s that led to the Griffiths inspired reforms of the mid 80s.

Where do I stand on this? It seems to me absurd not hold governments to account for the general running of infrastructural systems such as health. It is both moral and in a nation’s self-interest to ensure that a health system is in place which provides good care to individual citizens reasonably cost effectively. It is equally absurd however, to blame government for individual poor care which is not a direct consequence of the system. Thus, fair to blame the government for the 2 day GP wait debacle, unfair to blame them when the GP fails to spot my condition.

And certainly not right that the Daily Mail should force secretaries of state to intervene in rows about Herceptin.

Friday, October 13, 2006

Apologies

For some reason the settings on comments were only allowing me to post comments - something of a weakness. This should now be sorted.

Can only think this is the same thick thumb syndrome that led me to put Louise's nationality as Algerian on our first draft of visa applications.

Thursday, October 12, 2006

Towards a classification of incentives

OK, incentives. I've hypothesized that incentives are the key to understanding how people inside health systems behave. This is important in the context of seeking to improve or change (let's be cautiously neutral about this) services. I am finding it increasingly important however to define what these incentives actually are, how they work, and what behaviours they incentivize.

This is, of course, really important in measurement and the publication of measurement. We do so in the expectation that this will change the behaviour of the measured, or change the behaviour of those who receive services from the measured.

When I started out on the path of undertaking this work, I was given tremendously kind and helpful advice by Martin Marshall (now the UK's Deputy Chief Medical Officer) and he pointed me towards his earlier work http://jama.highwire.org/cgi/content/abstract/283/14/1866
which emphasized the importance of kudos and censure for healthcare providers, particularly doctors, as a means to incentivize them. As he states with clarity and precision, "publishing the information will increase providers' sensitivity to their performance by reminding, refocusing, or shaming them into action". Certainly this is an important incentive, one which seems more a plausible description of most doctors I have known than "they're only in it for the money".

But it's useful to think about this, I think, as one of range of incentives that may be stimulated by the publication of information .

First are a range of internally generated incentives, ones that are actually immune from stimuli. Typically these could be called "altruistic", seeking to do what the doer considers to be "the right thing"; or, slightly more subtly, seeking to conform to one's self-image that one is the sort of person who does "the right thing". It is worth remembering, of course, that in this context what "the right thing" actually is, is entirely subjective. So the same internal incentive, doing what they believe to be right, exists for both Mother Theresa and Osama Bin-Laden. The point is that external stimuli are not responsible for their actions. Allied to this incentive is the motivation to be a "good professional" whereby acting inside the norms set out by one's peers is critical.

At the other extreme are rewards that are explicitly linked with measurement, these may be financial or non-financial. For example: pay for performance schemes that increase salaries or payments directly according to achieved performance, or through giving market advantages to the better performers; the extra million quid for three star trusts; and the threat of losing your job and salary for 0 star trust chief execs were all examples of financial rewards. Non-financial rewards might have included the opportunity to apply for foundation trust status, or the avoidance of "the terror" of intense managerial/ regulatory oversight.

The "kudos and censure" incentives exist somewhere these two poles. The incentive is an external one, in that the rewards are bestowed by others (as opposed to "being received in heaven") but they are not explicitly, prospectively linked to the measurement. So, for example, the respect of peers and invitations to sit on eminent committees or otherwise advance one's career might be the kudos incentives, while a sense of letting the side down would be a censure avoidance incentive. A more negative expression of this is the sense of pure competition, and clinical colleagues have spoken to me of this. In essence the competition becomes an end in itself, "I want to look better than those cowboys up the road" (and that is a direct quote, well almost, he didn't say cowboys). The reason I say that this is a negative is that when ends start to justify the means, behaviours become less positive, and this will be the subject of a future post.

Four hypotheses follow.

First, most people in any field have a mix of these incentives governing any actions they make, so it is not a simple task to work out which levers to pull. Example - why did I want to do this fellowship. Being absolutely honest a mix of various things: the sense that I would learn things that would be useful for UK health policy, the sense that this would be interesting, the knowledge that having Harkness Fellow on the CV was scarcely a career limiter and the kudos of having an international scholarship. My point is no-one has entirely unselfish motives all the time.

But to leaven that thought, let's consider Maslow. He believed that self-actualisation was the highest point of his "hierarchy of need". This is entirely analogous to the internal incentives I listed above. This would imply that, eventually, these are going to be the most powerful ones. No amount of money, social standing, peer respect or terror is going to work in the long-term if the basic values of the participants are offended. I have been rightly reminded this week about the importance of "calling" in health care.

Second, the best way of publishing performance information will depend upon which of these incentives we want to use. The internally-based incentives can be stimulated simply by sharing an individual's performance data with them with some comparative information. If people purely wish to be the best they can be, evidence of their performance and some sort of comparator (whether theoretical norm, an average level of performance or some description of the distribution of performance), will be enough to "remind, refocus, or shame". Broader publication will not be necessary. To take advantage of kudos and censure, publication of performance information across services is required, with the individual levels of performance being shared with each provider, at a low enough level of granularity to have teeth. This may be individual clinical team or physician, or could be at a practice or specialty level. Explicit, prospective incentives require full publication, either to work at all (market-based approaches) or for reasons of accountability and justification (direct system incentives).

Third, there is a range of responses to these incentives of which not all are positive. There ia also a range of types which will help determine what the response is. This will be the subject of the next post.

Fourth, the wrong measurement, combined with the wrong publication strategy increases the risk of negative responses. This too will be the subject of a future post.

As ever, very much work in progress. More to follow.

Sunday, October 08, 2006

Incentives matter more than systems

Those of us who have worked with performance measurement in health care and its interplay with management know that it can produce some regrettable unintended consequences. For example, we know reasonably well that while the target based regime from 2001-2005 that underpinned star ratings led to sharp improvements in the issues being measured (principally waiting times – compare the number of long waiters in England with those in the rest of the UK) it also produced some unexpected, nasty, and in some cases dishonest behaviours (oh what fun I had with ambulances).

There is a considerable literature about this which goes back 50 years to economic reviews of the Soviet Union. The interplay of a strong central control (almost “terror”) and partial measurement of an issue make the apparatchiks “hit the target and miss the point”. So, apocryphally at least, nail factories in Soviet Union first made billions of tacks (when given a numbers targets) and then made 6 foot long nails (when given a weight target), neither, of course, were fit for purpose supplied. In the NHS, A&E departments employed “hello nurses” when given a target of how quickly to first deal with patients entering an emergency room, then designated corridors as wards when given a target of how quickly they were processed through casualty. (Before anyone thinks I'm making a party political point I'm not, the target for quick dealing with a patient on first arrival dates back to the Patient's Charter – introduced by the Conservative government of John Major).

An immediate conclusion is that this sort perverse behaviour follows and is the consequence of having a command/control system – and the analogy of the Soviet Union only encourages this.

As I have alluded to in an earlier posting, however, I am starting to wonder if there really are different behaviours in a highly marketised system. The precise mechanisms by which incentives are rewarded are different, but the incentives themselves remain the same.

My work in the last week has involved some detailed study of the HEDIS indicators, the measurement of healthcare quality used in the US. In theory these should have two advantages over the politically-set targets.

First, they are more clinical than managerial, concentrating on the processes, provision and outcome of care at a disease specific level, thus in theory each has less widespread influence, than a target that covers the whole of a given hospital.

Second, their method of influencing services are more subtle. Rather than being a 'must meet' target set by one central purchaser, they act (inasmuch as they act outside of the health systems themselves) as a kind of “consumer reports” for the numerous corporate purchasers of healthcare; therefore, in theory, this is one piece of information that a corporate purchaser may use in choosing and negotiating which health plans it will make available to its employees. The agency of approval/disapproval is thus a less direct “market”one.


However, in conversations with various experts concerning how these indicators work, I have discovered that exactly the same concerns apply to the working of HEDIS measures as to NHS targets:


  • having to comply with measurements that you don't agree with because the purchaser insists on it (for govt, read corporations); and,

  • distortion of clinical priorities – particularly away from preventative work - because of the unintended effects of indicator definition;

Long-term students of the publication of cardiac surgery outcomes in New York state will remember that gaming in reporting of co-morbities and cream-skimming (and dumping sicker patients onto the Pennsylvanian health system) were reported negative behaviours.

So maybe the moral is that the unintended consequences and the regrettable behavior is more universal than situational. Even good measures can lead to bad behaviour, and neither markets nor Stalinism can guard against this.

This poses two questions
Why is this?
Why bother measuring anything then?

The answer to the first is I think bound up in a better understanding of how incentives work inside complex systems like healthcare - an attempt to suggest how this might work will be the next post on this blog


The answer to the second is simple: For better or worse, the human mind equates what matters with what it can measure. It may be imperfect, it may have perverse effects that we need to ward against, but if we stop trying to measure it, however imperfectly, what we say is that the quality of healthcare doesn't matter.