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Mandating COVID Shots – Part II

There is a major new development that may impact the number of employers mandating COVID-19 vaccinations. Just this Monday (August 23), the Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine for individuals, ages 16 years and older. Prior to this, the vaccine was available under emergency use only, which is still the case for individuals, ages 12 through 15, and for “the administration of a third dose in certain immunocompromised individuals.”

This full approval cannot come soon enough. According to the Iowa Capital Dispatch, about 2,200 new COVID-19 cases are occurring each day in Iowa. A recent study published in Health Affairs found that COVID-19 vaccines prevented nearly 140,000 deaths during the first five months of the vaccine campaign. This number is approximately the size of Cedar Rapids. Finally, a Kaiser Family Foundation research brief published last week reveals that about 113,000 Americans could have avoided being hospitalized in June and July if they had received the COVID vaccine – which amounted to an estimated cost of $2.3 billion.

For individuals and employers on the fence about whether to obtain (or mandate) vaccinations, this latest move by the FDA signals that the (Pfizer) vaccine was determined to be both safe and effective – far outweighing the potential risks. The two shots together were found to be 91 percent effective at preventing COVID-19 and potentially serious outcomes, including hospitalization and death. The full approval by the FDA provides a stronger, fortified reason for employers to consider implementing – if desired – a vaccine mandate at the workplace.

New Reports that may Help Employers

I must give a big thanks to the May 20 podcast of Tradeoffs that addressed the employer mandate issue. This particular episode provides much of the background information that I am about to share on WHY employers might seriously consider mandating vaccine shots to their employees.

  1. Requiring Vaccines Actually Works

    Many studies show that, by mandating vaccinations at work – such as the flu shot – more people get vaccinated. Nursing homes and other healthcare settings (hospitals included) spell this out. For employers in other sectors, having more workers vaccinated will translate to having a safer work environment that results in fewer sick days and a smaller probability of new virus strains developing.

  2. Vaccines Reduce Community Spread

    According to a new study in The Journal of Human Resources by Corey White, a Cal Poly, San Luis Obispo health economist, California hospitals and counties that implemented influenza vaccine mandates for their employees found there was an uptick of flu shots by about 10 percentage points. But just as importantly, there was a 40 percent drop in the number of patients who caught the flu at the hospital, in addition to a 20 percent drop in people coming into the hospital with the flu. White calls this a ‘positive externality’ benefit, as it benefits not only the person getting the vaccine, but also reduces the risk of spreading the disease to others. It must be noted this may not be a perfect generalized finding for non-medical employers, but it does suggest that any employer, regardless of size and industry, may greatly impact their own community with such a mandate. This is especially true if many customers visit popular businesses throughout the community – such as restaurants and grocery stores.

    We also know that because COVID has become more politicized than the flu, mandating COVID shots may elicit a stronger response from employees than a simple flu mandate.

  1. Provide Exemptions, But Stay Vigilant About Asking Employees

    Brandyn Churchill, a Vanderbilt PhD candidate, released a study that found an 11 percent increase in the number of Washington D.C. school girls receiving the HPV vaccine by allowing parents to make the decision once a year, rather than only asking one time. The study suggests that employers, who may be concerned with employee backlash, can provide ‘generous exemptions’ to their mandates – such as for medical reasons or religious objections – but still increase vaccination rates if they repeatedly approach their employees about getting vaccinated. According to Churchill, how opt-outs are designed can actually lead more employees to getting vaccinated. From his study, it is unknown whether the uptick resulted from the HPV vaccine becoming more normalized during a period of time and therefore more accepted by parents, or because parents were asked more frequently to vaccinate their daughters. Churchill believes both reasons helped push the vaccination rate upwards. The takeaway from this study is that vaccine-hesitant people should be given plenty of opportunities and have options that are based on credible and relevant information. Over time, the vaccination rates will rise.

Final Thoughts…

It is true that in the new world in which we live, COVID is a wild-card on how employees will accept a workplace vaccination mandate. Will our ‘liberties’ be lost, or will we finally gain our freedom from this pandemic? Because the information on COVID-19 is so imperfect and ever-evolving, the delicate balance of providing caveats and caution must be used by employers to ensure that trust is built and maintained for a more informed workforce. The full approval by the FDA for the Pfizer vaccine is a good step toward increasing the vaccination rate. Hopefully, when thorough and appropriate analysis has been completed on the other two vaccines, additional approvals will be forthcoming.

From this, we can all benefit.

NOTE: For additional background on this topic, please see my August 4 blog, Can Employers Mandate COVID Shots?

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Tackling Healthcare Spending – One Percent at a Time

One Percent Steps Adding Up to Something BIG?In healthcare, there is plenty of waste…and this waste is enormously costly to those who pay. This unnecessary spending is baked into the outrageous health insurance premiums we pay. In 2019, I estimated that ANNUAL waste baked into Iowa premiums for single and family coverage averaged $2,400 and $6,600 respectively. This translates into nearly 34 percent of all healthcare costs as non-value-added. 

Now, to be fair, there are those who make a living from this waste. Waste becomes a paycheck. Removing this unnecessary payroll, however, will most likely erupt into anguished rebellion. Justifications can always be made by various healthcare stakeholders about the necessity of their ‘value’ in a highly-convoluted and dysfunctional system. Admittedly, some may have a point. 

Six Domains of Waste

In the broadest sense, waste is found in six ‘domains’ of healthcare – as identified by Donald Berwick and Andrew Hackbarth in a 2012 study:

  1. Overtreatment (low value care)
  2. Failures of care coordination
  3. Failures in execution of care processes
  4. Administrative complexity
  5. Pricing failures
  6. Fraud and abuse

Using each of these six broad buckets of waste, my aforementioned 2019 blog provided the estimated impact of waste to health insurance premiums. Eliminating too much unnecessary spending at one time, however, will most likely create a backlash of stakeholder opposition. This may result in missed opportunities to actually fix the expensive leaks in our healthcare ‘system’.

How can costs be incrementally reduced to make a sizeable impact to payers?

One Percent Steps for Health Care Reform Project

According to a February article in Health Affairs, authors Zack Cooper and Fiona Scott Morton discuss implementing a series of one percent solutions that could collectively lower healthcare costs by hundreds of billions of dollars. If you are an employer that offers health coverage, this should grab your attention.

The authors explain their reasoning on using the one percent solutions:

Rather than speaking about health spending via abstractions, we should view high U.S. health care costs as the result of a series of discrete problems that each incrementally raises health spending by a percent or two — so-called ‘one percent problems’. While each problem is unremarkable in isolation, the collective impact of a series of one percent problems can help explain why the U.S. spends more than other nations.

The vastness of healthcare issues require new approaches that disrupt the status quo from being replayed into the future. Doing so begins with smaller steps that make sense. Cooper and Morton prescribe 16 steps that economists and policymakers can take to reframe healthcare spending as a series of one percent problems. These problems, they argue, can be used as a road map for cost reduction. 

If implemented, the following 16 steps would decrease overall annual healthcare spending by nearly nine percent. This amount of savings may not sound impressive, but when nearly nine percent can be lopped off from the health system that absorbs $3.8 trillion of costs, it is an impressive beginning. Each step does not serve as a silver bullet, but rather, an incremental solution that makes sense.

These 16 evidence-based steps are ranked by their projected annual savings as a share of national health spending:

  1. Regulating healthcare provider prices: 1.89 percent
  2. Addressing surprise medical bills: 1.67 percent
  3. Increasing the efficiency of claims adjudication: 1.25 percent
  4. Addressing vertical integration of hospitals and physicians: 0.91 percent
  5. Introducing smart provider networks: 0.83 percent
  6. Addressing hospital consolidation: 0.69 percent
  7. Improving health insurance plan choice: 0.63 percent
  8. Improving plan auto-assignment in Medicaid managed care: 0.24 percent
  9. Reforming how Medicare reimburses biosimilars: 0.21 percent
  10. Addressing orphan drugs: 0.15 percent
  11. Reducing fraud in home health: 0.12 percent
  12. Reforming the payments for long-term care hospitals: 0.11 percent
  13. Decrease cost barriers for living kidney donations: 0.08 percent
  14. Expanding preferred pharmacy networks: 0.04 percent
  15. Eliminating prescription copay coupons: 0.03 percent
  16. Expanding kidney exchanges: 0.02 percent

Zack Cooper, Associate Professor at the School of Public Health and the Department of Economics (Yale), discusses the ‘one percent’ approach in a ‘Creating a New Healthcare’ podcast. He can also be found on Freakonomics Radio, “How to Fix the Hot Mess of U.S. Healthcare.”

As we fight the daily battles of the Covid-19 pandemic, we are reminded that many inherent problems continue to persist in our costly healthcare system. Without action, these problems will not go away. Will market solutions be able to fix many of these issues? The clock continues to tick – and healthcare costs continue upward.

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Optical Illusions of Healthcare ‘Reality’

I spend a great deal of time studying healthcare issues, giving balanced attention to both the ‘delivery’ and ‘payment’ of medical care. Admittedly, I have my own biases. How healthcare is delivered in our country is largely dependent on the incentives and disincentives that come from the payment side of our healthcare infrastructure. As a result, the fallout from the misalignment of these incentives cause a great deal of unintentional consequences.

It is true there are positive stories about exceptional doctors and medical staff who shine brightly when caring for patients. In fact, their work can be awe-inspiring, as most people performing this work are honorable and want to do the right thing for patients. However, these well-intentioned professionals are relegated to work in systems ill-equipped for them to consistently succeed. This too-often causes morale problems that can eventually lead to job burnout for medical professionals – which adversely impacts all of us.

For me, cynicism about our healthcare ‘system’ has become a way of life. Key healthcare players are legally allowed to operate within their own myopic sphere to justify their ‘value’ within increasingly complex – yet profitable – inter-related sectors that suck oxygen from our economy. What escalating costs are doing to our families and to our economy, to put it mildly, remains deeply disturbing. Healthcare’s inability to control costs continues to shortchange other sectors of our economy. Opaqueness and creating illusions are important tools to ensuring the status quo will not go away soon.

Within the span of two hours one recent morning, I perused the following topics that fed my skepticism about the true intent of the healthcare sector:

Axios – Executive Pay Packages

This article analyzed the pay of CEOs from 70 of the largest U.S. healthcare companies, who have, on a cumulative basis, earned $9.8 BILLION during the seven years following the passage of the Affordable Care Act (ACA). Why does this matter? Because the pay packages rarely, if ever, incentivize CEOs to control healthcare spending, eliminate unnecessary procedures, tests or devices and coordinate care. Instead, CEOs are motivated to sell more prescription drugs, perform more tests and procedures, purchase another practice/competitor and create new medical therapies that may not add value to one’s life. In short, CEOs are paid to “do anything to create higher earnings per share” for their shareholders.

My Takeaway: Developing an organizational infrastructure to ensure “value-based healthcare” is evidently dependent on someone else’s pay-scale.

Modern Healthcare – Other Revenue Streams are the Priority

Ninety percent of surveyed hospital and health-system executives have an “urgent priority” to find new revenue streams in the next three years due to downward revenue pressure causing massive financial headwinds to their profitability goals. In healthcare, it is all about revenue growth.

My Takeaway: Too bad the revenue streams derived from patient-centric and safety programs are paltry when compared to other appealing opportunities being pursued by these executives.

A transcript of the most recent ‘Fixing Healthcare’ podcast – Perverse Incentives

Dr. Robert Pearl and Jeremy Corr interviewed Dr. Elisabeth Rosenthal, Editor-in-Chief at Kaiser Health News. Dr. Rosenthal does not mince words within this podcast, or in her bestselling book, An American Sickness, as well as other articles she has carefully researched and written. Within this nearly one-hour interview, Rosenthal pointed out many perverse bugaboos found in U.S. healthcare – many of which I have previously written about over the years. But one particular comment she made was screaming at me. Largely unnoticed in mainstream media is the perverse incentive for insurance companies to have little motivation to keep costs down. Yes, you heard me right.

Under the ACA, a well-intentioned, but flawed regulation was directed at insurance companies to spend 80 to 85 percent of premiums on medical care – a much larger chunk than what was spent by some insurers in the pre-ACA era. Put another way, insurers are bound by this rule to not spend more than 20 percent of individual and 15 percent of small-group premium revenue on administration, marketing and profit. On the surface, this seems to make sense. Insurance companies must spend a higher proportion of premiums on medical care, rather than retain as profit. However, insurers can skirt around this issue by paying inflated medical bills so that they can retain a larger piece of the cost pie. This certainly benefits the medical providers, as well. To be sure, this is seldom (if ever) admitted by industry insiders – and is also very difficult to prove this is intentionally done.

My Takeaway: No wonder why larger employers and states are looking to bypass the inflated appearance of negotiated ‘discounts’ arranged by insurance companies, and instead, directly negotiate payment arrangements with providers based on methods tied to lower Medicare costs. But when this happens, using the state of North Carolina as an example, hospitals and insurers balk at this approach.

Health Affairs Blog – Health Costs Major Concern for Americans

This blog is a direct result of the previous behaviors briefly described earlier. Cost-shifting fatigue is taking its toll on the payers. One quarter of surveyed U.S. adults reported that cost was the nation’s most pressing healthcare issue, while 61 percent indicated that paying higher premiums (or a greater portion of medical expenses) was a “major concern.” About one-half of U.S. adults worry they will not have enough money to afford care.

My Takeaway: The ‘optics’ in healthcare are alive – indeed thriving.  The hypnotic messages you hear and see from many key stakeholders may not be the reality we wish and hope to have. The desire to ‘reform’ our healthcare infrastructure to become more affordable with better outcomes runs contrary with how major stakeholders are being incentivized and motivated to act. Re-engineering appropriate incentives (and disincentives) is necessary before we can obtain meaningful progress. Until this happens, the chairs are on the Titanic are merely being rearranged for appearance purposes only.

Skepticism, especially in healthcare, can be a virtue. Accepting the truth that this is happening is the first step of recovery.

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